State officials warn of transit funding shortfall, urge cautious cuts to avoid 'death spiral'

Ross McDonald, public change program manager, told a legislative committee on Feb. 17 that the state is modeling how to maintain transit service levels amid tight budgets and a projected shortfall.

McDonald said the state has been moving FHWA flex dollars into transit—about $4.8 million in recent practice—and that, despite providing a record $4.85 million to support urban transit this year, the agency faces continued pressure. “We don’t leave federal dollars on the table,” he said, describing the trade-offs inherent in flexing highway funds to preserve transit hours and miles.

The presentation laid out several funding streams and recent one-time legislative supplements used as non‑federal match. McDonald described FY26 top-line state match at roughly $2.2 million, earlier one-time additions including $640,000 from a T bill and increases of $850,000 and $1.2 million in prior years, and federal capital award timing that produces year-to-year swings (for example, a projected $9.7 million drawdown in a year tied to a $22 million bus purchase and related facility work).

Staff reported a projected $560,000 shortfall in 2027 and discussed scenarios in which larger shortfalls could materialize. McDonald said analysts including Chris Damiani, Dan Courier and Steve Foggle are modeling how much the state can reduce program levels without breaching federal performance thresholds—what the agency calls "stick factors"—and where administrative savings might help. He warned against relying solely on administrative savings, saying past cuts produced short-term efficiency gains but that the agency wants to avoid a “death spiral” of declining service quality that would reduce ridership and revenue.

Representative Webb asked whether large fluctuations in federal capital totals reflect different funding sources or one-time awards; McDonald answered that the swings largely represent the timing of capital projects (buses, facility fit-up and charging infrastructure) and the portion of multi-year grants expected to be spent in a given fiscal year.

The committee was told staff will continue refining budget scenarios ahead of the governor’s budget and internal committee work later in the year. The committee noted the topic will be revisited during upcoming budget deliberations and related meetings.