The MTA’s “Deficits” Aren’t Just a NYC Problem: Taxes Bail Out the Commuter Lines Heavily Too

The New York State budget was submitted to the Legislature  by Governor Kathy Hochul for the fiscal year beginning April 1st, 2023, and ending March 31, 2024. It will be negotiated and adopted in the coming weeks. The budget includes large school aid and health care increases, while most of a current year $9 billion surplus is added to the State’s reserves to protect against what are projected to be rising deficits in coming years due to a slowing economy.

Governor Hochul has also proposed a plan to help the MTA with its serious financial problems caused by the losses of ridership originating with the COVID-19 Pandemic. The MTA will run out of the giant cash infusions from the Federal government during the pandemic and will have a $2.5 billion deficit by 2025. The plan expects fare and toll hikes and adds a combination of new subsidies, including State grants, required contributions from New York City, and a share of revenues from new casinos authorized to be built in the City. The State and City contributions provide $800 million.

The State plan to help the MTA also includes an increase in a Payroll tax first enacted in 2009 to help the MTA during the Great Recession. The payroll tax raises another $800 million. Increasing taxes is unpopular and suburban legislators are balking about supporting a Payroll tax increase. They are apparently under a belief that money raised from the payroll tax will just go fund New York City’s transportation deficits. Therefore, the payroll tax should only be levied in New York City.

But they are wrong, and I will show you why:.

Talking about the “ MTA’s Deficits “ does not make clear to the public whose deficits one is really discussing: those deficits aren’t just a New York City problem. The truth is that the suburban rail systems, the Long Island Rail Road and MetroNorth, have massive cash deficits just like the New York City Transit system and its subways and buses.

According to the MTA’s February 2023 Financial Plan, the Long Island Railroad will have, in 2023, a $1.5 billion deficit between its revenues from the riders (and reimbursements from the capital budget) versus its expenses like payroll, energy, and so on. MetroNorth’s deficit is about $1 billion; New York City Transit’s deficit, larger, of course, is $5.8 billion.  Here’s the MTA’s Deficits by system, based on the MTA’s Adopted budget for February 2023:

The deficits of the commuter rail lines, the Long Island Railroad,and MetroNorth, at $1.51 billion and $ 1.055 billion, are 25% of the total system deficit of $10.099 billion. New York City Transit is $5.8 billion, or 58%. MTA Bus has a deficit but New York City covers it. MTA headquarters is the administration of the system, costing over $ 1 billlion a year ( 6% of the system’s expenses). It generates little revenue and its and its expenses have to be heavily subsidized from system revenue as a whole, fares, tolls, and taxes.

The main point is this: the taxes raised from the suburbs really only cover the deficits of the suburban rail lines. When a business in Suffolk County pays the payroll tax, it is simply helping cover the deficit of the Long Island Railroad. When a business in Rockland County pays its payroll tax, all it is doing is covering the deficit of the Metro North system. The two suburban rail lines don’t just send commuters to New York City, they send residents and workers to other parts of the suburbs, have large weekend flows of travelers, and reduce traffic congestion. They are integral to suburban economies.

Data on the shares of wages for each region of the State, as a percentage of statewide wages, make it absolutely clear that money raised from the payroll tax on Long Island, or the Hudson Valley, does not even quite cover the proportions of the deficits of the two suburban lines to the MTA system as a whole, let alone the proportion of the wages statewide provided by the New York City economy.

Here are the regions’ shares of statewide wages, taken from the New York State Assembly February 2023, Economic and Revenue Report:

The tables show Long Island’s share of Statewide wages is 11.3%, which would form the base of the payroll tax. By comparison, its share of the MTA’s deficit is 15%. The Mid-Hudson region’s share of Statewide wages is 8.1%. MetroNorth’s share of the MTA deficit is 10%. New York City’s share of Statewide wages, and its base for the payroll tax, is 59.6%. Its share of the MTA’s deficit is 58%. MTA Bus is the New York City former private express bus system taken over by the City in 2005; its deficits are paid for by New York City alone.

 When former Governor Cuomo ordered the lockdown of all non-essential businesses in March 2020 at the beginning of the Pandemic, ridership on the MTA’s major systems- New York City Transit, the Long Island Railroad, and MetroNorth, nearly vanished for several months.  One of the unique benefits to our region of the Federal response to the Pandemic was the rescue of the MTA from financial disaster and possible collapse.

The Federal government gave the MTA $ 4 billion at the beginning of the pandemic in 2020, another $4 billion in December 2020, and $7 billion in 2021 from the American Rescue Plan. The MTA has used the funds to cover the deficits from the massive ridership declines in 2020, 2021, 2022, into this year and through 2024, and anticipated virtually all the Federal money would be used by 2025, with $2.5 billion annual shortfalls in that year and thereafter.

 Financial Outlook for the MTA, p. 15, New York State Comptroller, October 2022. Governor Hochul’s plan would accelerate assistance to the MTA now and enable the MTA not just to cope with its coming deficit but pay back money it borrowed to the pandemic and save significant sums long-term. The rescue of the MTA by the Federal government during the Pandemic was a recognition that mass transit was essential to the region. Although ridership on New York City mass transit and the suburban rail lines is still 30-35% below the 2019 pre-pandemic levels, there are still more than 3 million rides every weekday on the subway and more than 100,000 weekday rides on the suburban lines.

As the economic impact of the pandemic wanes, the State, the City, and the suburbs still can’t allow the mass transit system and its vital role in the economy to remain seriously damaged and risk further decline. It has to stay on target for recovery.

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