Over the past several decades in the United States, costs have increased far above the rate of inflation in industries like healthcare and higher education. Millions of people have been forced to choose between their personal and financial wellbeing as a result.
In response to these crises, the American left has strenuously argued for greater public subsidy to meet the soaring cost of these essential public and private services. In the practice of more mainstream Democratic Party governance, these measures often take the form of vouchers or other means-tested policies. On the left wing of the party, advocates call for eliminating user costs almost entirely. Popular movements have organized around policies like single-payer health insurance and student loan forgiveness that have been successfully demonstrated in many other nations.
In recent years, support has also grown on the left for a similar sounding idea: making public transit free. In some places, local leaders have moved quickly to implement this vision. In 2019, Kansas City, MO became the largest American city to eliminate fares on its bus network. In November 2021, Michelle Wu, a prominent advocate for free transit (among many other issues), overwhelmingly won Boston’s open mayoral race. Among her first policies was to make three busy bus routes free for two years. The recent increase in gas prices has amplified calls for other states and cities to do the same in order to bolster alternatives to driving.
At its most basic level, the concept of free transit seems like a natural relation to the concepts of free healthcare and higher education, easily appealing to people whose politics are left of liberal. But upon closer examination there are key distinctions.
In the United States, the quality of hospitals and universities is the best in the world. Rich people from everywhere else on the planet come to the Mayo or Cleveland Clinics for care and send their children to Harvard or Yale. Even the median American institutions are better resourced than their peers anywhere else. To access these best-in-class services, cost is the major barrier for ordinary people, and that cost is widely agreed to be out of control.
The opposite is true for American public transit systems. No city in the United States can boast a train or bus network that ranks among the world’s best. This is true even for New York City, whose venerable subway system is not keeping pace with more modern systems in Asia and Europe. But with public transit, cost is not a concern for all but the poorest of users. For almost any trip for which it is an option, public transit is nearly always the cheapest for an individual traveler, and this has always been the case. The problem is that public transit is not an option for many trips, because the quality of the service is so poor.
This relationship between quality and cost is important to note when thinking about how to price public goods. So too are international examples. Many nations offer free or nearly-free health care and higher education. But virtually no major transit system on earth is free, including in the capitals of large welfare states like Stockholm and Oslo. Even Soviet transit systems charged a fare. This fact should be a cause for reflection and reassessment among proponents of free transit
In this matter, there are two sequential questions worth asking. First, is it practical to guarantee the costs of free transit in the first place? Second, if the answer to the first question is “yes,” does then it make sense to prioritize spending that money in this way?
Fares Are An Important Source of Funding For Transit
The COVID-19 pandemic eviscerated public transit ridership across the country. In many cases, fare revenue decreased even more as some agencies suspended fare collection to minimize the risks to their workers. Some free fare advocates have argued that the experience of the pandemic proves that fares are an unreliable source of revenue. This argument is not convincing. That it took a once-in-a-century plague to destabilize the ‘user pays’ model is in fact evidence of its reliability and stability.
It is also telling that, absent fares, virtually every transit agency in the United States faced a major budgetary crisis that had to be plugged in a series of emergency COVID relief bills. The truth is that fare revenue is an essential part of the budget of every big-city transit system in the world. To illustrate, take these examples from the three American metros where I have lived:
Minneapolis-St. Paul’s Metro Transit is a small-sized transit system. Prior to the COVID-19 pandemic, it expected to collect $113 million in fares annually, nearly a fifth of its operating budget.
Philadelphia’s SEPTA system is a medium-sized system. Before the pandemic, it planned for $468 million in fare revenue, nearly a third of its operating budget.
New York’s MTA system is the largest in the country. Before the pandemic, it anticipated receiving $6.486 billion in fare revenue, nearly 40% of its operating budget.
Metro Transit’s 2020 budget forecast 18% of total revenue coming from fares, almost equivalent to the amount of direct state funding.
These are huge numbers. Eliminating fares for even a relatively small transit system in a top-twenty American metro area would cost over $100 million per year. Eliminating fares for a larger system would cost far more. If Mayor Wu were to eliminate fares on MBTA service, the City of Boston and the state of Massachusetts would need to plug a budget hole of over $650 million annually.
More important than the raw numbers is the relationship between ridership and fare revenue as a percentage of the budget. In the case of the three systems above, the more popular the system, the greater the percentage of the budget that is provided by fare revenue. This is not an accident of these specific examples but a general rule of transit funding.
To understand why, consider a fictional transit agency. This agency operates a single bus that runs a one hour round trip route along a straight line. To run this bus, the agency incurs a lot of costs. The most direct are the driver’s salary and the cost of the diesel fuel. There are also costs for the agency’s office staff, the mechanic who keeps the bus in good repair, the custodian who cleans it every night, spare parts, storage, the amortized cost of the bus itself, and more. These costs are fixed.
