What the MTA budget bailout means for New Yorkers

BY CAROLINE SPIVACK

The Issue

A STATE BUDGET AGREEMENT has pulled the Metropolitan Transportation Authority back from the edge of its fiscal cliff, providing the mass transit agency with the cash it needs to avoid a potentially devastating budget deficit largely caused by the pandemic. Gov. Kathy Hochul unveiled a budget deal on April 27 that would secure new, recurring revenues for the MTA. Crucially, the bailout will stave off service and job cuts officials had anticipated without aid.

The tentative rescue package includes an increase to the payroll mobility tax paid by businesses that benefit from the MTA’s services. But instead of the original proposal—that companies across 10 counties would pay higher rates—the increase from 0.34% to 0.6% will fall exclusively on companies in the five boroughs following a suburban outcry. The tax increase is expected to raise $1.1 billion for the MTA annually, Hochul said.

Other budget wins for the MTA include the state kicking in a one-time payment of $300 million, along with an extra $65 million that would allow the MTA to reduce a planned fare increase. Hochul had originally asked the city to contribute an additional $500 million annually to the authority, but instead the five boroughs will chip in $165 million. The steeply reduced figure is a win for Mayor Eric Adams, who fiercely resisted the idea that the city could afford $500 million a year. In addition, a large chunk of tax revenue generated by three planned downstate casinos will also go toward the MTA.

Somewhat controversially, free buses are on the horizon for parts of the city. A new pilot program will explore the impact of providing free bus service through one route in each borough. Lawmakers had initially pitched two free routes per borough.

WHAT’S NEXT

HOCHUL AND THE LEGISLATURE have yet to formally pass a budget. What has been revealed to date is a “conceptual agreement” of a $229 billion deal, Hochul said April 27. The state Senate and Assembly will still need to hash out the final details and pass the budget as a series of bills, which is expected to happen in the coming days. The tentative agreement for over a monthlate state budget signals an end to a fraught waiting game for the MTA, allowing the agency to plan its future and riders’ commutes with surer financial footing.

The Players

TRANSIT OFFICIALS had been eagerly awaiting the state’s budget outcome and can at last breathe a sigh of relief. MTA Chief Executive Janno Lieber said the bailout would “assure the MTA’s longterm financial stability” and address its expected budget deficits for four years.

Historically, funding for the MTA involves an annual budget-season fight involving city and state officials. This plan is different in that, once the state budget is approved, it will give the authority greater stability with more permanent sources of revenue. Gov. Kathy Hochul said in her April 27 remarks that the budget represented an intentional departure in its approach to the MTA. “The choice was just wait and see what happens, kick the can down the road, or launch a bold strategy of sustainability to shore up and ensure the viability of the MTA for years to come,” Hochul said.

YEAH, BUT …

CUSTOMERS CAN STILL EXPECT a fare increase later this year. The MTA typically raises fares every couple of years by roughly 4%, but transit officials have not raised rates since the pandemic began. A fare increase planned for 2021 was put off to encourage riders to return. This year the agency said it planned to raise fares by 5.5%—to $2.90 for the subway and buses. The MTA expected the bump to bring in about $50 million in additional revenue for this year and $100 million for 2024.

Now that the state has said it will provide an additional $65 million, New Yorkers could pay slightly less than expected or $2.86 per ride. The timing is not yet known. A fare increase won’t happen without a series of public hearings and a final vote by the MTA’s board. Jai Patel, the MTA’s deputy chief financial officer, said that the authority was originally shooting for a June fare increase but that July or August was now more likely.

Some Background

THE MTA’S FINANCIAL INSTABILITY revolved around a $600 million operating budget deficit for this year and a potential budget gap of nearly $3 billion by 2025. The financial chasm opened up largely because of the pandemic, when many people stayed home instead of riding subways and buses. But other financial pressures, such as billions of dollars in outstanding debt, have long put the squeeze on the agency’s finances.