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					                        New York State Budget FYE 2010
                 First Quarterly Update - Public Transit Funding

The Division of Budget issued their First Quarterly Update Report for the 2009-10 state
budget and financial plan on July 30, 2009. The report provides updated financial
information, including revisions to projected revenues and cash flows and provisions to
account for new funding provided to the MTA.

The first quarter report highlights a continuing deterioration in the revenues that fund the
state transit operating assistance (STOA) program, but the revenue reduction has not
been significant enough to warrant any added changes in the projected STOA payments
for the balance of this fiscal year and the first quarter of the next state fiscal year. As
noted in NYPTA’s analysis of the Enacted Budget Report which was issued in April,
decreased revenues have already resulted in a deferral of some STOA payments into
state FYE 2011, although the state has committed to the eventual full pay-out of all
appropriated transit aid for FYE 2010.

NYPTA is, of course, supportive of maximizing STOA payments, even if it means a delay
into FYE 2011. However, there is no free lunch, and there are potential negative
consequences unless the state’s revenue situation recovers quickly and dramatically.
Unfortunately, revenues are still deteriorating, and as a result MTOAF and DMTTF fund
balances are being further reduced to meet STOA obligations. Where that leaves the
STOA program as we look ahead to FYE 2011:

      Revenue to the dedicated operating assistance funds is still trending downward.
      Fund balances are being drawn down to meet current year STOA obligations.
      Some STOA for FYE 2010 will be paid in the first quarter of FYE 2011 using
       revenue that would ordinarily be available for FYE 2011 STOA.

We can’t spend the same revenue twice, so we are not at a good starting point for the
STOA program in next year’s state budget.

Revised Revenue Estimates

The First Quarterly Report updates revenue projections, and the table below shows that
“all funds” receipts for key taxes and fees continue to trend downward with the notable
exceptions of the bank tax and motor vehicle fees.

                           Tax & Fee Receipts Contributing to STOA
                       Periodic Changes in Annual Estimates (000,000's)
                Tax or Fee        FYE09     FYE09      FYE10      FYE10     FYE 2010
                                    1Q        Mid     Executive   Enacted         1Q
             Corp/Utilities         $816      $858        $929       $955     $946
             Petroleum Bus.         1,161     1,143       1,175     1,120     1,140
             Sales and Use         11,554    11,494      13,288    11,147    10,653
             Corp. Franchise        4,024     3,599       3,852     3,374     3,249
             Insurance              1,300     1,221       1,397     1,434     1,269
             Bank                     851       894         908       793     1,069
             Motor Fuel               530       523         528       520       500
             DMV Fees                 800       766         908       876       983
                          Total   $21,036   $20,498     $22,985   $20,219   $19,809




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Bank taxes are apparently benefiting from a stronger than expected recovery by financial
institutions. The DMV fees increase in large measure due to provisions of the MTA
funding package which was enacted earlier this year. Despite these increases, the
bottom line is that the revenue estimates highlighted in this table have decreased by
over $3 billion since the Executive Budget was released in December 2008.

Modified Cash Flow Projections for MTOAF and DMTTF

The First Quarterly Report includes updated cash flows for the accounts in the dedicated
special revenue funds that provide STOA and some capital funding. The tables below
reflect the latest revenue estimates and fund balance projections. Disbursement
projections remain unchanged from the Enacted Budget Report issued in April.

                   Downstate Account (MMTOA 313.02) Cash Flow
                FYE09 1Q, 2Q and FYE10 Exec, Enacted and 1Q (000’s)
                                     FYE 2009    FYE 2009    FYE 2010    FYE 2010    FYE 2010
                                           1Q     Mid-Year   Executive    Enacted          1Q
        Opening Balance               471,307      471,307    127,071     119,060     119,060
        Receipts
                            Taxes    1,745,435   1,729,125   1,691,642   1,744,612   1,668,212
                    Misc. Receipts      19,500      19,500      19,500      26,021      21,400
                    Total Receipts   1,764,935   1,748,625   1,711,142   1,770,633   1,689,612
        Transfers                       19,100      19,100      19,100      19,100      19,100
        Receipts+Transfers           1,784,035   1,767,725   1,730,242   1,789,733   1,708,712
        Disbursements
                  STOA Payments      2,084,748   2,084,748   1,836,305   1,786,337   1,786,337
                  State Operations       2,892       2,984       2,793       2,680       2,680
               Gen. State Charges        1,229       1,229       1,146       1,123       1,123
                         Transfers      23,000      23,000      16,721      16,721      16,721
        Disbursements+Transfers      2,111,869   2,111,961   1,856,965   1,806,861   1,806,861
        Closing Fund Balance           143,473     127,071         348     101,932      20,911
        Change in Fund Balance       (327,834)   (344,236)   (126,723)    (17,128)    (98,149)


