Why is there a budget shortfall?

TriMet is facing a shortfall of up to $17 million in the next budget year1 because of lower-than-expected revenue from payroll taxes, anticipated cuts in federal funding, and unsustainable health care costs for union employees. This funding instability comes at a time when there is increasing demand for transit service.

1

Due to a stalled economic recovery, projected revenue from payroll taxes is lower than expected.

Impact: $3 million

About half of our funding for operating buses and trains comes from a payroll tax paid by area businesses. Employers pay a portion of their employees' gross wages to TriMet ($7.02 per $1,000).

During extended periods of high unemployment, there are fewer workers, leaner payrolls and, as a result, less money for transit. As we slowly emerge from the deepest recession since 1929, employment is at 1999 levels in the Portland area and job growth is unusually slow.

The bottom line: Our incoming tax revenue is growing slower than expected, and it isn't keeping up with our increasing costs. We were expecting to see tax receipts grow 5% next year, but the lagging economic recovery has forced us to reduce our projected revenue by $3 million.

Payroll Tax Revenue (Budget vs Forecast)

Operating Revenue Sources, in Millions (Audited financial data, Fiscal Year 2011)

Our total operating budget is about $400 million. About half of our funding comes from a payroll tax paid by area employers.

2

"Formula funding" from the federal government, which provides us with about $40 million each year, is likely to be cut.

Impact: $4 million

There is a great deal of uncertainty over the federal grant program that distributes money ("formula funds") to state, regional and local governments.

These funds provide us with approximately $40 million in revenue each year.

We are projecting a $4 million reduction in federal formula funding in Fiscal Year 2013.

3

We cannot afford the rising cost of health care benefits for employees.

Impact: $5–10 million

The current trend in the cost of benefits for union employees is unsustainable, and we are at an impasse in negotiations with Amalgamated Transit Union Local 757.

A recent Employment Relations Board decision removed certain cost-saving proposals from our final offer, so some measures we were hoping to implement?such as bringing wage and health care costs under control?likely will have to wait for a future negotiation (after interest arbitration, which is now delayed).

Because of a 2007 change in the law, we cannot unilaterally implement our final offer to the union. Instead, we must engage in all-or-nothing interest arbitration, a forum in which it is extremely difficult to make significant changes no matter how out-of-line union wages and benefits are.

This could have an impact of between $5 million and $10 million on our FY13 budget, and even more in future years.

Annual Per-Employee PPO Health Care Cost for ATU Employees Under Different Plans

 

Total Projected Shortfall for Fiscal Year 2013: up to $17 million

 

 

 

1 TriMet's Fiscal Year 2013 begins July 1, 2012.