Inside WMATA's budget

Now YOU can have a spreadsheet that reveals Metro's budget right down to the last dollar spent on diesel fuel. You can even manipulate the numbers in the spreadsheet to play what if: what if electricity bills skyrocket, or if ridership surges?

Yesterday at Metro headquarters, the agency's chief budget man, Rick Harcum, briefed the Riders Advisory Council and willing members of the public on Metro's budget process. Before the fiscal year starts on July 1, Metro has to have a budget. One primary function of the budget is that it determines how much subsidy money the agency will ask its three sponsoring jurisdictions (the District of Columbia, Maryland, and Virginia) for.

The budget process
Harcum explained that Metro operates more like a business than like a government agency. You may have realized that government agencies generally can spend money only if expressly permitted by an act of the legislature. This is, for instance, why the federal government partially shut down in the 1990s and why the New Jersey government partially shut down recently: the legislatures had not yet appropriated the funds necessary for operations. If Metro operated the same way, then buses and trains might stop running. No fun.

But the prospect of a Metro shutdown is slim because, as Harcum explained, the budget does not tightly restrict Metro's operations. Instead, it's more like a "giant collection of assumptions." Harcum's people estimate how large various portions of Metro's budget will be. Some of these line items, like white-collar salaries, are fairly easy to estimate. Other, much larger line items, such as union salaries, are set outside the budget process altogether as collective bargaining agreements are reached. Still other expenses, such as diesel fuel, are difficult for anybody to predict at all.

Harcum plugs all these assumptions into the spreadsheets. This gives him three important bottom-line numbers: how much revenue Metro will take in from fares, advertising, and other sources of revenue; how much Metro's expenses will be, and how much of a difference there will be. Public transportation always operates at a loss to the agency, so the shortfall between revenues and expenses is the subsidy that D.C., Maryland, and Virginia will pay.

Using his spreadsheets and data, Harcum can calculate how much subsidy dollars the agency will need if the system is left on autopilot--that is, no fare increases, no changes in service, and so on. For fiscal year 2008, if the agency stays on autopilot, the subsidy dollars will have to increase by twenty percent. That's because while fare revenue is expected to increase due to higher ridership, expenses will be going up even more, with costs rising rapidly for diesel fuel, health care, and electricity. Everybody at Metro knows that they can't go to the three jurisdictions and request a twenty percent subsidty hike.

That's where the board comes in. After seeing Harcum's initial projections on how the budget would look like if the agency were left on autopilot, the board will be giving what they call "guidance" to Metro's budget people. This will give the budget folks guidance on how to reduce that gap between expenses and revenues. Will it take more measures to increase side revenues, like more advertising deals? Will it take a fare hike, or service reductions? These are policy questions left to the board.

After Metro's staff receives its budget guidance from the board, they will prepare the general manager's recommended budget. The board might nibble around the edges of the general manager's budget, but generally it is adopted with few changes.

Thus the budget is mostly set by the time the general manager proposes a budget to the board. The important, influential stage is the setting of the "guidance" from the board to the staff. That's when the board will decide whether to consider a fare hike or a cut in service. That's why RAC member Kevin Moore and Jack Corbett, co-founder of MetroRiders.org, want to be sure that the public has input into the budget process early, before the guidance is issued.

That's why Harcum released his spreadsheets. He wants to show exactly how Metro comes up with its budget projections so that the RAC, the board, and members of the public can take part in an informed discussion on the budget.

Inside the budget
Lots of interesting bits of information fall out of the budget:

• Metro is being hard-hit with rapidly increasing health care costs. This is a problem that is hitting all American employers, public and private. Business titans like General Motors chairman Rick Wagoner are very concerned about the issue. Of course all that our huge health care bills get us is crappy care, and it is a shame that none of our policymakers are doing a damn thing about this travesty.


• Metro expects its bill for traction power (which runs trains) to go up by twenty five percent. Thank you, deregulation. The agency cannot use futures to attempt to control costs because that's prohibited by the interstate compact that created WMATA.


• Metro will spend less on gasoline (not diesel fuel) due to cuts in the fleet of little white cars and trucks you see on the streets.


• Metro had a consultant help determine what best predicts ridership patterns, because this is such a key part of the budget estimates. The consultant said that the two biggest predictors of ridership are downtown employment and regional population. At the time the study was done, it didn't seem that gas prices had much influence on ridership.


• There aren't huge consequences if Metro goes over or under its budget. At the end of the fiscal year, if Metro needs more money to cover a shortfall, then the jurisdictions provide it. If Metro has extra money, then the jurisdictions get a refund. I skeptically thought that this would give Metro an incentive to consistently underestimate its costs, but in recent years Metro has frequently given a refund to the jurisdictions.


• Parking garages for Metro seem to be revenue boosters: when the new garage at the Vienna station opens, Metro will get increased revenue from parking and from the new riders' fares that will exceed Metro's cost in running the facility. Plus, if I recall correctly, Metro doesn't pay to build parking garages; instead that cost would fall on Fairfax County (or on the commonwealth of Virginia; I'm not sure which.) Good deal for Metro, at least on the surface.

Your input on the budget
So the pivotal time for the budget is coming up soon, as the board prepares to craft its guidance. If I become aware of forums for public input I will post them here. Also you can always come to RAC meetings, which are the first Wednesday night of every month at Metro headquarters (next meeting is on August 2.) There is a public comment period at the start of every meeting.

The spreadsheets!
If you're geeky like me, you think these are actually fun. They were originally made in an extremely expensive, proprietary spreadsheet program, but you can also view them just fine in OpenOffice.org, which is Free Software. WARNING: these spreadsheets do not represent the 2008 budget! The 2008 budget has not been set yet. These are just estimates that will hopefully inform the budget-making process.

Metro Budget Forecasting Spreadsheet

Metro Fiscal Year 2005, detailed breakdown

Thanks to the RAC and to Metro's Rick Harcum for making these available.