The Chicago Transit Authority this week proposed a $1.3 billion 2010 budget that relies on a fare hike, service cuts, other spending reductions, and dipping into capital funding to eliminate a $300 million operating deficit.

The proposal sets the stage for intense lobbying of Illinois lawmakers for a bailout and efforts to win union concessions. Even with a sales tax increase approved last year, the recession’s impact is cutting so deeply into revenue collections as costs  rise for pensions and union contracts that additional funding support is needed absent state help, officials warned.

Revenue from sales taxes and the CTA’s share of the city’s tax on real estate transactions will fall $213 million below previous projections while labor contracts call for a 3.5% increase in wages. The authority also faces increased debt service on its $1.8 billion of pension-related debt and rising pension contributions.

“Faced with declining revenues, our challenge is to manage responsibly and make strategic budget decisions that will enable CTA to weather the recession, operate more efficiently, and still provide the critical services that so many working men and women rely on,” CTA president Richard Rodriguez said in a statement.

Officials last week announced $122 million in cuts, leaving a $178 million hole. Under the budget plan that eliminates the deficit, train fares would rise to $3 and bus fares to $2.50 from $2.25 now, making the fare one of the highest for a public transit system in the nation. The plan calls for cutting as many as 1,200 positions and as many as 110 of 150 bus routes would see reduced service.

The agency operates the second-largest transit system in the country, with bus ridership of 328 million and rail ridership of 198 million annually, up 5.4% in 2008 from 2007. Moody’s Investors Service recently downgraded the CTA’s $1.9 billion of pension-related debt to A1. The bonds are rated AA-plus by Standard & Poor’s. The authority also has outstanding debt backed solely by federal grant funds.

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