Home MTA EconomicsDoomsday Budget Facing a $6 billion deficit in 2021, MTA could cut subway, bus service by 40%. But is this a real threat or simply a political one?

Facing a $6 billion deficit in 2021, MTA could cut subway, bus service by 40%. But is this a real threat or simply a political one?

by Benjamin Kabak

What happens to New York City without its transit system? Can the city function? Can it succeed? Can it serve as the self-professed Center of the Universe if the subways and buses that, in normal times, serve well over 7 million riders a day, can’t run frequently throughout the day? Can the Big Apple recover from the economic crisis of the pandemic without robust transit or will a transit decimated by political failures at every level drag down the city and the country as NYC and the USA, both hanging on by a thread right now, look to a post-COVID future? We may soon find out.

Facing billions of dollars in revenue shortfalls due to the ongoing pandemic, the MTA Board two weeks ago took another step toward enacting the agency’s Doomsday budget. With paralysis gripping the U.S. Senate and Mitch McConnell still refusing to negotiate a new stimulus package, the MTA’s financial picture has not improved since the Board first contemplated the worst-case scenario in August. Now, with the remainder of 2020 measured in days rather than months, the MTA has just a few weeks left to wait for federal relief before the Board is faced with the unenviable task of approving the budget presented at November’s meeting. It’s one that could cut service by up to 40 percent, but it remains a very political document aimed at Washington and with a glimpse at what the MTA truly needs to stay afloat through 2021.

During November’s Board meeting, the MTA did not vote on a 2021 budget; that procedural move will wait until December’s meeting, likely to be scheduled shortly before Christmas. Instead, the agency rehashed the same story it has been telling since the spring and again reissued its non-stop call for federal aid.

“The MTA continues to face a once-in-100-year fiscal tsunami and this is without a doubt one of the most difficult and devastating budgets in agency history,” MTA Chairman and CEO Patrick J. Foye said. “No one at the MTA wants to undertake these horrific cuts but with federal relief nowhere in sight there is no other option. As I have said, we cannot cut our way out of this crisis – we are facing a blow to our ridership greater than that experienced during the Great Depression. We are once again urging Washington to take immediate action and provide the full $12 billion to the MTA.”

What we learned was this: Since the MTA’s July budget, its financial picture has worsened, largely due to federal inaction on a pandemic relief package. Ridership remains as expected — subway ridership is hovering at around 31-32 percent of normal while buses have seen between 45-50 percent of riders return — but the $3.9 billion in HEROES Act funding never arrived. The latest budget projections include a total deficit of $15 billion, as you can see below, and here is where this document turns political.

Visual representation of the MTA's five-year $15 billion budget deficit.

The MTA keeps asking for $12 billion in federal funding, and that number has raised eyebrows. Could the agency actually be this far into the red through only eight months of the pandemic? As the chart details, the answer is no, the MTA’s deficit does not stand at $12 billion for one year. Rather, this is the MTA’s ask across multiple years. To be whole through the end of this year, the MTA needs $2.4 billion – which it can secure through the Fed’s Municipal Liquidity Facility. That loan though will come with more interest that we the riders will have to pay off over the years. It’s an imperfect, though necessary, way to keep the trains running.

For 2021, the MTA’s immediate need is around $6 billion or half of its continued request. The agency then anticipates deficits of $3.6 billion in 2022, nearly $1.8 billion in 2023 and almost $2 billion in 2024 for a total of around $13 billion. Securing $12 billion in one lump sum gives the MTA flexibility to restructure this out-year deficits, incorporating whatever internal cuts the MTA can institute with the federal funding to show balanced budgets on paper, but its immediate needs are $6 billion. If that amount comes in, the MTA can fight anew for a few more billions for 2022 and 2023 – if the Biden Administration and whoever controls the Senate are still in the mood to pass stimulus packages.

