MTA releases 2011 preliminary budget and four-year financial plan

Written by jrood

The Metropolitan Transportation Authority released its 2011 preliminary budget and proposed four-year financial plan for 2011-2014. The proposed plan reflects unprecedented internal cost cutting initiatives undertaken in response to a $900-million shortfall for 2010 resulting from cuts to state assistance and dramatic downturns in tax revenue. These shortfalls amount to more than $2.5 billion over the plan period.

As a result of its
cost-cutting actions, the MTA was able to limit the fare revenue increase to
7.5 percent in 2011, as agreed to with the governor and legislature in May 2009
as part of the MTA rescue package. The plan faces many risks, however,
including the need for labor participation to control wage and benefit costs.
The July plan is preliminary; the MTA Board will consider a final Plan in
December.

The plan relies on three
key components. The first is the continuation and expansion of the MTA’s
cost-cutting initiatives, which have saved more than $380 million in 2010,
translating into more than $500 million in annual recurring savings and growing
to more than $700 million by 2014. The second key to the plan is controlling
labor costs, which make up 2/3 of the MTA’s operating expenses. The plan
acknowledges that in the current economic situation wage increases must be tied
to productivity gains or other cost savings. The plan therefore assumes that
all employees – both represented and non-represented – would receive a
"net-zero" wage increase for two years. Finally, the plan includes the
7.5 percent increases in fare and toll revenue in 2011 and 2013 agreed upon
with the governor and legislature as part of the MTA rescue package approved
last spring, which also included a series of new taxes to support the MTA and
funding for the first two years of the MTA’s 2010-2014 Capital Program.

"The foundation of
this plan is the most aggressive and comprehensive overhaul in the history of
the MTA," said Jay H. Walder, Chairman and CEO of the MTA. "These
actions have allowed us to hold true to our commitment regarding fare increases
while maintaining the quantity and quality of service that New Yorkers rely on
every day. The state’s ongoing fiscal crisis is one of many risks to the plan,
but with continued hard work and the participation of our labor unions I
believe that this plan can be achieved."

Controlling wage and
benefit costs have a critical role to play in stabilizing the MTA’s finances.
Wages, benefits and other personnel expenses account for 2/3 of MTA operating
expenses. This financial plan assumes that each new labor contract will not
impose any additional financial burden on the MTA for two years. This is
intended as a clear statement that the MTA cannot afford to allow salary, wage
and fringe benefit costs to rise in ways unconnected to productivity and the
regional economy’s ability to support the system. This, however, does not
preclude the possibility of wage increases based on bankable productivity
improvements or contributions to benefit costs. Consistent with this "net
zero" labor initiative, non-represented employees will not receive a cost
of living raise in 2010, which will be the second of two consecutive years
without an increase.

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