MTA Economics

The MTA engaged in a very public and heated battle to slash staffing numbers last year in an effort to keep payroll expenses level, and it almost worked. According to a new report from the Empire Center, the MTA’s payroll increased by only $71 million — or 1.4 percent — last year as its headcount declined by 852 employees. The average MTA salary comes in at $71,237.

The report, a project of the conservative-leaning Manhanttan Institute, can be interpreted in numerous ways, and it again highlighted the MTA’s overtime expenses as labor costs will move to the forefront this fall. The topline findings are as they always are: More than 10 percent of the MTA’s workforce — administrative or otherwise — earned over $100,000 last year while 268 employees doubled their base pay through overtime and three tripled theirs. Jay Walder led the pack with his $350,000 salary while seven other executives earned more than $241,000. One Long Island Rail Road conductor earned $240,489, three times his base pay, through overtime while another took home $230,069. As the Center’s list of 100 highest paid employees shows, the top earners are split amongst administrative personnel and unionized workers.

The center, meanwhile, highlighted the engineers and conductors making bank via overtime. They found the following in the $150,000 club:

• 53 Metro-North conductors who averaged $90,367 over their base salaries of $76,127;
• 19 Long Island Railroad foremen who averaged $82,111 over their base salaries of $81,946; and
• 15 Metro-North engineers who averaged $75,929 over their base salaries of $80,521.

The MTA laid the blame for the payroll increase on the shoulders of its unionized workers. “In 2010, the MTA eliminated 3,500 positions, froze managerial salaries for the third straight year and cut 15% of administrative payroll, en route to an annual budget savings of more than $500 million,” the authority said in a statement. “Nonetheless, payroll did increase from 2009 to 2010 due to the 4% wage increase awarded by an arbitrator to the members of TWU Local 100.”

Nicole Gelinas analyzed the numbers and found that with fewer workers, those remaining are earning more due either to the TWU raises or overtime. She again noted how benefits have backed the MTA into a corner. “Without a doubt, these jobs are tough; it’s easier to write newspaper columns than to walk hot tracks or sit in a booth all night. But these jobs are not poorly paid,” she wrote. “The average New Yorker in the private sector earns about $55,120. The MTA worker earns 31 percent more — and has retirement security, while people in the private sector worry about whether they’ll be able to retire at all.”

Lee Zelding, the payroll tax employees who seemingly fails to understand how MTA payroll expenses and overtime allocation work, also issued a pointed statement: “Once again, a new report has been released highlighting the MTA’s continued fiscal mismanagement. This time the issue is with the MTA’s payroll. Whether it’s increasing payroll expenses, excessive salaries for administration, or abusive overpayments to employees, the MTA continues to come up short in bringing the expense side of the ledger in line with the revenue side of the ledger,” he said without making much sense.

Ultimately, it’s going to cost money for the MTA to stay afloat. New York straphangers want clean subways, and they want on-time performance. They want better facilities and more reliable rush hour trips. They want things that cost money — from track worker salaries to management. The MTA is going to try to freeze wages. Yet, at a certain point, overtime expenses are cheaper than hiring more workers, and labor costs are relatively fixed. That payroll went up only by 1.7 percent seems like a step in the right direction even if the path to fiscal responsibility has a long way to go.

Despite the fact that the State’s legislative year ends in just 11 days, Senators Lee Zeldin and Jack Martins aren’t going to give up on their attempts at repealing the state’s payroll mobility tax. Doing so would rob the MTA of $1.3-$1.5 billion annually that it needs to meet its budget mandate, and while these State Senators seem to think the MTA can just make these cuts materialize without further impacting fares or service, they are also quite content to shift more of the funding burden onto the backs of New York City residents. It just doesn’t make sense.

So what have Zeldin and Martins done? With the help of a bipartisan group of Senators and Assembly representatives, they have introduced a bill that would gradually repeal the payroll tax in the suburban counties while lessening the percentage but keeping it in place for New York City residents. If you care to read the memo or the full text of the bill, you can check it out right here.

As Martins explained, the proposal basically boils down to three topline actions:

• Small businesses and non-profits with 25 employees or less and schools would be completely exempt from the MTA payroll tax as of Jan. 1, 2012.
• Starting on Jan. 1, 2012, the remaining MTA payroll tax for Nassau and Suffolk Counties would begin a gradual reduction, resulting in a $35.4 million in savings to Nassau County taxpayers in that first year alone.
• This would lead to the complete elimination of this onerous tax by 2014. The resulting savings to Nassau and Suffolk county taxpayers is projected to be $220 million per year. That’s $220 million back in our local economy.

As NewsLI.com noted, “within New York City’s five boroughs, the tax would be reduced to .28% on January 1, 2013 and .21% beginning on January 1, 2014. The payroll tax would remain in effect at the .21% rate for New York City’s five boroughs.” We’ll return to this tax discrepancy in a second.

The argument these representatives are making are identical to the ones I discussed in this post back on June 1. Basically, after speaking with MTA officials and examining the agency’s budget documents, these state officials think the authority can somehow cut over 10 percent of its costs. The proposals Zeldin has put forward are laughably inadequate and would, as I noted, generate tens of millions of dollars of savings and not $1.3 billion. Without a replacement funding solution — a more equitable tax, bridge tolls, congestion pricing, higher fares, less service — the MTA simply cannot afford to lose the payroll tax.