Ask for all you need now because you don’t know what will come later. At its very heart, it is a political request, and the MTA is not shying away from politics. Earlier this year, MTA CFO Bob Foran stated the MTA’s ask included $1 billion to account for the Trump Administration’s slow-walking of congestion pricing, and the MTA is asking for more than it needs in the hopes that it can start negotiations with recalcitrant Senate Republicans at a higher baseline. It’s a dangerous game. For most of its existence, the MTA has been politically neutral while leaving the lobbying to politicians, but with federal politicians playing a game of economic chicken with states and municipalities, current MTA leaders have, at the behest of Gov. Cuomo, turned into partisan lobbyists. In fact, Foye recently penned letters to leading Georgia-based companies warning them that MTA capital funding could dry up without federal aid. This was a clear partisan shot aimed at drawing support for the Democratic candidates in the upcoming Georgia Senate run-off.

But the MTA is also hedging on its ask, aiming to draw out that $6 billion. Take a look at the MTA’s internal deficit reduction plan – a series of cuts that lowers its long-term deficit to a still-unmanageable $7 billion over five years.

Make no mistake about it, though, these cuts would be devastating. The MTA plans to cut $343 million from annual subway service expenditures and $641 million from annual bus service expenditures. For subways, this means service cuts of up to 40%, including 15-minute weekend headways and other off-peak frequency adjustments. One of the questions driving a cut of this nature is whether the MTA can actually implement a 40% reduction in service. As with overnight trains running but without passengers, there is simply not enough room to park trains that aren’t running, and it’s not cost-efficient to cut service significantly. Just the thread is enough to see how this would ruin the subway system and save a small percent of what the MTA actually needs.

The buses, as always, would bare double the cuts as subways, and a 40% reduction of bus service would practically zero out many local routes. “Bus service reductions of up to 40% may result in reduced frequencies by up to
33% on bus routes that are not eliminated,” the MTA notes ominously. The agency is planning only $265 million in annual cuts to the LIRR and Metro-North but still halving service by up to 50 percent.

But this is all still a threat aimed at scaring the Senate into saving the MTA and the U.S. economy. In my view and in the views of many advocates, the MTA should cut service as a last resort, especially as the pandemic drags on and essential workers need to be able to maintain their commutes. “Failing to save transit at this pivotal moment is not an option,” Betsy Plum, executive director of the Riders Alliance, said. “Should Congress fail to act, the MTA’s doomsday budget must be the absolute last resort. As Chairman Foye said, literally everything must be on the table. At the end of the day, Governor Cuomo must do all he possibly can to safeguard our transit system and New York’s future.”

Yet, the MTA is heading down this path as a way to exert political pressure on Washington. Let New York fail? We dare you.

The state, in fact, has yet to do much to shore up its own struggling revenue picture, and Andrew Cuomo has a responsibility to ensure transit survives. I know various budgets and services have seen the pandemic blow billion-dollar holes through their budgets, but the state should look at other possible revenue streams — gas tax increases, legalizing marijuana, taxing the rich — while at the same time avoiding service cuts and lobbying for federal aid. (Streetsblog’s Dave Colon had a deep dive on this topic worth reading.)

As a last ditch resort before cutting service, the MTA should also look to restructure its debt and secure more credit. The state could help enable this as well by legislatively permitting the MTA to explore bankruptcy, an option currently foreclosed to it due to state prohibitions. This would be additional bargaining chips, designed to bolster political support in Washington for a direct transfer of funds back to a state that, in normal times, pays more in federal taxes than it gets back.

While we can appreciate the budget as the political document that it is intended to be and hope these service cuts are a threat rather than an omen, at some point, though, reality has to settle in. Mitch McConnell isn’t very likely to fund transit on his own, and the state should use the levers it has to cut into the MTA’s deficit so that subway and bus service could survive un-cut in a New York City on the rebound. Otherwise, with transit on the chopping block, cars will choke a city that grinds to a halt, hinder mobility and New York’s recovery and the national one at a time when the country can least afford it.

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17 comments

Peter November 29, 2020 - 9:09 pm

Would 15 minute weekend waits be “devastating”?

Let’s face it – the levels of service we enjoyed pre-COVID are no longer necessary, at least for now. Why run a bunch of empty trains around?

New York will be like every other city that has more infrequent service. I think transit advocates are the ones doing the fearmongering.

