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September 24, 2008


DiNapoli: MTA Faces $522 Million Budget Gap for 2009

Wall Street Downturn Could Hurt Chances for Additional State and City Aid

The Metropolitan Transportation Authority (MTA) must develop a contingency program because its gap closing program relies too heavily on additional State and City assistance, which may not fully materialize given the recent developments on Wall Street, according to a report New York State Comptroller Thomas P. DiNapoli released today.

“The turmoil on Wall Street has created serious fiscal challenges for the City and the State, which will likely limit their ability to provide additional assistance to the MTA,” DiNapoli said. “To its credit, the MTA has directed its agencies to develop contingency plans, but the focus must be on administrative costs, not service cuts. Like everyone, the MTA has to learn to do more with less.”

The report also expressed concern that the Wall Street downturn could further erode tax collections and result in job losses that could ripple through the regional economy, resulting in lost ridership.

In July, the MTA projected operating budget gaps, on a cash basis, of $1.1 billion in 2009, $1.9 billion in 2010, $2.1 billion in 2011, and $2.3 billion in 2012. These gaps represent 11 percent of revenue in 2009 and more than 22 percent of revenue by 2012. The DiNapoli report found that while the MTA’s budget gap estimates were reasonable when they were presented in July, the State has lowered its forecast of dedicated transit taxes by $381 million over the financial plan period.

To balance the 2009 budget and narrow the budget gaps for subsequent years, the MTA has proposed a $6.4 billion gap-closing program. The report found that the gap-closing program is risky because it relies so heavily on actions that are either outside the MTA’s direct control or are still unspecified. Nearly half of the resources are expected to come from additional State and City aid. Less than one quarter would come from internal actions, and 37 percent of those savings remain unspecified.

After assessing the gap-closing program and other risks, the report concluded that the MTA still faces budget gaps of $522 million in 2009, $1.4 billion in 2010, $1.6 billion in 2011, and $1.8 billion in 2012. DiNapoli noted that even if all of the MTA’s gap-closing measures were successful, it would leave a gap of $250 million in 2010 – or the equivalent of a five percent fare hike. The MTA must have balanced budget for 2009 in place before the year begins.

Compounding the problem is a lack of resources to fund the MTA’s 2010-2014 capital program, which is needed to maintain and expand the system. According to the DiNapoli report, the next capital program has a funding gap of at least $15 billion.

The DiNapoli report also found that:

  • Subway, bus and commuter railroad use reached the highest level in decades last year and has grown by four percent through May 2008;
  • After peaking in 1992, the value of annual government subsidies has declined on an inflation-adjusted basis by $383.1 million;
  • The MTA has increased fares and tolls by 33.9 percent since 2002, which is 52 percent faster than the inflation rate. (If increases planned for 2009 and 2011 are enacted, fares and tolls will have outpaced inflation growth by 63 percent.);
  • Debt service grew from $848 million in 2004 to $1.4 billion in 2007, and will hit $2 billion by 2012 just to finance existing capital programs. (Debt service is forecast to consume 21 percent of total revenue by 2012, compared with 12 percent between 1996 and 2005;
  • The pension systems for the LIRR and the Manhattan and Bronx Surface Transportation Authority (a subsidiary of the NYC Transit Authority) have sufficient assets to cover only 33 percent and 55 percent, respectively, of their liabilities. (In contrast, the New York City Employees’ Retirement System, which manages the pension funds for most other transit employees, is virtually fully funded.) Together, these two pension systems have accrued unfunded pension liabilities of $1.9 billion;
  • The number of managerial, supervisory, professional, technical, and clerical employees increased by 568 employees between December 2004 and May 2008, and the agencies are authorized to fill another 818 vacancies by the end of the year; and
  • The gap-closing program would cut central administration by only 59 employees by the end of 2009, while maintenance staff would decline by 351 employees.

Click here for a copy of the report.



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