Albany Grabs Another $16.7 Million From MTA

Last week, the MTA announced it lost another $16.7 million to an Albany raid [PDF]. Because of lower-than-expected federal assistance for Medicaid, Albany instituted an across-the-board budget sweep of 1.1 percent, cutting state spending and also siphoning off theoretically separate revenue streams dedicated to specific programs and agencies, like the MTA. It’s a reminder that the state’s budget crisis is dragging the MTA and New York City transit riders down with it.

In its most recent raid on dedicated MTA revenue streams, Albany decided to leave the regional payroll tax alone, but siphoned off money from the collection of taxes known as MMTOA. Graphic: Carly Clark/Streetsblog
How Albany makes off with MTA revenue: In its most recent raid on dedicated MTA revenue streams, Albany decided to leave the regional payroll tax alone, but siphoned off money from the collection of taxes known as MMTOA. Graphic: Carly Clark/Streetsblog

The $16.7 million raid, which will ultimately fall on straphangers in the form of worse service or higher fares, was the final domino to fall in a chain of events leading back to Washington and a program called Federal Medical Assistance Percentage, or FMAP. The feds originally passed FMAP in the 2008 stimulus package to relieve the burden of Medicaid on struggling state governments. Though the federal government extended FMAP in August, it did so at a less generous level than before. Money that states expected to come in suddenly wasn’t there.

In New York, that meant a hole of around $280 million, according to budget office spokesman Erik Kriss. In response, the legislature authorized a single across-the-board budget sweep large enough to balance the state’s books. Not including a few exemptions written into the law by the legislature, that came out to 1.1 percent, said Kriss. For the MTA, he explained, that meant taking $14.6 million from contributions raised entirely from dedicated transit taxes, as well as smaller cuts to Long Island Bus funding and “MTA Aid Trust Account Reductions.”

The damage to transit would have been far worse if it weren’t for a small provision slipped into the language of the bill. Though most of the exemptions in the budget sweep were required by law, one of only a handful of discretionary exemptions was the payroll mobility tax, which raises over $1 billion a year for the MTA. Some legislator (or legislators) saved the MTA millions by negotiating that exemption. Lawmakers could have also done the same for other dedicated MTA taxes, but chose not to.

So Albany’s desperate need for cash has once again led it to raid the MTA. Perhaps it’s time to recognize that the way things stand, the separation between the MTA budget and the state budget is largely a fiction. Albany is using the MTA’s dedicated revenue streams — and those of other “independent” agencies — to keep a structurally unbalanced budget appear afloat via short-term fiscal tricks.

The problem was laid out extremely well last April by state Comptroller Tom DiNapoli’s report, “New York’s Deficit Shuffle” [PDF]. For fiscal year 2009-2010, he noted, the state’s financial plan projected more than $1.7 billion in dedicated funds would be swept into the state’s general fund. Writes DiNapoli:

In this fiscal shell game, money is shuffled among hundreds of accounts, creating funding shortfalls in some dedicated funds, hiding deficits in others and using excess revenue in still others to mask General Fund spending growth. This “deficit shuffle” reduces budget transparency, creates funding instability for critical State programs and allows the State to avoid making the difficult decisions needed to effectively align spending with available revenue. Furthermore, it creates a disincentive to agencies to cut costs, because savings in special revenue accounts are simply swept into the General Fund.

Sound familiar?

That last sentence is particularly important for the MTA as it moves forward with its cost-cutting plans. Even if it somehow manages to wring enough efficiencies out of its operations to balance its budget, unless overall state finances return to health as well, those savings just become a juicy target for new state raids. Similarly, though New York City’s contributions to the MTA are at historic lows, it won’t do much good for the city to restore transit funding to its rightful levels if that just results in an equivalent MTA revenue sweep by the state.

The state budget has an $8.2 billion projected budget deficit next year, according to WNYC. It’s quite likely that $16.7 million from the MTA is just the beginning.

  • Larry Littlefield

    This is a tax only collected downstate used to pay for statewide programs.

