Albany Didn’t “Cut” the MTA Budget. They Stole From It.

MTA_money.pngAs part of December’s deficit reduction package, Albany lawmakers took dedicated transit tax revenue from MTA operations to fund other parts of the state budget. The $190 million pot of money is known as the
state’s 18-B obligation to the MTA. The total MTA operating budget is
nearly $12 billion (with a "b").

When the state of New York announced in December that it would slice $143 million from the MTA operating budget, it may have seemed like a belt-tightening measure for lean times. But the truth of the matter — which often goes unstated, unreported, and unappreciated — is more insidious.

The overwhelming majority of the $143 million reduction in transit funding did not originate from the state budget. Instead, Albany took dedicated transit tax revenues from the MTA and redirected them to the state’s general fund. In effect, Albany stole $118 million from transit to subsidize the rest of the state budget. That’s enough money to restore all the subway and bus cuts currently on the table in the MTA’s austerity plan.

How did they pull off the heist? To explain, we need to give a short intro to the MTA operating budget.

In addition to fares and tolls, MTA service is mainly funded by an array of dedicated taxes, which total about $4.5 billion every year. A smaller portion comes from "state and local subsidies," of which Albany is supposed to contribute about $190 million. Already, we’re only talking about a small fraction of the MTA’s nearly $12 billion operating budget.

But here’s the thing — Albany’s "contribution" consists almost entirely of tax revenue that’s already dedicated to transit. This year, Albany put just $7 million from the general fund into MTA operations, according to the state Division of the Budget. The rest of its obligation to the MTA — $183 million — came from dedicated transit taxes.

So when the state made off with $143 million from the MTA budget in the December deficit reduction package, lawmakers were not reducing the state’s contribution to transit so much as raiding the MTA piggy bank and robbing transit riders of funds collected specifically to serve them. When all was said and done, Albany had taken $118 million from dedicated MTA taxes.

(The remainder was accounted for by a $19 million cut in state funding for student fares and the elimination of $6 million in state operating support.)

In a statement released last fall, Gary Dellaverson, who has since retired as the MTA’s chief financial officer, noted that this was "the first time that an existing appropriation to MTA has been
reduced under circumstances in which the money was derived from a
‘dedicated’ MTA tax and had already been collected by the State." In other words, the state didn’t pass onto the MTA the dedicated transit taxes it had collected.

The dedicated revenue source in question — the Metropolitan Mass Transportation Operating Assistance Fund (MMTOA) — was established in 1981 and consists entirely of taxes collected in the 12-county MTA region. (A report released by the New York City comptroller in 2008 [PDF] lays out how Albany has for years reduced the share of MMTOA that reaches the MTA.) So $118 million in downstate taxes, meant to fund transit exclusively, disappeared into the Albany money pit. Nothing in New York state law prevents the same thing from happening again.

What does it mean going forward? New transit funding would be great. But transit riders must also protect the transit funding we already have. Albany faces enormous budget gaps and is desperate to fund politically potent programs like education and Medicaid. Transit riders should beware attempts to steal more money from dedicated transit funds.

John Kaehny contributed to this post.

Graphic: Noah Kazis.

  • Larry Littlefield

    That’s really, really shocking.

    The state legislature has a game plan: get approval for debt, gambling or additional taxes by promising they will be used for things like the environmental trust fund, the Second Avenue Subway and East Side Access, mass transit in general, and in-classroom schools.

    Then they take the money for special deals. What good are dedicated revenues?

  • Larry Littlefield

    By the way, the legislature has played the same game with New York City income tax revenues by increasing the amount of money the state charges to collect it.

  • This post begs the question, “What does it mean for a tax to be a dedicated transit tax?” Obviously, it does not mean the revenues from the tax must be used exclusively for transit. Must state lawmakers demonstrate some financial in extremis condition to divert the revenues from mass transit? Does the “dedication” merely mean that transit needs were referenced in a “whereas” clause in the preamble of the bill? Does it mean anything at all?

  • If cordon tolls or road pricing are implemented in New York, are those revenues going to be collected by MTA employees, or will they get laundered into the general fund by some other agency?

  • J:Lai

    Larry, not sure if you were being sarcastic, but this is shocking.
    I also agree with BicyclesOnly, this raises of the question of what it means for tax revenue to be dedicated to transit (or any other purpose.) If it is legally dedicated revenue, then the actions by the state govt are illegal and it should be sued. If, however, this is legal, then it suggestions the dedication of revenues is based on a handshake and isn’t worth the paper it’s printed on.

    In light of this, I would potentially revise my support for bridge/congestion tolls as a revenue raising mechanism (still may be positive to reduce vehicle traffic) unless there is some stronger, legal, sense in which the revenue remains with the MTA.

  • Shaft

    And since the MTA is a public authority and doesn’t have the same debt service limits that government agencies have, they will continue to borrow and use the capital budget to pay for operational expenses. Not only are they getting less of the dedicated funds, but the cost of administering the system becomes much greater.

