Meeting_Body
BUDGET PUBLIC HEARING
FINANCE, BUDGET, AND AUDIT COMMITTEE
MAY 21, 2026
Subject
SUBJECT: FISCAL YEAR 2027 (FY27) PROPOSED BUDGET
Action
ACTION: APPROVE RECOMMENDATION
Heading
RECOMMENDATION
Title
CONSIDER:
A. ADOPTING the proposed FY27 Budget as presented in the budget document (provided in a separate transmittal and posted on metro.net <https://www.metro.net/about/financebudget/>);
1. AUTHORIZING $9.7 billion annual consolidated expenditures to achieve goals and objectives set forth by the Board adopted mission and goals;
2. AUTHORIZING a total of 12,321 FTEs, of which 10,024 are Represented FTEs and 2,297 are Non-Represented FTEs;
3. AUTHORIZING an average 3% performance-based merit increase for Non-Represented employees. The wage increases for Represented employees, in accordance with the pre-negotiated Collective Bargaining Agreements, is an average 4.0%;
4. AUTHORIZING a 5% adjustment to current Non-Represented job pay grade levels to reflect best practice (see Attachment A);
5. APPROVING the Life of Project (LOP) budgets exceeding $5.0 million for new capital projects and LOP budget increases for existing projects exceeding $1.0 million. Project details are presented in Attachment B;
6. AUTHORIZE the CEO to execute Metrolink’s continuing resolution to extend FY26 budget authorization through first quarter of FY27 until October 1, 2026, and execute all necessary agreements between Metro and SCRRA based on the continuing resolution;
7. AMENDING the proposed FY27 Budget document by including 76 additional FTEs for the Department of Public Safety (DPS), to support the phased start-up of the care-based, multi-layered safety unit, and $5.6 million in non-labor budget;
8. AUTHORIZE the CEO to execute contract modifications to extend the current transit law enforcement contracts annually (for up to three additional years), utilizing funds to be requested during future fiscal years’ budget processes;
9. AMENDING the proposed budget to include any Board approved actions currently under consideration from now to the end of the fiscal year (June 30, 2026); and
B. APPROVING the Reimbursement Resolution declaring Metro’s intention to issue debt in FY27 for capital projects, as shown in Attachment C, with the provision that actual debt issuance will require separate Board approval.
Issue
ISSUE
California Public Utilities Code Section 130105 requires Metro to adopt an annual budget to manage the revenues and expenses of the Agency’s projects and programs. The budget is the legal authorization to obligate and spend funds and to implement Board policy. It includes all operating, capital, planning and programming, subsidy funds, debt service requirements, and general fund activities for the fiscal year. The legal level of control is at the fund level. Total annual expenditures cannot exceed the final appropriation by the Board at the fund level except for capital expenditures, which are authorized on a life of project basis.
On May 5, 2026, the FY27 Proposed Budget was made available to the public at www.metro.net <http://www.metro.net>, in printed copies through the Records Management Center (RMC) at RMC@metro.net <mailto:RMC@metro.net>, and on the plaza level of the Gateway building. The public hearing is scheduled for May 21, 2026. On April 21, 2026, advanced public notifications of the Budget Public Hearing were issued through advertisements posted in more than ten news publications and in various languages.
Background
BACKGROUND
In preparation for the FY27 Budget development process, the Office of Management and Budget (OMB) initiated early engagement with the Board through a comprehensive presentation to the Finance, Budget, and Audit Committee on September 18, 2025. This analysis identified a growing structural deficit, driven by constrained revenue growth alongside rising operating and system expansion costs. In response, Metro approached FY27 as a disciplined budget reduction year, emphasizing cost control, operational efficiency, and the preservation of core services.
Metro is also advancing a forward-looking strategy to strengthen long-term financial resilience by actively evaluating and advancing opportunities to diversify and enhance revenue streams across the organization. These efforts, further elevated during the March 2026 Special Board Workshop, will continue to be refined over the coming fiscal year to support a more sustainable and adaptable financial future.
