CONGRESS 2018: THE 7% SOLUTION- CAN DEMOCRATS GET THERE? A MAY POLLING UPDATE

The  Congress 2018 column I published in early April looked at how the Democrats and Republicans are doing in the race for Congress this fall through a question entitled the National Generic Congressional Ballot: Are you planning to vote Democrat or Republican for the House of Representatives this fall? The column compared the results of four late March 2018 polls to the Results of Exit Polls for the last non-Presidential election year race for Congress, 2014. The 2014 Election Exit Poll reported that Americans who voted in House elections that year voted 53% Republican to 47% Democratic in a straight-match-up between the two parties.

The four late March 2018 polls, from Quinnipiac, The Economist, Marist, and Fox News, showed 5-6 point leads for the Democrats, with about 15% of the electorate still undecided or claiming they would vote for another political party. If the undecideds broke in the same proportion as those voters making a choice at that time, the Democrats would be close to a seven-point lead.

Nate Silver, the national polling analyst who founded fivethirtyeight.com, an online publication focused on politics and polling, has said the Democrats need to win the National Congressional vote by seven full percentage points against the Republicans (in the results, not just the polls!) to have a break even chance of taking the majority in the House of Representatives, given the distribution of the electorate across the country among the individual 435 districts. That’s what I call the ” 7% ” solution.

The Democrats still hold a lead in early May 2018 polls on the National Generic Congressional ballot question, but it’s smaller. (The National Generic Congressional ballot question, by the way, and most other polls are updated on a daily basis on the fivethirtyeight website. )

As we all know, polls are uncertain animals and a look at these early May polls exposes some of the shortcomings of polling, but still demonstrates the potential for a Democratic victory, much of which will ultimately depend on the intensity of the campaigns in the individual districts. The starting point for analysis remains a comparison with what happened in 2014, and then moving on to the new polls.The 2014 Exit Polls showed the following results:

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The four early May Congressional ballot polls show the Democrats with two five-point leads one three point lead, and one with six points*. This graph compares these results with the 2014 Exit Polls.

CONGRESS 2018 May Update Overall-page-001

CNN claimed that its poll, with the Democrats holding a small three point lead, showed the Republicans were closing the gap from 2017, when many polls were showing the Democrats with leads of ten points or more. Two other polls, Morning Consult and The Economist/You Gov, show five-point leads for the Democrats. The Rasmussen six-point  Democratic lead is interesting because Rasmussen polls a different segment of the electorate, likely voters, compared to the others, which poll all registered voters. Likely voters are defined as a group with a regular voting history in non-Presidential year elections. Rasmussen also uses this group for its Daily Presidential approval rating, which has shown Trump sometimes at 50% approval, higher than virtually all other polls. One explanation for this apparent contradiction is that voters may be frequently responding with approval for a specific Trump action, which may get reflected in the bumps up and down of the daily ratings, but still seek a check on him with a Democratic Congress.

This next graph compares a breakdown of Exit Polls for white voters with the new May 2018 polls for white voters:Congress 2018 May Update Whites-page-001

The Democrats lost the white vote 60-38 in 2014, according to the Exit Polls. The May 2018 Polls remain similar to the March 2018 polls- the four May polls show the Democrats holding an average of 39%, similar to how they did in 2014, while Republicans in the four polls average 46% among whites. The remainder are undecided or claim they would vote for another party. If the undecideds broke in the same proportion as the samples making choices now, the Democrats could reach 44% of the white vote, substantially better than they did in 2014.

The next graph compares Exit 2014 Polls for black voters with the results of three of the four May polls for black voters. CNN consolidated polling results for non-white voters and is shown in the graph.Congress 2018 May Update Blacks-page-001

The May 2018 polls for black voters show similar huge margins supporting the Democrats as 2014, although 2 out of 3 of the polls show slight improvements for the Republicans. Interpreting the results is difficult when polls reach only a few members of a group that is smaller than the sample as a whole. A poll of 1000 voters might have 120 black voters – similar to their share of the electorate- but a small sample of 120 could have a margin of error of +- 10, meaning the result of the poll compared to the real population of that particular group could be ten points higher or lower than the result of the poll. The prior results from 3 March polls for black voters were 83-7, 73-15, and 86-6, with the lopsided margins for the Democrats. Volatility in poll results for small samples demonstrates some of the limitations of polling.

Here are the results of the four May polls for Hispanics and/or nonwhites.Other-page-001

Only two of the four May 2018 polls separate Hispanics in the electorate; the other two group either group all nonwhites together or group Hispanics with other nonwhites except blacks. All four show the Democrats holding substantial leads among Hispanics and among nonwhite voters in general, within range of the 2014 results, but once again these results come from smaller samples. Three March polls among Hispanics had results of 64-30, 46-23, and 43-31, somewhat similar to the May polls. Regardless of these poll results, Hispanics were only a 7% share of the electorate in 2014- Democrats must boost the number of Hispanic voters substantially in 2018 to improve their chances of winning a majority, as well as win a share of their vote similar to 2014. Hispanics were 11% of the electorate in the Presidential election, compared to 7% in 2014.