    Meanwhile, those upstate say they deserve a better deal at the expense of New York City, because they are getting robbed.

    And to ensure no psychic price is paid for this, the deals are done in the dark.

    As I explained in the post below, city residents may also be paying state taxes to cover the pension contributions of localities elsewhere in the state, even as city residents pay more than anyone anywhere for the city’s own pension contributions. You have read about that anywhere, have you?

    http://www.r8ny.com/blog/larry_littlefield/could_new_york_city_taxpayers_be_paying_for_suburban_and_upstate_public_employee_pensions.html

    What you do hear about is gay marriage and abortion, for and against.

  • Thanks to Streetsblog for staying on top of MTA funding issues. For some strange reason, I never hear anything about this stuff from teevee news reporters, preoccupied as they are with MTA bashing (in between the SUV ads).

  • ShekB

    What’s most frustrating about these reports is that only “Albany” is cited – do we have any clue what individuals *in* Albany are responsible for diverting the MTA’s funds? It would be a lot easier to do something if there were a list of names of people to try to vote out of office.

  • Larry Littlefield

    “What’s most frustrating about these reports is that only “Albany” is cited – do we have any clue what individuals *in* Albany are responsible for diverting the MTA’s funds?”

    All of them. These sorts of votes are 212 to nothing. There is no debate, no discussion, no announcment.

    That the MTA is even acknowledging this is happening may be traced to a bill to give the head of the MTA more autonomy, and Jay Walder’s contract providing massive severance pay if he is fired. Neither were in place back in the Pataki years, when MTA officials knew to clam up to keep their own personal paychecks from bouncing.

  • Larry Littlefield

    In fact, that’s the story. The MTA has been raided and ruined for years. But thanks to that severance deal, Jay Walder is saying so.

  • ShekB

    I was afraid of that. Thanks for the info.

  • J. Mork

    The MTA should triple the fare and then start promoting congestion pricing.

  • Jason A

    That illustration is fantastic.

  • ShekB, everyone in the state legislature is culpable, but some are more culpable than others. Direct your pointed questions at the Three Men in a Room and their mooted replacements. If you’re in the mood for a campaign contribution, pick anyone who poses a credible challenge to Sheldon Silver.

  • J:Lai

    Mark Walker: there is someone who poses a credible challenge to Sheldon Silver???
    Keep dreaming . . .

    J.Mork: OR, the MTA could cut the fare back to a nickel, declare bankruptcy, and default on its bond and pension obligations . . . probably about as likely.

  • J B

    How about the city becomes its own state, and we then see how upstate manages without us.

  • Auditor

    The recurring upstate vs. downstate theme is fascinating. About 80 percent of the state’s generous welfare and Medicaid budget is spent in NYC. If it were left to upstate legislators, I guarantee the program would be far less generous: upstate pays for NYC largess. The same goes for universal pre-K, a wasteful babysitting program, mandated by the NYC majorities in the legislature and universally detested by upstate school districts. On the revenue side, Cuomo-era taxes aimed at upstate manufacturing, quickened the pace of good, high-paying jobs from upstate. It’s no wonder that cities like Buffalo have become wards of the state after having their wealth systematically drained to pay for the liberal social agenda.

    If upstate were separated from NYC, the giveaways would end and NYC could pay for it’s costly social-engineering all by itself. Bon Voyage!

  • Auditor

    It is also worth noting, that the state budget, proposed by a Manhattan resident governor and passed almost exclusively with NYC Democrat votes is responsible for robbing $16.7 million from the MTA and its riders. If you’re looking for someone to blame, start south of Gun Hill Road.

  • Auditor

    Oh, and I forgot to mention it was Brooklynite Schumer who pledged that the state would get $1 billion in FMAP funds that didn’t materialize.

  • Auditor

    And the $16.7 million pales next to the $495 million from the New York Power Authority — funds literally generated upstate at the Niagara and Fitzpatrick Power projects– that was supposed to go to reduce electricity costs for the few remaining industries upstate, figuratively and literally turning out the lights for thousands of upstate workers and their families.