Transparency and public engagement were central to the FY27 Budget development process, with a significant expansion of outreach beginning in September 2025. Through a dual-track strategy that included relaunching the My Metro Budget Activity Tool and introducing the youth-focused My Metro Priorities tool, Metro broadened participation and ensured more inclusive input, particularly from younger riders. These efforts resulted in high engagement, with more than 7,400 responses and 5,000 comments received, representing the highest level of public participation in Metro’s budget process. This level of engagement not only strengthens transparency but also ensures that budget decisions are directly informed by the communities Metro serves. Additional details are provided in Attachment D.
This report represents the culmination of the FY27 Budget development process and the final in a series of monthly updates to the Board. Building on the transition from recovery to reinvention, the FY27 Proposed Budget reflects a measured and strategic response to near term fiscal constraints, advancing Metro’s transit and transportation objectives in a fiscally responsible manner while embedding an equity centered approach led by the Office of Equity and Race (OER). Together, these actions position Metro to navigate current challenges while laying the foundation for a more resilient, equitable, and sustainable transit system.
Discussion
DISCUSSION
FY27 Proposed Budget Overview
The FY27 Proposed Budget totals $9.7 billion, reflecting a $223 million increase (2.4%) over the prior year. This growth remains modest and below the current inflation rate of approximately 3%, underscoring Metro’s commitment to cost discipline even as it addresses contractual obligations, system expansion, and rising operating costs.
Achieving a balanced budget this year proved exceptionally difficult, requiring a strategic reliance on fund balances to bridge the gap between projected revenues and rising expenditures. While this approach successfully preserves our existing workforce and avoids service cuts, it has significantly drawn down our fund balances, leaving limited flexibility for future fiscal years and highlighting the urgent need for long-term financial sustainability.
Despite these fiscal headwinds, the budget continues to advance critical multi-year capital investments already underway, while emphasizing efficiency, cost containment, and the preservation of the existing workforce.
Metro's Commitment to Preserving Service
The FY27 Proposed Budget marks a clear transition from recovery to reinvention, positioning Metro to move beyond stabilization and toward a more resilient, forward looking future. Under the direction of the CEO, Metro applied a disciplined and strategic approach to resource allocation, ensuring that limited funding is directed toward core operations and high value service delivery. This included a comprehensive reassessment of programs and expenditures to identify efficiencies, refine scopes, and align investments with the agency’s strategic priorities. The budget balances equity centered decision making with disciplined fiscal stewardship, prioritizing essential operations, preserving service quality, and aligning resources with the agency’s core mission.
Metro will continue to proactively address near term financial challenges while remaining grounded in its guiding principles of preserving essential services and prioritizing quality service. In FY27, the agency will maintain approximately 7.13 million bus revenue service hours and 1.45 million rail revenue service hours, including expanded service for new stations along the D Line. Maintaining this level of service underscores Metro’s commitment to delivering consistent, reliable mobility for the residents of Los Angeles County, even as the agency navigates a constrained fiscal environment.
FY27 Public Input and Alignment
The FY27 Proposed Budget is grounded in the delivery of a safer, cleaner, and improved transit system, shaped by an unprecedented level of public engagement. This input has directly informed strategic alignment across the agency, ensuring departments allocate resources in a manner that reflects the priorities of the riders. Key investments continue to enhance customer experience, including infrastructure improvements such as lighting retrofits and the modernization of elevators and escalators to improve reliability.
In addition, FY27 priorities include the expansion of Throne Restrooms pilot, continuation of the Tap-to-Exit pilot program, and the expansion of the taller faregate pilot to strengthen access control and reduce fare evasion. Metro’s multi-layered approach to enhance public safety, which balances traditional security measures with care-based services, further reinforces its commitment to system quality. Collectively, these investments ensure the FY27 Proposed Budget reflects the safety, cleanliness, and accessibility priorities identified by Metro’s riders.
Risks and Uncertainties
While the budget is balanced, Metro continues to operate in a complex and uncertain fiscal environment. Economic forecasts suggest a potential inflection point as investment in emerging sectors and fiscal stimulus begin to take hold; however, the recovery across California and Los Angeles County is expected to remain uneven, with modest job growth and unemployment levels continuing to exceed national averages.
