CTA President Releases 2006 Budget Recommendations

October 6, 2005

In his 2006 Budget Recommendations presented today, Chicago Transit Authority President Frank Kruesi proposed maintaining current service levels and raising cash fares by 25 cents. Although the CTA's long-term financial problems are not yet solved, Kruesi said he is committed to continuing to operate at current service levels and having the CTA work as efficiently as possible to manage its way through a difficult budget year in order to give the General Assembly, Governor Blagojevich and the RTA the additional time they need to devise a fair solution to the structural funding problem challenging the regional transit system.

Kruesi's 2006 budget recommendations include an operating budget of $1.037 billion ? an increase of $40.6 million, or 4.1 percent, over the 2005 budget -- that would include a public funding level of $524 million. The higher costs of fuel, healthcare, claims and litigated expenses have all contributed to the need for an increased operating budget over 2005.

"We had to find ways to close a projected $90 million shortfall this year. Shortfalls will continue to worsen until there are changes to the way in which we are funded," stated Kruesi. ?Dealing with this issue on a long-term basis is of paramount importance. But there is a new spirit of cooperation in the region. We have gone to our peer agencies, our customers and our elected officials to make our case. They have listened and acted, and a consensus is emerging that a problem exists and it needs to be fixed."

Kruesi said that when the 2006 budget process began, the CTA faced a projected shortfall of approximately $90 million, but that a $14.1 million increase in public funding from the RTA and anticipated paratransit funding of $27.1 million from the state have helped reduce it to just under $49 million.

He said that the CTA will continue to find more efficiencies and carefully manage its headcount. Over the past year, the Board and management have embarked on an intense and thorough review of CTA operations with an independent team of efficiency experts, AECOM Consult. They have helped develop a blueprint for new initiatives reflected in his budget recommendations for 2006.

Kruesi added that since he joined the CTA in 1997, major efficiency initiatives have helped reverse over a decade-long downward spiral of service cuts, fare increases and lost ridership. In 2006, the number of CTA employees is projected to be approximately 1,200 (10 percent) lower than in 1997. Cumulatively, an estimated $1.025 billion has been saved through cost-cutting initiatives. At the same time, service levels and ridership have increased.

To offset spiking fuel prices, which continue to put significant pressure on the CTA budget, Kruesi said that he is proposing to increase cash fares and rail farespaid with Transit Cards by 25 cents, for a total fare of $2. In addition, those who pay cash would no longer be able to purchase transfers. The increase is expected to generate $17 million. The CTA uses about 24 million gallons of fuel annually. In 1999, fuel costs of $12.5 million made up 1.5 percent of the budget. For 2006, fuel costs are budgeted at $48 million and comprise 4.6 percent of the proposed budget. Kruesi said that other initiatives and anticipated ridership growth will generate an additional $2 million in revenue.

The fare proposal is identical to the one approved, but not implemented, for 2005. Fares would not increase for customers who use either of the Chicago Card options and transfers would still be available to them for an additional 25 cents. Fares would also remain the same for all passes, such as the 7-day or 30-day passes. The $5 purchase fee for Chicago Card and Chicago Card Plus will be waived from December 1, 2005, through the first quarter of 2006 as an additional incentive for customers to switch from cash.

Kruesi recommends maintaining existing service levels. But in order to be able to afford to do so, Kruesi said he reluctantly concurs with the RTA's recommendation that the CTA transfer an additional $29 million in capital funds to its operating budget in 2006. Kruesi said he accedes to this in the spirit of regional cooperation and with the understanding that this is purely a temporary measure to buy time for the region's funding issues to be resolved.

?As I have made very clear in the past, I think this practice is bad public policy. I recognize, however, that circumstances are different this year and that we are not being asked to do this permanently, but rather as a prudent interim step that will enable us to avoid a worsening spiral of service cuts while the General Assembly works on funding," Kruesi said. ?If we do not take this action, a downward spiral of deep and continual service cuts will begin again, thereby undoing all the work that has rebuilt and revitalized the CTA in recent years. So, in the spirit of regional cooperation, I recommend that the CTA compromise on this point and allow our new RTA leadership, the General Assembly and Governor Blagojevich the opportunity to continue to work with CTA, Metra and Pace on the complex long-term issues that are really critical to all our financial futures."

With these steps, Kruesi said, the CTA can maintain its existing service for the next year, close its budget gap and meet its financial obligations while continuing to work toward permanent financial stability.