That’s an old story, though, and I want to take a quick look at a new story. Essentially, because they campaigned on the issue, these state representatives are proposing something fairly outrageous: They want to eliminate the tax in suburban counties while New York City folk continue to prop up the transit system to a great and substantial degree. They want us to pay more than we already do.

Right now, New York City Transit riders are shouldering more of the funding burden than anyone else. New York City Transit’s farebox operating ratio is clocking in at 64 percent while Metro-North and the LIRR are seeing figures of 58.7 percent and 48.6 percent, respectively. Already, dollars spent in New York City are subsidizing transit trips. By eliminating the tax outside of the suburbs and keeping it in place in the city, our dollars will further subsidize commuter rail travel. Maybe we should ask Zeldin and Martins to guarantee that any payroll mobility tax generated in New York City be siphoned only to Transit operations. We’ll see how long commuter constituents last as service degrades and fares climb.

In laying out an argument for repealing the tax, Martins further claims that the MTA “has the luxury of approximately $1.3 billion in cash reserves from which they can draw if for some reason they are unable to balance their budget through cost savings measures alone.” This though is a claim not backed up by evidence. The MTA’s latest budget projects show a reserve fund of $100 million in the adopted 2011 budget. If the MTA has that much of a cash reserve, they would risk defaulting on debts if they started using it to pare down the operating deficit, but I see no evidence that it exists in the first place.

Eventually, suburban politicians will have to come to terms with a tradeoff. They can claim that the payroll mobility tax is a “job stifling” “iniquitous” one as Martins contends, but they have to recognize that worse or more expensive transit service will also have a calamitous effect on jobs. Just ask UBS how they feel off the beaten track of reliable transit. Without a source of replacement funds, the payroll tax, for better or worse, simply cannot be eliminated, and suburban representatives cannot eat their transit cake without footing the bill.

Lee Zeldin has made it his singular goal to eliminate the MTA payroll tax. He won his election as state senator representing the Third District on Long Island by campaigning on the issue and has spent a lot of time working toward a repeal. Despite the fact that the state GOP may wait until 2012 to throw its weight behind a repeal, Zeldin isn’t letting up.

Yesterday, Zeldin unveiled the latest in populist rage: a website. His new effort is online at DumpTheMTATax.com, and it features the typical petition and volunteer network that has become so popular with anti-tax, anti-service politicians. “I campaigned for office with an important purpose and promise,” Zeldin said in a press release. “My commitment has been to hold the MTA’s feet to the fire on behalf of the taxpayers of the 3rd Senate District. I will continue to shine a light on all of the ways the MTA can do more with less. My promise is not to rest until the legislature takes action to repeal the payroll tax.”

The new online initiative — actually a part of Zeldin’s own campaign website complete with a “donate” button — won’t gain much traction before the State Senate splits for the summer. So those of us who are fighting for mass transit dollars won’t need to worry too much about the MTA’s bottom line. We know the authority can’t afford to see $1.3 billion in state subsidies simply dry up, but Zeldin thinks he’s found the magic unicorn to solve this problem.

Take a look at how Zeldin thinks the MTA can save the money they currently take in from the payroll tax. He has a list:

• Eliminate overtime abuse – well over $400 million is spent on overtime annually;
• MTA should share in enforcement camera fines in MTA bus lanes;
• Competitive bidding/ privatization of NYC bus system;
• Public/private partnerships;
• Reduce outside litigation costs by increasing utilization of in-house attorneys or the NYS Attorney General’s office;
• Sell some of the MTA’s capital assets currently valued at over $50 billion;
• Reduce the cash and investment float, which amounts to billions;
• Reduce the amount of managers and supervisors, which is currently over 10,000 of the MTA’s 66,000 employees;
• Crack down on pension padding where possible;
• Cashless tolls throughout the system;
• Reduced “vacancy/absentee” coverage of MTA Bridges and Tunnels; and
• Improve process for approving personal and miscellaneous services contracts.

Now, on paper, these initiatives sound well and good, but the problem is that they aren’t new ideas. The MTA, for instance, has trimmed $150 million in overtime spending annually, and at some point, they can’t cut more overtime without incurring significantly more costs through more full-time hires. Overtime, in other words, can save money even as it sounds like a taboo expenditure that politicians exploit for populist points.

Outside of the overtime expenses, Zeldin’s suggestions either generate ones or millions of dollars or are one-off solutions that do not address the MTA’s long-term funding problems. Selling capital assets allows for an infusion of cash now, but once those assets are gone, they can’t be sold again. Cashless tolling will save some money initially, but the authority needs to find billions of savings, not millions.

I’m no fan of the payroll tax. If businesses find it to be a problematic barrier to expansion, the state should do away with it, and I wanted to see Ravitch’s proposals put in place. But what’s done is done. The Senate cannot overturn the payroll tax without offering a better solution, and so far, Zeldin has failed to do so. Reform and repeal will come with a price as money simply does not materialize on its own.