At the local level, economic conditions present ongoing challenges to revenue stability. Los Angeles County continues to lag neighboring regions in sales tax growth, while out migration, high costs of living, and rising household expenses continue to repress consumer spending. These trends directly impact Metro’s primary revenue sources, reinforcing uncertainty in sales tax projections and limiting near term revenue growth.
External risks, including federal funding, tariff-related impacts on procurement, and persistent inflation. Federal transit funding remains subject to ongoing reauthorization discussions, increasing the likelihood of short-term continuing resolutions, while inflation, influenced by geopolitical conditions, energy prices, and tariffs, remains elevated above historical targets and continues to exert pressure on both operating and capital costs.
Internal pressures, such as ongoing rail expansion and increasing capital needs, continue to place constraints on available operating resources. Preparations for upcoming mega events add further uncertainty with a lack of additional funding. In response, Metro is maintaining a proactive and adaptive approach, closely monitoring economic conditions, revenue performance, and expenditure trends, and remains prepared to adjust projections and spending as necessary throughout FY27 to ensure continued fiscal stability and responsible program delivery.
FY27 Budget Summary & Proposed Budget can be accessed at:
Budget Book | Metro Budget Portal <https://budget.metro.net/budget-book.html>
Resources Summary
The FY27 Proposed Budget ensures that resources are available to meet the planned Metro program and project delivery schedules for the upcoming fiscal year. Revenue projections are informed by the following socio-economic factors:
• Uncertainty over tariffs, inflation, and immigration, impacting overall economic stability
• Rising insurance, health care, and housing costs, which constrain consumer spending on taxable goods
• Gradual economic recovery projections for FY27
• Leading regional economic forecasting sources such as UCLA, Beacon Economics, and Muni Sevrices
The total FY27 Proposed Budget planned resources are $9.7 billion, which are a 2.4% increase from the FY26 Budget. The 1.8% projected increase in sales tax revenues assumes a moderate sales tax revenue growth.
Figure 1
Expenditure Summary
The FY27 Proposed Budget of $9.7 billion reflects a deliberate and strategic rebalancing of resources, prioritizing investments to sustain essential operations while advancing critical capital projects already underway. This approach reinforces Metro’s commitment to maintaining reliable service today while building the system for tomorrow.
Growth is concentrated in operating and service-critical areas, with Metro Transit Operations & Maintenance increasing by $83.3 million (2.9%), supporting service delivery and addressing rising cost pressures (Figure 2). These investments ensure the system remains responsive to rider needs.
Targeted capital investments also drives key program increases. The Highway Multimodal Development Program reflects progress on major initiatives, including the advancement of I-105 ExpressLanes construction and the transition of multiple I-605 Hotspot projects into construction. Similarly, growth in the Regional Rail program is driven by continued momentum on the Link Union Station project, as the team advances the Construction Manager/General Contractor (CM/GC) contract and initiates early construction.
At the same time, the Program Subtotal reflects a net reduction of $201.6 million (2.5%), driven in part by CEO directed-targeted cost efficiency efforts by Cabinet members, as well as project phasing across capital and programmatic areas. These cost efficiency efforts include the reduction of discretionary spending, tighter controls on non-essential expenditures, and the prioritization of core service delivery with high-impact investments. Additionally, departments were directed to identify operational savings, streamline processes, and defer or rescope lower-priority activities where feasible. These actions reflect a disciplined approach to managing resources, ensuring funding is aligned with near-term priorities while improving overall cost effectiveness.
Each program, function, and departmental budget focused on aligning resources to current economic conditions, operational needs, and measurable progress on priority initiatives.
The table below presents expenditures by program type in the FY27 Proposed Budget, providing a detailed view of how resources are allocated across Metro to support these priorities.
Figure 2
Board Appointee Budgets
This year’s budget reduction efforts include the Board appointed functions for County Counsel, Ethics, Board Admin, and Inspector General. As the agency faces tightening financial constraints, these functions, like all other departments, were tasked to undergo a review of prioritization of activities. There were no new FTE requests and includes withholding one FTE vacancy which resulted in cost reductions of -2.2%. Figure 3 includes the total non-labor and labor budgets. These reductions were achevied without compromising the fiduciary responsibilities as intended by these Board oversight functions.
