Despite Fare Hike and Service Cuts, MTA Budget May Soon Derail Again

Posted by Alan Treffeisen, March 30, 2009

Facing a nearly $1 billion operating budget hole this year, the Metropolitan Transportation Authority’s board decided last week to hike mass transit fares and raise tolls on the agency’s bridges and tunnels. The MTA board also approved an array of subway and bus service cuts.

As the MTA’s customers are threatened with the prospect of paying more for less, some may be unaware that the authority’s current financial plan assumes there will be a further fare and toll hike in 2011. Worse, even with the two sets of fare and toll increases, the MTA still must cope with substantial operating budget gaps after this year: almost $300 million in 2010, over $400 million in 2011, and over $600 million in 2012.

Compounding the bad news even further is the fact that so far this year, the MTA’s receipts from real estate-related taxes dedicated to the agency have been less than half the levels projected in the current financial plan. This raises the possibility that the modest $49 million surplus now projected for 2009 could turn into a deficit, requiring further budget-balancing measures this year.

Some of the MTA’s revenue streams, in particular the transfer taxes, are notoriously difficult to forecast. A strong economic recovery in 2010 could increase tax revenues enough to erase the MTA’s operating budget deficit.

Regardless of what happens to its operating budget, the MTA would still face the challenge of funding its 2010-2014 capital program for expansion projects such as the 2nd Avenue line and East Side Access, renovating subway stations, repairing signals and rails, buying new trains and buses, and other improvements needed to keep mass transit moving. While substantial federal funding can be expected (over one third of the $24 billion 2005-2009 capital program is funded by the federal government), the MTA will likely have to finance the bulk of the program with its own resources.

Due to a debt restructuring in the early part of this decade, the MTA’s ability to issue additional bonds backed by existing revenue streams is severely limited. The Ravitch Commission proposals for tolling the Harlem and East River bridges and levying a new regional payroll tax would have allowed the MTA to support future capital improvements through the issuance of bonds backed by these revenue sources. Regardless of whether the legislature in Albany ultimately crafts a “rescue” package to roll back some of the announced fare hikes and service cuts, an important consideration will be whether or not the plan addresses the gap in funding for the MTA’s capital needs.

About Those Services You Prioritized

Posted by Doug Turetsky, March 19, 2009

Each year, as part of the city’s budget process, the 59 community boards are asked to rank the most important services in their districts. For fiscal year 2010, community boards could rank the importance of 90 services provided by 24 public agencies. The services to rank ranged from sidewalk repair to child care to trash collection. The community board priorities are then published in a little-known report called the “Community Board Service Program Rankings.”

So what are the most important services to the 48 community boards that participated in this year’s report? Topping the list is “services for the elderly”—up from sixth last year. Number two is “parks maintenance,” which was also second last year. Third is “after school/summer school programs” and fourth “youth development services,” which frequently overlap with after-school related activities. After-school and youth development services were tied for third last year.

The report also identified the priorities by borough. Services for the elderly are among the top three priorities for each of the boroughs except Staten Island, where it ranked 12th. Parks maintenance is among the top four priorities in each of the boroughs except Manhattan, where it ranked eighth. The ranking of after school and youth development services are more of a mix among the boroughs, though youth development is tops in Brooklyn and after school is number one in the Bronx and second in Brooklyn and Manhattan.

How did these top priorities fare in the Mayor’s Preliminary Budget for the upcoming fiscal year? Well, funding for senior centers is facing a $5.3 million cut, making the total budget for the centers $86.5 million next year. It is not clear yet how services will be affected, whether senior centers will have to reduce the number of people served or eliminate programs.

The parks department budget includes a proposed reduction in spending on maintenance and operations, which would drop from $244.1 million this year to $222.5 million in fiscal year 2010. About 90 percent of the parks department’s maintenance and operations budget goes to taking care of neighborhood parks.

After-school programs are also facing the budget ax. The budget plan includes the elimination of 91 Out-of-School Time programs serving 10,750 kids to save $6.1 million. Because of this and other budgetary changes, the number of youth served by Out-of-School Time programs is expected to drop from roughly 80,000 last school year to 56,000 in the upcoming year.

Senior services, parks maintenance, and youth programs have long been a City Council priority, with proposed cuts restored—sometimes with additional funds—when the budget is adopted. But given the city’s fiscal turmoil and the level of budget cuts in many other programs, there’s no guarantee for the year ahead.

How Much Did He Say in Pension Savings?

Posted by Doug Turetsky, March 6, 2009

When Mayor Michael Bloomberg released his budget plan in January, many observers were scratching their heads over one number in particular: $200 million in pension savings. That’s the amount the Mayor said the city would save in the next fiscal year alone if a new pension arrangement first proposed by Governor David Paterson was approved in Albany.

This so-called Tier V would require newly hired city employees to pay more into the pension system than current workers and make the new hires work longer before they become eligible to retire with full benefits, among other changes designed to lower public pension costs. Given that these changes would only apply to new municipal workers and that the city’s current budget malaise makes it unlikely there will be many of them in the near future, the Mayor’s savings estimate seemed very high.

It appears that the savings number in the Mayor’s Preliminary Budget is inconsistent with other estimates provided by the Bloomberg Administration. A Memorandum of Support of the Tier V proposal for city uniformed employees—police, firefighters, correction officers, and sanitation workers—based on information submitted by the Bloomberg Administration to the state Legislature cites much lower estimated savings. The memo says, “This bill will result in savings to New York City of approximately $25 million in the year after enactment. Savings would increase by approximately $25 million per year as new employees are hired, such that the annual savings will be $500 million in 20 years.”

So maybe most of the savings will come from the rest of the city’s workforce, including teachers and other civilian employees? A memo from the Mayor’s budget office to the state’s budget office puts that supposition to rest. Sent last January 9—just 21 days before the Mayor presented his Preliminary Budget—the memo estimated that savings from a new pension tier for teachers and civilian workers would be $10 million in the first year and grow by $10 million annually in subsequent years and reach $200 million in 20 years.

So how does a combined estimate of $35 million in first year savings morph into $200 million? It seems the Bloomberg Administration is hoping to get an agreement to “frontload” some of the expected savings by taking the average over a relatively long term and applying it annually rather than allow it to accrue on a year-by-year basis as current employees retire and new employees with lower pension costs for the city are hired.

Why the Mayor would want to do this is a matter for conjecture. But one thing is clear: whatever its longer term fiscal merits, a Tier V wouldn’t really save $200 million in 2010.