Monday, October 8, 2007

RTA Gamble--RTA Consequences?

In his "Getting Around" column in today's Chicago Tribune Jon Hilkevitch looks ahead to the 2008 doomsday scenario that the CTA will unveil on Wednesday. To set the stage for how the region got to this point, Hilkevitch looks back at the budget the RTA Board almost a year ago:

Early this year, RTA officials ordered the CTA, Metra and Pace to pass 2007 budgets based on the risky assumption that the state would approve $226 million in new operating subsidies for transit. It was a questionable move at the time by the RTA, which is responsible for providing financial oversight.

Today, the RTA's gamble looks much, much worse. Relatively mild service cuts and fare hikes that would have taken place earlier this year to balance transit agency budgets -- if indeed such measures were really necessary to convince state lawmakers of the pending transit meltdown -- will pale in comparison to what may lie ahead.

This "gamble" by the RTA Board was not only risky, it likely was in violation of the RTA Act, which requires the RTA to approve only balanced budgets based on reasonable and prudent assumptions. As noted previously (here and here), section 4.11(b)(2) provides in relevant part that the RTA Board:

shall approve the budget and plan if:
. . .

(ii) such budget and plan show a balance between (A) anticipated revenues from all sources including operating subsidies and (B) the costs of providing the services specified and of funding any operating deficits or encumbrances incurred in prior periods, including provision for payment when due of principal and interest on outstanding indebtedness;
. . .

(v) such budget and plan are based upon and employ assumptions and projections which are reasonable and prudent;

(vi) such budget and plan have been prepared in accordance with sound financial practices as determined by the Board.

The RTA Board failed to follow these statutory requirements when it approved a budget with a $226 million plug number for operating subsidies to come from some undetermined State source(s). The RTA gambled that the State would come through with that money and, as Hilkevitch notes, that gamble makes each doomsday scenario worse than its preceding scenario.

(Perhaps someone should submit a FOIA request to the RTA seeking something like "all documents that refer to or relate to the $226 million in additional state funding that is contained in the RTA's 2007 budget, including but not limited to any communications with the Governor or any legislators, or representatives thereof, concerning increased State funding for public transit in the six-county RTA region in 2007." Faced with ever more dire doomsday scenarios, the public deserves to know on what basis--if any--the RTA Board voted to approve its 2007 budget with a sizable uncovered operating deficit.)

Rather than base its budget on a large plug number, the RTA should have fulfilled its fiscal oversight responsibility by prompting the service boards to begin in January 2007 making service cuts, implementing fare increases, and taking other steps necessary for they and the RTA to live within their means. These actions may have prompted a quick resolution of the transit funding situation or by now we would have learned to live with a scaled down transit system. Either way, the RTA would have complied with its statutory responsibilities.

Supporters of increases in public transit funding (e.g., Richard F. Harnish's well done commentary) make much of the fact that the CTA and the other service boards are attracting a growing middle class clientele and no longer should be viewed primarily as a social service provider for the poor. At the same time, the RTA presumably justifies allowing the service boards to provide roughly 10 percent more transit service than they can afford on that ground that such transit service is a vital social service. Which is it?

Even if the RTA has the noblest of intentions in allowing the service boards to continue supplying more transit service than they can afford, the RTA Act does not give the RTA Board the power to exercise financial oversight based on its good intentions. The Act is quite specific that the RTA Board is not allowed to approve budgets that contain an uncovered deficit, which is just what the RTA did here. Clearly, the legislature wanted to get Illinois out of the cycle of rolling out more transit in northeastern Illinois than the service boards could afford, with doomsday scenarios as an inevitable result.

The cuts and fare increases necessary to balance the 2007 budget would have been less severe and less painful if they had been implemented early this year. Certainly, the Auditor General's report in March 2007 finding that the service boards had expanded service levels well beyond their financial means should have galvanized the RTA into action. Instead, the RTA's delay in matching transit service to available financial resources has created the very kind of crisis that the RTA Act was designed to avoid.

When a board fails to follow the spirit if not the letter of its governing law and when its "gamble" results in the creation of the very fiscal crisis that board was charged with preventing what can be done? One option is for the board to resign, allowing for a quick change in leadership. Another option is for other powers to step in and take over via an oversight agency.

