Port Authority passengers and finances in the pandemic

Summary:  The Port Authority of Allegheny County has been hit hard by the pandemic in terms of ridership and fare collection—both down about 67 percent.  However, state and federal funds offset most of the operating losses.  This has allowed the Port Authority to maintain employee counts despite falling ridership and service levels. 

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Ridership plunge

In terms of passengers traveling by bus and light rail, the Port Authority of Allegheny County (PAAC) has had a disastrous experience since the impacts of the coronavirus began to take their toll on the economy and the traveling public. During the eight-month April-through-November 2020 period, average total passenger count fell 64 percent compared to the same months of 2019. 

Compared to that same period in 2019, weekday bus passengers were down 67.5 percent while the light rail weekday count plunged 85 percent. Meanwhile, Saturday and Sunday bus rider count declines were smaller than the weekday drops (about 54 percent) but weekend ridership is on average only one third of the weekday total. Still, the smaller drop in weekend bus riders accounts for the overall eight-month drop being slightly less than the decline in the weekday number. For light rail, the weekend losses were almost as large as the decline in weekday ridership.

And there was no sign of a meaningful sustained pickup in passengers over the eight months. November weekday bus ridership was still 67 percent below the year ago reading while the light rail weekday count remained 82 percent behind the 12-month-earlier level. In short, the virus has taken a huge toll on mass transit use in Allegheny County.  

Financial impacts

Not surprisingly, passenger revenue has closely tracked the sharp drop in ridership, falling 67 percent over the first four months of fiscal year 2021 (July to October 2020) compared to the same period a year earlier. (October figures are the latest financial data available).

Based on data from the audited financial report for FY 2020, Port Authority had an operating loss of $499.1 million compared to $479.7 million in FY 2019, owing primarily to significant declines in passenger revenue in the March through June period. On the expense side, higher wage costs and depreciation were offset by a large decline in net pension expense from the FY 2019 level that lowered the total operating cost increases to just over a $1 million. Wages and salaries rose briskly by $10.9 million, or 6.7 percent, due to contract-based increases and higher employee counts during the year

FY 2020 non-operating revenue—funds provided entirely by government sources—rose by slightly over $25 million compared to FY 2019.  At the same time government capital grants fell by $10 million.  All told, PAAC’s net position fell by $64 million compared to a $59 million drop in FY 2019. It’s not a massive difference as state and federal funds rose to offset most of the FY 2020 operating losses.

More recently, unaudited data from the authority’s website show that for the four months July to October (latest posted data), PAAC had a cumulative deficit of operating expense over operating revenue of $119.5 million, up from $96 million for the same four months in 2019.

Thus, the Port Authority was running an average monthly operating deficit of $29.9 million. However, operating subsidies averaging $25.6 million held the net loss to a monthly average of $4.25 million. Note that during the period, the state’s general operating grant made up 78 percent of the total operating subsidy. In FY 2019 it accounted for 79 percent. Most of the remaining funds consisted of other state allocations or federal transit fund sources.

Expenses for the July-to-October 2020 period increased compared to the same months a year earlier as wages and salaries rose from $48.4 million to $50.7 million and benefits moved upward from $51.4 million to $52.2 million.  Those increases, along with a larger outlay for purchased services, were enough to offset lower expenses for materials and the ACCESS program and resulted in a net increase of $765,000 in outlays. As noted above, passenger revenue fell 67 percent from $30.5 million to $10 million.

Normally, revenue from passengers amounts to roughly a fourth of total PAAC operating revenue and 20 percent of total including capital grants. Taxpayers and turnpike users are covering the remainder. In the July-to-October 2020 period, passenger revenue was down by $20 million and represented only 9 percent of total operating revenue during the four months (capital grants were not posted in the four-month report). The other 91 percent was provided courtesy of government funding.

Clearly, if state and federal subsidies were not so large, or, said another way, if passenger revenue represented a much greater share of total revenue, the massive 67 percent drop in passengers would have been devastating to the authority’s financial picture. 

