Home MTA Economics A fragile budget, dependent on the union

A fragile budget, dependent on the union

by Benjamin Kabak

The MTA's most recent budget projections rely heavily on a net zero wage increase to avoid larger deficits down the road. (via)

A few years ago, the MTA faced a precarious financial situation. Amidst a bad economy with debt payments and pension obligations coming due and healthcare and benefits costs spiking, the agency that powers the transportation backbone of New York City had cut costs, slash services and raise fares to make ends meet. In the intervening years, the MTA has managed to find ways to find savings of nearly $1 billion per year, but as the agency’s long-term budget, unveiled on Thursday, is a bit rosier than it has been, it’s still a budget fraught with problems.

For now, the MTA is cautiously optimistic. As budget documents show, the 2013 Preliminary Budget and July Financial Plan for 2013-2016 contain some good news. With aggressive cost-cutting and a bump in tax revenue, the MTA expects to break even this year and next as its out-year deficits shrink. Still, in the documents presented today, those deficits could still reach $231 million in 2016, and that’s only if all goes according to plan.

“I’m pleased that we will be able to keep the MTA’s budget in balance despite our challenges, but I am concerned about the long-term trend in our expenses,” MTA Chairman Joseph Lhota said. “The MTA’s underlying cost structure is increasing for reasons that are beyond the authority’s control, so we are depending on all stakeholders coming to the table to find ways to address those areas that we can control.”

So what then needs to go according to plan? Who are these stakeholders? First, the MTA believes it must be its own stakeholder. Cost-savings measures will increase to $1.13 billion annually by 2016. Unfortunately, a big part of that equation has led to no raises or wage increases for non-union employees since 2008 (and the subsequent brain drain is a topic for another day). The authority is also relying on the “continued receipt of dedicated taxes as projected,” always a dicey assumption when Albany and its piggy bank raids are involved.

Additionally, the MTA is relying on biennial fare increases in 2013, 2015 and 2017, for starters. With a brighter financial outlook, though, the agency said today it would delay the fare hikes from January to March of each year. Such a move will cost the authority $67 million in 2013 and $69 million in 2015. I’ve questioned the wisdom of such a move, but MTA officials feel it is a positive customer service move.

Finally, we arrive at the key and controversial part of the plan: The MTA will keep its out-year deficits low only through a net-zero increase in labor costs. Without those savings, the deficit in 2014 could top $400 million, and 2016 could dawn with the MTA as much as $530 million in the red. As you might expect, TWU officials, still working on negotiating a contract, were not happy to hear this.

Already claiming that $29 million in service enhancements means the MTA is swimming in enough money to

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John Paul N. July 26, 2012 - 3:38 am

Has there been any point in time since the MTA’s creation in 1965 that the unions willingly accepted work rule changes without threatening to strike?

Chet July 26, 2012 - 8:52 am

It would be interesting to see proposed work rule changes by the MTA and how much money they would save. Then, the MTA should offer the union that a third of that savings will go to financing salary increases.

Sharon July 26, 2012 - 1:38 pm

I would agree with you on this but the union will never go for this because they know they have the politicians in thier back pocket. They spend tons on campaign donations and politicians just parrot whatever the union line is in the press. Does lahorta have Walders grit to take the heat. After all cuomo wants to be president. Common sense work rule changes would not “break the union” in any way and not even be unfair. The liberal democrats that want to help the poor need to stop being hypocrites and also supporting huge raises to the 1% union class in the city while most common folk suffer under high taxes, high rent(Which a good parts is pass though taxes). NYC needs to lower living expenses. All the unions need to it is in to make sensible changes to work rules to make the. It’s more livable. Should a sanitation person constantly bring in over $100,000 plus a year while the average person makes less than $40,000 a year. Part of the reason overtime rules that need to updated to make fair. Overtime based on weekly hours vs daily hours would save the mTa and other city agencies a boatload. The time and a half provision wa ment to be a discouragement from pushing workers to work excessive hours vs hired extra workers. Working 5 extra hours a week before time a d a half kicks in is not excessive. Along as us democrats just simplyb one democrat for any candidate that the political machine puts forward there is not hope for real change. I’m down in Florida this week. 3 out of 19 neighbors are ex NYC residents

Sharon July 26, 2012 - 1:51 pm

Just as a comparison, non union workers for the state department of taxation and finance were told they can not bill overtime(paid) and when an investigation required them to work longer then thier daily shifts they were instead given comp time(extra time off) and that time had to be taken within the next 7 days or they loose it. These Guys base salary is lower then many mta titles and depended on overtime to make ends meet. These Guys took pay cut of over $10,000. A year since cuomo has been in office. This is overboard due to tight state finaces while mta title got an 11% raise . This rule was but thier needs to be some middle ground. The mta is the Cadillac of pay packages per job skill not only vs the private sector but also other state and city jobs . Where else can a broom pusher make $25 an house plus another $20 an hour in benefits. The sad part is due to this overpayment, this person still lives a rather shabby quality of life. Something has to change and it has to be us democrates to say enough is enough and call on our elected officials and voice our concerns.

Streetsblog New York City » Today’s Headlines July 26, 2012 - 9:00 am

[…] MTA Counting on Fare Hike, Labor Cost Freeze, Access-a-Ride Savings to Make Ends Meet (NYT, SAS) […]

Larry Littlefield July 26, 2012 - 9:46 am

It’s worse that presented. If interest rates rise, the MTA’s debt service will increase drastically.