*- Three of the polls reported updates on May 23rd. The Economist reported a Democratic margin of 5 again, 43-38. Morning Consult reported a 6 point lead for the Democrats, 42-36, while the lead for Democrats in Rasmussen closed to one point, 43-42.

The Democrats maintain a small lead in the National Generic Congressional Ballot, but a large share of the population remains unsure of who they will vote for. Right now it seems that if the undecideds broke in the same proportion as those who had made choices in these polls, the Democrats would not quite gain the seven point margin. But the volatility of the Black, Hispanic, and other minority group poll results create some uncertainty in the direction of the polls. The Democrats are competing heavily in many more districts this year than they were in 2014, and still have an intensity that should increase their turnout.

STATE BUDGET DOES HELP MASS TRANSIT, BUT MTA CAPITAL PLAN UNCERTAINTY RISING

The MTA received two significant infusions of new money in the State Budget adopted effective this April 1st. The first is a full $836 million to be provided to the MTA by December 31st of this year, to fund the Phase One Subway Action Plan developed last July by Chair Joseph Llota and the MTA management. The second is a new tax on for-hire vehicle trips by taxis, Uber, and other for-hire vehicles, that starts Jan. 1,2019, to be imposed on trips in Manhattan south of 96th street. The tax revenue will put an estimated $400 million a year into the MTA  budget to provide regular, ongoing support for the increases in maintenance related to the Subway Action Plan. The new money is very welcome for the beleaguered transit system, but major policy and funding questions like the MTA’s long-term capital construction program and whether congestion pricing will become integral to future sources of funds remain unanswered.

The $836 million to be delivered in 2018 is a combination of about $500 million in operating funds to cover the expense of several thousand new maintenance positions in subway car overhauls, replacing track and signals, deploying emergency personnel, and other staffing, with the rest investments in related physical assets. Half the money for the 2018 infusion was initially put into the proposed Executive Budget submitted by the Governor to the Legislature from State funds. The State Legislature agreed to compel the City of New York to come up with the other half of the funds, $418 million, despite Mayor De Blasio’s objections to the City being required to provide the money when proposed last year after Governor Cuomo declared the Transit Emergency. The ongoing deterioration of subway service that led to the emergency declaration impelled the Legislature to agree that both the State and the City must provide additional support to the MTA.

Two other proposals in the budget by the Governor to force the City to pay even more money to the MTA were rejected by the Legislature, with the Assembly specifically denying the approvals in both its One-House budget and later in its summary of the Enacted Budget. These proposals were viewed as far more onerous than the Subway Action Plan mandate. One required the City to pay the full cost of the New York City Transit Capital Plan, which is supposed to be $17 billion over the five years of the current 2015-19 MTA Plan. Right now the City’s scheduled contribution is $2.5 billion. The second proposal gave the MTA the authority to determine how much property tax revenue in New York City it could take from “Value Capture “. This budget bill allowed the MTA to decide how much property tax value is added due to transit improvements it makes around the City, and then direct the incremental property tax revenue to itself without the City having a right to approve it, or even have a say in how much money is involved.  The Citizens Budget Commission called this proposal “confiscatory “. Although rejected, versions of these proposals are likely to resurface in the future as the Cuomo administration tries to find ways to shift financial responsibility from the State to the City to fund the MTA.

The State Assembly deserves thanks from the public for the $400 million for-hire vehicle trip surcharge for mass transit. Governor Cuomo never put legislation to create a congestion pricing plan into his proposed budget, despite endorsing the concept last summer and creating the FixNYC Advisory Panel, which offered a congestion pricing framework in a report that was released at the time of the budget. However, in early March the State Assembly, in its one-House budget, proposed the surcharge to fund the recurring maintenance program. A similar surcharge had been a lesser part of the FixNYC Report, the main element of which consisted of the charge to enter Manhattan south of 60th street for most vehicles, and was designed to yield up to $1 billion a year. But both the main entry fee and the trip surcharge had not actually made it into the Governor’s budget.

Governor Cuomo had the good sense to rapidly endorse the Assembly’s trip surcharge, and it was approved by the Senate after the tax was limited solely to Manhattan, with no new charges in the outer boroughs or the suburbs. The new tax, however, has not included a congestion pricing set-up. There is no funding for any infrastructure to electronically record entries into the Manhattan business district. Existing technology in the taxi and for-hire vehicle industry will pinpoint when those vehicles traverse Manhattan south of 96th street.

