New York legislative leaders veto MTA's capital budget plan

Marc A. Hermann / MTA

A state review board has vetoed the New York Metropolitan Transportation Authority's 2025-2029 capital plan.

The leaders of both houses of the state legislature, in their roles as members of the state Capital Program Review Board vetoed the $68 billion plan, citing its $33 billion budget gap. The ball is now in Gov. Kathy Hochul's court — she will propose a source of funding in her executive budget in January.

"This capital program was grounded in our 20 Year Needs Assessment, and we haven't heard any concerns or objections from the legislature since it was approved by the MTA Board in September," said MTA spokesperson John McCarthy in a statement. "It will unlock dozens of transformative projects — many of which are funded and ready to go on January 1st. We remain optimistic that the legislature will join the governor in supporting safer, more reliable, and expanded transit."

Each member of the four-person review board has veto power over the plan. Senate Majority leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie issued the veto. Their rejection came in a joint letter on Christmas Eve addressed to MTA CEO Janno Lieber.

"Closing the MTA's proposed 2025-29 capital plan deficit may require state legislative action, or identifying additional non-state revenue sources," the legislators wrote, "and can be solved during the upcoming legislative session in the context of the state budget negotiations."

The MTA referred the capital plan to the review board in September, and the deadline to approve or reject the plan was on Christmas. The letter did not object to any item in the capital plan or to the size of the plan, just to the size of the shortfall. 

"The state legislature looks forward to continuing the dialogue with you and key stakeholders in advancing a fully-funded capital program," Stewart-Cousins and Heastie wrote to Lieber. 

From the legislators' perspective, "this was a strategic move to give themselves more leverage over the budget process," said Rachael Fauss, a senior policy advisor at Reinvent Albany.

The MTA is a state agency largely controlled by the governor, as Hochul demonstrated this year, first by abruptly halting implementation of legislatively approved congestion pricing tolls for Manhattan in June, then by reversing course after the November election and allowing them to begin in January, at a lower toll rate that will generate less revenue and be less effective at reducing congestion.

Stewart-Cousins and Heastie have a point, Fauss said; the process for approving the MTA's capital plans is "somewhat backwards."

The MTA writes and passes its capital plans with funding gaps, on the faith that the legislature and governor will come up with new revenue in the next year's budget. Then the Capital Plan Review Board is asked to approve the plans before the budgeting process begins. 

The review board — the governor and New York mayor are the other two parties with a say — can either let the plan pass or object through public letters. In 2014, the board rejected the $33 billion 2015-2019 plan, which was also missing around half its funding. 

The board let the 2020-2024 plan pass, even though it had a $15 billion budget gap. However, Fauss said, the legislature and governor had already passed the law enabling congestion pricing, which was expected to support $15 billion of capital spending, so it was clear where the funds would come from.

Reformers have long called to change or eliminate the review board to solve the convoluted timing and lack of transparency.

Had the review board not vetoed the capital plan, it would have taken effect on Jan. 1. In the meantime, the MTA will continue work on the 2020-2024 capital plan. Delays are nothing new for the agency, Fauss notes — its 2015-2019 plan wasn't formally approved until 2016.

Hochul will propose a source for the $33 billion in her executive budget on Jan. 14, which she would have done anyway. But the legislators' veto signals that the funds will be a sticky subject in a contentious budget year. 

Hochul is likely to suggest a regional source of tax revenue for the capital plan, Fauss said. In the past, some regional taxes have won legislative approval — congestion pricing is a prime example — but the legislature prefers to fund the MTA with taxes on New York City. In 2023, when New York used the payroll mobility tax to pad the MTA's operating budget, lawmakers insisted that the tax only increase within New York City, Fauss said. 

"I think there is a real concern that [the burden] keeps getting pushed to New York City taxpayers," Fauss said. Her group, Reinvent Albany, has "strongly supported a regionally-funded MTA … where all those who benefit, pay."

Hochul may also try to increase the state's capital contribution grant, which is only around $4 billion in the MTA's proposal, Fauss said. The state's contributions, which are usually funded by bonds on the personal income tax, have historically been much higher; in the 2015-2019 plan, the state's capital contribution was $9 billion. 

This proposal would likely be less controversial in the legislature, Fauss said, and it helps limit the MTA's debt load. 

It's too early to tell whether Hochul and the legislature will find a way to fill the entire $33 billion funding gap. Hochul pledged to support the full capital plan in November, when she enacted a lower version of the congestion pricing tolls. 

At the time, Lieber said the MTA could weather the lower short-term toll revenues specifically because of Hochul's promise. 

"The only reason that we can absorb the timing impact of having the lower toll — which will mean that our full bonding that gets us to the $15 billion is probably delayed a little bit — is because we have a full and absolute commitment on the next MTA capital program," Lieber said.

The MTA can't afford to cut much of the plan, Fauss said.

It's mostly state-of-good-repair projects, and a review last year by the state comptroller's office found $90 billion of capital needs in the system, including replacement of decades old subway and commuter train cars and bus replacements.

The only new construction is accessibility upgrades, which are required by a settlement; the Second Avenue Subway expansion, which is largely federally funded; and the Interborough Express, a new rapid transit line linking Brooklyn and Queens, which Hochul has made a priority.