It does not appear that the RTA Board is taking any responsibility for gambling away its financial oversight duties. Nor does replacement of the Board through a a temporary oversight agency seem on the horizon.

Why not? Is there such a high degree of confidence in the RTA Board despite this gamble and other missteps and failures to exercise its current oversight powers that holding the Board accountable is unthinkable?

7 comments:

Anonymous said...

Face it, this blog is dead.

Anonymous said...

You place much on the RTA Board but nothing on its executives that recommended the action. Curious.

Davey said...

Why isn't it the duty of our elected leeches in Springfield to adequately fund public transportation in Illinois? Why are you blaming the victim? We don't need to replace the RTA board. We need to replace Blagojevich, Jones, and Madigan.

Moderator said...

Anonymous 3:00 p.m.--

I'd like to make this blog live and be useful. If you have some constructive ideas on that score or would like to contribute your own commentary please contact me. Scroll down to the "View My Complete Profile" link on the right side and hit the email link.

jackonthebus said...

No, davey, just for starters, we can start with the RTA Board. Section 3.09 of the RTA Act required that, as a result of the 1983 crisis, the then members of the RTA Board resign, and be replaced by a transition board. That could be done again.

Then look at the CTA Board. For instance, Section 27 of the Metropolitan Transit Act says that " The Board may appoint an Executive Director who shall be a person of recognized ability and experience in the operation of transportation systems to hold office during the pleasure of the Board." Is that how Huberman was appointed? The Act does not say that the Board President is delighted to accept the Mayor's recommendation of one of his aides regardless of experience in the transportation industry. Since the CTA Board is nothing but a rubber stamp, abolish it.

A more reasonable solution would be one board of about 9 members, properly apportioned among the areas represented in the 6 county area, in charge of all operations. Certainly, one should not reward the current board and politicians by increasing the RTA Board to 16, increasing the Metra Board, and leaving the CTA Board as is.

Davey, I do agree that the elected leeches ought to be recalled, because they aren't doing their jobs, either. But the RTA Board is not the victim; it is complicit.

Moderator said...

Davey--

Fair point. Hilkevitch in today's column does go to state that others share the blame for the transit funding crisis:

"Others share the blame with the RTA, however. When disagreement in the legislature over funding sources blocked passage of any new money for transit over the summer, Senate President Emil Jones (D-Chicago) was first to call on the CTA to postpone service cuts and fare hikes set for Sept. 16, in order to buy time for a deal.

"Subsequently, Gov. Rod Blagojevich came up with a plan to get the CTA and Pace through their 2007 budget crises by advancing money to the transit agencies that they are counting on in 2008, a move that critics denounced as nothing more than a "payday loan."

* * *
My point is that had the RTA fulfilled its statutory responsibilities then the blame for the failure to increase transit funding would clearly lie elsewhere, in the General Assembly, the Governor's office and among local public officials.

By allowing the service boards to continue to roll out service in excess of their bona fide financial resources the RTA Board helped make a bad situation worse.

Since the RTA is the agency that is charged with performing effective fiscal oversight of the service boards, the responsibility for the sustained deficit spending by the service boards lies with the RTA.

You are right that it is not the RTA's responsibility to provide adequate funding for transit. It is the RTA's responsibility, however, to have the service boards live within the means provided.

The Auditor General's report indicates that the RTA failed to do that for at least five years, a period when the service boards rolled out significantly more service than they could afford. The RTA's approval of a 2007 budget with a $226 million plug number is just the most striking example of the the RTA's failure to exercise effective financial oversight using its existing statutory powers.

Dave said...

Moderator, I still think you're falling into the trap of looking at the boilerplate instead of the big picture. How far does "living within its means" go for public transportation? If our Springfield thieves decide that $1000 is more than enough for Chicago transportation, is it then the RTA's job to decide to just run a van from the Water Tower to The Bean once a month?

Yes, of course it's a silly example. My point is, this is a political issue, not an administrative or bureaucratic one. Harping on RTA law seems to me just a distraction from the real issues that arise from having one of the worst state governments in the country. Fiddling with the RTA board or bylaws or budgets will do absolutely nothing to improve things.