MCTS Didn’t Report Deficit to County Board For Two Months

6400 series Milwaukee County Transit System (MCTS) bus. Photo by Jeramey Jannene.

The Milwaukee County Transit System (MCTS) discovered a projected budget deficit in April, two months before it reported the $10.9 million financial issue to elected officials.

MCTS first noticed budget overages in financial data in April, according to a written timeline of events provided to the Milwaukee County Board of Supervisors by MCTS interim President and CEO Sandra Kellner. By the third week of May, officials realized the deficit would not be contained by its “localized corrective action.” But the agency did not report a projected budget deficit to the Milwaukee County Board of Supervisors until June 17.

The new timeline shows the transit system failed to follow a county ordinance requiring department heads to report operating budget deficits of more than $100,000 to the county board. The system could have notified supervisors during their committee meeting cycles in May or June.

As officials have previously testified, the timeline provided by the agency suggests MCTS failed to spot the scale of the budget deficit because, from February to April, it was in the middle of transitioning to a new financial data system. Describing the cause of the deficit, MCTS once again pointed to unexpected overtime costs, an underperforming paratransit contractor, lower than expected passenger revenue and higher costs for parts and materials.

MCTS is planning to roll out a series of service reductions this fall, cutting the number of bus hours on routes across the system. These cuts alone will not close the projected budget deficit. They only reduced its projected magnitude, as Urban Milwaukee previously reported.

The transit system’s timeline says that it notified MCDOT and the County Executive’s office of a projected deficit in May after more data revealed a “fuller financial picture.” At that time, the administration requested “a stronger review” and scheduled a meeting between MCTS and the county’s budget office in June.

MCTS is also reported that it gave the County Executive’s office a heads-up of its plan to release a public statement. The County Executive’s office has previously said it was not notified by MCTS of the $10.9 million budget deficit.

“The Milwaukee County Department of Transportation (MCDOT) alerted our office of a projected budget deficit specifically for MCTS’ 2026 budget. That is different than the projected budget deficit for the current MCTS budget,” a spokesperson told Urban Milwaukee. “The first time our office was informed about the exact budget deficit amount for the current 2025 budget was through the press release shortly before it was distributed to the media.”

On June 23, the administration communicated “concerns” about the system failing to notify supervisors and “miscommunication from MCTS on the severity of the budget situation, and acting independently regarding major implications of service changes.” Crowley’s Chief of Staff Mary Jo Meyers wrote to Comptroller Liz Sumner the next day and asked for an audit of MCTS.

MCTS created the timeline after supervisors demanded answers to their questions about when the system knew it was running a deficit.

“While the timeline lays out the 2025 activities that led up to the June announcement, the fundamental budgetary issues predate this timeline,” Kellner wrote in her letter to supervisors. “Funding challenges are not new to MCTS and have been incrementally mounting for more than a decade, as we are one of the last remaining metro areas in the country without a dedicated funding source for transit.”

Service Cuts, Fare Increase in 2026

It’s likely that service will be cut and fares increased next year.

MCTS has a longstanding structural budget deficit. Since 2020, federal stimulus funds have closed the gap between the cost of service and available revenue. In response to the projected 2025 deficit, MCTS is spending down the funding faster than previously expected. It will now run out before 2027, revealing a structural budget gap as big as $17 million.

“Nevertheless, we as an organization are responsible for aligning our budget with our operating needs, something that was done with overly optimistic assumptions for 2025,” Kellner said. “This 2025 budget was developed in 2024 by previous leadership who is no longer with the organization.”

MCTS is now planning to cut service hours and raise fares in 2026, according to a budget request for next year submitted to the county administration on Aug. 12.

Base fares, currently $2, have not been increased since 2007. MCTS is planning to raise base fares to $2.75 next year. Daily, monthly and weekly fare caps would be raised, as well. The system implemented fare capping with its new payment system, which allows riders to ride for free after paying for a certain number of fares over the course of a week or month. Under the 2026 request, MCTS would raise the monthly fare cap from $37.50 to $49.50. Earlier this year, it increased the caps, but not the base fare.

The system is working on a strategy to address fare evasion. The transit system told supervisors in June it estimated that one in four riders were not paying a fare. Despite a planned fare increases, MCTS still only expects to collect $1.25 per passenger next year. The figure is driven in part by a reduced fare program for seniors, children and those with disabilities.

MCTS is also considering cutting more than 100,000 service hours across the system in 2026, going from 1,357,952 budgeted hours in 2025 to 1,239,962 in 2026.

The transit system is also attempting to negotiate new policies for employee overtime, to reduce overtime costs. The system has relied on overtime for years to provide the service it budgets for. The Amalgamated Transit Union Local 998 (ATU) has often said the level of overtime required of operators is unsustainable and leads to burnout.

It is also planning to renegotiate, delay or cancel the contract with its paratransit provider. TransDev, a French multinational transportation company, provides transportation to persons with disabilities. The company has troubled MCTS since it first took the contract over; now it’s underperforming and billing MCTS more for the same level of service.