MTA Adopts 2021 Budget that Assumes Billion in Federal COVID Aid
Real Estate In-Depth | December 17, 2020
NEW YORK—As Congress continues the debate on the next COVID relief package in Washington, the Metropolitan Transportation Authority Board on Wednesday adopted a 2021 budget and 2021-2024 financial plan that assumes Congress will eventually approve the needed $4.5 billion in COVID relief funding in 2021.
The MTA noted that without the billions of dollars in federal COVID funding, the Board would be forced to take drastic actions to cut service by 40% across subways, buses and Staten Island Railway and 50% across Long Island Rail Road and Metro-North Railroad.
Additionally, in that case the MTA would be forced to reduce the number of positions across the agency by more than 9,400 and the authority’s historic $51.5-billion capital plan, which the authority notes will be an economic engine for New York and the nation—will remain on hold.
The 2020 budget is balanced only with borrowing from the Federal Reserve’s Municipal Liquidity Facility (MLF). Even if the MTA receives $4.5 billion in desperately needed federal aid, this will only balance the authority’s 2021 budget—falling far short of solving the total deficit over the four-year plan.
The MTA projects it would still face nearly $8 billion in deficits through 2022-2024 that will need to be addressed. The MTA is prepared to make any necessary budget adjustments during this period, depending on the amount of federal aid it receives in the current negotiations in Washington.
“We are closely monitoring events in Washington and will revise the budget and prepare necessary actions, depending on what our federal leaders deliver,” said MTA Chairman and CEO Patrick J. Foye. “Congress should stay in session until passing a COVID relief bill that includes funding for public transportation. The MTA continues to face a once-in-100-year fiscal tsunami and this is without a doubt one of the most difficult budgets in agency history, with devastating deficits projected. No one at the MTA wants to undertake these horrific cuts and the only way to avoid them is with the $12 billion in desperately needed federal relief we have been arguing for months is needed.”
“The MTA continues to face the worst financial crisis in history and was able to close our budget deficit for 2021 with 2020 deficit borrowing and the assumption we will receive $4.5 billion from the federal government,” said MTA Chief Financial Officer Bob Foran. “If Washington does not come through, our budget will be in free fall—and that does not even account for significant out-year budget gaps we are facing in 2022, 2023 and 2024. There will be hard choices ahead.”
For its part, the MTA has taken aggressive measures to cut costs internally, focusing on three key areas: reducing overtime, consulting contracts, and other non-personnel expense reductions. Agencies have already begun implementing these savings, which are now projected to reduce expenses by $259 million in 2020, $601 million in 2021, $498 million in 2022, $466 million in 2023 and $461 million in 2024. These are on top of $2.8 billion in annual recurring cost savings achieved by the agency over the past several years.
In order to close the 2020 deficit caused by prior federal inaction, the MTA used its authority to borrow the maximum of $2.9 billion from the Federal Reserve’s Municipal Liquidity Facility (MLF) before the program closes at the end of 2020. The MTA is taking additional actions to address the 2020 deficit by releasing the current 2020 General Reserve of $170 million, applying the $337 million in the OPEB Trust Fund to current OPEB payments, and retaining Committed to Capital transfers in the operating budget at $187 million for 2020, $181 million for 2021, $120 million for 2022 and $114 million for 2023.