What will Cuomo’s payroll-tax concession cost the M.T.A. in the end?
The M.T.A. is in an awful financial state, with its well-being reliant on an unhealthy and turbulent economy. The state comptroller recently described its revenue structure as "volatile and unpredictable."
But that hasn’t stopped the governor and state legislature from continuing the Albany tradition of using M.T.A. money as a bargaining chip in budget negotiations.
Yesterday, Governor Andrew Cuomo, Assembly Speaker Sheldon Silver and Senate Majority Leader Dean Skelos unveiled the broad details of their “comprehensive plans to create jobs and grow the economy,” in a press release.
The plan, whose details will be sorted out shortly in a special legislative session, calls for a $250 million cut to the M.T.A.-dedicated payroll mobility tax for small businesses. The state would then ”compensate the MTA for the $250 million in lost revenue.”
The cut to the payroll tax was a concession by the governor to the suburban Republicans who control the State Senate, in exchange for sign-off on an overall revenue plan that technically violates their past promises not to raise taxes. If the Republicans and the suburban business owners they represent had their druthers, the payroll tax would be eliminated entirely. But the cut nevertheless gives the Republican senators something to present to their constituents.
The tax, as currently constructed, levies $.34 on every $100 of payroll in New York City and the surrounding, commuter-heavy counties. It came about in 2009, as a result of the prior year’s Ravitch Commission, whose mission was to stabilize the M.T.A.’s finances. The tax is estimated to bring in $1.4 billion a year, or 14.3 percent of the operating budget for the transit authority.
In October, nearly seven million people rode the authority’s Long Island Railroad to and from places like Bethpage and Hicksville and Manhasset. This year’s ridership figures for Metro North Railroad, whose sinews extend north along both sides of the Hudson River, to places like Poughkeepsie, Waterbury, Wassaic and Port Jervis, are expected to exceed 81 million.
Still, the tax is a political dog in those places. So the Long Island Republicans who run the Republican majority in the State Senate, and who therefore control the Senate, have lobbied fiercely to get rid of it. This past June, the Senate voted to phase it out, but the proposal, which would have blown a hole in the M.T.A. budget absent a replacement source of revenue, went nowhere in the Democratic-controlled Assembly.
The tax not only provides 14.3 percent of the M.T.A.’s operating budget, but is also integral to the M.T.A.’s capital plan. The M.T.A. has been planning to use the revenue produced by the tax to underwrite its application for a $2.2 billion low-interest loan from the Federal Railroad Administration.
As long as the M.T.A. is guaranteed to be reimbursed by the state for the money it loses from the payroll tax cut, that loan application should still be able to move forward.
The governor's plan proposes that the M.T.A. reimbursement be carved out of the $1.9 billion in revenue the state is supposed to net from taxes on the state's highest earners. The plan also says that the payroll-tax cut, and state reimbursement to the M.T.A. for the cut, will be written into the legislation and last only three years.
This does not particularly reassure transportation advocates about what just happened.
What if the state’s estimate that the cuts cause the M.T.A. to take in $250 million less in tax revenue are wrong? What if the M.T.A.-bound revenue is reduced by, say, $400 million? Will the state make up the difference?
“The governor’s people swear on the bible that the legislation, which as far as I know, does not physically exist now, will guarantee the $250 million and that it’s enough,” said NYPIRG’s Gene Russianoff. “That’s a question that needs answering. Legislative estimates are not always 100 percent accurate.”
On an even more basic level, there's the question of whether the state will actually reimburse the M.T.A. when it comes time to do so, when the governor and legislature inevitably come under pressure to find money from somewhere, as they do every time they have to make a new budget.
Certainly, Albany has been perfectly willing to raid M.T.A. coffers in the past. Starting in the mid-1990s, the state had been allocating $45 million every year to the M.T.A. to fund student MetroCards. In 2009, the state cut that back to $6 million, leaving the M.T.A. and its customers to make up the entire difference, until David Paterson upped the state contribution to $25 million last year.
As Russianoff noted, “Both Governor Paterson and Governor Cuomo raided money from this Metropolitan Mass Transit Operating Account. The total between the two was $260 million.”
“Everything is subject to appropriation, which means they can futz around with it," he said. "There’s no guarantee unless it’s in the state constitution.”
“We certainly have concerns,” agreed Kate Slevin, from the Tri-State Transportation Campaign. “Not adequately funding the M.T.A. has serious consequences on transit service. That has consequences on the regional economy.”