The point about Fulton St., however, can not be overstated. Huge waste of money.

As far as suffering from cyclical tax revenues goes, the most volatile is rarely mentioned. The real estate transaction tax provides a flood of tax revenue in good times, and drops significantly. The deviation of this tax from GDP growth/contraction can be as much as an order of a magnitude!

Isolating operational and capital budgets is, in my view, excellent policy. They should remain separate. Especially in New York, where politicians haven’t been able to resist the urge to demagogue transit funding issues since the nickel fare.

As far as the issue of the Federal Government funding operations goes, I hope that if that is ever again implemented that it includes work efficiency standards, from management to hourly workers. Its not fare to ask for greater subsidies for an organization that is rife with feather bedding.

And, we are in unusual times of financial crisis. Here one should distinguish between maintenance and state of good repair and system expansions (“shovel ready” or not). And normal maintenance, which would be counted as an operating cost in almost any other enterprise public or private, has always been exempted from the strictures of the federal funding prohibition. Much normal maintenance is paid out of federal aid and has been since the glory days of Speaker Gingrich.

Also, no one is advocating ending the expansion of the system but nonetheless many people recognize the fallacy of expanding a system (Second Ave. Subway, East Side Access – LIRR, 7 Train extension and Fulton Street) at the same time service is being radically cut because of immediate budget concerns.

SAS and ESA have long been programs the MTA has needed and for decades advocated for with the support full of political forces in both parties. Fulton Street and the 7 Train have been sort of late comers, one the progeny of Shelly Silver and the other of Mike Bloomberg. These same leaders have not found the will to provide the same level of historic support for the capital plan even while adding these very expensive projects. The 7 extension particularly is radically changing land use patterns and real estate values in a particular neighborhood and benefiting a particular group. Ironically, (or maybe logically) the 7 Train and Fulton Street will be the first projects completed leaving the SAS and ESA behind. Clearly less complex on many levels the 7 Train will be on line long before any realistic completion date for SAS and ESA. Fulton Street is burning money and apparently will burn more.

So, if Mayor Bloomberg has found the money for the 7 train extension, let him find the money for the student passes and the operating deficit and let the Feds participate in funding the daily operations.

The logic that if the Feds pay operating the State, City and riders will have no compulsion to provide operating support should be turned on its head. The other side of the coin is forceful. If the riders must pay for Capital projects by paying off the bond debt out of operating and paying directly in pay as you go funds why would the State and City feel compelled to support the capital plan.

The logical path here is to accept the Federal Operating support offered and stretch out, not terminate, the huge capital projects and fully fund state of good repair projects. That wouldn’t actually solve the enormous debt issues but it would keep the system running to get through this crisis.

It should also be noted that the funding provided last Spring by the legislature only paid for two years of the five year capital plan in any event. So, the capital funding problems were not caused by shifting Federal capital money to operating accounts.