Need for employee count and costs adjustment 

In March 2020, at the start of the pandemic, the Port Authority announced a 25 percent reduction in service.   But there have been no accompanying employee cuts as the increases in wage and salary expenses and benefit expenses during FY 2020 and over the last several months show. In contrast, the Massachusetts Bay Port Authority announced a 25 percent staff reduction in November as passenger demand remains very weak.

Over the last few years, Allegheny Institute Policy Briefs have documented the extraordinarily high bus per revenue mile and per revenue hour operating costs at the Port Authority in comparison to transit agencies around the country.  The following quote from Policy Brief (Vol.18, No.18) of May 2018 illustrates the extraordinarily high bus operations costs.

Total operating expenses per revenue hour data for 2016 were gathered from the National Transit Database for 28 transit agencies across the country. Of the 28 only one, New York City at $226, had higher operating cost per revenue hour than PAAC’s $189.69. Boston ($185.14) and San Francisco ($186.54) were close to PAAC. The next most expensive were Newark, N.J. at $167.47, Seattle at $159.41 and Southeastern Pennsylvania Transportation Authority (SEPTA) in Philadelphia at $158.40. D.C. Metro was $152.30 and Los Angeles was $153.73.

A detailed comparison of PAAC with 10 comparably sized agencies in Charlotte; Cincinnati; Columbus; Cleveland; Milwaukee; Minneapolis; St. Louis; Atlanta; San Antonio and Salt Lake City was performed.

The comparison study found that PAAC had total bus operating expenses per revenue hour of $189.69 while the 10-agency comparison group averaged $117.42, making PAAC 62 percent more expensive than the 10-system average. Total employee cost per revenue hour at PAAC was $150.08 compared to an average of $89.77 for the 10 systems making PAAC employee costs per hour 67 percent higher than the group average. Fringe benefits for all bus service employees at PAAC was $72.76 and the average for the 10 systems was $36.27 making PAAC’s costs per hour 100 percent greater than the group.

In December 2019, Policy Brief Vol.19, No.43 confirmed with more recent data the findings of the 2018 Brief.  For the 10 agencies, average total cost per bus revenue mile in 2017 was $9.63 and with PAAC at $14.30. Meanwhile, the total cost per revenue hour average for the sample was $123.69 with PAAC highest at $185.91. In short, PAAC’s costs are far above its peers and near the top for all transit agencies in the country, even the large cities with far higher costs of living.

Given ongoing raises at PAAC there is little chance that the authority’s very high cost structure relative to other agencies has changed very much or will change appreciably in the future. Thanks to the collective bargaining power the unions possess in having the right to strike, the situation is not likely to improve.  Pennsylvania public transit workers are one of only a handful with the right to strike and have used that right to coerce very favorable contract settlements over the years.

Unfortunately for PAAC, the Policy Brief of Jan. 13 pointed out that funding for mass transit in Pennsylvania will face a huge problem after FY 2022 when the requirement that the Turnpike Commission contribute $450 million to PennDOT for mass transit and road and bridge work each year will be reduced to $50 million. 

The Legislature will need to come up with a major source of funding to replace the Turnpike Commission’s contribution, and quickly, or the enormous burden will fall on riders and affected local governments. With Pennsylvania’s fuel taxes already among the highest in the country, raising them further is not an option.  Nor is extending the requirement for the Turnpike Commission to pay the $450 million per year. The Turnpike Commission’s enormous building up of debt in the last several years and the continuously rising tolls simply cannot persist.

Whatever the Legislature comes up with, the egregiously high costs at the Port Authority of Allegheny County must be taken into consideration. Of course, there is the possibility the federal government will be asked to help and will provide the necessary funding if the state is unable to find a solution.

We must conclude with these two questions:

Is it reasonable to continue indefinitely the rationale that very expensive public transit is such an essential service that no employees should ever be laid off even if ridership remains 50 percent—or more—below its pre-pandemic levels for another year or more?

In light of the pains being suffered by many in the private sector as a result of COVID-19, is every municipal government and authority employee in the county so absolutely necessary that none will ever be laid off?