A congestion pricing plan remains in limbo, even as the MTA’s long-term capital construction budget may unravel. In March of this year Standard & Poor downgraded the MTA’s bond rating one notch after an MTA report showed the agency would have a $400 million operating deficit in 2020 and a $600 million operating deficit by 2021, even after two fare and toll hikes. The primary cause of the deficit was reported to be a drop in real estate transaction revenues like the mortgage recording tax, which in part are dedicated to mass transit. The $32 billion 2015-19 MTA Capital Plan, to which the MTA is now committing significant funds as it finally wraps up the prior plan, includes $11 billion from the MTA itself, primarily from money it will borrow. The forecast deficits, however, are very likely to constrain the ability of the agency to actually borrow that much money. Not only that, but the State government’s share of the 2015-19 Capital Plan, $ 8 ½ billion, included $7 billion for which there was only an I.O.U. with no stream of revenue to back it up. Shortfalls in the 2015-19 Plan could materialize soon.

The MTA also has to propose its 2020-2024 Capital Plan in October 2019. The recent five-year plans have cost about $30 billion each- but if the current plan begins to unravel the 2020 plan will be in trouble. A fall 2017 State Comptroller report expressed concern that the 2020 plan might have shortfalls ( meaning lack of sources of funding to pay for projects) similar to the $15 billion shortfalls that plagued decision-makers for both the 2010 and 2015 plans before funding schemes were patched together.

The public and the State Legislature need critical information from the MTA very soon to determine the agency’s ability to sustain a meaningful capital program. In 2007 the Legislature made the MTA accelerate submission of its Capital Plan at that time earlier than the law had provided – and it could do so again, scheduling a submission for early 2019 rather than the end of the year to get a better handle on what the problems really are.

Congestion pricing involved rational policy proposals to deter vehicles from entering Manhattan to reduce pollution and congestion, and provide a long-term funding stream for the MTA. But this is the second time in ten years a push for congestion pricing has not been successful in the State Legislature.  If congestion pricing won’t fly there is no shortage of possibilities for taxes to fund the mass transit system. There are payroll taxes, personal income taxes, corporate income taxes, sales taxes, millionaires’ taxes, mansion taxes, you name it. The issue is the political will. A consensus on funding this most vital of services remains frustratingly elusive, along with the leadership to forge that consensus.

 

CONGRESS 2018: A LOOK AT RECENT POLLS VS. WHAT HAPPENED IN 2014

The flow of polling across the country about politics includes a question regularly asked of the electorate called the Generic Congressional Ballot. It simply asks how do you plan to vote in the upcoming 2018 election for the House of Representatives­—Democrat or Republican? With seven months to go before the November election, this column looks at how the Democrats are doing on this national question by reviewing four recent polls and comparing them to what actually happened in the 2014 House elections. Looking at what really happened in the previous midterm election is a good reality test in thinking about what could happen in the next midterm. Generic Congressional ballot polls are challenging in their predictive value: after all, they are just snapshots in time with tiny samples of the huge American electorate. National congressional polls also do not provide data for the 435 individual Congressional districts as to how the electorate might vote in each of those districts.

Nate Silver, the statistician turned national polling expert with his own online analytical firm, 538.com, also provides a general rule of thumb for understanding the meaning of a generic Congressional ballot poll. In an article he wrote for 538 after the November 2017 election, where the Democrats had done well in Virginia and New Jersey, he said, “Democrats also face a big disadvantage in the way their voters are distributed across Congressional districts, as a result of both gerrymandering and geographic self-sorting. Although these calculations can vary based on incumbency advantage and other factors, my back-of-the-envelope math suggests that Democrats would only be about even money to claim the House even if they won the popular vote for the House by seven percentage points next year.“ This means that polls showing Democratic margins of seven points or better (as long as they are accurate when it comes to the actual result), suggest that Democrats have the potential to attain a Majority in the House.

Using the 2014 House elections as a starting point to compare current polls shows the challenge for the Democrats to win the Majority. Before that election, the Democrats held 201 seats and the Republicans held 234 as a result of the 2012 election, where the Democrats won eight seats in the year President Obama won re-election. 129 million people voted on the Presidential line that year, and 122 million votes were recorded as the sum of all the ballots in the House elections. But in 2014, the number of votes cast on the Congressional lines across the country dropped to 78 million, and the Democrats lost a net of 13 seats. The drop-off in the vote from the Presidential election to the off-year Congressional one is staggering.

The national Congressional popular vote in 2014 dropped by 44 million, more than one-third, compared to the votes on the Congressional line in 2012, from 122 million votes in 2012 to 78 million in 2014. The 2014 vote was also 8 million votes below the previous off-year Congressional election, 2010, when 86.7 million Americans voted (and the Democrats lost 63 seats). The 2014 vote was even below the 81 million who voted in 2006, eight years earlier. The Republicans won the 2014 national Congressional popular vote by six points, 51.2 to 45.5, with about three points for other candidates. On a straight Democrat vs. Republican, excluding votes for candidates of other parties, the Republicans won 53% to 47%.

This Exit Poll graph for the outcome of the 2014 Congressional election breaks down the vote both in overall numbers, as well as by racial and ethnic group.