But if interest rates don’t rise, eventually all those pension deals will have to be paid for, and pension costs will soar. And who is to say there will not be more pension deals?

Meanwhile, what about ongoing maintenance and normal “capital” replacement? Since the MTA uses borrowed money in the capital plan to pay for “reimbursible” operating expenses, the minute it stops borrowing there are going to be a lot of layoffs. In addition to the eventual deterioration.

petey July 26, 2012 - 12:57 pm

so net-zero is the smallest contributor to budget balancing.

Sharon July 26, 2012 - 1:23 pm

Personally I think the mta is being over generous. The twu got thier 11% raises and allowed to keep thier criminal work rules while the public paid the extra taxes and endured massive service cuts. The mta should embark on a top to bottom overview of each and every job function and bring it up to modern subway operating practices. The goal is the best for the riders and tax payers. We need on this forum to educate the public on what Work rule changes need to be do e and how much it will save. I think the hiring of 70 new eagle team members to stop fare evasion is a good start. The station agent role should move towards an eagle team role and not a person in a booth. We need to get the conductors out. The media and u ions depiction of this extra money as a surplus is inaccurate. They just lost less money. The union members must be reminded about the layoffs. Larry your right their will need to be massive layoffs if the debt does not get paid down. A nys bankruptcy is not out of the question either. As the cost to live in NYC continue to rise, the tax payers will continue to flee and we will have a repeat of the 70’s and 80’s again. My buddy just bought a huge house in Florida, his mortgage is 550 per month. A large part of rent in NYC is indirect taxes

Larry Littlefield July 26, 2012 - 2:26 pm

“The union members must be reminded about the layoffs.”

Unions like layoffs. The losers can’t vote in union elections anymore, and the decrease in public services is generally far greater than the decrease in cost.

There are issues with the TWU, and with paratransit. But what about the commuter railroads? When the TWU says the MTA only looks to them for savings, they may have a point.

Nathanael August 24, 2012 - 1:39 am

The LIRR unions in particular have truly appalling records, ones which should embarrass any union. But they’re very deeply entrenched. Nobody’s had the guts to fight them.

And, you know, an LIRR shutdown wouldn’t be so bad, as shutdowns go. It’s Long Island. Half of it will be under the ocean in 20 years. Perhaps best to encourage people to leave.

Jaime July 26, 2012 - 5:54 pm

I doubt very much that the TA will threaten layoffs. As a matter of fact, NYC transit
has rehired all of the station agents that were terminated under Walder and they are hiring many more workers in various titles. The Signal department alone has hired hundreds of new workers in the last year or so when it was shown that the department was understaffed. Layoffs will only result in more overtime to fill the open jobs.

Sharon July 26, 2012 - 7:18 pm

We are not talking now. We are talking down the road when the layoffs will be unavoidable do to the fact that the mta can not borrow any more money, no more taxes could be raised etc. No money = no work regardless of need The mta is in very dangerous situation where they keep borrowing and do not get costs in line. Right now due to the oboma administration pushing treasury rates down(and because Europe is such a mess that foreigners see the us currency the safest place to keep thier money) interest rates are at historical lows. If the mta did not borrow an additional dime at the normal interest rate of about 6% there would have been no service reinstatements there would be more service cuts.

Transit employees are very fairly paid, more than the average for thier position, for leadership to be asking for more when thier riders have not seen raises in more than 5 years is insane especially since they already received 11% raises when thier ridership had to indure service cuts as a direct result and all the extra taxes went to raises..

The twu should sit down and plan what’s best for thier workers and riders. There needs to be serious work rule and work title changes. We need less station agents and more eagle team to stop fare evasion and vandalism . We need more train service but less conductors. We need overtime rules modernized .

What the riders can’t afford is the same old same old.

Like I stated before a good portion of the elevated cost of living in NYC is due to the high cost of the 1% union class putting indirect taxes on everything else

If you buy a house or refinance a mortgage you get hit with a 2% mta mortgage tax
If your landlord refinance he passes the 2% into your rent
Electricity, natural gas, cell phone, phone all have hidden mta taxes or other nyc\nys taxes
All construction projects have way higher cost to elevated union salaries and work rules

Ithis hurts the union workers who give up much of the gains in tax givebacks. This drives the working class into poverty and the middle class out of state,

All your left with is the ivy league educated six figure earning folks
The working class that are getting huge subsidies
New immigrants who move up the latter and then out
And the union workers who bolt to Florida with thier pensions ASAP upon retirement

This is unsustainable and will comentomand end very soon. In a bad way for all

Jerrold July 26, 2012 - 3:14 pm

A bit off-topic, but very relevant to our overall topic:


Yesterday, I was wondering why the Times seemed to be ignoring that story. They caught up to it today.

Sharon July 26, 2012 - 7:22 pm

And due to work rules and state regulations pushed by the unions to drive up costs it cost more then double the cost it cost in Spain to use the same machine

Matthias July 27, 2012 - 3:37 pm

Not to mention that we go 30 blocks and then take the machine out, so to go any farther we have to get a whole new one.

Nathanael August 24, 2012 - 1:41 am

Nobody else in the US is getting raises for nothing. Why should the TWU workers, who have perfectly good wages?

Of course, modernized work rules would be worth paying more for. If Mr. Samuelson won’t consider that, perhaps he should consider that he’s a bad person who is trying to hurt NYC.


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