Governmental Subsidies for Public Transit: History, Current Issues, and Recent Evidence

Funding for transit in the United States has been in a state of transition for half a century. Transit has evolved from a private industry sustained by farebox revenues to a public entity supported by federal and, more recently, state and local governments. To better understand the complex funding environment of public transit, especially the role of public subsidies, this research examines the history of public funding for transit, investigates issues that have influenced financial support for transit recently, and compares funding arrangements in ten cities for evidence of how transit agencies are adapting to the current funding environment. The authors find that: (a) the characteristics of local transit funding are strongly influenced by the funding approaches of state governments; (b) dedicated funding for transit is increasingly critical, especially where funds must be raised locally; and (c) metropolitan areas with considerable dedicated funding sources are at an advantage for undertaking large capital projects.