Gelinas on the MTA’s Woes

If you live in New York and think that the subways have been awful this year, it’s not just you:

“The MTA’s Escalating Cost Crisis”: Nicole Gelinas (Manhattan Institute)

As Gelinas explains, the MTA has grown its revenue both through increased volume/fares and through a more comprehensive tax-support structure. The former is evident to any New Yorker who has forked away more of their paycheck to stand on increasingly crowded trains.

The latter point is a bit more nuanced. MTA used to supplement rider fees with one-off subsidies from state and local governments. Now, those subsidies are more formalized and are granted annually. MTA also receives regular funding from taxes levied on residents of New York state and Connecticut, as well as local taxes for 12 counties of lower New York.

So MTA has a stable, growing revenue base that should be able to keep up with the needs of a larger population. Yet the MTA’s subway division employs fewer people than it did 30 years ago, and trains are indeed breaking and arriving late considerably more often.

Image via Wikimedia

Gelinas blames this primarily on increasing employee benefits:

…in 1985, retirement and health benefits for New York City Transit personnel cost $1.2 billion in today’s dollars. Today, they cost nearly $3.1 billion annually. At the MTA as a whole, in 2005, such costs constituted 23% of employee spending, costing $2.5 billion in current dollars. Today, they constitute 30%, costing $4.5 billion. This increase in benefits costs alone consumes all the additional revenue that the MTA takes in annually from the payroll tax that the state legislature implemented in 2009.

This should scare the heck out of New Yorkers. While it’s a more narrow problem than, say, Detroit, public-worker benefits have already bankrupted entire cities. As someone who lived in New York for seven years, I’ll state the obvious: without a well-functioning subway system, the city would be completely unlivable. And given their massive unfunded pension liabilities, we could see entire states (Illinois and California) go bankrupt barring federal bailouts. This isn’t going away.

Even if you’re skeptical of Gelinas’ analysis (and in fairness, I’m not a labor economist), it’s a very informative read for anyone interested in how the MTA gets and spends its money.


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