Port Authority bus service still very costly compared to peer agencies

Summary: As the Port Authority of Allegheny County (PAAC) continues to push its proposal for bus rapid transit from Pittsburgh’s Oakland neighborhood to Downtown, it’s time to look at the cost of current bus service for the agency.  This Policy Brief provides an updated comparison of PAAC operating costs for PAAC and nine transit agencies from similar-sized cities.

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This Brief updates Vol. 18, No. 18, that analyzed 2016 statistics.  That report found PAAC’s operating costs per revenue hour to be 62 percent higher than the peer group average.  Indeed, PAAC costs per revenue hour were higher than Boston, San Francisco, D.C., Philadelphia and Seattle. Only New York City was more costly than PAAC.

Using 2017 data from the National Transit Database, the most recently available, this Brief looks at how PAAC compares to transit systems in nine cities: Cleveland, Charlotte, Cincinnati, Columbus, Indianapolis, Kansas City, Milwaukee, San Antonio and St. Louis.

Unfortunately, this updated comparison finds there has been no improvement in PAAC’s cost structure compared to the other cities. It still has the highest total operating expense in this sample of 10 transportation systems ($301.1 million).  Total operating expenses for direct operating of motor buses includes items such as operators’ wages and salaries, fringe benefits for operators, fuels, lubricants, tires and tubes used by the buses.  It also includes vehicle maintenance, non-vehicle maintenance and general administration in the direct operation of motor buses. 

For the entire 10-city sample the average operating costs were just $134.9 million, meaning that PAAC was more than twice the average of this group of transit agencies.  The next highest amount in the sample belonged to San Antonio ($165.9 million).  Thus, PAAC’s total cost for running the bus system is $135.2 million higher than the next largest spending system in the sample. 

Because the peer group has a fairly wide range in the size of operations, a better comparison of costs takes size into account. One way to adjust for size difference is to compare total operating expense per revenue mile. 

PAAC buses covered 21.05 million revenue miles in 2017 while buses in San Antonio (22.02 million) covered the most in this sample of 10 systems. The lowest revenue miles occurred in Indianapolis (6.92 million) while the average for the 10 cities was 13.81 million. 

For the 10 agencies, average total cost per revenue mile in 2017 was $9.63 and ranged from $7.53 (San Antonio) to a high of $14.30 (PAAC).  These two transit systems also logged the most revenue miles in the group, yet PAAC’s costs per revenue mile were 90 percent higher.  Cleveland at ($12.75) was the second-most expensive but still $1.55 lower than PAAC.  The group average of $9.63 was $4.67 (48 percent) below PAAC. 

The most useful and relevant cost measurement for comparison is total cost per revenue hour. This measure reflects the expenses incurred per hour of operation, picking up and delivering passengers. The number of miles and the number of passengers can vary considerably by route and time of day.  But the expenses pile up every hour of operation, regardless of miles and passengers. In 2017 PAAC recorded 1.62 million revenue hours, second only to San Antonio’s 1.65 million hours.  For the 10-agency group, average revenue hours stood at 1.07 million hours. Four systems fell below the million-hour mark (Charlotte, Cincinnati, Indianapolis and Kansas City) and six above. 

Total cost per revenue hour average for the sample was $123.69, with a range of $185.91 (PAAC) to $98.80 (Milwaukee).  PAAC is $62.22 higher than the sample average and $87 higher than Milwaukee.  Cleveland, the next highest agency had a total cost per revenue hour that is $39 less than PAAC—a stunning indication of just how expensive bus transit is in Allegheny County.  If PAAC operated at the average cost of $123.69, with 1.62 million revenue hours, the agency could have saved about $100.8 million in 2017. 

One contributing factor to the high expense level is operator compensation.  On a per revenue mile basis, PAAC had the highest operator wages and salaries per mile at $2.86—15 cents higher than the next highest city, Cleveland.  The average for the sample was $2.42 per revenue mile.  PAAC was 42 cents higher than the sample average.  If PAAC’s operator wages and salaries would have been at the sample average, it could have saved $8.8 million. 

