HD52 - Distribution of State and Federal Aid to Mass Transit Programs


Executive Summary:
Local revenues support a larger share of the costs of providing public transportation services in Virginia than either federal revenues or state revenues. Federal and state funds represent large shares of the financial support for public transportation but localities bear most of the responsibility for developing and operating transit services in Virginia. This is very different from the funding of highways, aviation and ports.

During the late 1980’s and early 1990’s federal support for mass transit was reduced and state support for transit increased very little. Local governments were forced to reduce transit services or to expend more of their local general revenues in order to maintain their transit services. The passage of the federal Transportation Equity Act for the 21st Century (TEA 21) in 1998 and a change in the Commonwealth Transportation Trust Fund formula, also in 1998, have increased the levels of federal and state funding in Virginia and allowed transit systems to begin a slow recovery from the funding shortages of the previous decade. At the same time public transportation systems are being called on more and more to address issues such as traffic congestion, air pollution, and welfare reform. The increases realized in federal and state funding for transit fall far short of what is needed to maintain and improve Virginia’s transit systems and localities continue to feel the pressure for greater investment in transit.

This has resulted in a call to examine the formulas that allocate federal and state financial assistance to public transportation to ensure that these important resources are distributed in a fair and equitable manner.

The formulas used for the apportionment of federal transit funds are the result of decades of political negotiations and compromise by Congress. The formulas that apportion the large federal transit funding programs are extremely complex and use many tiers, sub-divisions of tiers and multiple formulas at the sub-tier level. These formulas have been fine-tuned by Congress over the years to produce negotiated results and do not offer a good example for Virginia to emulate. It appears that in designing these formulas, more attention has been paid to how much funding they produce for certain recipients than the public policies that the formulas serve. The federal transit apportionment formulas that work the best in Virginia are the ones that allow the state the greatest flexibility in allocating the funds to recipients. Virginia’s interest in the federal transit program apportionment formulas should focus on how much assistance they produce for our transit operators, especially those in nonurbanized and small urbanized areas.

The formula currently used in the distribution of state funds is relatively straightforward, verifiable and serves an intrinsic public policy. This policy is that the Commonwealth will participate in the public transportation expenses of localities based on the amount of financial investment undertaken by the locality and in a manner that treats all localities across the state the same. Other options for state distribution formulas were examined but none were found to be superior to the current formula. It is recognized, however, that not all localities in Virginia are equally able to afford the public transportation services that they need. In the interest of equity, the current formula can be improved by taking into account the ability of the local jurisdictions to afford public transportation services as well as their actual levels of investment. It is proposed to apply fiscal stress index factors to the distribution formula for state public transportation operating assistance beginning in Fiscal Year 2002. These factors will be based upon the “Composite Fiscal Stress Index Scores” for localities as developed by the Commission on Local Government and published in their annual report. It is proposed to implement this change in Fiscal Year 2002 in order to allow time for the localities and transit community to review and discuss this change.

It is proposed to allow the Commonwealth Transportation Board to hold harmless any public transportation system from a decrease in state formula assistance funding below their prior fiscal year (FY01) level that results from the proposed change to the formula.

It is also proposed to allow the Commonwealth Transportation Board to hold harmless any public transportation system from a decrease in state funding that may result in a year when the levels of service provided by the transit system did not decrease but their operating expenses decreased or remained stable. This is a potential occurrence in a year when other transit systems have large increases in operating expenses and state revenues do not increase at a rate equal to or greater than operating expenses. Such an occurrence would unfairly penalize a transit system for being efficient.

Finally, it is proposed to simplify the current eligibility formula that allows a maximum state share of 95% for fuel, tires, and maintenance parts and supplies, 80% for ridesharing expenses and 50% for administrative expenses to a single, consistent maximum state share of 95% for all three categories of eligible expenses.

These proposed changes to not alter the total amount of state aid for public transportation to be provided and do not impact in any way funding for highways, ports, or aviation. These changes are intended to provide a more equitable, less complicated distribution methodology for state aid to public transportation. It is proposed to accomplish these changes through Appropriations Act language.