Transit Funding Bill Mandates 13% Cut for Agencies That Don’t Maintain Local Spending Effort

The Transit Funding Flexibility Act is making some specific but heavy-hitting changes to how federal dollars flow into your local bus and train systems. This bill focuses on the Urbanized Area Formula grant program (Section 5307), which is a major source of operating cash for public transit across the country.

The bill first streamlines things by removing a restriction based on population; specifically, it scraps the rule that complicated grant eligibility for urban areas under 200,000 people. This is a win for smaller cities, giving them more straightforward access to these federal funds.

The New Catch: Mandatory Maintenance of Effort

Here’s where the flexibility meets the fine print. The core of this bill is a new, strict requirement regarding Maintenance of Effort (MOE). If a transit agency receives this federal grant money, they must now send an annual certification to the Secretary of Transportation. This certification is basically a promise that the agency will keep up its local spending effort for the operating costs of any equipment and facilities that the federal grant money is paying for. Think of it like this: the feds are saying, “We’ll help you buy and run this bus, but you have to promise you won’t slash your own budget for its maintenance and fuel next year.”

This isn’t just a handshake agreement. The bill sets up a mandatory, specific penalty if that promise is broken. If the Secretary reviews the books and finds that an agency failed to maintain the spending effort they certified, the law requires a 13% reduction in that agency’s grant money for the following fiscal year. This is a hard, non-negotiable cut.

What This Means for Your Commute

For riders and taxpayers, this change is a double-edged sword. On one hand, the intent is good: it forces local agencies to commit to the upkeep of federally funded assets. This could mean fewer broken-down buses and better-maintained infrastructure over the long haul because local governments can’t easily offload maintenance costs onto the federal government while using local tax dollars elsewhere.

On the other hand, a mandatory 13% cut is a huge financial hit for any transit system, especially smaller ones that often run on tight budgets. Imagine a mid-sized city transit system facing a sudden local budget crisis—maybe a local tax didn't perform well, or a state subsidy was cut. If they have to temporarily reduce their spending on maintenance to keep the buses running, they could be penalized with a 13% federal funding reduction the next year. That kind of cut could lead directly to service reductions, fare hikes, or layoffs.

Because the bill doesn’t precisely define what constitutes “spending effort” or how the baseline is calculated, there’s a medium level of vagueness here. Transit agencies will be spending time and money ensuring their accounting satisfies the Secretary's interpretation of this new MOE rule, adding an administrative burden. While the goal is fiscal responsibility, the penalty is severe enough to potentially destabilize systems that hit a rough patch, forcing them to prioritize compliance with a spending number over the actual needs of their service area.