Charlie Baker, MBTA, Transportation

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THE MBTA HAS SPENT the last five years trying to eliminate any reliance on legislative appropriations to balance its operating budget, calling any use of the funds a sign of a structural deficit. But in an abrupt turnaround on Monday the agency did away with the deficit terminology and fully embraced using all of its legislative appropriation – plus additional operating funds being sought by Gov. Charlie Baker – to help balance its budget for the next five years.

The turnaround comes at a time when the Legislature is considering raising revenues to support transportation and the Baker administration, which opposes new taxes, is eager to show the MBTA doesn’t need new tax revenue to support it.

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David Panagore, the T’s chief administrative officer, said revenue is revenue, and the transit authority needs to tap the legislative appropriation to support the agency’s growing workforce, its expanding operations, and its many new initiatives.

“The world that we lived in three years ago is not the world of today,” Panagore said.

The MBTA’s operating budget relies on three primary sources of revenue – a portion of the state sales tax, an annual legislative appropriation, and revenues it generates itself from fares, parking, real estate transactions, and other measures.

Over the last five years, the transit authority has succeeded in bringing its expenses more in line with its revenues, but it has repeatedly taken the position that it should only use the sales tax money and its own revenue sources to cover its operating expenses. The T chose not to tap the legislative appropriation for two reasons: one, the money is subject to appropriation and therefore not guaranteed year to year; and two, the T has tried to funnel the legislative money into longer-term capital projects.

Whenever the T has been unable to balance its operating budget with its sales tax and own-source revenues, it has dipped into the legislative appropriation and defined the additional funding as the agency’s structural deficit. The T has repeatedly gone to great lengths to minimize the size of that structural deficit, including paring back spending, raising fares, and even proposing to cut service.

Transit advocates and key lawmakers have argued that the “structural deficit” referred to by the T is a fiction. Rep. William Straus, the House chair of the Legislature’s Transportation Committee, said in a 2017 interview that he viewed the annual appropriation as just another source of funding for the T that is unlikely to disappear. He applauded the T’s cost-cutting efforts, but said the agency doesn’t face a structural deficit.

“Structural deficit is a loaded phrase because it conjures up an image of some sort of budgetary crisis,” he said. Straus was not available on Tuesday.

At a presentation to the Fiscal and Management Control Board on Monday, Panagore outlined how the agency would balance its operating budget for the next five years. His revenue projection for the operating budget included a $127 million expected legislative appropriation, and added in $73 million being sought by Baker in his budget for the coming fiscal year. The analysis assumed that the same level of funding – a total of $200 million — would be forthcoming for the next five years.

Meet the Author Bruce Mohl Editor , CommonWealth About Bruce Mohl Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester. About Bruce Mohl Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Transportation Secretary Stephanie Pollack, citing a relatively recent surge in sales tax revenue, the expected higher legislative appropriation, and a proposal for more relaxed rules on how bond funds can be used to pay for employee salaries, said there is plenty of money for the T to do what it needs to do over the next several years. “I think it’s a good story,” she said.

But the good story is now dependent on legislative appropriations and a new approach to budgeting that makes that dependency acceptable. Without the legislative appropriation of $200 million a year, the MBTA operating budget would quickly be in actual deficit. The budget in fiscal 2023 is also counting on a 4.5 percent fare increase.

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Expenses are forecast to rise 8.2 percent this year, the second-highest percentage increase in 20 years. More than half of that increase is for safety and infrastructure employees, for which Baker is seeking separate funding that is not expected to last beyond fiscal 2021. The operating budget also does not include higher debt costs for major $1.5 billion projects on the Red and Orange Lines and the initial launch of regional rail.