Home MTA Economics In final four-year budget plan, no service cuts

In final four-year budget plan, no service cuts

by Benjamin Kabak

If the MTA is unable to attain a net zero wage increase for unionized workers, operating deficits could top $500 million by 2014. (via)

The MTA Wednesday unveiled its final 2012 budget and the latest set of projections for 2013-2015. Although the budgets still rely on revenue generated by fare hikes in both 2013 and 2015, the authority does not currently anticipate cutting services to balance its books. However, the long-term outlook remains debt-heavy, and the MTA admitted that its four-year projections rest on a precariously balanced dime.

“The MTA has achieved a fragile fiscal stability by reducing expenses and operating more efficiently,” Joseph Lhota, MTA Executive Director, said in a statement. “It’s clear, though, that we’re still feeling the impact of the economic crisis and must continue to reduce costs even as we work to improve service.”

The details, available in full as a PDF here, remain substantially the same as they were in July. Thanks to aggressive cost-cutting measures instituted while Jay Walder was the CEO and Chair, the MTA anticipates annual savings of at least $850 million by 2015. By freezing non-unionized worker pay for three years, reducing administrative overhead and reining in overtime, the MTA has begrudgingly become a leaner organization.

Yet, the long-term outlook is rife with potential problems. Even still, the MTA is relying on two fare and toll hikes that will be designed to increase revenue by 7.5 percent, but those are the safe figures. The MTA is counting on $323 million in what they’re calling “net zero wage savings for represented employees.” In other words, unionized workers will either by taking pay freezes for the foreseeable future or the MTA will have to resort to layoffs. I don’t think John Samuelsen will be too happy to hear that.

The MTA, meanwhile, warned of inherent risks in their rosy projects. For now, the authority anticipates an operating surplus in 2011, a balanced budget in 2012 and a smaller surplus in 2013 before the MTA lands over $200 million in the red by 2015. Much of this deficit, the authority says, is driven by increasing costs of retiree and healthcare benefits that will eat up nearly all of the additional revenue generated by the anticipated 2013 and 2015 fare hikes.

Furthermore, the MTA warns that a variety of factors could turn this rosy outlook sour. Among those factors are a stagnant overall economy; reductions in state subsidies and dedicated taxes; a failure to achieve desired expense reductions; an increase in labor costs due to bargained-for agreements that do not attain the “net zero” wage level; less funding for the capital program. As far as projected budgets go, then, the MTA’s current plan may be a final one that needs approval but it’s hardly set in stone.

The other 800 pound gorilla in the room involves debt on the operating budget and funding for the capital plan. As the MTA seeks to close a significant funding gap in its five-year capital plan, it will do so through a series of measures that will increase its long-term debt obligations. Even as the authority retires debt from the 1980s, more will hit the books. Future New Yorkers will have to pay for both our desired maintenance and theirs.

“In the context of the ongoing economic crisis in New York State, this proposal advances our critical capital investments in an affordable way,” MTA CFO Robert Foran said. “It relies on revenues already dedicated to capital expenses and keeps debt service at a manageable level, with the percentage of debt to capital investment the lowest in 15 years.”

And what of the surplus and budget flexibility? Two MTA Board members have proposed reinstituting services lost to the 2010 cuts. Mitch Pally and Allen Cappelli both called up on the MTA to include a $20 million item in its $12 billion budget that would restore some of the old service. “I don’t believe we can restore all of them, but I believe a portion of them should be – and can be – funded in this plan,” Pally said during yesterday’s MTA Board meeting.

Everyone is fighting for a piece of the pie, and those who inherit the most are those who will have to face the MTA’s mounting pile of debt. For now, the authority will stay afloat, but the long-term outlook is not comforting.

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Christopher November 17, 2011 - 6:14 am

How much money do they waste in having redundant management? Is there any real reason LIRR, MNCR need to be run separately? Why is there more then one bus company? Who is responsible for their IT department(s?) and why can’t they get something basic running like PeopleSoft with out massive security holes and cost overruns? Who is responsible for the probably very costly and obviously deficient website/mta.info redesign? Why does 266266 not show bus time tables? How is it that the MTA has money for lawyers to sue bloggers for using their IP?

There are way more elephants in the room then just the Capital Plan.

BrooklynBus November 17, 2011 - 6:00 pm

They have been trying to reduce redundant bureaucracy for 40 years like when they combined MaBSTOA and TA functions. But I agree why is it taking so long and if they are streamlining why is it that they are always adding layers of bureaucracy?

The website redesign is horrible. It is not user friendly at all. I can’t even get the search function to work. It always locks up. You have to know what you are looking for and it seems many items are hidden. When they move the weekender to the main page, on Fridays, you have to hunt for the ” home” word to get to their regular page. Even if you use the site map, it is not easy. There needs to be multiple links and reports need to be organized so they make sense. For example for the 2010 Customer Service reports, you go to Special Reports, but the 2011 reports are under Board Materials. There are like five separate ways of finding the SBS reports and the documents all conflict. B44 SBS starts in 2011, 2012, or 2013 depending on which link you access. To find out about employment opportunities, you go to “About the MTA”. But if you are an existing employee, you have check under the individual agency you are employed by. There needs to me some consistency.

Alon Levy November 17, 2011 - 9:06 pm

Is there any real reason LIRR, MNCR need to be run separately?

Yes, Dean Skelos and other Long Island honchos raised a stink last time the MTA proposed to merge the two railroads.

al November 18, 2011 - 8:55 pm

If the suburban counties repeal the payroll tax, the MTA can consolidate the commuter rail bureaucracy (and other redundant departments), and legitimately claim the need to cut spending.

Streetsblog New York City » Today’s Headlines November 17, 2011 - 8:59 am

[…] Get the Best MTA Budget Breakdown at 2nd Ave Sagas […]

Larry Littlefield November 17, 2011 - 9:42 am

“In other words, unionized workers will either by taking pay freezes for the foreseeable future or the MTA will have to resort to layoffs. I don’t think John Samuelsen will be too happy to hear that.”

He’ll be happy to hear it. Layoffs mean service cuts, and that’s what the TWU wants. He’ll be glad to here there is a Plan B.

And they TWU isn’t taking pay freezes. They are being asked to take cash pay freezes while their total compensation continues to rise to pay for the 2000 retroactive pension enhacements, which were described as free and thus weren’t paid for for a half-decade or more.

Larry Littlefield November 17, 2011 - 9:46 am

By the way, Giuliani was in on some aspect of those 2000 pension deals. Was Lhota involved?

Specifically, he negotiated with the unions to have the employee contributions to the pensions cut permanently in exchange for having the taxpayer share cut temporarily — so he would have money to throw around during his aborted campaign for Senate.

In other words, the pensions were INTENTIONALLY underfunded due to a deal cut some time in 1999 or early 2000s. Was Lhota invovled? Ben, if you ever get the chance, ask him about that deal. Aren’t we paying for it now? Didn’t he preside over a sale of the future which has now arrived, to benefit a past that is long gone?

Today’s Headlines | Body Local NYC November 17, 2011 - 3:28 pm

[…] Get the Best MTA Budget Breakdown at 2nd Ave Sagas […]

Nathanael November 21, 2011 - 11:33 pm


It’s time to stop watching every single business and government agency get hammered by healthcare costs. This isn’t happening in countries with single-payer universal healthcare.


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