Thomas DiNapoli, New York State comptroller, has delved into the MTA’s books, and he doesn’t like what he has found there.
Three months ago, amidst talks of regular fare hikes and budgetary concerns at the MTA, DiNapoli announced he would conduct an audit of the MTA’s books. This week, he released his report on the MTA’s financial outlook, and the picture is not pretty. While the authority’s internal budget gap-trimming measures have been relatively successful, DiNapoli still sees budget gaps climbing to $1.8 billion by 2012. The financial future of the nation’s largest public transit authority has never been more in doubt.
In the report — available here as a PDF — DiNapoli urges the MTA to wean itself off government funding and warns that the recent economic problems coming out of Wall St. may spell financial doom for the agency. In fact, DiNapoli goes one step further and warns the MTA not to expect any additional government funding. Additionally, with the MTA so dependent on taxes and fare revenue, any widescale loss of jobs — such as the collapse of Lehman Bros. or the banking crisis in general — could significantly impact the future finances of the transportation authority.
“The turmoil on Wall Street has created serious fiscal challenges for the City and the State, which will likely limit their ability to provide additional assistance to the MTA,” DiNapoli said, in a statement. “To its credit, the MTA has directed its agencies to develop contingency plans, but the focus must be on administrative costs, not service cuts. Like everyone, the MTA has to learn to do more with less.”
DiNapoli’s office summed up the vital parts of the report in a press release:
In July, the MTA projected operating budget gaps, on a cash basis, of $1.1 billion in 2009, $1.9 billion in 2010, $2.1 billion in 2011, and $2.3 billion in 2012. These gaps represent 11 percent of revenue in 2009 and more than 22 percent of revenue by 2012. The DiNapoli report found that while the MTA’s budget gap estimates were reasonable when they were presented in July, the State has lowered its forecast of dedicated transit taxes by $381 million over the financial plan period.
To balance the 2009 budget and narrow the budget gaps for subsequent years, the MTA has proposed a $6.4 billion gap-closing program. The report found that the gap-closing program is risky because it relies so heavily on actions that are either outside the MTA’s direct control or are still unspecified. Nearly half of the resources are expected to come from additional State and City aid. Less than one quarter would come from internal actions, and 37 percent of those savings remain unspecified.
After assessing the gap-closing program and other risks, the report concluded that the MTA still faces budget gaps of $522 million in 2009, $1.4 billion in 2010, $1.6 billion in 2011, and $1.8 billion in 2012. DiNapoli noted that even if all of the MTA’s gap-closing measures were successful, it would leave a gap of $250 million in 2010 – or the equivalent of a five percent fare hike.
Basically, the MTA, which already relies more on farebox revenue than any other transit system in the nation, will have to keep pushing riders to pay more or else they’ll have to cut service to meet financial expectations. No organization — outside of the federal government — can operate by racking up $4.8 billion in debt over three years, and I have to wonder if the MTA is going to collapse under the weight of its borrowing before the next few years are out.
Meanwhile, as the MTA has increased fares at a rate outpacing inflation by 52 percent, the capital budget is still facing a seemingly insurmountable $15 billion gap. The MTA is also facing the prospects of unfunded pension liabilities reaching nearly $2 billion.
In the end, DiNapoli’s report is long on the doom and gloom and short on answers. He warns the agency not to expect state and city money, and he urges the agency to consider cutting services. From a practical, governmental perspective, DiNapoli’s suggestions are sound, but from a customer service viewpoint, the MTA — enjoying sixty-year ridership highs — can’t really cut service. How this plays out is anyone’s guess.