Things to note in the downstate account: projected tax revenue is revised downward by
$76 million, STOA payments remain unchanged, and the closing fund balance falls to a
mere $20 million, which is over $100 million below historic levels. This account will have
a difficult time meeting all STOA obligations for the first quarter of FYE 2011, especially
in light of the deferral of some FYE 2010 STOA into that quarter.

                     Upstate Account (PTOA 313.01) Cash Flow
                FYE09 1Q, 2Q and FYE10 Exec, Enacted and 1Q (000’s)
                                     FYE 2009    FYE 2009    FYE 2010    FYE 2010    FYE 2010
                                           1Q    Mid-Year*   Executive    Enacted          1Q
        Opening Balance                 2,713        2,713      2,725       1,744       1,744
        Receipts
                            Taxes      63,065      62,075      64,658      61,688      62,788
                    Misc. Receipts          0           0           0         410         410
                    Total Receipts     63,065      62,075      64,658      62,098      63,198
        Transfers                      42,000      42,000      30,904      30,904      30,904
        Receipts + Transfers          105,065     104,075      95,562      93,002      94,102
        Disbursements
                  STOA Payments       101,376     101,376      95,097      90,099      90,099
                  State Operations      1,934       1,999        1,863      1,819       1,819
               Gen. State Charges         688         688          641        632         632
              Total Disbursements     103,998     104,063      97,601      92,550      92,550
        Closing Fund Balance            3,780       2,725          686      2,196       3,296
        Change in Fund Balance          1,067          12      (2,039)        452       1,552




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The upstate account benefits from a slight upward move in petroleum business tax
revenue. However, the situation is not materially different than the last report, and the
account remains dependent upon transfers from the General Fund and the downstate
account to meet STOA obligations.

                           DMTTF (MTA 073.01) Cash Flow
                FYE09 1Q, 2Q and FYE10 Exec, Enacted and 1Q (000’s)
                                      FYE 2009    FYE 2009    FYE 2010    FYE 2010    FYE 2010
                                            1Q     Mid-Year   Executive    Enacted          1Q
        Opening Balance                 59,102       59,102     66,239      60,079      60,079
        Receipts
                             Taxes     528,054     523,211     535,722     520,793     517,593
                     Misc. Receipts      6,917       6,917       6,324       5,670       9,504
                     Total Receipts    534,971     530,128     542,046     526,463     527,097
        Disbursements
                    Grants to Local    522,991     522,991     536,028     475,497     527,172
                      Governments
              Total Disbursements      522,991     522,991     536,028     475,497     527,172
        Closing Fund Balance            71,082      66,239      72,257     111,045      60,004
        Change in Fund Balance          11,980       7,137       6,018      50,966         (75)


                        DMTTF (MTA Rail 073.02) Cash Flow
                FYE09 1Q, 2Q and FYE10 Exec, Enacted and 1Q (000’s)
                                      FYE 2009    FYE 2009    FYE 2010    FYE 2010    FYE 2010
                                            1Q     Mid-Year   Executive    Enacted          1Q
        Opening Balance                 10,434       10,434      9,743      10,607      10,607
        Receipts
                             Taxes      91,220      90,366      94,511      91,831      91,231
                     Misc. Receipts      1,224       1,224       1,100         975       1,674
                     Total Receipts     92,444      91,590      95,611      92,806      92,905
        Disbursements
                    Grants to Local     92,281      92,281      94,565      84,217      93,124
                      Governments
              Total Disbursements       92,281      92,281      94,565      84,217      93,124
        Closing Fund Balance            10,597       9,743      10,789      19,196      10,388
        Change in Fund Balance             163       (691)       1,046       8,589       (219)


Total receipts projected for the two MTA accounts of the DMTTF fall off slightly, but of
more significance is the upward revision in projected disbursements. The figures cited
are more in line with expected payments to the MTA because these accounts are
essentially “pass throughs”. The Enacted Budget Report may have been incorrect.