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The Republicans won 60% of the white vote, to 38% for Democrats. Blacks voted 89-10 Democratic and Hispanics voted 62-36 Democratic. Asians and others voted 50-49 Republican. National Exit Polls also reported that 75% of the 2014 electorate was white, 12% was black, 7% was Hispanic, and 5% was Asian or other.

With Donald Trump in office more than a year, Democrats are hopeful that his unpopularity and the traditional poor performance of the party that holds the presidency in the off-year will help them regain the majority in the House and either win the Senate or hold the line there. The Democrats need 24 seats to win back the majority. Whether it is galvanizing younger and minority voters, moving affluent suburbanites appalled by Trump to vote Democratic, or persuading ancestral white working class voters to come back to the Democrats, the Democrats have many messaging challenges to craft for these diverse groups. Local Democrats running in special elections for vacant seats have been running ahead of Hilary Clinton’s presidential election performance in those districts, sometimes by very large margins, and there are many Republican retirements, giving Democrats even more room for optimism.

Four polling firms completed national generic Congressional ballot question polls around the same time period in late March 2018. The firms are Quinnipiac, Fox News, Marist, and The Economist/You Gov. Here are their overall results compared to the 2014 Exit Poll.

Graph 2.PNG

The four polls are showing either 5 or 6 point Democratic leads. The results don’t add to 100 full points because some voters are undecided, and small numbers say they won’t vote or will vote for another party. All the polls are of registered voters, rather than all American adults, and generally had margins of error of +- 3 points. If the undecided voters split their votes along the same proportions as the voters who made choices in these polls, it would bring the Democratic margins up to 6-7 points, meaning the Democrats are just barely reaching the Nate Silver 7 point threshold he said the Democrats would need to have a breakeven chance to win the Majority.

Here are the 4 polls broken down by race and ethnicity:

Graph Blacks.PNG

For Black voters, the four recent polls show similar margins to how Black Americans voted in 2014; overwhelmingly Democratic, and likely to vote in the same range, 90-10 Democratic, as they did that year (an updated The Economist Poll this week had the Black electorate at 72-6 Democratic).

Hispanis.PNG

The results for Hispanic voters from the recent polls once again are similar to 2014; Hispanic voters are voting Democratic nearly 2-1. Fox News combined all nonwhite voters into one group in its release of data, but 69-21 is overwhelming when Blacks, Hispanics, and Asians are combined and are actually several points higher for those groups combined than 2014. With Hispanics seven per cent of the turnout in 2014, a major challenge for the Democrats will be to increase Hispanic turnout, which was 11% of the vote in the 2016 Presidential election.

Whites.PNG

The results for white voters for the four recent polls compared to 2014 shows the Democrats getting a range of 38-41%, meaning they are holding their base of the white vote from 2014, 38%. The results for the Republicans show a range of 45-51%, below the 60% of whites who voted Republican in 2014. Undecided voters ranged from 9-17%. But if Democrats could win 40% of the undecided white voters, they would clearly do much better than 2014.

Many districts have not yet even nominated the person who will be the Democratic or Republican candidate. Many intangibles like candidate quality, local energy, sudden retirements of incumbents, fund-raising advantages, and the like can affect individual districts outcomes regardless of the overall national situation. But in the last week of March 2018 current polling shows the Democrats tantalizingly near where they need to be to win.

 

 

 

STATE BUDGET MASS TRANSIT UPDATE: NEGOTIATIONS BEGIN AS DEADLINE DRAWS NEAR; S & P CUT MTA BOND RATING

With the New York State budget deadline of April 1 fast approaching, the Assembly, Senate, and the Governor are now actively negotiating to adopt the budget on time. Despite the Governor’s Fix NYC Advisory Panel proposing a congestion pricing plan in January, Governor Cuomo never actually submitted legislation, either as part of the budget or in the ensuing months, to implement the main proposal, to charge private vehicles entering a Manhattan business district zone.

The Assembly did advance a major funding proposal for the MTA. Its one-House proposal included $488 million in new funds for the MTA, divided between a small surcharge on for-hire( cabs, Uber,etc.) vehicle trips in the metro region, with a larger surcharge for trips south of 96th street in Manhattan. It also proposed an additional levy on real estate transactions of more than $5 million. The Assembly proposal is similar to a part of the Fix NYC report that advocated a for-hire vehicle surcharge. The new money would be sufficient to fund the Subway Action Plan developed by MTA Chair Joe Llota last summer to add mostly maintenance improvements to cut delays and breakdowns in the subway system. The Assembly rejected several of the Governor’s proposals to force New York City to pay more to the MTA. The rejected budget bills include requiring the City to pay the entire New York City Transit Capital Plan( $17 billion over 5 years), giving the MTA unilateral authority over determining how much of the City’s property tax revenue to take for transit projects that add real estate value, and forcing the City to pay half the cost of the Subway Action Plan.

