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Commentary By Nicole Gelinas

MTA Budget Blues

AS the economy flails, New Yorkers should worry that the state-run Metropolitan Transportation Authority will try to bridge its huge deficits by neglecting the physical assets of downstate's public-transportation system.

MTA leaders and state politicians, including Mayor Bloomberg and Gov. Paterson, don't want to repeat that experience of 30 years ago. But unless they're going to squeeze every inefficiency that they can find, they'll have to do something politically unpopular.

Before the next elections, the pols will have to allow the MTA to hike fares by likely more than it did earlier this year. Or they'll have to find a way in the cash-strapped city and state budgets to make up for the hundreds of millions of dollars in revenue that a fare hike would provide.

The MTA took a blow last week when Albany shot down Bloomberg's congestion-pricing plan. It had already budgeted for $600 million in congestion-pricing revenues annually starting in 2010.

Without that $600 million, the authority faces a $1.2 billion budget gap in less than two years, or more than 10 percent of expected spending—a serious hole. It'll have to scramble to pay its current debt as well as such fixed obligations as contract-labor costs, without cutting customer service and maintenance of subway cars, tracks and stations.

Part of this is the same old story. Everyone knows that the MTA spends a lot of money on its workforce, both unionized and white-collar. Labor costs are up almost 24 percent in three years, largely owing to health care and pension escalations. But the MTA is being squeezed from another angle that could be more dangerous in the short term: inflation of its non-labor operating costs.

Reported cost-inflation in metro New York is up about 3.9 percent in the last year, one third above the average of the last decade or so—and the MTA feels it. The price of everything from fuel to electric wiring has skyrocketed, pushing non-labor costs up 32 percent in three years.

Fuel costs are up 47 percent; materials and supply costs (excluding much larger construction-project expenditures) are up almost 40 percent. Costs for both now total $766 million, up from $541 million in 2005.

These costs are small compared to payroll and pensions, but they matter—and they eat up money from the recent toll and fare hike, which brings in about $200 million annually.

This piece originally appeared in New York Post

This piece originally appeared in New York Post