How significant are the financial challenges facing the Massachusetts transportation and highway systems?

“The people mowing the grass are paid from the capital budget,” Transportation Secretary Richard Davey told more than 200 business leaders at the AIM Executive Forum this morning.

Davey said the plan announced this week to close a $185 million deficit at the MBTA is merely a prelude to a broader debate about how to solve a $1.3 billion annual shortfall in funding for roads, bridges and mass transit in the Bay State. The Department of Transportation (DOT) continues to squeeze savings and efficiency from its three-year restructuring, according to Davey, but he said no amount of administrative overhaul will solve the long-term financial puzzle.

“This system we have currently is one we cannot afford,” said the secretary, who took over the top job at the Department of Transportation in August after serving as general manager of the T.

The Patrick administration announced a plan Wednesday to raise MBTA fares by an average of 23 percent and to eliminate four bus routes and some weekend commuter rail service. Subway fares would climb to $2 from $1.70 – a 17 percent increase – and the cost of a bus ride will climb to $1.50 from $1.25, a 25 percent jump.

Davey called the fare hikes a one-time solution that will still leave the T with a deficit of between $100 million and $110 million next year. At the same time, he said, the T spends approximately $300 million a year less than it should to maintain its system.

The commissioner demurred when asked to endorse a single long-term solution to the financial crisis but said that the commonwealth will need a user-based system to raise revenue. He noted that Governor Deval Patrick’s proposal three years ago to raise the state gasoline tax generated significant opposition.

Davey said that the Department of Transportation has four primary objectives:

• Driving reform to save money and improve service – DOT has its lowest staffing levels in 15 years, has overhauled its retirement system and is using electronic tolling and other technology to deliver services with fewer people.
• Make reform visible to citizens – DOT is already using electronic highway signs to provide commuter information and is exploring the possibility of allowing consumers to renew licenses with smart phones.
• Transparency – The T conducted 30 public hearings and reviewed 6,000 comments before finalizing its fare proposal.
• Running DOT like a business – The agency has been merging functions and facilities, and rewarding employees for creative ideas that boost efficiency.