But perhaps a more egregious example is the level of fringe benefits paid to those in vehicle operations.  The total fringe benefits paid in 2017 were $70.6 million—$10 million greater than the wages and salaries total of $60.1 million.  It was one of only two transit systems to pay out more in fringe benefits than salaries (Columbus paid $31.5 million in fringe benefits and $30.8 million in wages and salaries). 

As we have written many times before, most recently in Policy Brief, Vol. 18, No. 13, PAAC has huge legacy costs that will take a long time to rectify. 

On a per revenue mile basis, the contrast is very stark.  PAAC spends $3.35 per revenue mile on fringe benefits while the 10-sample average comes in at $1.96—a difference of $1.39.  The next highest paying city is Columbus ($2.42).  In fact, PAAC skews the average as there are six cities paying in a range of $1.69 to $1.42 per revenue mile for fringe benefits for bus operations—about half PAAC’s payments.  In addition to Columbus, only Milwaukee ($2.33) and Cleveland ($2.22) in this sample pay more than $2.00 per revenue mile in fringe benefits. 

No matter to which peer group of cities PAAC is being compared, last year’s (Vol. 18, No.18) or this year’s sample, its costs are far out of line and outrageously more expensive on a per revenue mile or per revenue hour basis.  The high costs are being driven in large part by high personnel costs such as operator wages and fringe benefits.  These high costs can be directly attributed to two things—the state law giving transit workers the right to strike and the loyalty and support of most elected officials for unionized workers.  As mentioned above, just lowering the total expense per revenue hour to the sample average would save the authority over $100 million.  This isn’t just a problem for residents of Allegheny County or the people who pay bus fares but for taxpayers across Pennsylvania, including the users of the Pennsylvania Turnpike, whose tax dollars and tolls help fund the system.

Details on the Port Authority’s Extremely Costly Bus Service

Summary: A recent Policy Brief (Vol. 18, No. 13) demonstrated the Port Authority of Allegheny County’s (PAAC) very high bus operating expense compared to five comparably sized transit agencies. This Brief expands the number of agencies compared and looks at additional measures of efficiency and pay levels to develop a thorough understanding of the key differences that lead to PAAC’s extremely expensive bus operations. The news is not good. PAAC’s bus service is inexcusably costly and imposes far too heavily on taxpayers and Turnpike users.

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As noted in the March Policy Brief, the most comprehensive measure of operating cost effectiveness for comparison purposes is operating expense per revenue hour. That is, the non-capital outlays required to deliver services divided by the hours buses are actually on routes picking up and discharging paying passengers.

Total operating expenses per revenue hour data for 2016 were gathered from the National Transit Database for 28 transit agencies across the country. Of the 28 only one, New York City at $226, had higher operating cost per revenue hour than PAAC’s $189.69.  Boston ($185.14) and San Francisco ($186.54) were close to PAAC. The next most expensive were Newark, N.J. at $167.47, Seattle at $159.41 and Southeastern Pennsylvania Transportation Authority (SEPTA) in Philadelphia at $158.40. D.C. Metro was $152.30 and Los Angeles was $153.73.

No other agency in the group of 28 had total cost per revenue hour over $150. Several were in the $140s including Cleveland, Minneapolis, Miami, Syracuse and New Orleans. Chicago was $139.14. The remaining 14 bus systems had costs per revenue hour ranging from $101 to $130, including Phoenix; Buffalo; Jacksonville; Dallas; Charlotte; Milwaukee; Columbus; Salt Lake; Denver; Indianapolis; Cincinnati; St. Louis; San Antonio and Atlanta.

For detailed comparison with PAAC, a group of 10 systems were selected:  Charlotte; Cincinnati; Columbus; Cleveland; Milwaukee; Minneapolis; St. Louis; Atlanta; San Antonio and Salt Lake.

Operating expense per revenue hour is made up of several expenditures and factors, including operator wage expenses; wages of other employees necessary to produce bus services; fringe benefits of all employees involved in bus service delivery and nonemployee expenses (fuel, etc.), the percentage of vehicle hours that are actually on revenue-producing routes and any time for which drivers are paid while not actually operating a vehicle.