Figure 3
Full-Time Equivalent (FTE) Summary
The FY27 Proposed Budget includes 12,321, FTEs, an increase of 61 FTEs from FY26. FTE additions include 50 Non-Represented (33 are mostly cost-neutral by shifting from temporary to permanent) and 11 Represented (Figure 4).
Non-Represented FTEs for FY27 total 2,297, which include an additional 50 new positions (33 are mostly cost neutral), to serve the following areas:
• Operational Efficiencies
• Enhance the Transit Rider Experience
• Safety and Security
• Organizational Support: General Administration, Contract Management, Financial, and Legal Compliance
• Capital Project Support
• Workforce Initiatives
• Joint Development
Figure 4
Represented FTEs for FY27 total 10,024, which includes 11 new positions (Figure 5) for the following:
• Technical Support: Network Infrastructure, Databases, and Systems, administrative functions for Vehicle Operations, as well as invoice processing and resolution.
• Operational Maintenance: CCTV, HVAC and Electricals
Figure 5
Labor Summary
The FY27 Proposed Budget includes contract wage increases of an average of 4.0% according to the negotiated Collective Bargaining Agreements (CBAs) with the represented union groups AFSCME, ATU, SMART, TCU, and Teamsters. An average 3.0% performance increase is included for non-represented employees which will be distributed on a merit-based system; this adjustment is intended to help align compensation with inflation and ensure competitive retention.
Health and welfare benefits for represented employees are determined by their respective CBAs. Non-represented employees receive medical and dental benefits at the carrier contract rates previously approved by the Board.
Non-Represented pay grade levels were last updated by 5% in July 2025. To remain competitive with the external market, the Chief People Office will adjust the current compensation pay grade levels by 5.0%. There will be a minimal impact of $361,317 to the budget and current employees’ salaries. Please refer to Attachment A for more details.
Budget Amendments through June 30, 2026
The proposed budget shall include any Board approved actions currently under consideration, from now to the end of the fiscal year (June 30, 2026).
Life of Project (LOP) Budgets
The Board must approve new capital projects with LOP budgets exceeding $5.0 million; existing projects with LOP exceeding $1.0 million requiring LOP amendment also requires Board approval as separate Board action. Attachment B details projects which fall under this category.
Metrolink Continuing Resolution
Metrolink is facing significant fiscal and operational challenges which have delayed the transmission of its budget to the Member (funding) Agencies. At Metrolink’s request, the new fiscal year will begin under continuing resolutions to allow time for rigorous decision-making. When Metrolink transmits its official proposed budget to Metro, staff will return to the Board for consideration of the proposed Metro subsidy for the official FY27 Metrolink budget.
Department of Public Safety (DPS) Start-up
Implementation of the Department of Public Safety (DPS) is well underway, and FY27 represents a significant milestone as the Department initiates large-scale hiring of sworn personnel. In parallel, DPS will expand the broader public safety ecosystem by adding care-based teams. To support field operations, DPS will also add new operational and administrative FTEs, including dispatchers to facilitate communication with sworn staff and technical personnel to support the implementation of core systems such as Computer-Aided Dispatch (CAD) and Records Management Systems (RMS).
Additionally, several Metro departments have identified the need for incremental staffing to support DPS implementation. These include several CPO positions to manage recruitment, hiring, pensions, and benefits, as well as ITS staff to provide programming, systems support, and communications infrastructure. Collectively, these support FTEs are critical to successfully establishing and sustaining the DPS operating model.
Additional non-labor funding is required to support the implementation of the DPS, including various stages of the hiring process, uniforms, firearms, and other related safety equipment. In addition, supporting departments-particularly CPO and ITS-require non-labor resources to hire, recruit, and onboard DPS personnel, including funding for recruitment, live-scan fingerprinting, written assessments, and other hiring-related services. ITS costs include procuring computers, mobile devices, software, and associated licenses for all new DPS hires. These investments are necessary to ensure DPS staff are fully equipped and operational from the outset.
