March 24, 2009
By General Manager Fred Hansen
We are facing unprecedented challenges to meeting our mission at TriMet. It is impossible to read the newspapers or watch the news and not see what perilous times we as a nation, let alone a state or region, are facing. And on a personal note many of us know of a family member, friend or neighbor who has been laid off or is facing substantially less work than they enjoyed just a few months ago.
I believe as I hope you do that we will emerge from this recession stronger and with the best years of TriMet and our region yet ahead of us. But until then, we need to take bold and decisive actions to keep TriMet on solid financial footings.
On Wednesday March 25,we will be announcing service cuts that will be taken out to public hearings, adopted by the Board in May, and in place for service beginning in September. This is one of the most difficult decisions any of us in transit ever have to make - cutting the very thing that we are all about, particularly at a time of increasing demand for transit service. But it is absolutely necessary.
Many of you have seen the reports of where we are financially today. Let me reiterate. For the FY 2010 budget we are down $13.5 million. In January of this year I imposed a hiring freeze covering all positions in TriMet (unless specifically approved by me in emergency situations) and a wage freeze on non-union positions. This will be in effect from now through at least all of FY 2010.
Overall, about 55% of our revenue comes from the payroll tax, an additional 20.5% comes from the fare box and the remaining comes from various Federal programs with a very limited contribution from some state sources such as a little cigarette tax money for the elderly and disabled LIFT service. The only source that is up is fare box revenue as we have seen more riders, but this increase is not nearly enough to offset the reduction in payroll tax revenue.
To address our $13.5 million reduction I initially directed a 5% cut across the whole of TriMet, including service. And although we received almost $45 million of stimulus money (ARRA) we are only able to use a small portion to offset service cuts. Most of the stimulus money is required to be used for capital building, thereby putting some of our fellow Oregonians back to work. But by directing what stimulus money we could to preventative maintenance we were able to offset about half of the expected 5% service cuts.
These budget reductions were based on reduced payroll tax receipts; however, unemployment continues to increase. Recently the unemployment rate hit nearly 11% further reducing payroll tax revenues. As a result, I asked each division to prepare an additional budget reduction of 3% as a contingency. This 3% additional reduction, combined with the original 5% reduction, reflects essentially flat payroll tax revenue when comparing FY 2009 with FY 2010.
As of today, I am directing that this contingency budget be put in place because I am convinced it will be necessary when we see actual payroll tax revenue payments in mid-May. Meantime, I am asking each Executive Director, Director and Manager to closely review every expenditure this fiscal year to determine whether it is absolutely necessary.
Further, I have imposed on myself an unpaid 2-week furlough during this year and have asked the Executive Directors to do the same. I believe that in these very difficult times it is appropriate for your senior management to lead by example.
As we learn more about payroll tax revenues in mid-May, we may need even further reductions. Our options will include layoffs, other budget cuts, furloughs, a fare increase, and additional service cuts. These are options that will need to be weighed as we deal with the continuing deteriorating economy.
Because the last thing we want to cut is service, I am holding off ordering any additional service cuts until we actually see the payroll tax receipts in the mid-May timeframe. Knowing the lead-time necessary to do run-cuts and meet postings for the December operator signup, holding until mid-May for these decisions makes sense.
I wish I could say that all these steps will be sufficient to see us through this very challenging economic time. But I can't. We will closely monitor the employment picture and the subsequent affect on payroll tax revenues and take additional steps when necessary.
I know that the changes we are implementing including a combined 8% budget reduction, the wage and hiring freezes and the executive furloughs are not easy. But we all have an obligation to ensure that the most important service we provide, transit service on the street, must be preserved to the greatest degree possible.
Thank you for your assistance during these difficult times.