For purposes of this analysis the ratio of operator wages paid, other employee wages and fringe benefits for all bus-related employees to revenue hours and to vehicle hours were calculated for each of the comparison agencies. Recent estimates of average hourly wages for drivers for each agency were collected.

PAAC had a total operating expense per revenue hour of $189.69 while the 10 agency comparison group averaged $117.42, making PAAC 62 percent more expensive than the 10 system average.  Of the 10 agencies, Cleveland had the highest cost per revenue hour at $148.86 followed by Minneapolis at $145.57. The lowest operating cost agencies were Charlotte ($101.31), Milwaukee ($101.28) and San Antonio ($103.28).

Calculated on the basis of cost per vehicle hour, PAAC stood at $161.58 and the average for the 10 was $107.44 making PAAC 50 percent more expensive than the group average. Note that PAAC’s 62 percent greater operating expense per revenue hour compared to the 10 systems is significantly higher than the 50 percent difference in the cost per vehicle hour. This results in part because only 85 percent of PAAC’s vehicle hours are actually revenue hours while the average of the 10 comparison agencies was 91.5 percent.

A look at the components of operating expenses reveals the underlying problem with PAAC’s extremely high relative operating expense per revenue hour.

The most obvious comparative cost measure is driver wage rate.  PAAC’s average of over $25 per hour is 32 percent above the 10 system average of $18.98. The highest wage rate agencies are in Milwaukee, Minneapolis and Cleveland with average hourly wages of between $24 and $25.  The lowest hourly wage agencies were in Atlanta, San Antonio, St. Louis, Cincinnati and Salt Lake with wages between $15 and $17 per hour.  Among the very large transit systems reviewed, Chicago’s driver wage was just under PAAC’s while Boston’s was slightly higher. New York and San Francisco at $31 plus per hour were much higher.

Total operator wages expended per revenue hour to deliver bus service were $37.48 at PAAC and averaged $28.77 for the 10 agencies, a difference of 30 percent. The highest wages per revenue hour for the 10 systems were in Minneapolis at $36.19, followed by Cleveland $32.12 and Cincinnati at $32. The lowest operator wage expense per revenue hour was in Columbus ($23), followed by Atlanta ($25.45); San Antonio ($25.88) and Salt Lake ($25). The remaining three systems had expenses ranging from $28 to $30 per revenue hour.

Note that PAAC’s total operator wage payments per vehicle hour were $31.92, reflecting the fact that only 85 percent of vehicle hours are actually revenue producing hours. Still, the operator cost per vehicle hour is about $6 higher than average driver wages per hour.  This occurs because of overtime pay and pay for time the operators are not driving but are still on the clock.

For the remaining analysis only per revenue hour figures will be discussed since the relation of those costs to cost per vehicle hour has been established.

The second cost component examined is wage expense for bus service employees other than operators. For PAAC the wage expense per revenue for non-operator employees is $39.85 while the average for the 10 comparison agencies is $24.73 making PAAC 61 percent more costly than the group for this cost component. The highest expense among the 10 agencies was in Cleveland at $36.80. The lowest non-driver wage expense agencies were Charlotte ($17.20); Columbus ($22.88); St. Louis ($19.99); San Antonio ($20.54) and Milwaukee ($12.31).

The final component of employee cost is the fringe benefits for all bus service employees. At PAAC fringe expense per revenue hour in 2016 was $72.76 and the average for the 10 systems was $36.27 making PAAC’s costs per hour 100 percent greater than the group. Cleveland had the highest fringe expense per hour at $47.57, followed by Minneapolis at $46.58. Charlotte was lowest at $22.47. The rest ranged between $31.50 and $39.

Total employee cost per revenue hour at PAAC was $150.08 compared to an average of $89.77 for the 10 systems making PAAC employee costs per hour 67 percent higher than the group average.  The highest employee cost system in the group was Cleveland at $116.50 and Minneapolis at $116.07. Lowest employee cost was posted by Charlotte at $68.59. The other systems’ employee costs ranged from $78 to $91 with most in the $80s. In short, PAAC’s employment expenses are enormous compared to these similar sized agencies.