Let’s make up some numbers and say that when you combine all these costs, it takes $100 per hour to operate the bus. Fares are $2. If 25 people ride the bus in an hour, the agency makes back 50% of its operating budget. If 50 people ride the bus in a hour, the agency makes back all of its operating costs. Because the costs of running transit service are mostly fixed while the revenues are mostly variable, efficiency matters a great deal. The busiest transit agencies that earn more revenue (carry more passengers) per revenue mile (the service they run) are going to make up more of their operating budget through fares.
What if 75 people ride the example bus? Then the agency is making 150% of its operating budget. With the surplus funds, the transit agency can run a second bus. If it runs that bus on the same route as the first, it can double the frequency of service. Now instead of coming every hour, a bus comes every half-hour. Because the service is more useful than before, more people will ride it. That added ridership in turn might make it possible to run a third bus, or a bus on a different route, each option drawing in still more riders. There are eventually diminishing returns to adding service, but few American transit routes are anywhere near this threshold.
There are two key points worth restating here. First, large transit agencies rely heavily on nine to ten figures of annual fare revenue. Second, fares create incentives to provide service that is actually useful to the most people.
Putting these two points together yields a third conclusion. If fares were eliminated, transit agencies would instead rely on annual appropriations from state and local governments to fill the hole. This arrangement would be entirely predicated on a durable consensus (either bi-partisan or within a single dominant party) on funding transit at this level. To maintain this political consensus would naturally reorient transit priorities from the needs of riders to the needs of voters. Even in a city with as much service as New York, these two groups are not the same. Without financial incentives to boost ridership, transit agencies would instead be subject to political incentives to boost coverage instead. Shifting these incentives would naturally degrade the quality of the system over time.
Fares Aren’t the Most Pressing ISSUE for Transit Riders
One of the striking aspects of the free transit movement is that it is often elite driven. The MBTA in Boston launched a free transit pilot program in 2022 because that was a policy that newly-elected Mayor Wu cared about, not necessarily because a wellspring of citizen activism put the idea on the agenda. While this is not to say that transit riders or advocates are opposed, a look at the website of Transit Matters, a Boston-area advocacy group, shows little interest in the fare issue and instead a focus on more prosaic matters.
This is important and telling. The up-front cost of free transit discussed in the last section is only one big obstacle for free transit. If that can be overcome, making the case for prioritization is even more challenging.
If you could somehow guarantee Metro Transit in the Twin Cities an annual grant of $115 million dollars to spend on whatever it liked, what would be the best way for the agency to use that money? As we’ve seen above, the agency could completely cover the cost of eliminating fares. But it could also cover the capital costs of building one or two new rapid bus lines every year. It could raise operator salaries and benefits to more quickly fill its crippling driver shortage. It could run more buses on existing routes. It could inaugurate more routes overall, perhaps in the suburbs where service is thin. It could buy more battery electric vehicles and install more chargers. Or it could wire the entire sum to someone claiming to be a Nigerian prince over email. In short—there are smart and there are wasteful ways in which Metro Transit could use this hypothetical pot of new money. What matters is that there are many available options and it should not be automatically assumed that spending a marginal dollar to make transit free is the best one.
Lower fares didn’t even make the top seven improvements prioritized by MUNI riders in 2018.
When American transit riders are actually asked about what changes they’d like to see to the service they use, they almost never indicate that fare policy is a top priority. A 2018 survey of MUNI riders found that just 4% chose lower fares as the most important improvement the agency could make, ranking far behind all kinds of service improvements. 2018-19 survey of 1,700 transit riders across seven cities by Transit Center found that “one major factor under agency control can either build or discourage ridership: the quality of the transit service itself.” A 2019 survey of random participants by Masabi (a fare payment technology company, full disclosure) found that just 20% of people who were reached even had access to transit at all and just 12% of the total used it. When those riders were asked if various changes to agency operation would cause them to ride transit more frequently, just 13.4% of riders chose cheaper fares. 13.1% chose longer operating hours and nearly 35% chose none of the provided options (increased frequency or reduced travel time was not included for some reason). A 2021 survey of bus riders by WMATA found that lower fares was the priority of just 10% of riders, ranking behind more frequent, reliable, and direct service, as well as longer operating hours.
WMATA bus riders prioritized better service over changes to fare policy.
These findings are not surprising. American transit service is highly competitive with other modes of travel in terms of cost. In the densest US cities it cheaper to make most trips by bus than by car. But transit is much less likely to be competitive in terms of convenience. Regular transit riders often experience long and unexpected waits, they may have to walk a meaningful distance to or from a stop, and they may have to take indirect routes to their destination that involve transfers and more waiting. Wasted time is not just annoying, it has a monetary cost of its own that may exceed the savings of taking transit.
