GOV. Paterson yesterday released the Ravitch Commisson’s recommendations for how to fix the MTA’s hemorrhaging finances. Former MTA chief Dick Ravitch and the governor are right that we have to start paying attention to our invaluable mass-transit assets – but the details matter.
Ravitch wisely wants to help the MTA get out from under the crushing debt burden run up under ex-Gov. George Pataki and its former board.
Without a change, in a year the MTA will be stuck paying nearly 20 percent of its operating expenses on debt service – a cost that exceeds the normal wear-and-tear depreciation of the assets that the debt paid for. This sucks up money better spent on service and new investment.
Some of Ravitch’s ideas make good sense:
* Let the MTA raise fares on an inflation-adjusted basis every two years without having to go through the horror-show public-hearing process.
Riders will scream, but this is a much-needed reform. After all, the cost of everything goes up regularly with inflation. In fact, it would probably be better to mandate that the MTA hike fares to match inflation – so that politicians can’t score cheap points by fooling with the process.
* Levy tolls on the East and Harlem River bridges, raising $600 million a year after $400 million in costs.
It’s not clear why the net return on this is so low. But the basic idea is sound: It’s just another form of congestion pricing to regulate traffic onto the island. Plus, the money is supposed to go for much-improved express-bus service for the outer boroughs – something that’s decades overdue.
* Combine the two top roles at the MTA. That’s another fine idea: Make one person accountable for the agency. But there’s a danger: Will future pols restrain themselves from making this a patronage position, held by some big political donor, rather than someone with real transit expertise?
After that, Ravitch’s proposals get dicier. His biggest idea is to levy a new income-based payroll tax on downstate employers. At one-third of one percent, the tax is supposed to raise $1.5 billion annually.
One problem here is that downstate, already so heavily taxed, is well past the ability to absorb new income-based taxes. Another problem is that the tax could be dangerously volatile, as downstate’s existing income taxes already are. (My colleague E.J. McMahon examines the problems with the tax in greater detail below.)
But the larger problem with the tax is that it imposes another cost on New Yorkers – without asking anything reasonable of the MTA labor force.
The Ravitch report has plenty to say about the “structural budget imbalance” that is the MTA’s debt burden – but it nearly ignores the MTA’s other structural imbalance: inflexible and high-cost labor.
Yes, the MTA can get some labor savings on its own. It’s already started to cut costs (modestly) in its work force over the past year or so. But that’s nowhere near enough.
What New York really needs is for Paterson and Mayor Bloomberg to stand together to ask the MTA’s labor unions for concessions – starting now, for next month, when the contract of the MTA’s largest union, the Transport Workers, is up.
If the agency doesn’t get anything here, the MTA’s labor costs will rise by $700 million in three years’ time, consuming much of the funds from the proposed payroll tax.
What concessions to ask for?
* Gradually triple employee health-care contribution over time. MTA workers now pay just 1.5 percent of wages – far below the US average.
* Increase their contributions to their (immensely valuable) guaranteed pensions, from 2 percent to 4 percent of wages.
* Freeze wages for the next two years, due to the fiscal crisis.
Within two years, these changes would save the MTA more than $200 million a year.
Raising the retirement age from 55 to 62 would save even more over a longer period.
So would letting the MTA put some work that’s now union-only – such as some maintenance or express-bus operation – up for competitive bidding. Done right (rather than, say, just letting mobsters bid for the contracts), this could do more to bring costs down – and the TWU could bid on such contracts, too.
Getting any union concessions will be politically difficult – the TWU went on strike over proposed pension and health changes three years back.
But TWU workers, with an average income of about $60,000 a year, are generously paid – and it’s impossible to fix the MTA’s problems, and vastly improve service, without looking at the union costs, too.
Nicole Gelinas, a Chartered Financial Analyst, is a senior fellow at the Manhattan Institute.
Nicole@city-journal.org