Equity and public finance issues in the state subsidy of public transit

Purpose - Public transit is an essential service for people without access to an automobile, particularly those who are low income, elderly, or with disabilities. Previous research has found that large urban transit agencies receive less state funding per ride provided than suburban agencies. The paper aims to discuss this issue. Design/methodology/approach - Using data from the National Transit Database for 37 of the largest US transit agencies, the authors create a panel data set of services provided and sources of operating funds for the period 1991-2009. The authors develop an equity index that represents the difference between the share of state funding that an agency receives and the share of the total transit rides in the state that it provides. The authors use fixed-effects regression modeling to examine the determinants of fiscal balance and the equity index. Findings - The authors find that the share of an agency’s operating funds that come from dedicated taxes is a significant predictor of fiscal health as measured by its fiscal balance; reliance on passenger fares and provision of bus service are significant predictors of operating deficits. The equity index finds that large agencies receive less than their fair share of state transit funding based on ridership. Practical implications - Dedicated tax revenues are a key ingredient to transit agencies’ fiscal stability. Transit agencies’ fiscal condition in states and localities that do not have a dedicated tax could benefit from such a tax. Social implications - Transit is an essential service for people who are unable to drive or own an automobile; funding inequities maintain old patterns of segregation and isolation for “transit dependents.” Originality/value - This study supports earlier research finding that large agencies receive less than their fair share of state funding based on ridership. It contributes to the literature on transportation equity and transit finance.