The State Senate proposed no new funding at all for the MTA in its one-House budget. Instead, it rejected the Governor’s revenue proposals, intended to balance the budget, and actually threw $750 million more in tax cuts on the table for the short term. For the long-term the Senate proposed removing senior citizens from having to pay property taxes at the end of ten years. While the Senate offered little specifics on this idea, a plan of this nature would likely cost school districts and local governments at least $4 billion a year when fully implemented. The State would either have to make up the difference or the schools and local communities would lose the money or raise taxes on everybody else. Where the State would get this extra revenue is not clear. The Senate proposal is on top of a plan advanced by the Senate to cut income taxes by $4 billion a year by 2025, which was adopted by the Legislature just two years ago and is being phased in.

Earlier this month Standard & Poor downgraded the MTA’s bond rating one notch, to A-plus, and issued a negative outlook for the agency. This action was likely related to a Feb.25 quarterly budget update to the MTA Board. This report stated that the MTA would face a $400 million deficit in 2020, and $600 million by 2021, notwithstanding fare and toll hikes in 2019 and 2021. The main cause of the deficits was reported to be declines in real estate transaction revenues like the mortgage recording tax, a part of which is dedicated to the MTA within the region.

Left unsaid in the bond rating downgrade and the MTA deficits is the impact on the agency’s capacity to borrow funds to meet its commitments to the 2015-19 Capital Plan. Those commitments are scheduled to be $13 billion of the $32 billion adopted in 2016-17. A $600 million shortfall in available cash flow could translate into an inability to sustain, or borrow, about $9 billion of its $13 billion commitment.

Adoption of the funding plan advanced by the Assembly would help mass transit in a meaningful way, funding both maintenance improvements and some essential capital improvements like signals. These funds still do not address long-term issues like the 2020-2024 Capital plan or shortfalls in the current 2015 plan that seem likely to materialize, but would be a big step in the right direction. We will know the outcome of the budget shortly and can take stock of the next steps needed to address deepening challenges for the mass transit system.

CONGESTION PRICING TRAIN ALREADY RUNNING LATE IN ALBANY

There is plenty of debate ongoing in Albany now about the pros and cons of congestion pricing-but little discussion yet about the purpose of creating such a large flow of money($1-1.5 billion a year), which logically must be a way to fund the next MTA Capital Plan. That plan is due out in the fall of 2019 for a five-year cycle from 2020-2024. The MTA had estimated that both the existing plan(15-19) and the prior plan(10-14) would cost about $30 billion each. But the Agency, the Governor, and the Legislature had trouble figuring out how to raise the money to cover the immense costs of both plans, and the 2010 plan was ultimately downsized. The next cycle will have the same problem-where to find money to pay for it. In fact, the problem of paying to keep the mass transit system in a state of good repair and pay for expansion projects will continue for decades.

In 2013 the MTA put out its 20-year Capital Needs Assessment for 2015-34. This assessment identified system needs which would cost $106 billion to keep mass transit in a state of good repair, without even considering the cost of the expansion projects. In the current plan, the big expansion projects like East Side Access and Second Avenue Subway cost $7 billion. The State of Good Repair( regular replacement of track,signals, stations,subway cars and buses, etc.) for the existing system costs $25 billion.

Governor Cuomo, MTA Chair Joe Lhota, and legislative leaders have said very little about just how problematic the MTA’s long-term funding needs really are. There is a proposal in the new State budget to force New York City to pay half the recurring maintenance costs of Lhota’s Subway Action Plan, estimated at $300 million a year by 2020, but that is primarily for a step-up in regular maintenance, not capital projects. Mayor DeBlasio has refused to support the idea. The current capital plan had a shortfall of half, or $15 billion, of the $30 billion in needed funds. The Governor and the Legislature patched up the problem in 2016 by promising in State law in 2016 that the MTA would get the money when it needed it, meaning it would have to spend down what it had available first.

There is still no congestion pricing bill to accompany the Fix NYC Panel report released by Governor Cuomo at the same time as his January budget,that gave a framework for a congestion pricing setup. The Legislature has already left Albany for its annual Presidents’ week break and will not return until the end of February, at which time it will have to begin the process of negotiating with the Governor and adopting the main budget, due April 1. The main budget itself is controversial, as always, with the Governor seeking $1 billion in new revenue to plug the deficit, and Mayor DeBlasio protesting cuts and cost shifts of $750 million to the New York City budget, excluding any MTA-related costs shifts.

Each house of the Legislature will adopt its own preliminary one-House budget in mid-March, and must decide what will be in those budgets by the end of the first week in March. With so many tough issues to resolve just for the regular budget, it is very possible that resolving major mass transit issues will be delayed until after the budget, with congestion pricing still an open question. This will leave the mass transit debate to continue until the end of this year’s legislative session in June.