  • Larry Littlefield

    Hey “Auditor,” does anyone up there still believe this stuff? I though the Rochester-based Center for Governmental Research pretty much tamped down that nonsense in the 1990s.

    http://www.cgr.org/searchreports_result.aspx?keywords=&fromdate=01%2f01%2f1975&enddate=12%2f31%2f1999

    Go to that page and read this report.

    The Fiscal Balance Among NYS Regions: NYS Fiscal Years Ended March 31, 1992-March 31, 1997 (GAIN of Metropolitan Rochester and NYC Office of Management and Budget) January 1999
    1/1/1999, by Kent Gardner

    CGR traced the revenue and expenditures of New York’s $60 billion budget by region. Jointly funded by New York City and a Rochester group, the report summarizes trends in the geographic dispersion of revenue and expenditure for SFY 1992-1997.

    Full Report

    Subject(s): Public Finance, Economic Analysis
    Location: New York State (New York)

    Bear in mind that NYC was far less prosperous in FY 1992-97 relative to the rest of the state than it is today, and the money still flowed out.

  • Auditor

    You’re missing the point: without state-mandated welfare and Medicaid costs(more than California and Florida’s combine), and other costly mandates such as pre-K and the by more than a quarter.

    Since the mandates are foisted on taxpayers by NYC state legislators, a separate upstate would undoubtedly vastly scale back these programs and more than make up for any supposed benefit of being part of New York State.

    A side benefit would be that NYC would probably keep the mandates meaning welfare and Medicaid recipients upstate would flock to NYC for the benefits, further driving down the cost of government upstate. What the report to which you refer shows, is that the NYC-driven programs have bankrupted upstate. Now, they are bankrupting the entire state, which is one reason the MTA is a financial bind.

  • Umm, Auditor? Couldn’t you describe universal pre-K as a government jobs program that employs thousands of upstate New Yorkers? It’s true that an independent Upstate might not have the panoply of social programs that New York State offers today, but alternate histories, though engaging, don’t offer much in the way of evidence to support your claim.

  • Larry Littlefield

    You are missing the point that local governments in the part of New York State outside New York City have added 130,000 employees since 1990, while the number of local government employees in NYC has gone down.

    No one made them do it — they did it because they (thought they could) to allow the politically connected to have more jobs. As much as there is waste in Medicaid in NYC, there is overspending on schools in the rest of the state.

    I’m not just speaking off the cuff. I compile data on this stuff.

  • J. Mork

    I’ll just paste some stuff from the report Larry mentioned:

    “Statewide, of the total sum allocated
    by CGR, NYS spent an average of about
    $1,800 per capita per year over the six year
    period of the study. The NYC and
    Rochester metro areas received about
    $1,600 per capita compared to about $1,900
    per capita distributed to NYS counties not in
    metropolitan statistical areas and about
    $2,000 for the Utica-Rome, Elmira and
    Syracuse metro areas.”

    “The New York City metro area generally contributes a share of revenue that is larger than
    its share of expenditure. When NYC is viewed separate from its suburbs, NYC still contributes
    more to the state in revenue than it receives from the state in expenditure. When viewed from
    a “place of work” perspective, the NYC metro area annually contributes about $5 billion more
    in revenue than it receives in state expenditure.”

  • Larry Littlefield

    Hey Mork, you should see their subsequent post when the city was booming. And the median household income in NYC is around $55K, vs. $66K for the state as a whole.

    But Upstate is increasingly poor, so of course they are going to be a net recipient. What bothers me is the assertion that NYC is draining the rest of the state. That wasn’t true when NYC had 1 million people on welfare, and it isn’t true now.

  • Anonymous

    Mta is the worst most inefficient system ever created in the US. Philadelphia’s SEPTA is superior in every way. Mta is cheap, poorly designed, poorly engineered, cheap rail cars,tons of corruption and debt. Mta needs to be severely cut. They’re a disgusting agency. They’re dirty and people hate them.

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