Finally, the cost comparison analysis looks at non-employee costs. PAAC’s non-employee expenses per revenue hour were $39.61. The 10 system average was $27.65, making PAAC’s non-employee costs per hour 43 percent more expensive than the average.

All told, the operating expense per revenue hour was $189.69 at PAAC.  None of the 10 similar size systems came anywhere near that close to that figure with Cleveland the closest at $148.90.

PAAC’s costs are not just a problem for Allegheny County for matching funds and fares, the agency also receives substantial state funding.  For many years, the management and boards at the authority succumbed to union pressures in order to avoid strikes.

Consider that if PAAC had the same cost per revenue hour as the 10 similar size agencies, it would have cost $114.8 million less than the $301 million PAAC actually spent for the 2016 level of service. Just lowering PAAC to SEPTA bus costs per revenue hour would save $48 million per year at current operation levels. Then, too, finding ways to raise the ratio of revenue hours to vehicle hours to the level in the 10 system average would save a lot of money.

Public transit system funds have to come from the fare box or taxpayers, and in PAAC’s case, from tolls paid by Pennsylvania Turnpike users, thanks to Act 89 of 2013. The decision made by the Legislature to allow unionized transit workers to strike and the unwillingness of management to face down unions threatening to strike has resulted in a cost structure that is far outside the norm. Then too, PAAC’s non- employee costs are much higher than those expenses at comparison transit systems.

The PAAC situation demands action to correct the egregious costs PAAC is incurring. Why does the Legislature countenance this glaringly overly expensive transit system and make no effort to rein in the spending and at the very least remove the right of transit workers to strike?

Port Authority Bus Service Is Very Costly Compared to Peer Agencies

Summary: Like Pittsburgh’s city government and the Pittsburgh Public school district, the Port Authority of Allegheny County (PAAC) is very costly compared to its peers. Unfortunately, PAAC and the school district depend heavily on state funding to finance their expensive operations.

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Notwithstanding PennDOT’s performance review of 2016 that let PAAC off easy through its choice of a so called “peer” group of agencies for cost comparisons, PAAC has dreadful cost numbers compared to areas of comparable size and cost of living.  PennDOT deemed several cost measures “in compliance” because they were within one standard deviation of the average cost measure of 14 agencies in the peer group (13 plus PAAC). However, when the group is made more comparable by eliminating two high cost of living areas and PAAC itself to get a better measure of true peer average, the picture is very different from the one PennDOT creates.

Included in the peer group of 14 agencies is Alameda County transit, where the service area’s cost of living is 34 percent higher than Pittsburgh, and Santa Clara transit where the area’s cost of living is 36 percent higher than Pittsburgh.  Removing Alameda and Santa Clara as well as PAAC from the peer group average calculations yields quite different results (PennDOT used 2014 data because it was the latest available).

For example, the cost per revenue hour of bus service for PAAC was very high at $186 compared to the average of $136 for the 14 agencies but even higher than the $123 average of the 11 better peer group agencies. While PennDOT did note that PAAC was “at risk” on the measure, the better conclusion would have been “out of compliance.” Then too, PennDOT determined that PAAC was “in compliance” on cost per passenger trip at $5.18 compared to the 14 transit group average of $4.45 because adding the standard deviation to that figure put the allowable compliance number at $5.58.  But for the 11 agencies the average per rider cost was only $4.06 with a standard deviation of only $0.72 making PAAC’s cost per bus trip well above “in compliance.”

Moreover, 2016 data comparing PAAC to five comparable peer transit agencies (Milwaukee, San Antonio, St. Louis, Columbus and Charlotte) show PAAC to be far more costly on several metrics. All data unless otherwise noted are from the National Transit Database. Key measures are shown in the following table.

