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With state transit funding frozen, MTS could face 'fiscal cliff' in summer 2025

The Metropolitan Transit System is grappling with a curve ball in its budgeting process after hundreds of millions of dollars in state funding were frozen because of California's budget deficit.

State lawmakers approved SB 125 in 2023, pledging $4 billion to aid public transit agencies in their pandemic recovery efforts. MTS had planned to use its share of the funding to increase bus and trolley frequencies, hire more security personnel, upgrade signals on the Orange Line trolley and launch a new overnight bus line to the border.

But late last month, MTS officials were notified that the funding was frozen as state lawmakers and Gov. Gavin Newsom work to close a deficit of at least $27 billion. Gordon Meyer, the agency's manager of financial planning and analysis, told the board of directors on Thursday that the news came just as MTS was drafting its budget for the fiscal year that begins July 1.


"We were planning on receiving $284 million over multiple fiscal years," Meyer said. "The final timing and amounts of these funds is still unclear at this time."

MTS has seen a stronger pandemic recovery than other transit agencies in California, but ridership still hasn't fully recovered and the agency has been using reserves to maintain its existing services. SB 125 was meant to help public transit agencies avoid a so-called death spiral, in which operating deficits would force the agencies to cut services, leading to an even bigger drop in ridership and fare revenue.

San Diego City Council President Sean Elo-Rivera said Thursday that he was disappointed by the potential loss of improvements to bus and trolley services, which the city is counting on to achieve its goals for reducing greenhouse gas emissions.

"These were changes that folks were excited about and looking forward to because of the impact it will have on riders' lives," Elo-Rivera said. "But we didn't have control over the SB 125 funding, and so we need to pivot."

Meyer said that without the SB 125 funding, MTS could face a "fiscal cliff" as soon as July 1, 2025, when reserves would effectively run out. He said the agency could push that cliff back by two years if it shifted funding earmarked for capital improvements, such as new bus purchases, to the operations budget, which pays for things like fuel and staff salaries.


El Cajon City Councilmember Steve Goble said those short-term budget-balancing measures were not ideal and the state should do more to support transit agencies.

"The five-year look on this thing is really the elephant in the room, because we can either raise fares, cut services or find new funding," Goble said. "Orange County, Los Angeles, BART, Sacramento — everybody's in the same situation."

The agency's budget woes could be relieved significantly if San Diego County voters were to approve a half-cent sales tax measure due to appear on the Nov. 5 ballot. Sixty-four percent of the measure's revenue would go toward public transit infrastructure and operations, representing the largest transit investment in the county's history.