In addition, due to the General Assembly's decision to transfer paratransit service to Pace exclusively, with RTA oversight, Kruesi recommends that the previously planned fare increase for paratransit scheduled to go into effect at the start of 2006 be cancelled to allow Pace maximum flexibility going forward.

Last year, the Chicago Transit Board approved an increase of the paratransit fare from $1.75 to $3.50. When the General Assembly provided additional funding, the fare increase was postponed until January 1, 2006. Kruesi said that in his view it would not be appropriate for the CTA to adopt significant policy changes during this transition period since it will not be operating paratransit much longer and will, like Metra, provide mainline service only.

Kruesi reported that the agency's financial performance for 2005 is better than expected. Through August 2005, systemwide ridership was up 3.8 percent over 2004. With increased ridership comes an increase in farebox revenue. Combined with investment income, advertising revenue and parking fees, CTA's 2005 system-generated revenue is projected at $510.5 million, which represents a growth rate of 2.1 percent over the 2005 budget. In addition, sales tax revenues in the city and suburbs are stronger than projected due to a rebounding economy.

The 2006 budget proposal includes a capital improvement program of $1.8 billion over the next five years. The five-year plan includes $41 million in preventive maintenance in 2006 and $65 million in 2007, which will alleviate shortfalls in CTA's 2006 and 2007 operating budgets. It will, however, defer some capital projects to later years. The RTA has indicated that it will provide $61.9 million in additional capital funding to CTA in 2006 and allow the agency to use capital funds for preventive maintenance. When future funding is made available by the Illinois General Assembly, additional capital funds will not have to be diverted to the operating budget and CTA's ability to maintain and upgrade its infrastructure will be improved.

Capital projects include expanding capacity on the Brown Line, renovation of the Howard 'L' station on the Red Line, upgrading the bus fleet and maintenance of the rail fleet.

A substantial amount of CTA's capital improvement program remains unfunded. As the Illinois legislature looks at providing additional capital funding to the region, CTA will be conducting a thorough and systemic look at the additional funding needed to reach a state of good repair, similar to the comprehensive assessment undertaken in anticipation of Illinois FIRST. Vital projects such as replacement of subway lighting and ventilation systems, viaduct renewal, track and track bed renewal, and station upgrades remain unfunded. In addition, CTA is preparing federally required analyses for new projects such as the Circle Line and Ogden Transitway, and continuing planning for extensions of the Orange, Red and Yellow Lines as well as express airport service, to meet the needs of future growth in the region.

CTA customers and the general public will have the opportunity to provide comments to the Chicago Transit Board on the President's 2006 Budget Recommendations at an upcoming public hearing scheduled for Thursday,October 27 at 4 p.m., CTA Headquarters, 567 W. Lake Street.

The Chicago Transit Board will consider the budget at its November meeting. It will also be presented to the Cook County Board in November, as required by the RTA Act. The Chicago Transit Board must submit a budget to the RTA by November 15th and the RTA must approve budgets for the service boards by year end.

Written comments may be submitted through November 4, 2005, by writing to the following address: Chicago Transit Authority, P.O. Box 7567, Chicago, IL 60680-7567, Attention: Gregory Longhini, Assistant Secretary.

E-mail comments may be submitted through November 4, 2005, by writing to CTABoard@transitchicago.com.

The proposed budget is available for public review at the CTA's General Office at the 567 W. Lake Street, 2nd floor, weekdays between 8 a.m. and 4:30 p.m. Regular and large print copies are available at this location. Audio copies are also available by request.

Copies will also be available at the main office of the Regional Transportation Authority located at 175 W. Jackson, 15th floor, Chicago. A copy of the proposed budget is also posted on the CTA's web site at www.transitchicago.com. A list of libraries and additional locations where the document will be available is attached.

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Copies of the budget proposal will also be available at the reference desks of the following libraries:

Chicago Public Library - 3 Regional Locations
Harold Washington Public Library400 S. State Street, 10th FloorChicago, IL 60605

Sulzer Regional Library4455 N. Lincoln Ave.Chicago, IL 60625

Woodson Regional Library9525 S. HalstedChicago, IL 60628

Suburban Libraries
Evanston Public Library1703 Orrington Ave.Evanston, IL 60201

Evergreen Park Public Library9400 S. TroyEvergreen Park, IL 60805

Oak Park Public Library834 Lake St.Oak Park, IL 60301

Riverdale Public Library208 W. 144th St.Riverdale, IL 60827

Skokie Public Library5215 W. OaktonSkokie, IL 60077

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