What Chicago can learn from Philadelphia as the transit fiscal cliff approaches

Beginning in 2026, Chicago’s regional transit system faces a projected $770 million annual budget gap. At nearly 20% of the annual operating budget, this gap, if not addressed by spring 2025, would drastically impact current service and fares and prohibit any additional improvements to the regional system starting 2026.

The RTA system is not alone in facing many of its current challenges. Large transit systems across the U.S. are facing proportionally similar funding gaps as they draw down remaining federal COVID relief funds, many facing shorter timelines than our region. The Southeastern Pennsylvania Public Transportation Authority (SEPTA), which serves the Philadelphia region and provides an average of over 700,000 trips per weekday, serves as a cautionary tale for what may be in store for our transit system if the Illinois legislature does not put forth a sustainable funding solution in time.

SEPTA’s fiscal cliff

SEPTA faces a $240 million budget gap—roughly 15% of their operating budget. Like our own region’s $770 million fiscal cliff, which is 20% of our operating budget, SEPTA’s financial challenges were exacerbated by pandemic-induced changes to ridership patterns and expiring federal relief funds.

In May 2024, Pennsylvania Gov. Josh Shapiro proposed allocating an additional $283 million to transit statewide, which would have covered $161.5 million of SEPTA’s budget gap. When budget negotiations finished in July, Pennsylvania’s state legislature approved a $51 million one-time appropriation—less than one-third of the governor’s proposal. In light of the insufficient state support, SEPTA began planning for severe service cuts and fare increases. These plans were temporarily put on hold when Gov. Shapiro directed the Pennsylvania Department of Transportation (PennDOT) to flex $153 million in federal highway funds to support SEPTA’s operations through their 2025 fiscal year, which ends this June.

The stopgap funding will allow SEPTA to continue current levels of operations through June 2025 and temporarily prevent a 21.5% fare hike and a 20% service cut. A 7.5% fare increase that took place in December remains. SEPTA will need fiscal certainty in the next year to meet increasing demand for service as Philadelphia prepares to celebrate America’s 250^th anniversary, the FIFA World Cup, the MLB All-Star Game, and other major events in 2026.

But with still no sustainable funding solution, SEPTA is plagued by uncertainty for fiscal year 2026 and has been forced to plan for more cuts and fare hikes. Details on those cuts will be released by February, a budget draft will come out in March, a public hearing in April, and a board vote on the budget in May.

What does this mean for SEPTA?

Jody Holton, SEPTA’s Chief Planning and Strategy Officer, said Gov. Shapiro’s budget address is scheduled for February 4, and while his draft budget may include more funding for SEPTA, the agency can’t count on it.

“We are creating a budget for next fiscal year (FY26) that’s based on the fiscal cliff, which is what we’ve been allocated today,” Holton said. “There might be funding for SEPTA in the Governor’s proposed budget in February, but it won’t be voted on by legislature until July, which is after SEPTA needs to adopt a balanced budget.”

“This fiscal year—2025—we adopted a budget that included proposed funding, and we thought that the legislature would come through with a funding solution in fall 2024,” Holton said. “When that didn’t happen, the Governor flexed $153 million in highway funds to SEPTA, as a one-time solution for this year.”

Like the CTA, Metra, and Pace, SEPTA has planned for and implemented service improvements that have resulted in ridership growth since the pandemic. But with funding uncertainty, SEPTA now must shift planning efforts to cutting service, a move that is sure to result in slowed ridership growth or possibly even a loss in ridership.

“We have pulled back on our new bus network implementation strategy, which we were scheduled to start implementing in June 2025, but relies on stable funding,” Holton said. “While we had been preparing schedules that gradually increased service closer to pre-COVID levels, now we’ve shifted to creating schedules for a 20% service cut plan across all modes.”

For example, in September, SEPTA increased weekend regional rail schedules, resulting in weekend ridership gains of 30%. But without funding, the agency is forced to plan for lower weekend service levels. Airport service would decline from half-hour headways to hourly. The cuts will come in the form of discontinued routes, truncated routes, and postponement of the new bus network plan’s implementation.

“In terms of service planning, it takes a long time to plan for and implement new schedules,” Holton said. “If we received funding in the beginning of July, we could pull back the scheduled service cuts and continue to run the same service we’re running this spring. We really need a three-month window to create the schedules and train the operators on the new services, and then a couple months to educate the riders on the new services. Whether it’s a service cut package or a new bus network, we need that time to tell riders so they can plan their trips.”

If these service cuts are implemented and the Pennsylvania legislature provides a funding solution after the fact, service will not be restored overnight; it will take time to rebuild the momentum SEPTA has established post-pandemic. And during that time of reduced service, it is the riders who will suffer most, and in a way that can never truly be reversed.

“The whole region benefits from more people riding the system,” Holton said. “Transit provides access to more opportunities, more jobs, health resources, groceries, and social networks. Our riders will be losing that service and access to those opportunities. A 20% service cut is detrimental to our whole transportation system in Philadelphia, adding traffic congestion, slowing economic growth, and eventually sending SEPTA and the region into a downward spiral.”

Future action is needed to preserve transit in Philadelphia

Although SEPTA receives a larger portion of its funding from the state than our region, new, sustainable sources of revenue are needed, and Pennsylvania lawmakers are undergoing lengthy negotiations on a legislative solution. Gov. Shapiro and Pennsylvania Democrats proposed a 1.75% increase in transit support by shifting a greater portion of sales tax revenues from infrastructure to the state’s Public Transportation Trust Fund; however, Pennsylvania Republicans—who have a majority in the Pennsylvania Senate—blocked the proposal in favor of the one-time appropriation. Senate Majority Leader Joe Pittman expressed a need for new transit funds to be tied to new funds for roads and bridges and pitched a gaming tax on slot machines to support transit. Regardless of how state leaders prefer to distribute transportation funds, an agreement needs to be met well before June 2025 for SEPTA to preserve current service levels.

Warning signs for Illinois

The future of SEPTA remains uncertain due to the one-time nature of the most recent funding package. While major fare hikes and service cuts have been postponed, the agency continues to plan for the worst given Pennsylvania’s divided government.

Our region’s transit system and its riders deserve a full long-term solution that sets us on a path of certainty and growth in the coming decades. Parts of the solution may include opportunities like flexing road funds for transit, but that alone will not be enough, even as a last resort. Due to federal Title VI requirements, fiscal calendars, and other considerations, Illinois lawmakers must reach a transit funding solution by spring 2025 or set off transit agency budgeting processes that propose drastic cuts and fare increases. These cuts would harm local economies across our neighborhoods and suburbs by turning riders away from using deficient transit, further reducing revenue and creating a transit “death spiral”, while a robust investment in transit operations will accelerate equitable economic growth and bring in financial returns to the region, paying off the investment quickly.

Join the Transit is the Answer Coalition

The RTA is working with policy makers at all levels of government to develop sustainable funding solutions and improve the system for all riders. Join the Transit is the Answer Coalition to help bring about the legislative changes needed to support transit at this pivotal moment.