Chicago Transit Authority President Forrest Claypool today proposed a $1.39 billion budget for 2013 that maintains current service levels, freezes base fares, and calls for modest reductions in discounts for CTA passes to bring them in line with other major U.S. cities.

The budget reflects a new, tentative labor agreement with the Amalgamated Transit Union Locals #241 and #308, which represent CTA bus and rail operators. The four-year tentative agreement slows the rate of growth in health care spending and emphasizes preventative care, among changes shaving approximately $50 million off the 2013 budget deficit. Agreements with a dozen other CTA unions resulted in similar changes contributing nearly $10 million toward deficit reduction.

But facing a $165 million shortfall for 2013, the CTA needed to take further steps to shore up its finances in both 2013 and beyond. Additional management reforms have paid off with tens of millions in savings, and modest reductions in pass discounts will balance the remainder of the budget and ensure future fiscal stability.

Base fares remain unchanged at $2 for bus and $2.25 for rail. The discounts for passes (3-day, 7-day and 30-day) will be reduced by $6, $5 and $14, respectively, but still will provide significant discounts to frequent users. The one-day pass, primarily used by tourists, will have its discount reduced by $4.25. CTA pass discounts are currently the second most generous of major U.S. cities. (See also: Chart, FAQ)

Discounts for CPS students will actually increase by 12 percent. To encourage school attendance, students currently paying 85 cents will only pay 75 cents.

“This is a sound, fair and forward-looking budget that protects taxpayers and will improve service throughout the CTA system,” said Mayor Rahm Emanuel. “The CTA is the backbone of our transportation network, and I commend the labor unions and CTA leadership for working together to craft a budget that works for everyone in the city of Chicago. I look forward to the ongoing modernization and improvement of our public transportation system, which creates jobs in our neighborhoods and economic opportunity throughout the city.”

“Our management reforms have taken well over $50 million in costs out of the system and our labor partners have helped us bend the cost curve, “ Claypool said. “These changes put the ‘doomsday’ budgets of the past behind us. We’re moving forward, and building a modern CTA on a strong fiscal footing,” Claypool said.

“Most importantly, we have protected the bus and rail service that our customers depend on every day while preserving and creating good-paying jobs.”

Changes to the labor contracts will allow the CTA to hire more tradesmen as well as additional customer assistants and bus and rail janitors, improving customer service and the cleanliness of facilities and vehicles.

Additionally, over the last 18 months Mayor Rahm Emanuel and the CTA have launched more than $2 billion in modernization projects, upgrading aging infrastructure and improving the customer experience.

The CTA has financed more transit police and built a sophisticated camera surveillance network that’s driven down crime. More than 100 rail stations have received facelifts; replacement of the bus and rail fleet is underway; and contracts have been let to eradicate slow zones. Work is under preparation for construction of a new railroad on Chicago’s south side. Better management has reduced absenteeism and workers compensation costs and a modern supply chain is nearly in place. New technologies, from Bus and Train Tracker to contactless media, are making CTA travel more convenient, safer, and efficient.

Ridership has increased significantly in the past 18 months, jumping by 5.3 percent or more than 27 million new rides.

These reforms are essential, particularly in light of the underfunding of the CTA under a 30-year-old state funding formula, which ignores both number of rides and ridership capacity. CTA provides 82 percent and 58 percent, respectively, in exchange for just 49 percent of state funding.

As part of state and federal mandates, the CTA also provides more than $100 million each year in free and heavily discounted rides. The state provides only $28 million to help offset the cost of its mandates.

Most significantly, the General Assembly in 2008 – just before the Great Recession ground the economy to a halt—required immediate and fully-funded pension and health care trusts. Although new revenue was passed as part of the 2008 mandate, it fell $100 million short of covering the new costs. In 2013 alone, the CTA’s operating budget will grow by $32 million because of mandates from the 2008 legislation.

The 2013-2017 Capital Improvement Program (CIP) totals $2.8 billion, with projects designed to modernize aging CTA infrastructure, overhaul and replace fleet vehicles, and bring the system into a state of good repair.

This is the second consecutive budget under President Claypool that the CIP does not divert scarce capital funds to balance the operating budget, a move that would cause the delay or cancellation of other critical projects. From 2008 to 2011, the CTA borrowed $554 million, much of it in transfers from capital, to balance the operating budget.