Facing increased costs, SEPTA is proposing a 3.9 percent operating budget increase for fiscal year 2012.
The budget proposal, released Thursday morning, comes in at about $1.2 billion, $46.2 million higher than this year.
As expected, no fare increases or significant service changes are included in the budget proposal.
The budget increase is being driven by a $32.5 million projected increase in wage, pension and benefit costs.
Health care costs make up most of that increase, along with 2.5 percent scheduled wage hikes.
Richard Burnfield, SEPTA’s treasurer and CFO, attributed the increase to health and prescription drug costs that are rising faster than inflation, as well as new coverage mandates in the federal health care regulation.
Starting in January, for instance, SEPTA will be required to cover dependents up to the age of 26.
Burnfield said SEPTA was working to contain costs by promoting preventative care and healthy lifestyle choices for workers.
(These increases are based on several cost assumptions because Independence Blue Cross, SEPTA’s health insurance company, works on a schedule that doesn’t match up with SEPTA’s fiscal year.)
Other cost drivers include fuel and propulsion costs, which are projected to increase by $4 million ― though SEPTA has managed to mitigate the rising cost of oil somewhat by negotiating an 18-month contract for diesel fuel back in July, locking in prices at $2.20 a gallon.
Injury and damage claims are also expected to increase by $3.9 million, reflecting the fact that the authority will be going over budget on claims this year.
SEPTA is “working very aggressively” to combat falsely filed claims using newly installed cameras on its vehicles, Burnfield said.
At the same time, the total number of claims is increasing, and more law firms are insisting on jury trials and not accepting pretrial settlements.
Burnfield said litigated claims tend to cost slightly more.
Though costs are going up, SEPTA is banking on the recent fare hike and ridership spikes to bring passenger revenue up to $434.7 million, or $18.8 million more than last year.
The authority is also predicting on increased revenue from other sources, such as increased advertising sales and the sale of the naming rights to the Pattison Avenue station to AT&T over the summer.
SEPTA’s total operating subsidies are also projected to increase $25.7 million, to $742.6 million.
Not shown in the budget are expected cost savings and increased ridership from SEPTA’s two signature projects: the new Silverliner V railcars and the smart card fare collection system.
Burnfield called the two projects “transformational” but doesn’t want to put a specific amount in the budget.
SEPTA is planning on maintaining its workforce at nearly the same level, with 12 reductions due to either attrition or the end of stimulus projects.
While this year’s budget should be easily balanced, SEPTA could face significant budget challenges going forward.
The budget proposal projects escalating deficits in the five fiscal years beginning in fiscal 2013.
While the projected $15 million projected deficit for that year is small in comparison with the size of SEPTA’s total budget, annual deficits are projected to increase above $100 million by fiscal 2015, hitting $116.9 million. By fiscal 2017, the deficit is projected to increase to $166 million.
Burnfield said that a lot can change to alter those budget projections but that they reflected, in part, projected stagnant state subsidies as a result of the failure to toll Interstate 80.
Given that and the budget cuts proposed by Gov. Corbett “we’ve got to continue to” run a “tight ship,” Burnfield said.
Hearings on the budget proposal are slated to begin April 18. A schedule ― as well as a copy of the budget ― can be found here.
SEPTA is taking comment on the proposal through April 29, and the SEPTA Board is scheduled to vote on the budget at its May meeting.
SEPTA is planning on releasing its capital budget proposal next week.
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