By Scott Ryder, News Correspondent 

Ridership on the Massachusetts Bay Transportation Authority (MBTA) has been at an all-time high since last year, but the authority recently proposed fare hikes and service cuts to balance its operating budget, which includes a $185 million deficit for Fiscal Year 2013 and more than $5.5 billion in outstanding debt. Since its formation in 1964, the MBTA was burdened with inefficiencies and fiscal irresponsibility, according to a study entitled “Financing the MBTA” published by the Beacon Hill Institute, the research arm of the Department of Economics at Suffolk University, in 1999.

Before 2000, the authority operated on a backward funding plan, meaning it was reimbursed each year by the Commonwealth of Massachusetts for any outstanding expenses, according to the study. The Massachusetts state legislature wanted to change the authority’s budget to a forward funding plan, which would require the MBTA to operate within an allocated budget each year. This new system, by design, would require fiscal responsibility at a time when the MBTA was seen as “a model of inefficiency and dependency on government largess,” according to “Financing the MBTA.”

Jonathan Davis, the T’s acting general manager and former chief financial officer, has worked for the agency since 1996. He said he believes forward funding made sense when it was enacted. “I think forward funding was good,” he said in an interview with The News. “It brought budget discipline to the MBTA. It required us to take a look at our cost structure, [and] put in productivity measures and efficiencies.”

Under the forward funding budget, the MBTA was awarded 20 percent of the then-5 percent Massachusetts sales tax along with funds allocated by annual assessments of various cities and towns the T serves. In exchange, the MBTA was left with $3.3 billion in debt from the “Big Dig” highway project, according to “Born Broke,” a 2009 independent study by Brian Kane of the MBTA Advisory Board. But despite the efforts of the Massachusetts legislature to ensure a dependable revenue stream for the T that would not have to be revisited annually, including a 2009 state-wide sales tax hike to 6.25 percent, the plan has clearly not lived up to expectations; the MBTA is exploring options to close the projected $185 million budget deficit for Fiscal Year 2013. The T is holding public meetings concerning its two proposals released in January concerning possible service cuts and fare hikes.

“They would have what people thought was a pretty reliable source of income to depend on. Well, it didn’t turn out that way,” said Zach Tucker, a freshman stage and production management major at Emerson College and founder of Boston group Students Against T Cuts.

He said he has read virtually every article released by the MBTA Advisory Board, Central Transportation Planning Staff and the MBTA Rider Oversight Committee concerning forward funding. Davis echoed Tucker’s statement.

“I think the one thing that didn’t turn out the way that people expected on the forward funding was the rate of growth in sales tax,” Davis said. “Prior to forward funding taking place, sales tax [revenue] had risen somewhere between 6 and 8 percent per year. Since we’ve been under the [forward funding] sales tax formula, we’ve seen no growth in sales tax over those 12 years.”

Davis also said the T really had no choice over the decision to switch funding mechanisms.

“We’re a creature of the legislature and the legislation,” he said. “Certainly we will deal with whatever is given to us.”

Despite the sales tax allocation and regional assessments given to the T, its overall debt has increased from $3.3 billion in 2001 to roughly $5.5 billion as of June 2011, according to a June 24 Boston Business Journal article.

“What we’re seeing now is record ridership of public transit, probably higher than any time in our history, and people are seeing that it’s both convenient and affordable,” Davis said. “And, the question would be, should we be looking at reducing service in a time that people are needing it more and more? However, we have the stark reality of having a budget deficit. We can’t pay for service; we can’t put service out there that we can’t pay for.”

And, other than the sales tax projections, which didn’t materialize, the salaries of the unionized MBTA workers are at least partially responsible for the budget crisis, said one Boston-area economist.

“Across the board, public sector workers ought to be taking pay cuts,” said Dr. David Tuerck, professor and chair of the Economics Department at Suffolk University, and executive director of the Beacon Hill Institute, author of the “Financing the MBTA” study. “[There is] simply no justification in this particular climate to maintain existing compensation levels and even to give raises when we are desperate to keep, in this case, literally, the trains moving.”

MBTA administrators are considering eliminating weekend E Line service to close the impending budget deficit. The lowest annual salary of a full-time Green Line operator in 2010 was $47,548.80, according to public records. The highest annual salary was $64,084.80, although overtime allowed several workers in this category to gross more than $85,000. This category of 350 workers does not include inspectors, training staff or repair workers.

“Public workers in general, and this bunch of public workers in particular, have exercised union muscle to extract compensation from their employer that’s way beyond anything reasonable,” Tuerck said. “We’re going to get service cutbacks, and thus we’re going to eliminate jobs for MBTA workers, rather than getting the workers to accept reductions in compensation, which would make it possible to maintain the level of service, and keep these people working.”

Tuerck said he disagrees with the idea of allocating 20 percent of the state sales tax.

“What I would have considered to be better would be for the legislature to fund the MBTA out of general revenues, out of a review process that began all over again every year,” he said.

Tucker said he thinks forward funding isn’t the best way to finance the T.

“I think some hybrid of taking back some or all of the debt and new revenue sources – new revenue sources that increase with ridership, that don’t stay stagnant no matter how many people use the T, is the best solution,” he said.

He also said the MBTA should receive more help from the state, due to its economic importance to the commonwealth, not just to Boston.

“Boston, of course, is the capital of Massachusetts, so a lot of the business that benefits Massachusetts as a whole goes on here. I would make the argument that people in western and central Massachusetts who don’t directly use the T still benefit from it, because we are the seed of our state’s economy,” Tucker said. “I still pay income taxes, and I pay sales taxes which benefit [central and western Massachusetts] by paying for their public projects and their roads.”

Tuerck said it’s not that simple. He and his fellow economists at the Beacon Hill Institute compared the MBTA’s compensation to that of other unionized transit agencies in 1999, including the New Jersey Transit Corporation, the Maryland Transit Authority and the New York City Transit Authority (NYCTA). They found that, although all of the agencies paid relatively more to their workers than similar, non-unionized transit agencies, the MBTA paid the relative most. While the NYCTA paid workers on average 38.25 percent more than other New York state employers for similar positions, the MBTA pays about 65 percent more  on average than other state employers pay workers in the same occupations, according to “Financing the MBTA.”

“When we did the study, we decided that [the MBTA] was much more heavily subsidized than similar operations around the country,” Tuerck explained. “Forward funding was going to help, but the real problem was that the unions didn’t believe – and the management didn’t believe – that they would have to be held to a budget. And, thus, we’ve, over this period of time, had increasing compensation to the workers and a continued reluctance to get the riders to absorb a bigger share of the costs.”

Although it is unclear how the MBTA’s budget crisis will be resolved, Davis said he appreciates the involvement of the rider community at the public meetings that will continue through the end of March.

“What I like about these public meetings that we’re having is the passion that people bring to support public transportation, and I encourage all people, to the extent that they can, to come out to as many meetings as their schedule will allow them,” he said. “I think we all recognize that the revenue assumptions that went into forward funding have not materialized.”