On a sustainable path? Financing local public transport in Hungary between 2018 and 2022

Abstract

Our study explores the effects of the Covid-19 pandemic and the Russian-Ukrainian war on local public transport, and more importantly on its financing, in cities with more than 30,000 inhabitants and local public transport. A public interest inquiry was carried out in 26 cities, which resulted in the analysis of the public service reports on local public transport for 2018, 2019, 2020, 2021 and 2022, prepared by the operators for the client, and the public service contracts currently in force for the provision of local public transport. By analysing the data, we sought to understand how the Covid-19 epidemic and the recession caused by the Russian-Ukrainian war have affected the revenue structure of public service providers, and hence the need for public intervention. The study found that the central players in organizing local public transportation are the municipalities, which must address environmental challenges, territorial development, and economic efficiency considerations when ensuring the provision of public services. The analysis reveals two extremes in the financing of public transportation: fully subsidized public transport through state support, or a market-based service, which would involve the elimination of public service provision. The solutions adopted by the analysed Hungarian municipalities lie between these two extremes, increasingly shifting towards the dominance of central state support. This is especially characteristic of those municipalities where Volánbusz Zrt. is responsible for transport provision, as state wage subsidies are only granted to state-owned companies since 2017, distorting competition between public service providers. Another important finding is that the role of market revenues in financing public transport is negligible, and this is expected to decrease further due to the introduction of discounted nationwide and regional passes eSective from 2024, as well as expanded local transport discounts. Current trends suggest that the sustainability of local public transport can only be achieved through significant state funding, which, however, may distort the position of market participants and reinforce the dominance of the state-owned company due to the state aid system structure.