July 29, 2008
First, it is important to understand that transit agencies are not profit maximizing corporations and, therefore, are not governed by traditional economics. Plus, even if transit agencies were privately owned companies, they would probably be failing for the very same reasons that airlines are failing: the operating costs are too high and the demand for service is too elastic. Americans are willing to fly or to use transit, but only granted that prices are rock-bottom. Start raising fares and all of a sudden driving seems like a great alternative, even given the current price of fuel.
Where does government funding for transit come from? It varies from city to city; big capital projects are usually funded primarily by the federal government and operating funds come from local municipalities. In Cleveland, funding for operations comes from a sales tax levied in Cuyahoga County, which creates an interesting bind. If we're driving less, that could mean we're not driving to places like shopping malls and movie theaters; or, if we're not driving less, by the time we get to the mall, we have less disposable cash to spend on goods and services. Either way, less sales tax is being collected and funding for transit is stalled.
In May, vehicle miles traveled fell 3.7% from a year earlier. Fewer miles driven, combined with some switching to slightly less inefficient vehicles means fewer gallons of gasoline are being purchased. The federal gasoline tax hasn't been raised in over a decade, despite the fact that labor and materials costs have soared, and not surprisingly, the national Highway Trust Fund is expected to be more than $3 billion in the hole next year. There are folks who are still convinced that technology will save us, and thus see a need to continue funding road infrastructure (they talk about "technological breakthroughs", even though the problem isn't that tech doesn't exist, but rather that it is not economically competitive). The Bush Administration has proposed raiding the Department of Transportation's mass transit account to make up the difference.
If you are baffled by all of this, you aren't alone. Fuel prices have skyrocketed; they may come down temporarily, but we have been warned, and yet, our country's leadership is trying to do the exact opposite of what it should: they are stealing money from high demand transit projects in order to fund driving which, for the first time in decades, is seeing a decrease in demand. Really, less driving isn't inherently killing public transit, but the way we're responding to it certainly is.