Manhattan Institute for Policy Research.
Subscribe   Subscribe   MI on Facebook Find us on Twitter Find us on Instagram      

New York Post


A Desperate Gimmick

April 30, 2009

By Nicole Gelinas


HOW long will Albany stand by as the state-run Metropolitan Transportation Authority torments itself and the economy with desperation measures?

Yesterday, the MTA decided to give itself 18 months to rebalance its current annual budget -- just this once, it said. (State law requires the MTA to balance its budget annually.)

This means the MTA is seeking to borrow money from next year to cover some of this year's budget. That would include doing such things as asking partners (like advertisers) to pay now instead of next year. The MTA could also borrow outright against next year's cash.

The problem with the proposal is obvious: It's not a good idea for state and city governments to borrow for operating expenses, which is what this would amount to. One-year budgets are necessary to show discipline. And now is when discipline is most needed, when the MTA -- and the state and the city -- already are so far behind.

It's not clear that the state comptroller will allow all such things -- but it's a horrible sign that the MTA is even asking.

Last year, the MTA figured it would have a $1.2 billion deficit for this year. It hoped for reasonable measures from Albany, like permanent new cash. Absent them so far, it will raise fares and cut services precipitously starting next month.

Turns out, the MTA wasn't pessimistic enough. Property-related taxes continue to fall, and, more scarily, ridership is falling, too.

So the MTA is short an extra $600 million, with a new billion-dollar gap looming for next year -- even after higher fares and service cuts.

Here's an idea of what the public can expect if Albany doesn't get its act together: The "draconian" cuts already announced will save only $200 million or so annually when fully implemented. The 30 percent fare hikes coming soon will raise only $1.2 billion a year.

So next year, we could be looking at new fare hikes that are just as big, bringing the monthly ride to more than $120, as well as further service cuts -- including possibly eliminating overnight service -- that will threaten New York's productivity.

MTA chief Elliot Sander sees "irreparable harm" if service is cut or fares raised too quickly to close this year's bigger-than-expected gap. Thus, the 18-month budget plan. But absent a new stream of revenue and labor-cost cuts, the only question is, Do we want to "irreparably harm" ourselves now -- or later?

Over the past year, the MTA has repeatedly shown itself to be too optimistic in its budgeting. It also could be too optimistic about next year's deficit -- at the same time it wants to borrow from next year.

True, it's hard to budget in these tough economic times. But it's reckless to make next year's deficit worse without knowing how bad it will be. And if it is worse, Albany will be in even less of a position to help next year, given its own deficit problems.

The MTA says it will make necessary cuts as next year rolls around. But while the authority has made some progress in cutting its back office, those cuts haven't been wide-ranging or specific enough to earn it the credibility to borrow against future years.

It would be one thing if the MTA were making such an extraordinary move at a time it was doing other extraordinary things that would help in closing the gap. For example, Sander et. al. could sound the alarm that the MTA must get pension and health-benefit reforms from Albany to become solvent.

But it's clear that the MTA is terrified of its unionized workforce, and for good reason. At a hearing yesterday, one station agent openly threatened the MTA board and the public, saying, "If you are going to lay us off, we are going to shut you down."

Now, Albany has yet another excuse to delay -- not just on necessary labor reforms but on the new-money part of a bailout, too.

In one big way, the MTA is horribly right. It looks impossible for it to balance this year's budget in compliance with state law without doing unacceptable harm to its (and the city's) long-term viability. That dreadful reality is not something that should be covered up, even half-heartedly, with desperate gimmicks.

Yes, an MTA capitulation to an impossible situation -- not enough money to cover unsustainable labor and debt costs -- would wreak havoc with bond markets. But it might -- might -- also send fear through Albany.

The sooner the MTA stops trying to do the impossible, even if it hurts now, the better in the long run -- for itself, its riders and the city. Because that's when we can start to fix it.

Original Source:



Rolling Stone’s University of Virginia Gang Rape Fiction and the Real World
Heather Mac Donald, 03-25-15

The Christie Hiatus
Steven Malanga, 03-23-15

Republicans Want A Better Life For You That Democrats Can't Stand
Diana Furchtgott-Roth, 03-19-15

Manhattan Moment: Medicare's Doctor Payments Mess (and How to Fix It)
Yevgeniy Feyman, 03-19-15

Rules For The Fed To Live By
Charles W. Calomiris, 03-18-15

The Class Gap In Unplanned Babies
Kay S. Hymowitz, 03-17-15

Peak Oil Price? Winners And Losers At The End Of The Era Of The $100 Barrel
Mark P. Mills, 03-17-15

Why A Higher Minimum Wage Will Hurt The Poor
Diana Furchtgott-Roth, 03-17-15


The Manhattan Institute, a 501(c)(3), is a think tank whose mission is to develop and disseminate new ideas
that foster greater economic choice and individual responsibility.

Copyright © 2015 Manhattan Institute for Policy Research, Inc. All rights reserved.

52 Vanderbilt Avenue, New York, N.Y. 10017
phone (212) 599-7000 / fax (212) 599-3494