As DPS starts the initial stages of hiring and recruiting sworn officers, Metro will continue the existing law enforcement contracts, as there is still a need for sworn officers on the system to respond to calls for service requiring a sworn officer response, and address penal code violations and violation of local laws in jurisdictions throughout the Metro system. Sworn officers will be needed during this transition, and a gradual demobilization of both contracts is expected as Metro resources assume responsibility for stations and law enforcement patrols. DPS recognizes the need to maintain services and ensure consistency on the Metro system during the upcoming major events (FIFA World Cup, Super Bowl). Metro will extend the existing law enforcement contracts, utilizing funds to be requested during the annual budget process, consistent with the last three years, as DPS hires sworn resources and begins patrolling segments of the system.
Reimbursement Resolution
Per Federal tax law, bond proceeds can only be used for capital expenditures incurred after the issuance of bonds. Metro must pass a resolution indicating the intent to issue bonds at a later date to reimburse expenditures incurred prior to the bond issuance. See Attachment C for Reimbursement Resolution.
Debt Program
Debt financing is a cash management and budget tool Metro uses to help deliver projects. Debt issuance is authorized by applicable state and federal legislation and the local sales tax ordinances. The Board-adopted Debt Policy establishes prudent guidelines for the issuance and management of debt following industry best practices and ordinance-specific affordability limits.
Debt is not an additional source of revenue. It must be paid back with interest using existing and predetermined funding sources, in most cases, local sales tax revenues. However, it is a way to spread out the impact of large spikes in capital costs over multiple years. For this reason, most of Metro’s large projects have been utilized or are expected to use debt financing to facilitate project delivery.
Beginning July 1, 2026, Metro has approximately $4.3 billion in outstanding long-term debt. The annual debt service cost in FY27 is estimated at $535.7 million, an increase of 12.1% over the FY26 Budget of $477.8 million, according to the debt service schedule. In FY27, it is anticipated that the I-105 Express Lanes will utilize toll revenue bond proceeds and other projects such as Westside D Line (Purple) Sections 3, East San Fernando Transit Corridor, Metro G Line Bus Rapid Transit (BRT) Improvements, Vermont BRT, E-Line Eastside Transit Corridor Phase 2, A-Line Foothill Extension Phase 2B2, Heavy Rail Vehicle Procurement, Bus Acquisition and Maintenance, and various other projects will utilize bond proceeds from future issuances.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
This recommendation will not have an impact on safety standards at Metro.
Financial_Impact
FINANCIAL IMPACT
The FY27 Proposed Budget, provided under separate submittal, totals $9.7 billion and is balanced. This budget reflects Metro’s continued commitment to meeting its capital and operational obligations, which are critical to maintaining eligibility for federal and state funding. It also supports the effective administration and distribution of regional transportation funds to local jurisdictions and municipal operators.
Equity_Platform
EQUITY PLATFORM
Metro’s commitment to equity is embedded in the FY27 Budget development process through the continued application of Equitable Zero-Based Budgeting (EZBB) and equity assessments to understand and quantify potential impacts on marginalized communities and highlight budget requests that advance equitable outcomes. Staff used the Equity Focus Communities (EFC) Budget Assessment and the Budget Equity Principles Next Step Equity Initiatives for the FY27 Budget; staff did not apply the Metro Budget Equity Assessment Tool (MBEAT). The Offices of Equity and Race (OER) and Management and Budget (OMB) are working with consultants to complete an Agencywide Budget Equity Assessment (ABEA) to identify opportunities for improvement to the MBEAT and budget equity approach overall. A revised ABEA process will be implemented in the FY28 and FY29 Budget development processes.
