The $74.9 million budget is relatively good news for passengers, who have had to deal with service cutbacks and higher fares over the past several years because of declining revenue and ridership on the line.

But Caltrain's top official warned Thursday that if ridership does not show an uptick this year, it could mean big cutbacks in 2006, because officials are exhausting a number of one-time funding sources in 2005.

"It's no secret that next year will be very, very difficult," said Caltrain executive director Mike Scanlon. "God knows what we will have to cut."

Scanlon said it was important to keep service levels high as they launch the baby bullet this June. They hope the express trains -- which will cut commutes from San Francisco to San Jose from 90 minutes to under an hour -- will attract new riders and turn around the recent slump. Caltrain is banking on a $3 million increase in fare revenue next year.

Another factor also mitigated what otherwise would have been a bleak financial picture next year. The three counties that fund Caltrain increased their contributions by 2 percent -- the first such increase in four years. San Mateo County will kick in $14.9 million next year.

The 2005 operating budget is a $5.8 million increase over last year's $69 million budget. It calls for increasing the number of trains Caltrain runs each day from 76 to 86, including 10 baby bullet trains. Service to Giants games will continue. Caltrain will make one major reduction: cutting the number of shuttles it runs from Caltrain stations from 32 to 28.

The budget will go before Caltrain's board of directors for final approval in June. Caltrain officials were supposed to unveil a capital budget at a board meeting on Thursday, but put it off until June, saying there were still issues to be worked out.