MCTS Will Fix Budget With Federal Funds

MCTS Bus. Photo by Jeramey Jannene.

The Milwaukee County Transit System (MCTS) will use the rest of its federal stimulus funding to close a projected budget deficit this year, raising new concerns about a transit budget deficit in 2026.

Previously, MCTS planned to slowly spend down its reserves of federal funding released during the COVID-19 pandemic, closing its structural budget deficit until 2028. Last year, it cancelled planning for a second bus rapid transit route to move federal funding into its operations and buy more time.

MCTS has a structural deficit estimated between $12 and $18 million. If federal stimulus funds are spent down to close the 2025 budget deficit, MCTS will be staring at a fiscal cliff next year.

MCTS Chief Financial Officer Alexander Corona told supervisors on the Committee on Transportation and Transit the funds would help the system cover a $10.9 million budget deficit being driven by overtime costs and a poorly performing private contractor.

For supervisors on the committee the budget deficit, seemingly, came out of nowhere. They learned about it in a story by Urban Milwaukee. So did Milwaukee County Executive David Crowley. The transit workers union, Amalgamated Transit Union Local 998, learned about the deficit during contract negotiations, after it hit the news.

Since then, Milwaukee County Department of Transportation Director Donna Brown-Martin and interim MCTS CEO Julie Esch have both resigned. The officials testifying before the committee Wednesday are the new, albeit transitional, leadership for the county’s transit system. Interim CEO Sandra Kellner had been in her role for less than 48 hours when she appeared before the committee Wednesday.

“I would first like to apologize for how the information on the service changes was handled,” Kellner said. “It is our goal to share information as soon as possible and in this instance we did not meet our own standards, and more importantly we did not meet your expectations.”

Supervisors pushed transit leaders to explain how the budget deficit could go unnoticed, or unreported to elected officials. Kellner and other officials declined to say whether Esch and Brown-Martin’s resignations were directly related to the budget deficit or the failure to report it.

Sup. Jack Eckblad said it seemed, “a lack of oversight is is a core issue here.”

Sup. Justin Bielinski questioned the timing of the the deficit announcement: in the middle of contract negotiations with ATU. “Part of this, at least, looks like a negotiating tactic for ATU negotiations, because you’re talking about a benefit that was agreed upon by both parties,” he said, referencing overtime.

Sup. Priscilla Coggs-Jones pointed out that county departments are supposed to report budget deficits over $100,000. “Why did MCTS miss the obligation… who dropped the ball?” she asked.

MCTS officials weren’t immediately certain whether they were looking at a “blip” in budget projections or a trend pointing to a deficit, Kellner said. Corona came into his role as the new CFO in February and at the same time MCTS began implementing a new system to connect data from both operations and finances. It wasn’t until the end of the third quarter of the fiscal year that MCTS realized, “we have a larger trend than what we had anticipated,” Kellner said.

Joe Lamers, director of the Office of Strategy, Budget and Performance, told supervisors the deficit is “very concerning” for the budget office and the county administration. Looking at the budget, his office sees MCTS facing a “confluence” of financial challenges — paratransit, overtime, passenger revenue and more — and they’re all “trending in the wrong direction.” The system does have federal funding available, but those funds were supposed to keep the system solvent until 2028.

“And now we’re likely going to run out of funds in 2026,” Lamers said. “Now we’re getting ready to prepare the 2026 budget, and we are suddenly faced with this federal funding lapse issue that we previously thought we have a little bit longer of a timeline to get to.”

Overtime

MCTS is utilizing overtime at a rate of approximately 25% to provide bus service, according to Corona. That means 25% of service hours are provided by a bus operator working overtime. This is approximately 10% higher than budgeted for, according to MCTS.

“We’re experiencing too many employees regularly accumulating many hours of overtime while working less than 40 hours per week,” Corona said.

There are certainly workers who are volunteering for overtime to make extra money, said ATU President Bruce Freeman. But those shifts are available because so many of their co-workers are burned out and calling in sick to get a day off.

Drivers are regularly working six to seven days of work a week and it’s burning them out, ATU Vice President Michael Brown said. They’re using sick time to get a day off, and overtime is relied upon to plug the hole. So great is the need that MCTS even allows mechanics and maintenance workers to pick up shifts in order to get all the bus service out.

Paratransit Contract Overruns

MCTS’ paratransit program TransitPlus, which provides public transportation for persons with disabilities, is $3.4 million over budget. The problem is TransDev, the French multi-national corporation that MCTS contracts with, is not meeting service goals, according to MCTS.

TransDev is supposed to be carrying a minimum of 1.7 passengers per hour. But it’s only carrying a average of 1.46 per hour. The result is thousands more hours that TransDev is billing the county for each month.

“That means that they are charging us more hours for moving the same number of people from point A to point B,” Corona said.

The committee and MCTS officials went into close session to discuss the county’s legal options, including potentially litigation, with the county Corporation Counsel Scott Brown.

Paul Buharin, senior vice president for operations at TransDev North America, told the committee the company has implemented a new schedule and expects to begin meeting service goals before the end of the month.

Declining Passenger Revenue

Despite reporting ridership growth in recent years, passenger revenue is also heading in the wrong direction, according to MCTS.

Due to a combination of fare evasion and the fare capping system that was implemented, revenue is down 5% from what the system expected, Corona said.

Union officials feel fare evasion has grown into a larger issue that it previously was because MCTS has refused to develop a strategy for addressing it. ATU President Freeman said he remembers when MCTS started encouraging drivers to let riders ride even if they couldn’t pay the fare and provide them with a paper transfer.

“I realized that if we continue that type of behavior, it’s going to be a problem that’s going to get out of control so fast,” he said. “And now, 2025, here we are: It is out of control.”

An operator recently told him that he hit the fare evasion button on his bus 96 times during a five hour shift, Freeman said. Other operators don’t press it at all, viewing it as futile, he said.

Sup. Shawn Rolland has authored a resolution requesting MCTS develop a plan to address fare evasion. It was recommended for approval by the Committee on Transportation and Transit Wednesday.

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