Cuomo Deal Will Cut Payroll Tax, Reimburse MTA, Create Infrastructure Fund

The details of Governor Cuomo’s economic plan, which includes both tax reform and a new infrastructure fund, were released today with support from Assembly Speaker Sheldon Silver and Senate Majority Leader Dean Skelos.

One of the MTA’s most important revenue streams is seriously affected by the tax reforms. The payroll mobility tax will be cut by $250 million under the deal, though the MTA will be reimbursed for its losses.

The payroll tax, which generates around $1.5 billion in revenue for transit every year, has been a top target of Senate Republicans from the minute it was proposed in 2009. Under the deal, small businesses — likely those with annual payrolls less than $1.75 million, based on previous reports — will have their MTA tax reduced. The current payroll tax exemption for public schools will also be extended to private and parochial schools.

According to the Daily Politics blog, the reductions were one price of Senate Republican support for the tax package. It does not appear, based on press reports, that previously-discussed plans to reduce the payroll tax in suburban counties made it into the package.

According to the Straphangers Campaign’s Gene Russianoff, that $250 million cut may not affect the MTA at all. For public schools, the exemption currently works like this: They first pay the payroll tax and then file for a refund from the state’s general fund. The MTA gets the money up front despite the exemption. If the proposed reimbursements work like this, transit service will likely remain unharmed by the changes.

It’s also possible, however, that the reimbursement might prove insufficient. If the state doesn’t reimburse the full $250 million, transit riders could be in for another round of cuts and fare hikes. Even if the reimbursement takes another form, it could leave the agency vulnerable to cuts down the line. The payroll tax is a dedicated funding stream and has so far avoided being raided; the general fund reimbursement wouldn’t be nearly so secure. If the state were to actually cut $250 million from the MTA, said Russianoff, “It would be very bad, worse than what we sustained with the $100 million hit from the raid on their dedicated funds.” Those raids led to last year’s unprecedented service cuts and fare hike.

Also included in the plan is a new $1 billion infrastructure fund, being labeled the New York Works Infrastructure fund. The fund would be used to invest in roads, bridges, water systems, parks, and schools, but apparently not transit. The leadership agreed on passing legislation permitting “design-build” contracts for infrastructure work, which can allow for speedier and more accountable project delivery. The infrastructure fund would also “streamline” the permitting and regulatory processes and coordinate activities across agencies and authorities, according to the press release. Some details remained unclear: The press release says that the fund will total $1 billion, but seems to list $1 billion in public money, including $300 million from the Port Authority, and $1 billion from private sources, including union pension funds.

We’ll bring you more details as they emerge on what the fund will look like and how it will affect transit. With the support of the state’s three top leaders, however, it seems like the structure of the infrastructure fund and MTA tax cut are both relatively done deals.

  • Anonymous

    With all due respect to Gene and Noah, I’m a lot less sanguine about “reimbursement.” The joint statement from the Governor’s office, http://governor.ny.gov/press/1262011GrowTheEconomy, suggests that the vast majority of the $250 million reduction in the payroll tax will go to small business and the self-employed rather than schools, making reimbursement problematic. And while the statement says the MTA will be “compensated,” it doesn’t mention a mechanism. I’d be very skeptical at this point.

    Needless to say, congestion pricing could make back the $250 million in a jiffy. Hey, the tolls could be “on” just Thursdays and Sundays and “off” the other five days and still net $350-$400 million.

  • Larry Littlefield

    Cuomo plans to borrow $1 billion for infrastructure over some number of years.

    Meanwhile, multiple $billions flow into the MTA and the Transportation Trust Fund every year under “dedicated” taxes, but it all goes to interest on past debts, leaving anything that Cuomo doesn’t cut a ribbon on to deteriorate.  We’re going back to the 1970s.  The tax increase will go to rising pension costs, and will not be noticed amidst the service cuts.

  • Joe R.

    Why are the pension costs written in stone?  Why must taxpayers be stuck paying for pension plans which cost so much they made little sense even when the economy was good, never mind now?  These pension plans were never negotiated in good faith with the unions constantly threatening strikes if they didn’t get their way.  As such, they should be voided.  The money just isn’t there to pay them, never will be.

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