Early yesterday evening, news broke of a state error concerning revenue generated from the payroll tax that was supposed to bailout the MTA. Although up until last week, the state had been maintaining its initial figures, collection totals were $200 million off pace, and with a state appropriations cutback of $143 million going into effect, the MTA will end the year with $343 million less than expected.

Even though the state accountants are to blame for this large gap, for many New Yorkers, it will just be another arrow in the quiver of barbs to launch at the MTA. The agency, they say, cannot be trusted with any money because it all just disappears. Here, that’s not true, and as an agency spokesman said to me, Monday’s revelations represented “significant unraveling of the rescue package passed by the Legislature in the spring.” Twenty percent of the money promised by the state to the MTA just simply is not there.

The MTA and the state will now have to battle it out for funds, and the MTA will probably end up losing. Although they say they will do everything within their powers to avoid an unplanned 2010 fare hike, they might have to cut services across the board and will have to engage in serious internal belt-tightenin”

On the flip side, the MTA will be asked to do more. The agency will be asked to shuttle more people around New York City while relying on infrastructure that is badly in need of some major capital investments. The agency will be asked to provide more service to underserved areas, and more reliable and frequent service to those transit-rich neighborhoods. More, more, more is squaring off against less, less, less.

It is undeniable that the MTA is the engine that drives much of New York’s economy. The city is entirely dependent upon the subways for its transportation needs. Over seven million New Yorkers ride the subways each week day while Metro-North and the Long Island Rail Road each carry approximately 300,000. The MTA’s bridges and tunnels see just 800,000 toll trips per day. It is clear that the city’s road network and geographical reach make the subway the prime people mover in this urban area.

Outside of the city, the MTA’s economic reach extends throughout the state. As the Permanent Citizens Advisory Committee to the MTA noted during its statement last week on the MTA’s capital plan, “more than 60 municipalities through out the state of New York benefit from the MTA’s Capital Program through subcontractors for subway, bus and rail cars.” The 2005-2009 capital plan, they say, leveraged around $42.1 billion in economic activity from an original investment of $24 billion. The state, though, will not pledge to cover a $10 billion capital gap just as they can’t put together a proper bailout package to fund the MTA’s operations budget gap.

Still, forces conspire against a financially strapped MTA. As the agency’s fiscal picture heads further south, a group angling for TWU leadership posts is threatening “direct action” if the authority does not honor the arbitration award. The union leaders are simply upholding their duties to protect and defend their workers, but it is but another demand on money the MTA does not have. Somehow, the MTA is expected to find $300 million more every year for employee salary and benefits raises.

In the end, where will a looming financial Armageddon take us? The MTA is too important to fail, and it’s too important to roll back services. Maybe we’ll have skyrocketing fares, but more likely, we’ll have sensible funding mechanisms such as congestion pricing and East River Bridge tolls. For now, though, the MTA continually has to make do with less and less from the state while providing more and more for its workers and the millions of customers each day who rely on it for basic transportation needs. Something has to give.

The Metropolitan Transportation Authority will end 2009 where it begin: amidst a financial crisis that could lead to service cuts — but hopefully no fare hikes — in 2010.

In an e-mail to the MTA Board members this afternoon, MTA CFO Gary Dellaverson said that, in addition to the $143 million in state appropriations cuts, the MTA is now facing the reality of a shortfall in the payroll tax collections that will reach approximately $200 million. In total, the MTA’s 2009 revenue totals will miss expectations by $343 million, and although the agency can roll this cuts over into 2010, the MTA faces, in the words of Dellaverson, some “very difficult choices” as it prepares its balanced budget for next year.

“Receipts from the recently enacted mobility tax now appear to be under-running projections by about $200 million for this calendar year,” Dellaverson said. “This is a shocking development both because of the magnitude of the under-run (about 20%) and the late date of its discovery. As recently as last week, the State was continuing to advise us of their comfort with the forecast. We do not yet know what is causing these disappointing results. While compliance and timing may be a part of the answer, there is a substantial disconnect from the current performance of other similar tax sources.”

MTA officials were prepared for the original $143 million in state cuts, but this new shortfall caught them by surprise. “It’s the extra $200 million that’s really painful,” MTA spokesperson Jeremy Soffin said.

Although the MTA has long borne the brunt of a public skeptical of its ability to manage its own finances, officials at the agency and outside transit watchdogs stressed the state’s role in this new found gap. Jeremy Soffin called it, a “significant unraveling of the rescue package passed by the Legislature in the spring.”

Gene Russianoff of the Straphangers Campaign was more pointed in his ire toward Albany. “The Campaign,” he said in a statement, “calls on Governor Paterson to investigate whether New York State Department of Taxation and Finance has adequately administered and enforced the new payroll tax and on the MTA to redouble its efforts to find new administrative savings and financial actions that will maintain current fare and service levels in 2010. In 2010, both the governor’s office and the State Legislature are up for election. Hundreds of thousands of riders will not take kindly to broken promises on decent and affordable transit.”

While we await a state response to this Albany accounting error, the MTA is springing into action. The agency’s fiscal year ends at the end of the calendar year, and the Board is under a legal obligation to approve a balanced budget before the end of the month. Furthermore, the agency has committed to avoid a fare hike in 2010 but has plans to raise fares in 2011 and 2013. “It remains our intentions to stick with that understanding on the fare schedule,” Soffin said.

So the agency will look to roll this budget problem into 2010, and as Dellaverson turns his gaze internally, agency spokespeople could not say how the MTA would cover a gap. Service cuts remain on the table, and Jay Walder, the new CEO and Chairman, will continue his initiative to “overhaul with how the MTA does business.”

Furthermore, the MTA is now putting a $350 million bond issuance on hold until the agency board has a chance to review the budget.

All in all, this news caps a turbulent fiscal year for the MTA, and it is news we all could have done without. The agency has promised to “be as transparent as possible about where we were, what caused the situation and what we’re trying to do,” and Dellaverson will have an updated budget proposal when the Board’s Finance Committee meets next Monday.

Still as the authority looks for guaranteed revenue sources, as state calculations continue to fail, the East River Bridges remain free, and congestion pricing is but a glimmer in the eyes of transit advocates. As 2009 nears its end, this story is far from over.