As New Yorkers awoke to their free daily newspapers on Tuesday morning, a poorly-done Photoshop along with an article predicting doom and gloom for the MTA screamed out from the cover of amNew York. According to a report by New York State Comptroller Thomas DiNapoli, the MTA’s budget hole will expand to $2.1 billion by 2014, and everybody should panic! Or at least that’s what amNY’s take on the story was.
Now, this evening, I checked out DiNapoli’s report, and he paints a bleak picture of the MTA’s financial future. The authority, he says, “faces a budget gap of more than $1 billion next year, which could more than double to $2.1 billion by 2014 unless the MTA begins to drive more efficiencies in the way it does business.” While fares are going up and services eliminated, the MTA must reduce costs and improve worker inefficiency to stave off financial disaster.
“We’re seeing the effect of the recession and years of undisciplined bloat and inefficiency,” DiNapoli said. “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.”
There’s only one glaringly obvious problem with DiNapoli and the report: The MTA has already acknowledged these funding woes and is already working to close the budget gaps both in 2010 and in the future. While it remains to be see if a bureaucracy famous for its bureaucratic bloat can truly become a lean — or at least a leaner — organization, DiNapoli’s reports are simply rehashing the MTA’s own financial statements and urging the authority to enact measures it already said it would enact.
The most obvious example of DiNapoli’s doomsaying tendencies comes on pages 2 and 3 of his report. Here, he highlights the deficit but also notes that the MTA is committed to closing the deficit. So despite the fact that his press release leads with the $2.1 billion figure, the MTA doesn’t anticipate a deficit of that size in reality. DiNapoli writes:
The MTA has moved aggressively to reduce the size of the projected budget gaps and has outlined a comprehensive gap-closing program for the next four years (see Figure 1). It is currently implementing actions (discussed below) that are expected to generate $367 million in 2010 and about $525 million annually thereafter. These actions, even if fully successful, would still leave budget gaps of $200 million in 2010, $500 million in 2011, $803 million in 2012, $1 billion in 2013, and $1.6 billion in 2014.
The MTA intends to close the remaining budget gap for 2010 mostly with actions that will generate only one-time savings. For subsequent years, the MTA has proposed raising fares and tolls by 7.5 percent in 2011 and in 2013, and has outlined additional management initiatives. In total, the MTA expects to generate more than $700 million in recurring savings through management actions by 2014. If all of these actions are successfully implemented, the MTA forecasts small positive cash balances in 2010, 2011, and 2013, and manageable gaps in 2012 and 2014.
Considering the MTA’s initial success in reducing overtime costs, there’s little reason to doubt that these actions will be at least partially implemented. Is it skeptical of me to say then that DiNapoli’s $2.1-billion figure is simply a creation of a man running for reelection and trying to gain headlines?
Despite my dismissal of this report, there are real financial concerns behind the MTA’s budget. As John Mancini reported tonight at NY1, the MTA now anticipates that it will have to raise its pension contributions by an unplanned $150 million next year, and its real estate tax revenues are “no better than last year.” The authority had hoped to see a boost in tax revenue as the economy improved, but that — a true deficit-reducing event — will have to wait for 2011 or beyond.
There is no doubt that, as DiNapoli charged, the MTA is “inefficient and bloated.” The authority has suffered this problem since the day of its founding in 1968, and after the authority suffered through this problem for 42 years, Jay Walder seems willing to confront it. Yet, threats loom large. A constitutional challenge to the payroll tax or political change in Albany could jeopardize $1.5 billion in MTA revenues, and until the authority is on sounder financial footing — whatever that might be — the threat of financial doom looms large while fares remain artificially low. If the state comptroller paid more attention to that reality, perhaps the right people would listen.