The financially strapped Port Authority of Allegheny County is expected to receive $55 million more in state funding this fiscal year as part of a budget deal being hammered out in Harrisburg, allowing the transit agency to avoid a second round of service cuts in September.

With lawmakers nearing agreement on an additional $300 million in transit funding statewide, it will be up to local officials to come up with their mandatory share.

"If we're not able to generate local matching funds, frankly, Port Authority won't have access to these dollars," Port Authority Chief Executive Officer Steve Bland said yesterday.

Legislators are expected to grant the county the authority to tax drinks served in restaurants, bars and clubs at a rate of up to 10 percent and tax rental cars $2 a day. But implementation of any new taxes will be tricky at the very least.

County Chief Executive Dan Onorato said yesterday he would not push for new taxes unless the Port Authority brings down both union and management costs.

"I will present a bill to County Council, but I want to make it clear, that bill is going to have a big contingency in it. The contingency is going to be, no new money, no new revenues, unless the costs at the Port Authority get corrected," Mr. Onorato said.

Republicans on County Council, where Democrats hold a 10-5 majority, are already maneuvering to foil the implementation of new taxes. Councilwoman Jan Rea last night introduced a bill that would require a two-thirds majority vote to pass tax increases.

"Philosophically, I'm opposed to taxing anything else in Allegheny County," Ms. Rea said yesterday.

Port Authority has a projected $46 million deficit in its $325 million operating budget for 2007-08. To cope with its dire fiscal condition, the agency eliminated 30 routes last month and announced that 34 more routes would disappear Sept. 2.

The agency had planned to nearly deplete a special fund earmarked for capital expenses -- such as buying new buses -- to plug the budget hole.

But if the new dedicated transit funding passes and is approved by Gov. Ed Rendell, the agency will not have to resort to either drastic step -- draining the fund or reducing service in September.

"It would allow us to not implement the September service reduction," Mr. Bland said. "The service out there now would be stabilized."

The additional money will not allow the rollback of the June service cuts, however, and it will not be enough to stave off a January fare hike.

Under a new transit funding scheme, Port Authority could see its share of state funds rise to $197 million this year, from $142 million in 2006-07, according to Johnna A. Pro, spokeswoman for state Rep. Dwight Evans, D-Philadelphia, chairman of the House Appropriations Committee.

The agency will need to obtain more money from Allegheny County, however, to leverage the additional state funds.

The county provides about $25 million a year to Port Authority, and Mr. Onorato said he would like to increase that to $30 million to $35 million.

"The local match would probably settle in around $30 [million] to $35 million within the next two or three years. That's what's going to be required to get the match from the state," Mr. Onorato said.

Taxes on drinks and rental cars would allow the county to shift the burden away from property taxes, he said.

"If we didn't get any help or get the ability to have a different dedicated funding, property tax would ultimately have to go up to bail out public transportation, and I didn't want to do that," he said. "The question is, do you want to fund transit using the property tax, or some kind of a sin tax or user fee, like a drink tax or a car rental tax?"

Mr. Onorato said any additional revenue would come with strings attached, namely reducing post-retirement labor costs.

The current contract with Local 85 of the Amalgamated Transit Union expires in June. The union represents 2,500 active and 2,200 retired Port Authority workers.

Patrick J. McMahon, the union's president/business agent, hailed the apparent budget compromise and what it means for preventing a second round of service cuts.

But when told of Mr. Onorato's comments linking new taxes to reducing labor costs, Mr. McMahon said his union has already made concessions. Health care costs increased in January 2006 for both active employees and retirees, he said.

"I don't know what they're looking for. They're looking for us to increase our contribution, that's for sure," he said.

Mr. McMahon, Mr. Onorato and Mr. Bland have been meeting quietly in recent weeks to seek common ground. Labor and management at Port Authority have exchanged lists of cost-saving ideas. The union is willing to open contract talks early, Mr. McMahon said.

"They always want to say the ball's in my court. Well, actually the ball's in their court. We have welcomed the idea of going back and starting the negotiations early," Mr. McMahon said.