State Comptroller Tom DiNapoli reported last fall the MTA was likely to face another $15 billion shortfall for its 2020-24 Capital Plan, and possibly much more because the MTA’s Subway Action Plan Phase Two indicated a need for another $8 billion for New York City Transit. But right now the State’s leadership is not articulating this problem. It is an election year and if congestion pricing fails there would be a shortfall for the MTA of the sum of money congestion pricing would raise. If that was the case, there would be no place to go to except tax increases or fare hikes to fund the long-term needs of the mass transit system. The City of New York can only raise its property tax. Only the State government can raise the payroll tax, the corporate income tax, the personal income tax, the sales tax, the real estate transaction taxes, and others. The City must get approval from the State to raise any of its own taxes except the property tax.

Chair Lhota claimed the City is responsible for the capital needs of the New York City Transit Authority ( $16-17 billion in the current 5-year plan) on the grounds that a 1953 law said so. That law, Section 1203 of the Public Authorities Law, did in fact say that but added that the City was responsible for a limit of $5 million a year without approval of the New York City Mayor. That $5 million cap has not been changed since 1953, making the law obsolete; an anachronism.

The concepts that have funded mass transit since have radically changed and are connected to the fact that New York City can only raise its property tax and is responsible for the City’s basic services and much of its social welfare and health care funding. When the MTA was created in 1968 the Legislature allowed the City to draw down bridge and tunnel surpluses to fund New York City Transit. In 1981 the Legislature began passing new State taxes within the MTA region to dedicate to the MTA because of the obvious limitations on the capacity of the City government.

Back to the obvious: it’s an election year and in my considered opinion the Governor and the Legislature are not likely to raise taxes, and the MTA will not do a fare hike. That means it’s congestion pricing or bust this year as far as mass transit is concerned.

With MTA Facing Massive Shortfall, A Lot Riding on New Congestion Pricing Push

Governor Cuomo’s “Fix NYC” Commission produced a framework for a congestion pricing plan, released just after the Governor’s Executive Budget for the 2018-19 Fiscal Year, whihc begins April 1. The congestion pricing framework outlines a three-year phase in that would provide revenue of $1 billion to $1.5 billion a year by 2020, most of which would be intended for the MTA Capital Plan.

That is also the year the MTA must begin its next five-year capital plan for continued investment in the upgrade and preservation of the subway, bus, and commuter rail systems. The current $30 billion plan, the 2015-19 plan, faced a shortfall of $15 billion when initially proposed in 2014, and it was not until 2016 that the Governor and the Legislature finally adopted a framework for that plan. The 2020-2024 Five Year Plan likely faces a similar funding shortfall of $15 billion, so money flowing from a congestion pricing plan for the MTA in 2020 would arrive just in time to fill much of that shortfall, although the Fix NYC framework did not outline a specific disposition of the money from a congestion pricing setup.

A November 2017 report by State Comptroller Tom DiNapoli, “ Financial Outlook for the MTA,”  stressed that the MTA’s capital funding shortfalls could be even larger than $15 billion because more than $7 billion in the 2015-19 plan that the State government committed to providing the MTA still does not have an identified funding source.

Beyond that, Chair Joseph Llota’s Subway Action Plan Phase Two indicated a need to add $8 billion in capital funding for the subway system. The MTA is not under an obligation to offer the details of its 2020-2024 Capital Plan until the fall of 2019 so it is not clear how all these unmet needs and proposals might fit together. But a shortfall of more than $20 billion is likely.

The Comptroller’s office suggested the MTA accelerate the release of the details of its 2020-24 plan to enable greater public engagement in the process of coming to terms with these important decisions. The MTA should do this- the Governor, the Legislature, and the public need to get a handle on what the MTA thinks is needed sooner rather than later. ( The Comptroller’s report confirmed the concerns raised in my September 30 Gazette column, “The MTA’s Long-Term Financial Problem is Severe and May Soon be Worse. “)

If the Legislature does not enact a formidable congestion pricing plan, worth $1 to $1.5 billion a year, enough revenue to support $10 billion or more in bonded funds for the mass transit system, or find some other alternative, it will be catastrophic for the subway, bus, and commuter rail systems, the fundamental infrastructure that allows for the wealth of the New York City metropolitan area. In fact, even if the congestion pricing plan was adopted, the MTA’s greater than $20 billion shortfall  would only drop by half, $10 billion, and there would still be $10 billion to find unless the Federal government stepped in to provide much larger amounts of money than at present.

Mayor DeBlasio’s proposal to tax millionaires was envisioned to raise ¾ of a billion a year, with $500 million to fund $8 billion worth of bonds for the MTA, and $250 million to subsidize low-income New Yorkers’ subway and bus rides with ½ Fare Metro cards. Together the congestion pricing plan and the millionaire’s tax might raise nearly $20 billion for the MTA, coming close to closing the gaps in meeting mass transit capital needs.

Both proposals face significant opposition in the Legislature, from State Senate Republicans opposed to the millionaire’s tax, to everyday legislators of both parties who simply don’t wish to impose new charges or fees on their constituents to drive into Manhattan, either because they feel the charges are unfair or won’t solve the congestion problem.