  • Larry Littlefield

    “Larry, not sure if you were being sarcastic, but this is shocking.”

    Nope, it’s a new low.

    As is the latest Ravitch plan to defer the pain until his generation has taken all it can, by borrowing money to pay for the state budget.

    Just remember, what is every new tax or increase for? Past debts, enriched pensions, retiree health care, and senior benefits younger generations will never see.

    What is every budget cut designed to offset? See the above.

    What is every debt for? See the above.

    Prospect Park hasn’t filled with garbage because I and others donate to it, in addition to the taxes we pay. Perhaps they’ll seize that revenue too. The transit system is going down, and so are the schools. Public service have been destroyed in a bi-partisan manner. In New York, Democrats are happy to “starve the beast” too as long as they get their cut.

  • Larry Littlefield

    “And since the MTA is a public authority and doesn’t have the same debt service limits that government agencies have, they will continue to borrow and use the capital budget to pay for operational expenses.”

    Is everyone else willing to adopt my last ditch approach? Ignore elections that don’t exist, and talk past the state legislature that only listens to its campaign contributors, and tell the bondholder we won’t pay debts imposed without a referendum. The debts are unconstitutional. And they may be “backed” by a particular tax, but the state constitution says the tax revenues of the state MAY NEVER BE CONTRACTED AWAY!!!” Because back in a less evil era, they knew what could happen otherwise.

  • vnm

    Jonathan, J:Lai: The MTA’s subway, bus and commuter rail services are currently funded, in small part, by bridge and tunnel tolls collected on the MTA’s seven bridges and two tunnels. This money is collected by MTA employees and transferred within the MTA to help fund public transportation. That money never goes north of the Henry Hudson Bridge’s Bronx landing at Spuyten Duyvil. The proposals to toll the untolled East River / Harlem River bridges or to do congestion pricing could/would have transferred the ownership and maintenance of those bridges to the MTA. This would have set up a system more or less identical to the one that already exists. And it could have been done within the existing institutional framework: MTA Bridges & Tunnels, a/k/a the Triborough Bridge and Tunnel Authority, might simply expand its maintenance and toll collection duties to river crossings that NYCDOT maintains at taxpayer expense today.

  • Here’s a question for Andrew Cuomo and whoever the Republicans nominate to oppose him: Would you take steps to ensure that MTA taxes go only to the MTA? The current electeds clearly consider themselves invulnerable to criticism so the yet-to-be-electeds may be our only hope.

  • New York State kleptocracy at its finest!

    The current level of dysfunction in New York State government is so high that I am beginning to see the appeal of anarchism.

  • Shouldn’t the TWU & Working Families Party be up in arms over this?

    The signs protesting at the MTA hearings should read:

    “Stop Raiding MTA budget”

  • Ray

    Lawsuit?

  • Welcome to the California system. Governator stole billions of dollars that were dedicated to transit and even lost a lawsuit. Doesn’t change a thing.

  • Thanks for bringing our attention to this. But I still don’t get it. How can the funds be “dedicated” if it’s legal to spend them on something else?

  • DingDong

    Does anyone have standing to sue to enforce this? The MTA might, but I don’t see them bring suit. The Straphangers or someone else representing those subject to service cuts? Do you need standing to sue in New York court?

  • John Kaehny

    Exactly Cap’n, what is a “dedicated” tax that is not protected by a constitutional “locked box?” In theory, there is supposed to be a high political price paid when Albany passes a tax that is supposed to be “dedicated” to one thing and then spends it on something else. But since there are very few contested elections, and the transit unions don’t seem to yell about it and the press doesn’t understand it, well we have a big problem. Part of the problem is that the press mixes together “dedicated taxes” and other forms of subsidies (which do not exist.) See today’s Daily News for an example.

  • glenn

    How do the MTA’s bond holders feel about this concept?

  • Larry Littlefield

    “How do the MTA’s bond holders feel about this concept?”

    They should be thinking that repaying bondholders is probably more important to the politicians than providing transit service to the serfs, but less important to the politicians than other things.

    Chapter 9. We’ve reached the tipping point where there is more to be gained by not paying old debts than incurring new ones, uniting moral outrage over generation inequities with the self interest of members of Generation Greed.

  • Well, Fitch’s ratings outlook is negative.

  • Ben, John, this is very interesting. I had a quick look at the comptrollers report, and it looked like there was only a $14 million diversion of the MMTOA moneys to upstate, but it was pretty confusing. where does the 124 million diversion come from exactly? it is a small part of Albany’s support for the MTA, very small compared to the massive problem of the ballooning debt payments on the fare backed bonds. The 18b money the city has to match, and my recollection was that in recent years the city never put up the matching money, so the state didn’t either. Not sure if this is still the case, but if so, its largely the city’s fault, no? MMTOA is the 1/8% on the sales tax, no?

  • these mta bosses are there to get rich instead of helping to improve the mta they dont. they don’t even encourage investors to invest in the company but after they lose money, they try to increase our fairs so we could pay their debt for them

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