Fuel Prices, Free Rides, Loss of State Subsidy and Soft Economy Combine to Put Pressure on the Budget
Chicago Transit Authority President Ron Huberman today outlined a series of belt-tightening measures the CTA is taking to reduce costs in light of soaring fuel prices, the loss of a state subsidy for reduced fare rides, new free ride programs and lower than anticipated tax proceeds that have combined to put pressure on the CTA's $1.2 billion budget. In total, the new and ongoing cost control initiatives are estimated to save the CTA about $40 million.
Current projections indicate that CTA's fuel and energy costs for 2008 will be $37.3 million higher than last year; the loss of the reduced fare subsidy will be $16 million; the free ride program will cost at least $20 million this year, and the RTA has reported that tax proceeds are coming in lower than projected.
"In order to keep the CTA on the right track financially, we have to stay on top of the budget and keep making adjustments as often as needed," said Huberman. "In July we announced steps we were taking to offset rising costs, such as fuel. The realities of a weak economy and new unfunded mandates such as the free rides programs require us to find additional ways to cut costs."
Huberman announced the elimination of 43 positions and said that CTA plans to eliminate 80 administrative positions before the end of the year through a combination of layoffs and cutting vacant positions. The job cuts announced today are expected to save the CTA $4.9 million (total includes fringe benefits as well as salaries).
In addition, he said the CTA is moving ahead with plans to outsource refuse collection at its facilities. This is expected to save the CTA more than $500,000 annually.
Other cost cutting initiatives already underway include:
- deferring contract spending for non critical needs;
- changing the labor mix to reduce reliance on overtime;
- reducing bus maintenance costs through fleet upgrades and more efficient preventative maintenance practices; and
- using technology to improve the efficiency of bus supervision, making supervisors mobile instead of stationary.
Huberman said that 43 positions announced today include nine management positions. The other positions come from realignments in the Technology, Purchasing, and Law departments in order to reduce costs and operate more efficiently.
He said the remaining positions will be identified in the next few months as the CTA develops its 2009 budget proposal. Each department has been directed to reduce costs.
Earlier this year, the Illinois General Assembly passed legislation to provide the CTA with additional funding. It enabled the CTA to issue bonds to restore the financial health of the pension and establish a retiree health care trust. It was also expected to provide sufficient funding to allow CTA to get its operating budget back on solid financial footing.
However, due to the economic slow down, some projected tax revenues have been less than anticipated. In addition, new free rides mandates have been added. Most recently, the reduced fare reimbursement was vetoed, impacting the CTA's bottom line by $32 million annually. The CTA was counting on this annual funding to help offset a portion of the free ride programs. The lack of a new state capital program has also strained the CTA's operating budget as resources are diverted to maintain aging equipment and facilities.
Although these complications, in addition to skyrocketing fuel prices, have put pressure on the CTA's budget this year, Huberman said the agency is committed to maintaining service and improving quality for customers. The CTA will continue to look internally for ways to cut costs and operate more efficiently.
"Like every rider of the CTA, we had hoped that the state funding would be enough to bring the CTA financial stability, but soaring fuel prices, the weak economy, all the new free rides initiatives and loss of expected revenue are resulting in continued financial challenges," said Huberman. "Still, we have devoted significant resources to maintaining service levels, improving the cleanliness and reliability of our vehicles and investing in projects to enhance service and safety. It has been our goal to avoid budget actions that would impact the riding public, and that is why we continue to look internally for ways to tighten our belt."
Huberman said that the CTA is still developing its 2009 budget, but has already begun the process of cutting costs.
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