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SEAN November 30, 2020 - 3:50 pm

“Would 15 minute weekend waits be “devastating”? What is considered adequate in any other US city for transit service doesn’t work at NYC’s size & scope.

least for now. Why run a bunch of empty trains around?

“”New York will be like every other city that has more infrequent service. I think transit advocates are the ones doing the fearmongering.” So just minimal functional transit is good enough & we should resign our selves to that going forward. Got it.

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Jack Fuller November 29, 2020 - 9:24 pm

I guess I have a hard time understanding why MTA wants to continue running trains [subway, Metro North, LIRR] that average 30% full. MTA service frequencies are certainly appropriate when rider levels are normal, but when 70% less?

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Optimist November 29, 2020 - 9:39 pm

Maybe this budget crunch will lead to a silver lining of cutting waste, fraud, and bloated pension contracts – perhaps even renegotiating the current deal with the corrupt union. This “creative destruction” could potentially push the reset button and bring subway costs per mile more in line with other places around the world.

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Asher Samuels December 7, 2020 - 6:14 am

Unless some outside force is willing to take on the TWU this is a non-starter.

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marvin gruza November 29, 2020 - 9:49 pm

The question is when is frequency for capacity vs when is it to make waiting times enticing for users?
Clearly the frequency for capacity should be reduced until it is again needed.

Frequency to make waiting time manageable and encouraged ridership can be reduced by turning some branches in shuttles on those branches – thus maintaining the frequency on the branch while not have under capacity trains on the trunk lines.

There are real financial issues and a delicate balancing act needs to be employed as all of us take come of the pain of a year of Corona.

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Larry Penner November 30, 2020 - 9:41 am

These service reductions would require the MTA to update their Federal Transit Administration bus, subway and commuter rail fleet management plans. FTA would want to insure that the MTA still has the financial resources to maintain all assets, so they reach the intended useful life requirement. If these service cuts were to take place, hundreds to several thousand local and federally funded bus, subway and commuter rail cars might no longer be needed for passenger service. Reducing service by 40% in bus and subway, along with 50% in commuter rail implies, an equivalent reduction in equipment needed for rush hour service. Keeping 100% of the current fleets in service would result in excessive spare equipment partially defeating the goal of cost savings.

Most of the NYC Transit subway and a significant number of bus and commuter rail fleets are federally funded. Federally funded equipment no longer needed for revenue service, as a result of major service reductions, would require the FTA permission to be temporarily mothballed in a safe and secure location. The useful life clock for equipment would be frozen. The equipment still has to be maintained. The useful life clock starts once the equipment resumes transit service.

(Larry Penner — transportation advocate, historian and writer who previously worked for the Federal Transit Administration Region 2 NY Office)

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RICH December 1, 2020 - 2:27 am

Maybe this situation will push the MTA to actually start adopting cost saving late 20th century operating practices such as one person train operation. Its been the standard around the world since the late 1970s. I know they have agreements with the unions to do this with shorter trains. With lower ridership and this type of operation with short trains on the subways they could actually provide a somewhat more frequent level of service while still realizing significant operating cost savings. As for the ridership I believe a lot of the off peak leisure and non 9-5 non-CBD work related trips will come back. The CBD office work ridership will be significantly impacted by the people working from home 2-3 days per week or even full time which I think will become the new norm – nobody really wants to go back to spending 3 hours a day and $4-5K per year to commute to a job that they can do at home and employers want to get rid of office space. This is a trend I’ve noticed accelerate over the past few and has really taken off with covid. This presents another opportunity to the MTA to for cost savings by implementing schedules without the sharp ramp up of service during the peak hours. That peak hour service requirement affects everything from labor to equipment requirements. Going forward the MTA needs to find ways to tailor its network and service to provide transit options for those not travelling to or from Manhattan. One option they need to look at is to integrate the commuter rail operations into the local transit networks. Fact is local transit service in outer parts of the city and the suburbs is miserable. Integrating the rail lines with local bus services would combine the speed and frequency of the rail lines with the reach of the buses to make transit use viable and bring more riders to otherwise empty trains.