Five-agency average PAAC % Difference
Operating Expense per Passenger Trip $4.56 $5.62 23
Operating Expense per Revenue Mile $8.24 $14.46 75
Operating Expense per Revenue Hour $106.46 $189.69 78
Total Expense per Revenue Hour $124.95 $224.44 80

Obviously, these statistics point to large differences in PAAC’s cost of bus service compared to the peer group. The gaps between PAAC’s costs per revenue mile and per revenue hour and the costs at the five peer agencies are 75 percent and 78 percent, respectively. In 2016, PAAC posted just under 1.6 million revenue hours of operation. If PAAC had the same expense per revenue hour as the peer group, its operating expenses for buses for that year would have been $169.1 million, or $132.4 million below the $301.4 million PAAC actually incurred in bus operating expenses.  The operating expense per revenue hour should be considered the best cost measure since that is the fundamental cost of providing the service.

PAAC has the good fortune of having a higher number of passengers per revenue hour than the group average, 33.8 compared to 23.3, a difference of 45 percent. This accounts for the fact that the operating expense per passenger trip at PAAC is only $1.06, or 23.2 percent, above the group average.  This ratio is viewed by some analysts as a good measure of efficiency.  But clearly the operating cost per hour is a far better way to compare agencies. Even with the much smaller gap of cost per trip relative to the peer group, if PAAC had operated at the group average it could have saved $56.6 million in annual bus operating expenses.

A principal cause of the dramatically higher operating expense at PAAC is the compensation levels of employees providing the bus service, especially fringe benefits.  In 2016, the wage and salary expense per passenger trip for the peer group was $2.00 while PAAC’s stood at $2.29. The benefits expense per trip was $1.44 for the peer group and $2.15 at PAAC, a gap of 49 percent.

More troubling are the enormous differences in employee expense per revenue hour. For the peer group, the wages and salary costs per revenue hour averaged $46.87 and $77.32 for PAAC, a gap of $30.45. And for fringe benefits per revenue hour the peer group was $33.72 with PAAC at $72.76, a gap of $39.04 or 116 percent.

The fringe benefits problem at PAAC began to explode in the early 2000s. In 1998, benefits stood at $44.6 million (data from PAAC budget documents) while wages and salaries were $97.7 million, resulting in a benefit to wage and salary ratio of 45.6 percent. By 2006, the ratio had risen to 69 percent and by 2012 to 100 percent. During the period from 1998 to 2012, annual benefits for bus operation employees rose by $69 million while wages and salaries climbed a much smaller $16.2 million. As of 2016 the ratio had slipped a bit to 94 percent as wages increased faster than benefits, partly as a result of adding employees following substantial job cuts in preceding years.

Bear in mind that during the period from 2006 to 2013, PAAC reduced revenue hours and revenue miles of service by 30 percent accompanied by significant employee layoffs.  And even with the service cuts and layoffs that began in earnest in 2008, it took several years of cuts to stop the rise in operating costs which finally fell in 2012 and again in 2013 at the nadir of revenue hours operated.

Note that with the passage of Act 89, PAAC is now guaranteed a dedicated generous flow of revenue from the state. Act 89 mandates that $420 million of the $450 million provided annually by the Turnpike Commission to PennDOT (as ordered by Act 44) be transmitted to the state’s transit systems.  As soon as the guaranteed revenue was in hand, PAAC began to increase bus service and add employees even though passenger counts had not improved as of 2016. Sadly, the operating expense reductions achieved through slashing service are now a thing of the past with annual expenses rising $30 million from 2013 to 2016.

One can only speculate when the state’s dedicated support of transit systems—at the expense of Turnpike users—will no longer be adequate to satisfy the voracious appetite for money PAAC has exhibited over the years. And if the truckers’ association wins its suit against the Turnpike that stops or rolls back tolls, the state will once again be looking for sources of revenue to subsidize mass transit.  As Policy Brief (Vol. 17, No. 38) noted earlier, the transportation funding scheme in Pennsylvania is a misguided mess.

Bottom line: PAAC’s board of directors needs to nip in the bud the return of PAAC’s spendthrift ways, especially in light of its already extraordinarily high operating costs.