Math Appears Faulty in Senate M.T.A. Plan

Published: March 19, 2009
The New York Times
By WILLIAM NEUMAN

For weeks, Democrats in the State Senate have raised questions about a financial rescue plan for the Metropolitan Transportation Authority by repeatedly sounding a central theme: The authority’s numbers cannot be trusted.

But when the Senate majority leader, Malcolm A. Smith, proposed a scaled back, short-term bailout plan this week, he was met with a similar complaint from the transportation authority and its supporters: Mr. Smith’s plan, they said, would not work because he had the math wrong.

A review of the charges and countercharges shows that on several major points, Mr. Smith’s critics are right.

At issue is a plan developed by Richard Ravitch and supported by Gov. David A. Paterson that calls for imposing tolls on the East River and Harlem River bridges, taxing payrolls in the 12 counties served by the authority and increasing fare revenues by 8 percent.

Doing those things would close the authority’s budget shortfall, $1.2 billion this year, and provide money for a capital program for years to come. Without those measures, the authority says it will have to slash services and raise revenues from fares by 23 percent.

The Senate Democrats, who hold a 32-to-30 majority, have rejected the idea of bridge tolls.

As an alternative, they propose imposing a smaller payroll tax than the one in Mr. Ravitch’s plan and increasing fare revenues by 4 percent. Mr. Smith says that his plan would provide the authority enough money to operate through next year and buy time for a longer-term solution.

But aides to the governor say that the Senate plan contains at least two basic errors — and a review of the data backs up their critique: the Senate plan overstates the amount of money it would raise over the next two years by more than $700 million. The governor’s office said that to make up for the shortfall, the Senate would have to increase fare revenues by a total of 13 percent.

Marc Shaw, a senior adviser to the governor, said the Senate plan miscalculated the amount of payroll tax that could be collected this year, overstating the amount by about $300 million.

The reason is based in the way the state collects taxes and the way the authority does its bookkeeping.

The Senate plan assumes that a full year’s worth of tax receipts would pour into the authority’s coffers this year.

But Mr. Shaw said that because the tax, like other similar taxes, is collected quarterly (in part this is meant to make it easier for employers), money from the final three months of this year would not reach the authority until January 2010. That means that the authority, which uses what is known as a cash method of accounting, cannot show the final quarter’s tax revenues on this year’s books.

The Senate plan gets that wrong, projecting four quarters of tax receipts this year.

Mr. Shaw said that in working to develop the Ravitch plan, the governor’s office had tried to find a way around the collection and accounting obstacles but was told by the state budget office and the finance department that it could not be done.

The second error in the Senate’s plan is one of simple math: the Senate mistakenly turned a series of expenses into income.

Under the Ravitch plan, the authority would use hundreds of millions of dollars from the payroll tax to finance bus costs that had previously been paid for by New York City and the surrounding counties.

The Senate plan eliminates that provision. But in its proposal, it makes a mistake in accounting for those bus costs. Instead of simply removing them from the transportation authority’s balance sheet, it turned them into income.

The mistake adds up to $409 million over the two years of the Senate plan.

Initially, Senate officials denied that they had made any mistakes in their calculations. But subsequently they blamed the authority for the errors.

“The blatantly ambiguous manner in which they categorized their numbers clouded the picture of their finances,” said Austin Shafran, a spokesman for Mr. Smith.

“If the math was wrong,” he said, “it was wrong based on the way they gave us the numbers.”

But Mr. Shafran said that Senate staff members had not checked their numbers with the authority or sought clarification.

He also said that Senate staff members were not aware of the bookkeeping issues related to the payroll tax and that the Senate believed it could find a way to allow the authority to show a full year’s tax receipts this year.

Mr. Smith has made other assertions about the authority that do not seem to hold up under scrutiny.

On Tuesday he questioned how the authority could say that it needed to increase its fare revenues by 23 percent at the same time that it supported the Ravitch plan, which calls for an 8 percent rise in fares.

What Mr. Smith failed to acknowledge is that the lower fare increase in the Ravitch plan is possible because the plan creates other revenue sources — namely the payroll tax and bridge tolls.