Per Board Direction, the EFC Budget Assessment was introduced in 2022 for the FY23 Approved Budget. It is a geographic equity analysis to identify the extent that Metro’s budget invests in EFCs, areas in very high and high need of mobility investment, which comprise approximately 40% of Los Angeles County’s population. The FY23 Approved Budget established a baseline of 67.3% EFC Benefits. The FY27 Proposed Budget exceeds this baseline by 13.1 percentage points, increasing EFC Benefits to 80.4% of the budget. This represents roughly $3.3 billion in targeted and $4.7 billion in indirect benefits. Year-over-year fluctuations in Benefits to EFCs in the table below can be attributed to an evolving understanding of how to quantify expenses and major transit projects being developed or coming online. OER and OMB are working on continued improvements to staff training to ensure consistent application over time. See Attachment E for more details on the EFC Budget Assessment, including the results of the EFC Budget Assessment for the FY25 Actuals, completed in December 2025.
Figure 6
Staff also aligned their FY27 department budgets towards Metro’s Budget Equity Principles, using the Next Step Equity Initiatives Pilot, in support of Metro’s Equity Platform. The Pilot was part of the ABEA and sought to engage Metro’s Senior Leadership Team (SLT) in identifying the initiatives that are moving the needle the most on equity at Metro in FY27. All SLT members and their staff established measurable outcomes and identified a point person for each initiative. OER will meet with departments regularly in FY27 to check in on the progress of the initiatives.
Vehicle_Miles_Traveled_Outcome
VEHICLE MILES TRAVELED OUTCOME
VMT and VMT per capita in Los Angeles County are lower than national averages, the lowest in the SCAG region, and on the lower end of VMT per capita statewide, with these declining VMT trends due in part to Metro’s significant investment in rail and bus transit.* Metro’s Board-adopted VMT reduction targets align with California’s statewide climate goals, including achieving carbon neutrality by 2045. To ensure continued progress, all Board items are assessed for their potential impact on VMT.
As part of these ongoing efforts, this item is expected to contribute to further reductions in VMT. This item supports Metro’s systemwide strategy to reduce VMT through investment activities that will improve/benefit and further encourage transit ridership, ridesharing, and active transportation. Although projects and programs in this budget have mixed outcomes, taken as a whole, most of the investments described in this report will likely decrease VMT in LA County. Within the suite of projects funded in this budget, Metro seeks to reduce single-occupancy vehicle trips, provide a safe transportation system, and increase accessibility to destinations via transit, cycling, walking, and carpooling. Some of the projects funded include items that will ease congestion for cars and trucks, or expand vehicle capacity, resulting in the possibility of increased VMT. However, the investments Metro is making into programs such as rail, bus, active transportation and shared mobility will result in an overall decrease in VMT. Metro’s Board-adopted VMT reduction targets were designed to build on the success of existing investments, and this item aligns with those objectives.
*Based on population estimates from the United States Census and VMT estimates from the highway performance monitoring system data between 2001-2019.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
The recommendation supports the following Metro Strategic Plan Goal:
Goal # 5: Provide responsive, accountable, and trustworthy governance within the Metro Organization.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The annual budget serves as the legal authority to obligate and spend funds. Failure to adopt the budget would severely impact Metro’s goal of improving transportation in Los Angeles County.
Next_Steps
NEXT STEPS
Upon Board authorization and adoption of the FY27 Proposed Budget, Metro will make funds available for the planned transit and transportation programs outlined in the proposed budget document and program funding to regional transit/transportation partnering agencies, cities, and recipients.
Staff will closely monitor the financial situation and provide regular performance updates to the Board.
Attachments
ATTACHMENTS
FY27 Budget Summary & Proposed Budget can be accessed at:
Budget Book | Metro Budget Portal <https://budget.metro.net/budget-book.html>
Attachment A - FY27 Compensation Adjustment
Attachment B - FY27 New Capital Projects and Existing Projects LOP Increases
Attachment C - FY27 Reimbursement Resolution
Attachment D - FY27 Public Outreach (Public Comments)
Attachment E - Metro EFC Budget Assessment Results Over Time
Prepared_by
Prepared by:
Jeffrey Lopez, Director, Budget, (213) 418-3183
Tina Panek, Executive Officer, Finance, (213) 922-4530
Tim Mengle, Executive Officer, Finance, (213) 922-7665
Irene Fine, Deputy Chief Financial Officer (Interim), (213) 922-4420
Reviewed_By
Reviewed by:
Michelle Navarro, Chief Financial Officer (Interim), (213) 922-3056
