Public transit systems in California — and especially in the Bay Area — continue to struggle financially, with inflation and tariffs pushing up costs on the heels of COVID-19-related ridership and revenue losses. In the Bay Area, these losses will amount to more than $800 million dollars annually for the four largest operators — Muni, BART, Caltrain, and AC Transit — starting in fiscal year 2026 (July 1, 2026–June 30, 2027). BART’s deficit alone is $380 million starting in fiscal year 2026, even after it realized more than $140 million in cost reductions. The remaining $380 million gap equates to 35% of its operating budget, a gap that can only be closed with drastic measures, like shutting down the system entirely.
Most of the people who rode transit before the pandemic are riding now, but they are taking fewer trips per week. That means that overall ridership and revenue levels have not recovered to pre-pandemic levels. It’s hard to overstate how problematic this situation is for heavily fare-dependent operators such as Caltrain and BART. BART, for instance, generated 95% of its operating fares pre-pandemic, a feature that made it the envy of most other transit agencies in the country. Since the pandemic, that feature has become a bug.
Bay Area counties are advancing a new multi-county tax measure for transit and plan to place a ballot measure before voters in November 2026. However, the region’s largest operators will have hit a fiscal cliff earlier that year, triggering drastic service cuts, ranging from 30% for Muni to 90% for BART. The cuts would undoubtedly be damaging to the climate, communities, downtowns, and the broader economy. To avoid those cuts, Bay Area counties asked the state for financial assistance through the November 2026 election.
On June 30, Governor Newsom signed the state budget into law after an unusually fraught and unpredictable season of budget negotiations. The adopted budget provides critically needed relief funding for public transit by restoring $1.1 billion in proposed cuts to public transit relief funds that were on the chopping block as recently as May. The budget also authorizes Muni, BART, AC Transit, and Caltrain to take out up to $750 million in loans from the state, but only after the legislature passes Senate Bill 63 (Wiener, Arreguin), which would enable the regional transit funding measure to be placed on the ballot by counties or through a voter initiative. Together, these state funds will help stabilize the finances of transit agencies and avoid catastrophic service cuts until the region can generate new local money.
A Rough Start
In March, Senator Scott Wiener, Senator Jesse Arreguin, and Assemblymember Mark Gonzalez requested $2 billion in funding for public transit in the budget. If fulfilled, this funding would have been distributed to operators across the state to address local operating or capital needs. Of this total, the Bay Area needed approximately $800 million in operating funds to allow BART, Muni, Caltrain, and AC Transit to maintain service in the near term as the region works toward long-term solutions to close the deficit.
Early on, it became clear that the state’s general fund would have a $12 billion shortfall. Coupled with justifiable anxiety about the continuity of federal funding, the state would be unlikely to provide any new funding for public transit. That fact was confirmed in the governor’s May Revision, which is the governor’s second budget proposal (the first is always issued in January).
The May Revision did not propose to fulfill the $2 billion request, which was expected, given that the revision focuses on the administration’s priorities. However, it proposed drastic cuts to existing public transit funds from programs that are currently funded by the Greenhouse Gas Reduction Fund (GGRF), which has historically generated $3 billion to $4 billion per year in cap-and-trade auction proceeds, which are distributed to programs that support the state’s climate goals. Some of the GGRF funds are continuously earmarked for specific programs, including several that fund public transit.
The governor’s proposal sought a quick reauthorization of the state’s Cap-and-Trade Program through 2045 in order to stabilize auction prices, which had been declining for months as the program nears its expiration in 2030. But the proposal did not address the fate of multiyear funding awards that had already been committed through 2030. This cast uncertainty over $3 billion in operating and capital funds statewide and over more than $1.4 billion promised to the Bay Area — including relief funds that were provided in 2023 (thanks, in part, to a hard-fought campaign led by SPUR). Additionally, the proposal included dedication of $2.5 billion in GGRF funds annually to high-speed rail and CalFIRE (combined). Consequently, fewer funds would likely be available for other priorities and existing programs, including for public transit, but also for affordable housing, safe drinking water, recycling, land conservation, and other important needs.
The Turning Point
The May Revision appeared to put public transit agencies, especially those in the Bay Area, on an even more precarious financial footing.
This development triggered a pivot for the SPUR-led coalition of more than 120 organizations working to secure critical public transit funding. For months, SPUR coordinated a comprehensive advocacy campaign to secure $2 billion in new funds. After the May Revision, the coalition focused advocacy efforts on asking the state to restore at-risk transit relief funds from 2023, thereby preventing further cuts to public transit programs in reauthorization of the Cap-and-Trade Program, and to provide near-term funding to address the needs of the agencies facing the largest operating shortfalls (Muni, BART, Caltrain, and AC Transit), thereby avoiding severe service cuts. Thanks to senators Wiener and Arreguin, the legislature’s counterproposal (known as the two-party agreement) protected relief funding and proposed a loan for operators facing imminent financial catastrophe.
The Deal
On June 24, the legislature and governor finalized a deal that restores $1.1 billion in transit funding and authorizes a $750 million loan from the state for new funding to keep BART, Muni, Caltrain, and AC Transit operating at a high level. While the $1.1 billion in restored funds is available to all transit agencies in the state, the loan is exclusively for BART, Muni, Caltrain, and AC Transit. This $1.85 billion will keep the region’s largest operators running through early 2027, averting the most severe service cuts for the next 18 months. Without this funding from the state, BART was contemplating slashing service by 70% to 90% — the equivalent of cutting 4,200 trains per week to just 500 trains per week.
What’s Next: Passage of SB 63 and Reauthorization of the Cap-and-Trade Program
The state conditioned the above-noted $750 million loan on the legislature passing SB 63 this summer, which would enable three to five counties to place a tax measure on the November 2026 ballot and to generate operating revenue for the largest and most vulnerable transit agencies while also addressing local transportation priorities. The regional measure directs most of the funding to regional systems, which means that additional actions will be needed to ensure that Muni can provide high-quality service to San Francisco residents.
Concurrently, state policymakers will continue to negotiate reauthorization of the Cap-and-Trade Program. In SPUR’s view, the Greenhouse Gas Reduction Fund has played an important role in funding public transit and should continue to do so. Reauthorization presents an opportunity to increase funding for transit and to reimagine how the state achieves its policy goals through a new approach to funding. Transportation remains the single-largest source of greenhouse gas emissions, and the California Air Resources Board has called for a significant reduction in vehicle miles traveled. Given the direct and strong relationship between transit ridership and resources, significant growth in transit ridership entails major increases in operating costs and the need for increased funding.
To achieve its climate goals, the state should invest more heavily in transit service, which translates directly into higher ridership and fewer emissions. SPUR will continue to advocate for more transit funding, especially for more and better transit service.