Analysis of the Allocation Formula for Federal Mass Transit Subsidies

PAD-79-47: Published: Oct 9, 1979. Publicly Released: Oct 9, 1979.

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The federal government has granted funds to urban areas to subsidize mass transit operating expenses. These funds are allocated on the basis of a congressionally determined formula. GAO has developed criteria by which various factors included in such a formula can be evaluated. Although no single factor satisfies all criteria, some are clearly unsatisfactory, and GAO has indicated the type of formula which satisfies the criteria reasonably well.

Potential allocation formulas can be evaluated according to the following criteria: (1) interjurisdictional equity whereby each area receives an allocation appropriate to its relative need; (2) attainment of federal program objectives; (3) creation and maintenance of incentives for efficiency; and (4) availability of data. Conflicts exist among these criteria, however, and potential factors must be considered. The potential factors fall into four categories: transit supply factors; transit demand factors; joint transit supply and demand factors; and urban factors such as population, employment density, per capita income, and age of the city. GAO believes that a good formula should include at least one factor that ensures that the largest shares go to urban areas with the greatest need and at least one factor that creates incentives for desirable responses by operators. One possible formula includes the following measures: population; population density; revenue-seat-hours of service; and transit availability. A formula based on these measures is a reasonable way to allocate operating assistance because: (1) existing incentives for cost efficiency are maintained; (2) reliable data are generally available; (3) the largest shares can be allocated to areas with the greatest need; (4) incentives are created to attain federal program objectives; and (5) the formula is neutral with respect to the use of farebox revenues and state and local subsidies to finance the nonfederally funded portion of transit costs.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Current legislation authorizes operating assistance through fiscal year 1982. If the decision is made to continue the program, it is suggested that congressional committees examine alternative allocation formulas. Congress will also need to evaluate new Department of Transportation proposals for allocating bus replacement funds in 1981 and 1982, and the allocation formulas analyzed by GAO may be of use concerning these issues. Early consideration should be given to ensure the existence of the necessary data to implement a formula of the type proposed by GAO. Congress may wish to ask the Urban Mass Transportation Administration to develop cost estimates for obtaining more accurate measures of transit availability, which is a useful factor in allocating operating assistance. If the decision is made to use a formula with several transit-based as well as urban-based factors, Congress must decide the appropriate weights given to each. It appears that the greatest incentives for attaining federal program objectives and providing service efficiently can be provided within the proposed formula by weighting revenue-seat-hours and transit availability most heavily.


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