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The MTA Recently released its latest financial plan.
By Forum Staff
The Metropolitan Transportation Authority recently released its February Financial Plan, which includes the 2023 Adopted Budget, the 2023-2026 Financial Plan, and all relevant financial tables and reconciliations to the 2022 November Plan.
The purpose of the February Financial Plan is to incorporate certain Board-approved MTA Adjustments that were captured “below-the-line” and on a consolidated basis in the November Financial Plan into Agencies’ Financial Plan baseline budgets and forecasts. It also establishes a 12-month allocation of the Adopted Budget for financials, utilization, and positions, which will be compared with actual results. Variances will be analyzed and reported monthly to Board Committees. The February Plan, unlike the July and November Plans, typically does not include new proposals or programs.
The November Plan, which the Board approved in December 2022, projected a continued balanced budget in 2023 assuming $600 million of additional government funding or MTA actions, which could include further expense reduction, additional revenues, or acceleration of federal COVID aid to achieve balance for 2023 that would have otherwise been used to reduce deficits in the years after 2023. Annual deficits of $1.2 billion in 2024 and 2025, and a deficit of $1.6 billion in 2026 remain. MTA operating efficiencies, applying the financial resources stemming from federal COVID aid to reduce debt and operating costs throughout the Plan period, and the cash repayment (rather than long-term bonding) of the Federal Reserve loan are reflected in these deficits, which otherwise would have been significantly higher.
As noted, the November Plan included an assumption of $600 million of additional government funding, and if that could not be fully or partially realized, additional cost savings actions, revenue generation, or a rescheduling of the financial benefit from federal COVID aid over the financial plan period would be required. On February 1, 2023, Governor Hochul released her State Fiscal Year 2024 Executive Budget which addressed the $600 million need for 2023 as well as the deficits projected to start in 2024. Among the Governor’s proposals to address the MTA fiscal imbalance are: increases in the top rate of the Payroll Mobility Tax which is anticipated to generate $800 million annually; nearly $500 million annually from New York City through increased City payments for paratransit costs and student fares, as well as a City-funded increase in PMT Offset payments to MTA related to the foregone tax revenue of PMT exemptions for small businesses and K-12 schools at the higher rate; $300 million in one-time State aid in SFY 2023 to address the extraordinary pandemic impact on MTA operating revenues; and, a share of licensing fees for up to three downstate casinos as well as a share of annual tax revenues generated from these casinos expected to provide revenues to MTA no earlier than 2026. The additional and recurring governmental support in Governor Hochul’s Executive Budget, combined with MTA operating efficiencies, proposed fare and toll increases and other MTA actions set forth in the November Plan, is projected to be sufficient to balance MTA’s financial plan through the financial plan period and potentially beyond 2026.
The February Plan incorporates into the MTA baseline several Board-approved actions that were captured below-the-line in the November Plan: MTA Operating Efficiencies Phase 1. Remaining Operating Efficiencies Phase 1, totaling $44 million in 2023, $48 million in 2024, and $46 million thereafter, have been incorporated “above-the-line” into the baseline financial plan. Provision for Increased Pension Costs. To conform with the increase in pension costs for NYCERS in New York City’s November Financial Plan, the MTA included a provision below-the-line totaling $83 million in 2023, $176 million in 2024, $263 million in 2025 and $344 million in 2026. These amounts have been incorporated “above-the-line” into Agency baseline financial plans. Savings from Deficit Note Repayment. This action, approved by the Board, repays from the unspent proceeds of the borrowing, and not from long-term bond, the Federal Reserve Municipal Liquidity Facility Bond Anticipation Note at maturity. This proposed action eliminates debt service costs of $111 million in 2023, $178 million in 2024, and $190 million in each of 2025 and 2026, which is unchanged from the November Plan. Financial Resources Stemming from Federal COVID Aid for Operating and Debt Costs. MTA is proposing to use the resources made available from federal COVID aid for direct deficit funding, debt payments, pension payments and retiree health deposits over the financial plan period. The November Plan anticipated using remaining financial resources made available from CRSSA aid ($1,166 million) and ARPA aid ($776 million) to offset the 2022 deficit. Through the remainder of the November Plan period, $598 million of financial benefit from ARPA aid will be applied against MTA Bus and SIR deficits, reducing New York City subsidies by the same amount and therefore not available to offset MTA deficits. This leaves $5,620 million of remaining resources stemming from ARPA aid available, with $4,365 million utilized through 2026 and $1,255 million to offset liabilities beyond the financial plan period to moderate the potential growth of deficits beyond the plan period. The financial benefit from federal COVID aid have been moved from belowthe-line and are incorporated in the consolidated subsidy tables in the February Plan, with the impact on the bottom line unchanged from the November Plan.
Several items remain below-the-line in this Plan:
- MTA Operating Efficiencies Phase 2. MTA operating agencies are engaged in an ambitious effort to identify innovative ways of doing business more efficiently and, as a result, reduce expenses and improve service to customers. Operating Agency and Headquarters leadership have identified concrete initiatives to generate sizeable savings and help shrink the outyear deficits. The operating efficiency initiatives will generate $100 million in 2023, increasing to $400 million in 2024, $408 million in 2025 and $416 million in 2026. This is unchanged from the November Plan.
- Fare and Toll Increase in 2023. The February Plan includes a 5.5% fare and toll increase beginning in June 2023 which still requires future Board approval. This increase is projected to generate for MTA, after factoring in subsidy impacts for MTA Bus, SIR and B&T, $201 million in 2023, $362 million in 2024, $369 million in 2025, and $375 million in 2026. This is unchanged from the November Plan when factoring in the $100 million in annualized additional fare and toll revenue from the “Additional Fare/Toll Revenue Above Base Assumptions” which were also included in the November Plan.
- Fare and Toll Increase in 2025. An increase in fares and tolls, yielding a 4% overall increase in farebox and toll revenues, is assumed for implementation in April 2025 which still requires future Board approval. This increase is projected to generate for MTA, after factoring in subsidy impacts for MTA Bus, SIR and B&T, $210 million in 2025 and $283 million in 2026. This is unchanged from the November Plan.
- FEMA COVID Reimbursement. Reimbursement of direct COVID-related expenses through the Federal Emergency Management Agency (FEMA) are expected to increase by $44 million to $749 million in the Plan, reflecting reimbursable expenses incurred through July 2022. Claims and supporting documentation were submitted to FEMA through the State in October of 2022. The February Plan assumes MTA will receive reimbursements of $250 million in 2023, $100 million in 2024, $250 million in 2025 and $149 million in 2026, although timing remains uncertain. This assumption is unchanged from the November Plan.
- New Government Funding or Additional MTA Actions. The 2023 budget assumes $600 million in additional government funding and/or additional MTA actions, both of which have not yet been specified. If no additional government funding is made available, MTA actions could include further expense reduction, additional revenues, or acceleration in the use of the financial benefit from federal COVID aid to achieve balance for 2023 that would have otherwise been used to reduce deficits in the years after 2023. As noted earlier, the State Fiscal Year 2024 Executive Budget includes actions to address the $600 million need for 2023, as well as providing additional resources to direct towards the deficits in the out-years of the Plan period. As the State Budget process proceeds, MTA will monitor these proposals and will adjust the July Plan accordingly.
