MTA: Budget Tradeoffs Necessary to Meet Labor Costs

New York's Metropolitan Transportation Authority on Wednesday afternoon proposed a $14.2 billion fiscal 2015 budget and four-year financial plan that assumes an average of $260 million annual increase to labor costs as a result of two recent settlements.

The MTA two weeks ago averted an LIRR commuter rail strike at the last minute and in May, struck a deal with subway and bus workers.

Chief financial officer Robert Foran told the MTA's board in Midtown Manhattan that the plan makes several long-term tradeoffs to ensure that revenues meet ongoing obligations, including the elimination of supplemental contributions to a Long Island Rail Road pension plan totaling $110 million for the 2015-2018 period of the financial plan, although all actuarially required contributions will continue.

Also, the MTA will withdraw $254 million from a discretionary fund for future retiree health benefits and suspend for four years additional contributions to that fund, totaling $533 million. That other post-employment benefits, or OPEB, fund, said Foran, has no mandatory funding level.

Foran said contributions would resume, though at a much lower level, in 2018. "Should finances improve, we intend to increase funding to the extent practicable," Foran said.

The plan also reduces pay-as-you-go funding for the MTA capital program by roughly $80 million per year, equivalent to a roughly $1.5 billion cut in capital program funding capacity.

"It's been a very ugly year in terms of this whole process," said board member Allen Cappelli.

The authority must propose its four-year capital plan to state officials by Oct. 1.

According to Chairman Thomas Prendergast, the MTA plans to invest $20 million per year in new subway, bus and commuter rail service as well as an additional $125 million over the four-year plan period for new operational and maintenance needs.

No additional toll and fare increases are necessarily beyond the state-mandated hikes in 2015 and 2017, said Prendergast. The MTA last year dropped the increases from 7.5% to 4%, roughly the rate of inflation. The authority also earmarked $363 million worth of safety improvements over the four-year period.

According to Foran, the MTA has eliminated its projected $255 million deficit for fiscal 2017, with the 2018 gap pegged at $262 million. Foran, citing favorable budget trends and cost savings, projects a year-end cash balance of $162 million in 2014, which it will roll forward to help balance 2015.

Foran warned that management must continue to pursue efficiencies and consolidations to avoid what he called "backsliding." He urged the use of non-recurring revenues, favorable budget variances and unused general reserve funds to reduce such long-term unfunded liabilities as OPEB, the additional LIRR pension plan or pay-as-you-go capital. He said the authority would reinvest debt-service savings in PAYGO capital.

The board will hold a final vote on the budget in December.

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Transportation industry New York
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