The Port Authority board yesterday passed a $347.5 million 2006-07 operating budget leaving a $31.5 million question about what happens after Dec. 31, the midpoint of its fiscal year.

That's when $32 million in traditional federal highway funds transferred by Gov. Ed Rendell run out and the agency faces a $31.5 million deficit. If the deficit is not addressed, it may result in a large fare increase and drastic bus-trolley service cuts for riders.

"We don't have enough (revenue) to get us through the next 12 months," said Guy Mattola, head of the board's administration-finance committee. "A better solution must be on the horizon."

The Port Authority and other transit systems around the state, including the Philadelphia-based Southeastern Transportation Authority, which consumes about 70 percent of state subsidies, are banking on quick legislative approval of long-term, dedicated funding after a special state commission finishes a study and issues a list of recommendations by Nov. 15.

"A growing, predictable source of revenue must be enacted by our legislators to keep the Port Authority viable," Mr. Mattola said.

Steve Bland, the authority's new executive director, said he'll spend the larger part of next week in Harrisburg, meeting with and lobbying state lawmakers and officials of Gov. Ed Rendell's office and the Pennsylvania Department of Transportation.

While Pittsburgh's population ranking dropped to No. 57 this week, "Port Authority ridership ranks 19th, so we need to recognize its importance to the region's vitality," Mr. Bland said.

"The time is here for Pennsylvania to create a long-term solution to the funding problems that continue to challenge all of its transit providers."

The authority has been cutting expenses for several years, but rapidly rising healthcare, pension, fuel and labor costs, along with general inflation, have been blamed for a new operating budget that is $27.5 million higher than the current fiscal year that ends July 1.

Also yesterday, the nine-member authority board approved a $210.3 million 2006-07 capital budget that includes expenditures to start a light-rail extension to the North Shore, the continued rehabilitation of light-rail vehicles, the purchase of new buses and improvements to facilities.