Proponents of free transit make various claims about the impact of eliminating fares on ridership. It is clear and obvious that there is a boost, but the strongest evidence available (from a citywide free transit experiment in Tallinn, Estonia) suggests that the effect is small. Various other studies have arrived at different percentage increases (including +22% for a single-route pilot run by the MBTA last year) but there is no overarching consensus and the case that free transit represents a uniquely potent boost to ridership is not strong.
The scale of the effect matters when weighing priorities. It is impossible to design a perfectly controlled experiment to assess the impacts of free transit versus increased service, but we can set up compelling comparisons. When Houston METRO launched a budget-neutral redesign of its bus network, ridership across the transit system increased by 6.8%. When Metro Transit launched the A Line aBRT, ridership in the corridor increased by about a third. Well-designed service improvements have a track record of increasing ridership by a range of percentages that is larger than the best alternate investments. Research has found that the fare elasticity of riders is highly contingent on the quality of the service that they use. The weight of this evidence is not conclusive, but it strongly suggests that money spent on increasing service is more likely to boost ridership than money spent on eliminating fares. In this context, the voices of riders in favor of prioritizing service improvements should decisively tip the scales.
Free Transit Is a Matter Of Cost, Not Operations Or Safety
It’s important to take a pause here and address several important arguments made by both sides of the free transit debate that haven’t been covered above. These arguments are related to fare policy, but only tangentially.
For example, proponents of free transit correctly note that fare collection is a significant source of delay for many transit routes. Eliminating the process by which riders line up and pay one-by-one at the front door of the vehicle would speed up travel and make the job of the operator easier. This is a major service improvement and potentially a big reason why the recent MBTA pilot program discussed in the last section achieved its ridership gains despite only a third of riders actually saving money (two thirds ultimately paid the standard fare anyway because they transferred from the free bus to the T).
There are major operational benefits when riders pay before boarding or after boarding and not while boarding.
However, these benefits can be achieved without making transit free. Almost all new LRT and BRT systems in the United States use a “proof of payment” fare system, where riders pay before boarding or at fare readers distributed throughout the vehicle. Instead of relying on the operator to verify fare payment, random spot checks are conducted to ensure compliance. This approach is widely used around the world, including on local buses, and is not contingent on eliminating fares.
At the same time, opponents of free transit convincingly argue that fares serve a gatekeeping function. Without a fare, transit systems can become hang-outs for problem riders, from truant teens to disruptive adults. This concern has the weight of history behind it. Early free transit programs in Trenton, NJ, and Austin, TX in the 1980’s, both were ended in large part because passengers and operators perceived and objected to an increase in anti-social behavior.
But charging fares is only a roundabout way of achieving a welcoming and safe environment on transit. Transit agencies can tackle the issue more directly by increasing staff dedicated to enforcement or norm-setting. Crowded vehicles also create conditions where anti-social behavior is less likely, so any strategy that boosts ridership could also be seen as a safety measure. Furthermore, disputes over fares are a common spark for disorderly incidents on transit and so lessening or eliminating fare checks could lead to fewer conflicts with agency staff in particular.
In these two instances, proponents and opponents of free transit raise important issues for the quality of transit services that can be impacted by fare policy. But the root of the matter remains cost and the most convincing arguments against free transit still revolve around that central problem.
Ways To Reform Fare Policy Without Making Transit Free
Just because fares are critical to transit agency budgets and their elimination is not a major priority for riders does not mean that fare policy is perfect.
As a general rule, transit agencies should try to keep fares low and simple. Fares will naturally go up over time thanks to inflation, but they should not increase more than once a decade at the most. Fares should not vary by mode and transfers should not cost extra. Children (usually 12 and under) should ride free so that families can ride for less. These are the basics.
Transit agencies can also target special assistance towards low-income riders by providing a special discounted fare program. These programs are common, but often poorly used because they are hard to sign up for. Agencies should aim to make it as easy as possible for qualifying riders to take advantage.
Another useful reform is called “fare capping.” This policy fixes a maximum amount that any given rider can pay in fares in a month, after which all rides are free. This means that lower-income riders who might lack the financial security to buy a monthly pass in one payment are not forced to pay more than the cost of that pass in increments over time. Every transit system should implement this policy.
Advocates should focus on strategies like these, which make a difference for those who need it the most without jeopardizing the funding, political base, and service quality of transit systems. Efforts to win free transit are risky in two ways. If they are unsuccessful, they will represent a lot of energy wasted on a moonshot. If they are successful, the results might be more harmful; the politicization of transit service and the increased vulnerability of transit funding.
The basic truth is that providing high quality transit service costs a lot of money and fares are an important way to help make the numbers add up. Instead of eliminating fares, we should make them more fair, and instead of working to make American transit cheaper, we should work to make American transit something that is truly worth paying for.