The agency's president blames the struggling economy. The mayor says the move is a last resort.
"People are getting laid off," Daley said. "People are cutting back. People are taking cut backs with your pay. People are taking furlough days, awful things like that. It's happening all over, and the government is not immune to this."
Mayor Daley added that the recession has slashed revenues the CTA had counted on from sales and real estate taxes by 30 percent.
Daley also says state lawmakers might want to reconsider the free fares given to older public transit riders in light of the fare increases and service cuts being proposed.
The free ride program is something former Gov. Rod Blagojevich added to last year's CTA bailout. Before he was removed from office, Blagojevich also extended the free rides to people with disabilities and military personnel.
One lawmaker is sponsoring a bill that would limit senior free rides to low-income seniors.
Gov. Pat Quinn, however, has said he supports the existing free ride program.
The CTA's president blames the economy for a $300 million budget shortfall. The transit agency is required by law to balance its budget.
Three dollars per ride is enough to make some riders wonder if it's worth it anymore, or if it might be time to start driving. Bus rides will increase to $2.50.
"You take the train to save money and not have a car. So, I'd have to rework the budget and see if it's worth buying a car at that point," said rider Noah Walman.
That was something many riders said Monday.
Let's say you already own a car and work in the Loop.
Gas will cost about a $1,000 per year.
Registration and city sticker: $135
Loop parking: $2,400, at least.
That brings the total to drive to just under $5,000.
However, taking the CTA, at the new $110 monthly train rate, will cost you $1,320 per year.
"I think the question is whether or not the difference, the savings in transit, is enough to make them deal with some of the inconvenience of a transit lifestyle," DePaul University transportation expert Joe Schweiterman said.
There is much more to the new CTA budget. Non-union employees have to take 12 unpaid furlough days, plus six unpaid holidays.
CTA President Richard Rodriguez says it's time for the unions to make some concessions, or there could be massive layoffs.
"They have not had to experience furlough days or unpaid holidays, and they've continued to get raises," Rodriguez said.
The CTA's two biggest unions said Monday that they've given up enough over the years. And the rank-and-file, like 17-year veteran bus driver Earl Williams, seem to agree.
"You know, these furlough days -- I feel for them. But I'm sticking with the union," Williams said.
Every big-city transit agency has been hit by the bad economy, but compared to Chicago, New York City seems like a bargain. New York raised its subway fare this year from $2 to $2.25, a 12.5 percent increase.
The Associated Press contributed to this report.