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Port Authority of Allegheny County faces a $19 million deficit in its next budget year even with the help of highway money diverted in March by Gov. Ed Rendell.

The Port Authority on Friday presented a $338.8 million spending plan -- with projected revenues of just $319.8 million -- for the fiscal year starting July 1.

Only labor concessions will help erase the shortfall, Port Authority board members said. The Port Authority is negotiating new contracts with its 2,600 bus drivers, maintenance workers and supervisors, represented by Amalgamated Transit Union Local 85.

The Port Authority wants to turn over to private contractors up to a fifth of its bus routes and vehicle maintenance work, according to a copy of the Port Authority's contract proposal, dated May 12. The Port Authority also wants to limit wage increases and make employees pay more for health care and pension benefits.

The union contracts expire June 30, as does the Port Authority's fiscal 2005 spending plan. The Port Authority board could adopt the proposed fiscal 2006 budget in June.

Union President Patrick McMahon said labor negotiators plan to meet with the Port Authority to review the budget proposal.

"I don't feel I should comment until the union has an opportunity to review and digest what the authority is projecting," McMahon said.

Talk of another deficit rekindles fears by some transit riders of the Port Authority's past budget-balancing proposals -- cutting routes and raising fares -- that were avoided in March when Rendell approved diverting up to $412 million in highway money to help transit agencies statewide.

Michael Freeman, of Observatory Hill, said he depends on the bus, which he takes daily to his job at Mercy Hospital, Uptown.

"That scared me back in January when they were talking about raising fares," Freeman said as he waited for a bus Downtown yesterday. "I couldn't take that hit."

The Port Authority provides bus, light-rail, ACCESS and incline service throughout 730 square miles of Allegheny County and portions of Armstrong, Beaver, Washington, and Westmoreland counties. About 70 million people ride its vehicles annually.

The Port Authority, which does not call for cutting routes and raising fares in its proposed budget, wants state lawmakers to approve a larger subsidy that can be relied on annually.

Rendell's diverted highway money, called a "flex," is a two-year patch. Under the measure, the Port Authority would get $45 million in fiscal 2006, which it included in its total revenue projection.

"Even with the assumption of the $45 million supplemental flex, we'll have a shortfall unless some actions are taken," Port Authority Executive Director Paul Skoutelas said.

The shift must be approved by the Southwestern Pennsylvania Commission, a Downtown-based agency that directs how highway dollars are spent in the region.

The report from Port Authority Chief Financial Officer Claudia Allen surprised board members.

"I've been under the assumption for over a year that with the flex funding we'd be all right," said board member James Burn Jr.

Of the Port Authority's $319.8 million in projected revenues, $229.7 would come from government grants. The rest -- $90.1 million -- would come mostly from fare box revenues and advertising.

The Port Authority's biggest expense by far would be $257.9 million for employee pay and benefits, representing about 76 percent of its total spending. Part of the problem is a projected jump in health care costs, from $51.9 million in fiscal 2005 to $67.4 million in fiscal 2006.

The Port Authority also anticipates paying $1.60 a gallon for diesel fuel in fiscal 2006, up from $1.37 in the current fiscal year. Each penny increase costs the authority an extra $100,000.

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