The Metropolitan Transportation Authority (MTA), which provides mass transit services essential to the New York economy, is in the midst of serious fiscal problems. In 2009, despite enactment of a major new dedicated tax and a substantial fare increase, the agency ended the year with an operating budget deficit of more than $300 million that was covered primarily by drawing down reserves and deferring expenses into 2010. At the beginning of 2010, the MTA had a projected budget gap of more than $400 million; the gaps in subsequent years were projected to grow to nearly $1.2 billion, or about 9 percent of operating expenses, in 2013.

During 2010, the MTA leadership took significant steps to help bring its finances closer to structural balance. Other than previously scheduled fare increases in 2011 and 2013, the measures involve little new revenue; instead, the emphasis has been on cutting spending through service cuts and efficiency savings. The carefully considered, yet difficult service cuts, which took effect in June 2010, are projected to yield annualized savings of approximately $100 million. The cuts included the restructuring of five subway routes and alterations in bus service including fully discontinuing some routes, halting overnight service on some routes and less frequent service on some routes.

The efficiency savings come from a variety of measures that the MTA Chairman presented under the theme “Over‐hauling How the MTA Does Business.” These measures include eliminating low priority projects, renegotiating vendor contracts, and reducing overtime. Other actions are the consolidation and elimination of many administrative services as well as cuts to maintenance, cleaning and customer service, with the latter creating some adverse service impacts as well as efficiency gains. These efficiency measures and service cuts are expected to result in recurring savings of approximately $525 million.