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Posts from the "Tom DiNapoli" Category

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Straphangers Will Be Asked to Shoulder MTA’s Growing Debt and Labor Costs

A new report [PDF] from New York State Comptroller Thomas DiNapoli says that the MTA budget picture is slowly improving as tax collections and ridership increase with a recovering economy, but that won’t protect straphangers from big fare hikes.

Revenues from the Payroll Mobility Tax and the more volatile tax on real estate transactions are expected to increase, driven by employment gains and the commercial real estate market. But the MTA’s operating budget — currently $12.5 billion annually — will face widening gaps because of ever-increasing debt and labor costs, growing from $487 million in 2013 to $1.44 billion in 2016 – a total shortfall of $3.76 billion over the next four years. The increase in labor costs is especially pronounced when it comes to health insurance and pensions.

Unless Albany takes action, fare hikes will cover most of the budget gap created by growing labor and debt costs. Photo: renaissancechambara/Flickr

Governor Cuomo and the state legislature have not stepped up with new funding, so the MTA has its own plan to cover nine of every 10 dollars in the budget gap. Toll and fare increases will pay for 82 percent of the shortfall. Fares are expected to increase every other year, rising 35 percent between 2007 and 2015 – almost three times faster than inflation.

Why will each MetroCard swipe cost more? Let’s take a look at the debt and labor costs creating the gaping maw that straphangers will soon be asked to fill.

In order to upgrade trains, buses, and stations and fund system expansions, Albany will continue to pull out the credit card. Borrowing will account for 60 percent of the 2010-2014 MTA Capital Program’s $24.3 billion budget, twice the rate of borrowing in the 1980s. The consequences:

  • Debt service passed $1 billion annually in 2005, is expected to pass $2 billion in 2012, and is forecast to pass $3 billion in 2016. By 2018, debt service is expected to consume 20 percent of the MTA’s revenue.
  • The 2015-2019 Capital Program, which could include future phases of the Second Avenue Subway, is not yet funded. If borrowing continues to be the major payment method, annual debt service could reach $4.4 billion by 2024.

Labor costs make up 60 percent of the MTA’s annual budget, and costs are expected to grow in the coming years.

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Albany Grabs Another $16.7 Million From MTA

Last week, the MTA announced it lost another $16.7 million to an Albany raid [PDF]. Because of lower-than-expected federal assistance for Medicaid, Albany instituted an across-the-board budget sweep of 1.1 percent, cutting state spending and also siphoning off theoretically separate revenue streams dedicated to specific programs and agencies, like the MTA. It’s a reminder that the state’s budget crisis is dragging the MTA and New York City transit riders down with it.

In its most recent raid on dedicated MTA revenue streams, Albany decided to leave the regional payroll tax alone, but siphoned off money from the collection of taxes known as MMTOA. Graphic: Carly Clark/Streetsblog

How Albany makes off with MTA revenue: In its most recent raid on dedicated MTA revenue streams, Albany decided to leave the regional payroll tax alone, but siphoned off money from the collection of taxes known as MMTOA. Graphic: Carly Clark/Streetsblog

The $16.7 million raid, which will ultimately fall on straphangers in the form of worse service or higher fares, was the final domino to fall in a chain of events leading back to Washington and a program called Federal Medical Assistance Percentage, or FMAP. The feds originally passed FMAP in the 2008 stimulus package to relieve the burden of Medicaid on struggling state governments. Though the federal government extended FMAP in August, it did so at a less generous level than before. Money that states expected to come in suddenly wasn’t there.

In New York, that meant a hole of around $280 million, according to budget office spokesman Erik Kriss. In response, the legislature authorized a single across-the-board budget sweep large enough to balance the state’s books. Not including a few exemptions written into the law by the legislature, that came out to 1.1 percent, said Kriss. For the MTA, he explained, that meant taking $14.6 million from contributions raised entirely from dedicated transit taxes, as well as smaller cuts to Long Island Bus funding and “MTA Aid Trust Account Reductions.”

The damage to transit would have been far worse if it weren’t for a small provision slipped into the language of the bill. Though most of the exemptions in the budget sweep were required by law, one of only a handful of discretionary exemptions was the payroll mobility tax, which raises over $1 billion a year for the MTA. Some legislator (or legislators) saved the MTA millions by negotiating that exemption. Lawmakers could have also done the same for other dedicated MTA taxes, but chose not to.

So Albany’s desperate need for cash has once again led it to raid the MTA. Perhaps it’s time to recognize that the way things stand, the separation between the MTA budget and the state budget is largely a fiction. Albany is using the MTA’s dedicated revenue streams — and those of other “independent” agencies — to keep a structurally unbalanced budget appear afloat via short-term fiscal tricks.

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DiNapoli’s Press Release Obscures Biggest Source of MTA Budget Woes

The MTA is spending more and more on debt service, contributing to higher fares and service cuts. Without $9.9 billion between 2012 and 2014, that debt service will eat even more of the operating budget. Image: NYS Comptroller.

The MTA is spending more and more on debt service, contributing to higher fares and service cuts. Without $9.9 billion to fill the gap in the capital program, that debt service will suck even more money out of straphangers' pockets. Image: NYS Comptroller

Earlier this week State Comptroller Tom DiNapoli came out with his latest report on the MTA’s troubled finances [PDF], and if you take a look at the numbers, the big takeaway is pretty stark. Without funding for the $9.9 billion hole in the agency’s capital program, MTA debt will soar even higher. If legislators don’t secure more revenue for maintaining and expanding the transit system, there are basically two options: either the MTA can reduce its capital spending or straphangers can pay the price through higher fares and worse service.

But if you read the release from DiNapoli, the takeaway is different:

We’re seeing the effect of the recession and years of undisciplined bloat and inefficiency. The MTA’s current administration is working to close its budget gap, but commuters and taxpayers are demanding results. The MTA needs to change the way it does business. Repeated fare hikes and service cuts can’t change a culture of complacency. My office has identified more than $296 million in waste and savings opportunities over the last year alone, and we recently began a forensic audit of the MTA’s $600 million overtime budget. These are tax dollars. Inefficiency and complacency just don’t cut it.

“Undisciplined bloat and inefficiency”… “culture of complacency”… These are the phrases that leap out of DiNapoli’s presser. Streamlining the MTA is all to the good, and $296 million is significant, but relying on too much borrowing to fund the capital program is a much bigger problem: Debt service is projected to cost the MTA $1.7 billion more in 2019 than in 2010, under the current scenario.

DiNapoli notes that the gap in the MTA capital program is a major threat, but manages to do it in a way that deflects responsibility from legislators: “The MTA assumes that the state and local governments will fill the gap, an optimistic assumption in the current economic environment.” DiNapoli conveys no expectation that Albany or the city should step forward and enact new revenue streams to fill this shortfall. This is the sort of rhetoric that continues to let state representatives like Brooklyn’s Joan Millman off the hook for failing to fund transit.

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