As Funding Uncertainties Linger, Budget Holes Are Opening Up
After a brief period of financial stability secured by an infusion of state funds last year, the Metropolitan Transportation Authority (MTA) now faces growing fiscal uncertainties and risks that create projected budget gaps that start at $211 million this year and increase to $652 million in 2028, according to a new report from State Comptroller Thomas P. DiNapoli. Those gaps could grow much wider if various budget risks that the MTA has identified come to pass.
“A year ago, the MTA was looking forward to a period of solid fiscal health, but its financial condition has quickly turned from stable back to uncertain,” DiNapoli said. “Paid ridership is not coming back as fast as the MTA hoped. With farebox and tax revenues down, a pause on congestion pricing and other financial risks, significant operating budget gaps could again be on the horizon. This is a very real and troubling possibility.”
The MTA’s recovery from the pandemic relies on riders returning systemwide and the MTA’s best option for achieving that is increased safety, reliability, and frequency of service. But with paid ridership not increasing at the rate MTA had expected, the authority has had to lower its expectations for farebox revenue.
While paid ridership in June 2024 was at about 70% of pre-pandemic numbers, it failed to grow at the expected pace in July and August. MTA’s consultant, McKinsey, has predicted subway ridership will reach 80% by the end of 2026, a much slower return than the consultant’s July 2021 prediction of 86% by the end of 2024.
DiNapoli’s report highlights how uneven the ridership recovery has been across the MTA’s various systems — Long Island Rail Road is closest to pre-pandemic levels, but weekday service is still down around 20%, with Metro-North further behind. Bus ridership had initially recovered faster but has trended slightly down since June 2023. Disparate growth among subway lines and different parts of the city have been a drag on overall ridership.
By contrast, the 335 million crossings at the MTA’s seven bridges and two tunnels last year set a new record, with 339 million crossings expected this year. Increased toll revenue, however, has not made up for slow farebox growth, forcing the MTA to budget for $811 million less in bus and subway revenue through 2027, including $200 million annually to account for the risk of continued fare evasion.
Another significant revenue stream that was revised downward from the MTA’s February Plan to its July Plan is the projected collection of real estate-related taxes, which are expected to be $790 million lower over the next four years due to lower commercial real estate activity in New York City.
As revenue growth is adjusted downward, the MTA’s expenses reflect growing costs for payroll and benefits, debt service, paratransit, and supplies and materials. Overtime is another growing cost, reaching $1.4 billion in 2023, above the previous record set in 2018. The rise in overtime spending is caused in part by the need to fill vacancies and fewer available workers, although the MTA does offset some of the additional overtime cost with payroll savings. The MTA has authorized new hiring and projects overtime costs will drop.
The MTA’s financial plan also does not yet factor in recent uncertainty for funding of its 2020-2024 capital program. The pause on congestion pricing has created a $15 billion funding shortfall in that capital program, and the 2025-2029 program was approved with $33 billion in unidentified funding, for a total of $48 billion in unidentified capital funding over the two programs. The MTA is relying on securing funding in the state budget in the upcoming legislative session. The outcome will have implications for capital investment and on maintenance and debt service costs.
DiNapoli’s report warns that if the loss of revenue from the pause on congestion pricing is not resolved, and if other risks noted in the MTA’s plan and the Comptroller’s report come to pass — such as an economic slowdown that damages ridership and tax revenues — budget gaps could reach as much as $3 billion in 2028.
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