The Port Authority of Allegheny County has proposed a record $319.8 million operating budget, keeping fares and service unchanged for people who account for 240,000 weekday bus, trolley, incline and paratransit rides.

The rosy-sounding spending plan for the 2005-06 fiscal year that begins July 1 makes the boldest assumptions in the transit agency's 41-year history.

It assumes:

The Southwestern Pennsylvania Commission, called SPC, which sets transportation priorities for the 10-county region, will ratify Gov. Ed Rendell's plan to "flex" $45 million in federal highway and bridge funds and give the transit agency an emergency shot in the arm for the fourth time in three years.

Wages and salaries will be frozen for union, management and administrative employees, although four union contracts covering about 2,650 hourly workers expire during the next six weeks.

The administration will achieve $19 million in savings in health care and pension costs, including raising employee co-payments for physician visits and prescription drugs. Otherwise, unconstrained employee benefits are projected to go from $89.2 million this year to $116.9 million in 2005-06 -- a 31 percent jump.

Diesel fuel prices will average no more than $1.60 per gallon for the year. Every 1-cent increase costs $100,000 over the span of a year.

However, the SPC is being pressured not to flex any more federal highway funds, no progress is being made in labor negotiations on economic issues and fuel prices continue to spiral upward.

"They're on a very slippery slope," said John Tague of Greenfield, after the Port Authority board's administrative and finance committee recommended approval of the budget yesterday. Tague is president of the Allegheny County Transit Council, a group of riders serving in an advisory role.

"They're banking on the fact we're going to get the [federal] money, but what happens if the SPC says 'no,' as [House Majority Leader Sam Smith, R-Punxsutawney] has asked?" Tague said. "If there's no money for the union, what do they negotiate?

"I don't know what the board can do differently but I have to say as a rider, I'm concerned."

The proposed $319.8 million, 2005-06 operating budget is $12.5 million more than this year's budget, which Rendell rescued with an 11th-hour infusion of $30 million in federal highway funds. With the Southwestern Pennsylvania Commission's reluctant approval of the transfer, the authority was able to cancel record fare hikes, service cuts and employee layoffs.

Port Authority Chief Executive Officer Paul Skoutelas said every budget makes assumptions on revenues and expenditures.

"I believe they're reasonable," he said, noting as he has often in the past that the only solution to recurring financial problems at the Port Authority and elsewhere in Pennsylvania is for state lawmakers to pass long-term, dedicated, predictable funding.

Meanwhile, when it meets Friday, the board is expected to authorize $33.8 million in short-term borrowing to pay bills until state and county grants and subsidies are received later in the year.

Patrick McMahon, president-business agent of Local 85, Amalgamated Transit Union, which represents 2,400 bus-trolley operators, mechanics, maintenance and other workers whose contract is up June 30, could not be reached.

Also affected is another Local 85 bargaining unit representing almost 200 first-line supervisors whose contract expires July 31. Contracts with two transit police unions end July 31.

In a statement, Skoutelas said:

"The realization of cost savings in the areas of health care and pensions is essential for Port Authority to balance revenues and expenses, and to continue to provide comprehensive and affordable public transportation services. These cost savings are our top priority as we negotiate new collective bargaining agreements and proceed into the next fiscal year."

Skoutelas said while authority and Local 85 representatives continue to talk, "there's nothing so far to exhibit a breakthrough has occurred."

For riders, there's no immediate cause for alarm.

If the two sides fail to reach a tentative contract by June 30 and an impasse is reached, state law governing the authority requires that a fact-finder be appointed to evaluate both bargaining positions.

Once the neutral fact-finder is named, the clock starts ticking. The fact-finder has 45 days to produce a nonbinding report and recommendations. Then there's a 15-day period for both sides to accept or reject the report.

If or when one side rejects the report, Local 85 can elect to strike. The union took that route in March and April 1992, shutting down the Port Authority for 28 days before courts intervened.

There is some immediacy and concern about the $45 million in federal highway funds on which the authority is counting to close the gap in the 2005-06 operating budget.

Rendell's office wants the SPC to approve a total of $113.5 million for the Port Authority, plus $2.3 million for the Beaver County Transit Authority and $145,000 for the Mid-Mon Valley Transit Authority, covering their unfunded operating deficits and capital needs through Dec. 31, 2006, not just $45 million for operating funds through June 30, 2006.

SPC rules require a public comment period that's already under way and continues through July 19 to amend the region's Transportation Improvement Program, flexing the federal money to transit.

"Obviously, we're hopeful they'll approve it," Skoutelas said. "That's a major assumption on the revenue side."

In addition to the operating budget, the board is poised to ratify a separate $148 million capital budget for the 2005-06 fiscal year at its monthly meeting on Friday.

The capital budget also makes a major assumption: That the Federal Transit Administration will approve a funding agreement to expand light-rail transit to the North Shore and Downtown convention center, providing $70 million to start boring twin tunnels under the Allegheny River.