Governor Cuomo has not yet submitted a bill to the Legislature that provides the details of the congestion pricing plan or how the money would be used. He has said he wants to discuss the issue with the legislature first, although he has embraced the concept advanced by MOVE/NY that the tolls on the outer borough bridges that don’t feed the Manhattan Central Business district should be reduced. That means some of the FIX NYC revenue would be diverted to reduce those particular tolls and not available to the MTA for its capital needs.

The Governor has also submitted bills in the budget to force the New York City government to come up with much more money for the MTA, a move the de Blasio Administration is strongly opposing.

One bill would force New York City to pay the 50% of Chair Llota’s Subway Action Plan that the Chair had demanded of the City and that Mayor DeBlasio had refused to pay. Another bill would give the MTA the power to create special districts in New York City where subway expansions add property value, and allow the MTA to obtain portions of New York City’s property taxes related to the new value created, for the MTA Capital Plan. The concept was used to pay for the #7 Train Extension by dedicating revenue from property in the Hudson Yards area to cover the costs, although that plan was a creation of the City of New York and the City controlled the dispositions of funds, unlike the Governor’s proposal here, where it does not appear the City has a say in the matter.

Another budget bill is perhaps the most dramatic of all- it says the City of New York must pay the full cost of the New York City Transit Authority capital plan. The City of New York has a seat on the MTA Capital Program Review Board and a vote on the New York City Transit Authority Capital Plan, so it has the power to veto that part of the plan. This power does not quite fit with the obligation to fund the plan, nor does it square how parts of the New York City Transit Authority Capital Plan might get funded from other sources of revenue and how the City negotiates the package. The MTA’s capital needs are so immense it is reasonable to ask the New York City government to increase its contribution- perhaps even in a major way- but the Governor’s proposals are orders rather than requests and may simply be opening gambits in what must come from a negotiation, not an order from the State.

Another major issue is the gargantuan expense of the MTA’s construction programs and purchases. A recent New York Times series described the immense wastage of funds in the projects. The MTA, the Governor, and the Legislature cannot ignore the problem- the size of the MTA’s needs just costs too much money and the City and State just can’t afford to just write checks to cover $20-30 billion shortfalls.

Right now congestion pricing is the main issue on the plate. Mayor DeBlasio and the Legislature should support it.

Governor Cuomo and Mayor DeBlasio should bury the hatchet- at least as far as the mass transit system goes. There needs to be a consensus about addressing the giant shortfalls faced by the capital needs of the system. It’s also worth mentioning that both former Mayor Bloomberg and the newer MOVE/NY Plan sought to use congestion pricing funds to improve express bus service in areas of the City poorly served (or even not served at all ) by the subway system, and that issue, among others, certainly needs to be taken into account.

The MTA needs an astonishing $2 billion a year in new sources of revenue for the cash and debt service on bonds to cover more than $20 billion needed through 2024-25. If congestion pricing fails and there is no meaningful replacement the prosperity and public safety of the metropolitan area will be threatened

Contrary to Cuomo Claim, Upstate Economy Faltered this Century, Not Last

Governor Cuomo described the Upstate New York economy as suffering from a “ bad fifty years “ as he tried to explain why it was hard to stimulate rapid growth in the region’s economy, which has grown far more slowly than the rest of the State and nation (See Gotham Gazette Opinion, Upstate New York is Home to Heavy Voter Turnout, Major State Investment, and Minimal Job Growth, Nov. 21,2017). He said also that his administration had changed the trajectory upward. Residents of the state should be concerned about how successful these efforts are: Upstate York has more than a third of the State’s residents and is nearly fifty percent of the vote in Gubernatorial elections; the State has enacted intensive programming to uplift that region’s economy, and the State must make major decisions about the allocations of its resources and assets every year and set policy directions.

When I wrote the earlier column, I assumed the Governor’s description of Upstate’s economic decline was generally true. But in the course of verifying the accuracy of the fifty-year decline statement in order to elaborate on the issue for this column, I learned that it was not true that the region’s economy has been going downhill for fifty years.

Upstate New York’s Economy only slowed to a crawl in the years after 2000-  alongside the two recessions that occurred between 2000 and 2010. This major slowdown did, of course, occur before Andrew Cuomo became Governor in January 2011.  But a detailed look at the history of the State’s economy and employment growth shows that Upstate New York’s employment growth actually outpaced the rest of the State in the 1980s, and continued a moderate climb forward in the 1990s, although both regions grew more slowly than the rest of the nation. Employment grew 20% in each decade across the U.S.

New York State Labor Department figures show Upstate employment growing at 17% in the eighties, vs. 12% Downstate (1). Downstate consists of New York City, Nassau, Suffolk, Westchester, Rockland, and Orange counties (2). Upstate is the remainder of the State.

