MTA faces $300M deficit, pointing to 'uncontrollable' labor, health costs

The MTA is facing a nearly $300 million deficit next year, with higher-than-anticipated raises won by LIRR union workers following their three-day strike in May projected to cost the agency an additional $180 million per year systemwide, officials said Wednesday.

That operating shortfall could grow to almost $900 million by 2030, according to MTA officials, who noted there’s little they can do to increase revenue beyond raising fares and tolls.

At the Metropolitan Transportation Authority’s monthly board meeting in Manhattan on Wednesday, chief financial officer Jai Patel revealed that after four years of balanced budgets, the transit agency is now anticipating a $297 million deficit in 2027. By 2030, the deficit would grow to $897 million — about $800 million more than the MTA’s last forecast in November. The agency's budget is expected to reach $22.8 billion next year.

Patel said the rising deficits are being driven primarily by soaring "uncontrollable costs," including fuel and employee benefits, as well as by wage increases included in contracts recently finalized with five Long Island Rail Road labor organizations and expected to be paid to other MTA workers.

The MTA had sought a three-year contract with raises of 3% in each of the first two years and 3.5% in the third, as had already been accepted by most other MTA unions. But the LIRR unions sought a fourth year at 4.5%. After a the strike in May, the MTA agreed to the raises, and now expects to offer similar raises to other unions in the first year of their next contracts. Because of some concessions, the MTA has said the raise would equal about 3.8%.

Patel said the raises will cost the MTA an extra $180 million per year systemwide, including for New York City subway and bus workers. "Productivity increases" would help offset some of the higher-than-projected wages, Patel said.

Gilman Lang, general chairman of the Brotherhood of Locomotive Engineers and Trainmen Local 269, which represents LIRR train operators, rejected the suggestion that the new contracts are contributing to the MTA’s financial woes. He noted MTA leaders, and Gov. Kathy Hochul — after suggesting during negotiations that giving in to the unions’ demands would result in steep fare hikes — have both since said the new agreement could be afforded without any impact to riders.

"They repeatedly use this labor force as their scapegoat," Lang said.

Other factors include health costs, disability services

MTA chairman and CEO Janno Lieber said the impact of the added wages is minimal when compared with other soaring costs that are out of the agency's control. As one example, Patel noted health benefit costs for employees are expected to reach $2.7 billion by 2030 — more than double what they were in 2019. Costs for the MTA’s Access-a-Ride transportation service for people with disabilities are similarly projected to rise by 135% over those 11 years.

While MTA fare and toll revenue increases by about 2% a year, Lieber said other costs, like healthcare and fuel, are climbing 10% annually or more.

Total labor costs account for about 60% of the MTA’s operating budget. Without productivity increases or other changes to offset rising labor expenses, Patel said closing future deficits "would require additional action."

The MTA has already achieved $500 million in recurring annual cost cutting since 2023, and has plans for another $250 million in efficiencies by 2029, Patel said. But, "you cannot cut your way to fiscal stability," said MTA Board member Neal Zuckerman, who chairs the board's finance committee.

"We can do some of the load, but we cannot do all of it," said Zuckerman, who noted the MTA has few tools to improve its finances, "unless we decide to drive fares up dramatically," which he did not expect to do.

"We’re not going to do that, but it’s the only real lever we have," he said.

Lieber said the MTA will introduce potential solutions for closing next year’s projected deficit when it releases its proposed 2027 budget in November. Adhering to a schedule followed for more than a decade, that plan would include a 4% fare and toll increase next year.

Larger fare hike?

Asked by Newsday if the MTA would consider a larger-than-usual rate hike, Lieber offered no direct answer, but said "riders should not have to bear the full brunt" of the rising costs.

"But we need a strategy ... to deal with the reality that we have to balance between the real cost growth and our revenue situation," Lieber said.

In a statement, Hochul spokesman Sean Butler said: "The Governor has put riders first since day one, rescuing the MTA from its post-pandemic fiscal cliff while preserving affordability and securing substantial savings. She will continue to push for these priorities."

Despite costs outpacing revenue, Patel said the MTA remains on "strong financial footing," pointing to several encouraging metrics, including booming ridership on the LIRR, which recently became the first MTA agency to post monthly ridership figures higher than pre-COVID levels.

After seeing revenues crater during the COVID-19 pandemic, which caused ridership to plummet, the MTA expects to close out 2026 with a balanced budget for the fourth straight year.

While the MTA’s "finances have stabilized," State Comptroller Thomas DiNapoli, in a statement, said "the road ahead depends on it successfully executing and communicating strategies to bring riders back and generate savings through greater efficiencies."

By Alfonso A. Castillo

alfonso.castillo@newsday.com@alfonsoreports

Alfonso Castillo has been reporting for Newsday since 1999 and covering the transportation beat since 2008. He grew up in the Bronx and Queens and now lives in Valley Stream with his wife and two sons.