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David Brown December 1, 2020 - 12:23 pm

The MTA created Taj Majal type train stations like Fulton St instead of saving for a rainy day. You would have thought the after effects of Sandy would have been a wake up call, but no business as usual. The MTA also forgets that it is not just New Yorkers suffering and need help it is all over the country.

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SEAN December 1, 2020 - 9:06 pm

I know what you are saying David, but the honest reality is… as NYC goes – so goes the country. If we work from home, the rest of the country will follow. If our transit suffers, so does transit across the nation. That’s not NY exceptionalism, it’s the truth.

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Larry Penner December 2, 2020 - 10:01 am

There is even more to past history for the MTA New York City Transit Fulton Street Transit Center project. The original start date was 2003, with a completion date of 2007. The actual completion date was November 2014. At $1.4 billion, the final cost ended up $650 million higher than the original $750 million. The Federal Transit Administration first provided $847 million in Lower Manhattan 9/11 Recovery funding. This was supplemented by $423 million in American Recovery Reinvestment Act funding to assist in covering cost overruns.

Larry Penner — transportation advocate, historian and writer who previously worked for the Federal Transit Administration Region 2 New York Office. This included the development, review, approval and oversight for billions in capital projects and programs for the MTA, NYC Transit bus and subway, Staten Island Rail Road, Long Island and Metro North Rail Roads, MTA Bus, New Jersey Transit along with 30 other transit agencies in NY & NJ).

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terry December 3, 2020 - 3:11 pm

Penner, keep on topic. Please.

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David Brown December 5, 2020 - 9:08 am

“Economics: The study of SCARCE resources and how best to allocate them.”’.,Look at two of Governor Cuomo’s biggest priorities. 1: LaGuardia airport Air Train. 2: Gateway Tunnel. He wants both when cutbacks in existing service are being discussed. Especially after the billions wasted on East Side Access, He either does not get it or wants to start new projects for political purposes.

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BenT December 3, 2020 - 11:30 am

I have read the MTA is has kept a large number of jobs that have been automated long ago, such as having 2 people operate a subway when most cities use one, an using 2-3x the construction workers for a job as other cities. Could cutting those jobs cover much of the transit deficit?

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Larry Littlefield December 7, 2020 - 9:28 am

Let’s face it, for those who have been pillaging the present of New York’s transit system for the past 30 years, back when it was the future, COVID-19 isn’t a crisis, its an opportunity. An opportunity to blame something else for the consequences of what they had done.

Next July, the COVID-19 part of this recession will be over, but the rest of it will remain. Ridership will be down from the absolute peak, because the government and the real estate industry/market had made New York such a raw deal that many who have left will not come back. But I’ll be it will be far higher than it had been before 2010, and much higher than in the 1980s and 1990s.

So why will the MTA, NYC, and NY State be in worse shape now than they were then? Because of decades of deals to put less in, and take more out, to benefit Generation Greed in general, and its most selfish and manipulative components in particular.

The fact that Cuomo has ordered Foye to blame everything on the federal government while simultaneously shifting “dedicated” MTA taxes to other things shows what is going on. Why is it only the transit system that is facing these kinds of fiscal hits?

Here is a list of things the PTB won’t even consider.

https://larrylittlefield.wordpress.com/2020/12/07/the-new-york-city-and-state-budget-crisis-the-circumstances-beyond-their-control-are-only-beyond-their-control-because-they-cut-deals-to-make-them-beyond-their-control/

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Larry Littlefield December 7, 2020 - 6:09 pm

“At its very heart, it is a political request, and the MTA is not shying away from politics.”

On whose behalf? I haven’t heard the MTA demanding that the city and state pony up more money, nor questioning what the other beneficiaries of spending have taken over the years.

The goal is to screw the riders and the future, without Cuomo, DeBlasio, the state legislature, and their predecessors getting the blame they deserve.

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Jose Flores December 10, 2020 - 9:01 am

The MTA have been trying to cover their mistakes for years. Now they want to cut services. Now using this pandemic as a convenient excuse. Typical MTA.

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