Eliminate the Federal Transit Administration

Background

The Department of Transportation's Federal Transit Administration (FTA) provides financial and technical support to roughly 6,800 local public transit systems across the country, through about two dozen formula grant and competitive grant programs. Its funds support capital investments, and in some cases operating expenses, for subways, buses, light-rail and commuter rail systems, trolleys, and ferries. The FTA was created in 1964, when it was known as the Urban Mass Transit Administration. Spending for programs administered by the FTA and administrative costs for the agency are projected to total about $127 billion from 2021 through 2028, or about $15 billion per year, the Congressional Budget Office estimates.

Option

This option would phase out the FTA, terminating new spending on its programs after the Fixing America's Surface Transportation Act expires in 2020 and eliminating the agency entirely upon completion of its outstanding grants. The option would not affect the federal taxes on motor fuels that provide some of the funding for the FTA: The 2.86 cents per gallon now credited to the transit account of the Highway Trust Fund would continue to be collected, whether the revenues were credited to the (sole remaining) highway account of the trust fund or to the general fund of the Treasury.

Effects on the Budget

Implementing this option would reduce spending by $87 billion over 10 years, CBO estimates, reflecting CBO's current baseline projection for programs administered by the FTA. (That figure does not take into account mandatory spending associated with various costs of closing the agency, such as payments to former employees for accrued annual leave, unemployment benefits, and early retirement.) CBO projects FTA's budget authority by adjusting the amount appropriated in fiscal year 2019 by a measure of projected inflation. Savings would be smaller if lawmakers chose to phase out the FTA more gradually or to retain any of its programs by assigning them to a different agency, such as the Federal Highway Administration.

As with similar infrastructure programs, savings in outlays would initially be small relative to the reduction in budget authority because that reduction would cancel projects involving spending in multiple years. The bulk of the savings in outlays would occur within six years of the reductions in budget authority.

There is relatively little uncertainty about the option's savings relative to CBO's baseline—although whether actual appropriations made by the Congress would match CBO's baseline projections in any given year is itself uncertain. The transition costs of closing the FTA are somewhat uncertain but also relatively small in comparison with the agency's total budget.

Other Effects

The main argument for eliminating the FTA is that the benefits of public transit systems are primarily local or regional and should be financed at the local or state level. If the people who benefit from a transit system bear its costs, it is less likely that too many projects or overly costly projects will be undertaken or that services of low value relative to their ongoing costs will continue to be supported. Relatedly, decisions made on the basis of state or local funding would not be influenced by the greater availability of federal support for capital investments than for operating expenses. Less capital-intensive options (for example, dedicated bus lanes instead of light-rail lines) are often more cost-effective overall.

An argument against eliminating the FTA is that public transit has benefits that extend beyond the area directly served. Without continued federal funding, transit services would be cut back and systems would deteriorate, leading to increased road use, with its attendant problems of traffic congestion, accidents, and emissions of local air pollutants and greenhouse gases. In turn, greater congestion could increase demand for road construction and development in outlying areas. Dispersion of economic activity to such areas, where greater distances and lower population density make the provision of transit services more costly, could reduce access to jobs by people who do not own cars.