Summary: Governments at all levels are facing a growing crisis in financing mass transit. As recently as the mid-1960's, transit systems nationwide were able to recover most of their costs through operating revenues. Since that time, however, the gap between operating costs and revenues has been increasing rapidly. Transit systems received over $3 billion in federal, state, and local government operating subsidies in 1980. The Urban Mass Transportation Administration (UMTA) has proposed phasing out federal operating assistance. Faced with the prospects of losing federal assistance and the difficulties of state and local governments in raising tax revenues, the transit system is in a serious financial situation. GAO identified two main reasons for growing subsidy demands: (1) rapidly rising transit operating costs are not being offset by productivity improvements; and (2) transit systems have adopted and maintained unrealistically low fares even though operating costs are increasing. Transit systems also have difficulty using labor efficiently because there must be enough vehicles and people to handle the peak morning and evening rush hours, and many transit systems are limited from adopting possible solutions to the peaking problem by labor agreements. Further, transit systems are experiencing serious problems in maintaining their bus and railcar fleets because: (1) mechanics are not being properly recruited, trained, and promoted; (2) transit systems do not have adequate preventive maintenance programs; (3) spare-parts inventories are not properly controlled; and (4) restrictive work rules prevent the efficient use of maintenance personnel. Transit systems are also expanding into lower density suburban areas that are costly to serve. Transit fares are frequently ineffective and inequitable, providing more subsidies to some riders than others, and failing to produce as much revenue as they could. Transit systems must devote more attention to controlling costs and improving productivity. UMTA must develop and issue policy guidelines which define its role and responsibilities in encouraging transit productivity and must develop and undertake specific actions to improve transit productivity. Transit managers must also devote more attention to transit pricing. The most important effort needed is to define exactly what it is that mass transit should accomplish and then to direct available resources to accomplishing these objec
