As U.S. transit agencies approach a fiscal cliff due to dwindling ridership, some public transportation advocates have called for eliminating customer fares in an effort to increase ridership. At the same time, large mass transit systems are experiencing a persistent fare evasion problem that has fed broader public concern about transit crime and safety. But forgoing this source of revenue would worsen transit's already gloomy outlook as decades of research have found that ridership is more sensitive to service quality than fare price. Instead, advocates should be more realistic about transit's role in delivering 21st-century transportation in the U.S. and demand efficiency improvements so that transit can function well in the niche markets where it can provide the most value.
The COVID-19 pandemic caused nationwide mass transit ridership to crater by 95 percent at its worst. Congress responded by sending nearly five years' worth of pre-pandemic federal transit funding—$69.5 billion—between March 2020 and March 2021. Unlike conventional federal transit aid, these funds were largely unrestricted and could be used by transit agencies as they saw fit.
In contrast to transit's fiscal bailouts, ridership recovery has been slow. December 2022 ridership remained 34 percent below December 2019 levels, according to the Federal Transit Administration's National Transit Database, which also indicates that nationwide farebox recovery of operating costs from transit riders fell from 30 percent in 2019 to 13 percent in 2022, with taxpayer subsidies accounting for nearly all of the remaining balance. This figure does not include the capital costs to build and refurbish transit systems, where taxpayers have been responsible for virtually the entire tab since the middle of the 20th century.
Transit experts are increasingly expecting a prolonged ridership winter, with ridership forecasted to remain below 2019 levels at least through the remainder of the decade. As this reality has started to set in, some transit advocates have called for desperate measures to regain lost ridership, most notably transitioning to fare-free transit.
Supporters of fare-free transit do have a point that ending fare collections can increase transit ridership. But it's important to understand that not all ridership gains are created equal. Transit is often sold to the public as a solution to social costs related to the use of private automobiles, such as traffic congestion and pollution. Fare-free transit may entice those who were already dependent on transit, as well as people who would have otherwise walked or biked. But it likely won't draw many new riders who can drive their own cars. This means that while fare-free transit can provide private benefits for riders, it is unlikely to meaningfully increase the social benefits often touted by transit advocates to justify additional government subsidies.
This proposed move to fare-free transit has also been justified on progressive social justice grounds, with some advocates arguing that transit service should be treated as a commons and that fare enforcement unfairly targets individuals living on the margins of society. Critics counter that fares are already low and heavily subsidized and that fare enforcement can be used to stop people from entering transit systems who then commit crimes.
In the real world of scarcity and tradeoffs, eliminating fares may also starve agencies of revenue that could otherwise be used to improve service, including transit security that is generally paid for out of agency operating budgets that fares support. A January 2023 report published by the UCLA Institute of Transportation Studies notes that decades of research have shown that "service improvements are likely to be a more effective use of resources than fare reductions, even for low-income riders."
This tradeoff between eliminating fares and improving service is even more stark in a tightening fiscal setting. Over the next few years, large transit agencies in Chicago, New York, San Francisco, Washington, and a handful of other major metropolitan areas that account for the vast majority of nationwide transit trips will have completely spent down their pandemic funding windfalls. Absent large ridership increases, addressing future shortfalls will require some combination of fare increases, service cuts, state and local tax increases, and additional federal subsidies.
With ridership and farebox revenue unlikely to recover in the near future, advocates are expected to appeal to Congress for perpetual transit operating subsidies. However, assuming a divided Congress will even consider it, lawmakers will likely insist on a local match given that transit is fundamentally a local service. Federal transit subsidies have traditionally focused on capital cost assistance for infrastructure construction and vehicle procurement, not day-to-day operations. These grant programs have often required recipients to contribute matching funds equal to 50 percent of project costs. The upshot is that eliminating fare collection will simply dig a deeper hole for transit agencies seeking to raise matching funds needed to access potential federal operating subsidies.
Undoubtedly, some advocates will claim transit is underfunded, especially when compared to highway funding. But this appeal is undermined by national transportation expenditure data. According to the Bureau of Transportation Statistics, combined federal, state, and local government spending on highways was over $2.6 trillion between 2007 and 2019. Transit spending was over $775 billion during this period, accounting for 22.6 percent of total highway and transit spending by all levels of government.
Compare this spending share to data from the most recent National Household Travel Survey from 2017, in which travel by transit accounted for just 2.5 percent of nationwide person-trips while travel by private automobiles accounted for 82.1 percent of trips. Transit appears to be extremely well-funded compared to its primary competitor.
Transit's outsized share of government funding relative to its travel share isn't commonly acknowledged in the political sphere, at least not with any precision. But economists have long noticed and analyzed this disparity. As a team of University of Pennsylvania and Brown University economists remarked in a 2020 working paper for the National Bureau of Economic Research, "The allocation of expenditure across modes of transportation requires scrutiny. That we spend about the same amount on public transit buses, which provide about 2 billion rides per year, as on the interstate highway system, which provides about 700 billion miles of vehicle travel per year, primarily for local travel, is a central and surprising feature of US transportation policy."
The biggest single problem facing transit is it tends to be poorly designed to serve modern transportation needs, and this was true even before the pandemic. Transit was always disproportionately used by commuters during the workweek, where transit accounted for 5 percent of journey-to-work trips, according to 2019 Census Bureau estimates. But even in its most favorable setting, transit declines have been steep, with transit's commuting share dropping from 12 percent in 1960 to just 2.5 percent in 2021, or half of its pre-pandemic share.
The reason for this decline is simple. In the second half of the 20th century, first households and then jobs dispersed from central cities into the surrounding suburbs. As a result, connecting people with employment by transit has become more and more challenging. By 2019, the University of Minnesota's Access Across America series showed those residing in the 50 largest U.S. metropolitan areas could on average access 47 percent of metro area jobs by car in 30 minutes of travel, or one hour of bidirectional daily commuting. In contrast, just 8 percent of jobs were accessible by transit in 60 minutes, or two hours of commuting. Working from home first surpassed transit's commuting market share in 2017, and the COVID-era increase in telecommuting among higher-income urban professionals is expected to remain several multiples above the pre-pandemic telecommuting share.
For transit to continue to serve a valuable role in the few places where it can compete, policy makers will need to rethink how service is provided. They must reconsider commuter-centric transit network designs and service schedules to account for remote and hybrid work, where allocating expenditures to serve high-volume rush-hour travel into central business districts five days a week is no longer defensible. They must somehow get transit capital costs under control, costs that dwarf those incurred by peer countries. They should consider smaller alternatives to better serve routes with fewer customers and avoid running vehicles mostly empty most of the time. Finally, they should pursue new technologies that could significantly reduce operating costs, especially automation, even if that means taking on powerful public employee unions.
Transit's future in the U.S. is uncertain, although broader societal trends are working against it. Eliminating customer fares may help transit regain some of its lost ridership, but this would likely undermine the flexibility of transit agencies to respond to a changing landscape and accelerate transit's long-run decline in the transportation marketplace. While transit will remain a niche mode regardless of what policy makers do, responsible leadership demands reevaluating status quo governance and adapting to best serve the customers most dependent on transit.
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