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Because both the transit workers union and SEPTA have been arguing back and forth over the state of SEPTA’s finances, we thought it would be good to take a step back and explain how the authority is funded.

Like every transit agency, revenues that SEPTA gets from the fare box — the money SEPTA gets from riders buying their TrailPasses or forking over their $2 to the bus driver — don’t cover operational costs.

Put simply, public transit is a public utility, much like water or gas, and a combination of federal, state and local subsidies helps SEPTA make ends meet.

As you can see from the pie chart above, the largest chunk of SEPTA’s total operating funding (48 percent) comes from the state. Next comes revenue from the fare box (37 percent) and money from Southeastern Pennsylvania counties (7 percent).

Federal subsidies make up a paltry 3 percent of SEPTA’s operating revenue because federal transit dollars are mostly restricted to agencies’ capital budgets. The feds will help pay for capital improvements, like station maintenance or buying new regional rail cars, but older and more developed systems like SEPTA are largely ineligible for operating subsidies. It’s unclear if this will change when the federal transit bill is reauthorized by Congress in the next couple of months.

So, how's SEPTA doing? The Transport Workers Union has been claiming that SEPTA is flush with cash, seeing increased ridership and large infusions of federal stimulus money, while the authority is bemoaning problems with state funding and decreased ridership.

In a way, both sides are right, and both sides are wrong.

SEPTA is undoubtedly in better financial shape than it was in 2005, when it negotiated its last contract with the union.

A lot of that has to do with Act 44, a state law that Gov. Rendell signed in 2007 that was meant to provide a steady source of funding for transportation throughout the state. Previously, the authority had to go to Harrisburg each year, hat in hand, begging for money, which lawmakers were often unwilling to provide. This led to chronic budget shortfalls and the constant threat of service contraction and deferred maintenance. In fact, in 2005, it faced a $96 million hole.

Things definitely aren’t that bad today. As of right now, planned service improvements are going forward, and there's enough money to bring the system up to a state of good repair.

At the same time, the outlook isn't completely rosy.

Ridership is down 5 percent this fiscal year because of the recession, offsetting increases SEPTA saw when gas prices spiked last summer. Revenues are therefore down about $5 million.

In addition, Act 44, which relies on sales tax revenue, is expected to reap SEPTA less cash than previously, as people hold back on purchases. And the act’s future depends on the state’s efforts to toll Interstate 80. Bonds from those tolls are supposed to secure much of the increased state funding SEPTA has been expecting going forward.

The state needs to get permission from the feds to toll the road. Its first request was rejected by the Bush administration; it just submitted another proposal.

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