 

NYS EMPLOYMENT GROWTH, 1980-90, NY AND REGIONS (000)
1980 1990            % Growth
NYS 7113 8098 13.8%
Downstate 4645 5206 12.1%
Upstate 2468 2892 17.2%

 

Governor Cuomo seemingly was expressing a public perception that manufacturing job loss broke the back of the Upstate economy decades ago. Manufacturing job loss has in fact been relentless, both in Upstate New York and Downstate New York, and the nation as a whole. In 1979 the United States reached its peak manufacturing employment with 19.5 million jobs. Here is New York’s manufacturing employment history since then, divided between the regions.

NYS MANUFACTURING EMPLOYMENT, 1979-90(1),1990-2010(1)
1979 1990 1990 2000 2010
Upstate(000) 707 574 513 421 276
Downstate(000) 787 557 468 328 181

 

In 1979-80, manufacturing jobs were 29% of Upstate New York employment, and 17% Downstate. Manufacturing job losses were seriously affecting employment in New York, but in the fifty-year lookback to the late sixties and seventies, it was New York City’s economy that was in freefall in the early seventies. New York City lost 600,000 jobs, including 300,000 manufacturing jobs, from 1969 to 1976 (Federal Reserve Board of New York, quarterly review, summer 1977). But the City economy recovered in 1977 and beyond. Two recessions, in 1980 and 81-82, hit the steel and auto industries in Western New York hard. The huge Bethlehem Steel plant in Erie County closed in 1982. Erie and Niagara Counties lost 41,000 manufacturing jobs from 1979-85. IBM and Kodak began their manufacturing job declines in the mid-to-late eighties and continued through the nineties. Despite these cutbacks, the Upstate economy as a whole still continued to expand once the recessions were over and grew by more than 400,000 jobs in the eighties.

In the 1990s, both regions saw their employment grow at a pace of about 5% during the decade, including the severe recession of the early nineties. In 1990, manufacturing was still 18% of Upstate employment but had fallen to 9% Downstate, meaning its transformation to a service-based economy had effectively been completed. After the recession was over, the Downstate area did grow more rapidly, but Upstate employment growth still gained over 200,000 jobs and had 7.4% growth over a seven-year period.

NYS EMPLOYMENT GROWTH, 1990-93-2000, NY AND REGIONS
1990 1993 2000 90-00 93-2000
NYS 8203 7750 8624 5.10% 11.30%
Downstate 5319 4941 5606 5.40% 13.50%
Upstate 2884 2809 3018 4.60% 7.40%

 

Foreign immigration, especially into New York City, began to make a major difference in population growth in the two regions in the 1990s. According to New York City Planning reports, the City gained 800,000 foreign immigrants in the nineties .This gain in the City, where 2/3 of the population Downstate lives, roughly mirrored the 800,000 person growth in population in that decade for the Downstate region. Between 2000 and 2015 the City had gained another 340,000 foreign immigrants and Downstate gained another 425,000 persons. Between 1990 and 2016 Downstate gained more than 1.6 million people and more than 14% increase in population. Upstate New York gained only 2% in population. With population growth comes new demand for goods and services and employment gains.

By 2000 manufacturing employment was 14% of employment in Upstate New York and only 6% Downstate. The United States entered another recession in 2001 and employment actually declined for two years, including a loss of 2 million manufacturing jobs. The terrorist attack that destroyed the Twin Towers and killed thousands also had significant effects on employment in New York beyond the impact of the recession. After the recession ended employment in the Downstate region grew rapidly until 2008. But the growth rates of the two regions differed sharply, with Upstate growing only 1.7% in the five years vs. 6.1% in the Downstate region, when the Great Recession hit New York and the nation. New York City’s economy took off after the Recession, but Upstate New York had lost another 145,000 manufacturing jobs in the decade, more than a third of its remaining factory jobs from 2000 (See Manufacturing Jobs Table). By 2010, Upstate New York had fewer jobs than it did in 2000. The Upstate economy had a very bad ten years, from 2000 to 2010, and the manufacturing and other job losses during this period truly shook the base of the Upstate economy.

2000 2003 2008 2010 Growth 2003-2008 Growth 2000-2010
NYS 8624 8395 8777 8544 4.6% -0.9%
Downstate 5606 5434 5765 5622 6.1% 0.3%
Upstate 3018 2961 3012 2922 1.7% -3.2%

 

The past column reported that Upstate private sector economic growth from 2010 to 2016 was 5.8%, with slightly faster growth in the bigger metro areas like Albany, Buffalo, and Rochester, but weak to no growth in other areas. How and where the State government is allocating its resources and assets will be the subject of the next column, along with a continued look at its economic development polices and overall strategic efforts to leverage meaningful improvement in the Upstate economy.

 

 

 

 

  • Older historical employment data contained different employment classification systems, that mixed proprietors and payroll together, among other differences, so the series used for 1980-1990, and for manufacturing from 1979 to 1990, is not comparable to a later 1990 base that uses only payroll employment coming forward from that time.
  • The New York State Labor Department metro area employment data places Orange County in a Westchester-Rockland-Orange region, so Orange County is counted in Downstate employment.