                        DMTTF (Non-MTA 073.03) Cash Flow
                FYE09 1Q, 2Q and FYE10 Exec, Enacted and 1Q (000’s)
                                      FYE 2009    FYE 2009    FYE 2010    FYE 2010    FYE 2010
                                            1Q     Mid-year   Executive    Enacted          1Q
        Opening Balance                 40,089      40,089      38,221      25,639      25,639
        Receipts
                             Taxes      53,787      53,285      55,698      54,167      53,867
                     Misc. Receipts      2,758       2,758       3,276       3,276       1,068
                     Total Receipts     56,545      56,043      58,974      57,443      54,935
        Disbursements
                    Grants to Local     57,911      57,911      75,821      73,571      73,571
                      Governments
              Total Disbursements       57,911      57,911       75,821      73,571      73,571
        Closing Fund Balance            38,723      38,221       21,374       9,511       7,003
        Change in Fund Balance          (1,366)     (1,868)    (16,847)    (16,128)    (18,636)


The combination of lower receipts and steady disbursements further erodes the closing
fund balance of the non-MTA account. This account will enter FYE 2011 with an historic



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low fund balance, a situation that will complicate planning for both STOA and capital
expenditures.

New MTA Funds

In May 2009, the Legislature enacted and the Governor signed legislation that provides
substantial additional funding for the MTA. This action post-dated the Enacted Budget
Report, so the First Quarterly Report is the first DOB report to reflect the provisions of
the legislation. New revenue will be generated by a payroll tax ($1.5 billion), taxi
surcharge ($85 million), motor vehicle registration fee ($130 million), driver license fee
($20.5 million), and rental car surcharge ($35 million).

The legislation created an MTA Financial Assistance Fund with two new accounts: the
Mobility Tax Trust Account to handle receipts and disbursements from the payroll tax,
and the MTA Aid Trust Account to handle receipts and disbursements from the other
taxes and fees. The legislation appropriated $1.482 billion from the Mobility Tax Trust
Account and $161.1 million from the MTA Aid Trust Account for FYE 2010. The following
tables outline the initial cash flows for these two new accounts.

                           MTA Financial Assistance Fund
                    Mobility Tax Trust Account (225.01) Cash Flow
                       FYE10 Enacted and 1Q Report (000’s)
                                                      FYE 2010   FYE 2010
                                                       Enacted         1Q
                        Opening Balance                      0          0
                        Receipts
                                             Taxes          0    1,498,000
                                     Misc. Receipts         0            0
                                     Total Receipts         0    1,498,000
                        Disbursements
                                    Grants to Local         0    1,462,000
                                      Governments
                              Total Disbursements           0    1,462,000
                        Closing Fund Balance                0       36,000
                        Change in Fund Balance              0       36,000


                          MTA Financial Assistance Fund
                      MTA Aid Trust Account (225.02) Cash Flow
                        FYE10 Enacted and 1Q Report (000’s)
                                                      FYE 2010   FYE 2010
                                                       Enacted         1Q
                        Opening Balance                      0          0
                        Receipts
                                             Taxes          0     161,200
                                     Misc. Receipts         0           0
                                     Total Receipts         0     161,200
                        Disbursements
                                    Grants to Local         0     161,100
                                      Governments
                              Total Disbursements           0     161,100
                        Closing Fund Balance                0         100
                        Change in Fund Balance              0         100


Projected Revenues and Disbursements

The First Quarterly Report includes out-year projections for revenues and disbursements
that help give some indication as to future STOA. Although the analysis is complicated


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by the inclusion of revenue and disbursement projections related to the new MTA taxes
and fees, it is possible to get a reasonable estimate for comparison with historic STOA
levels. Backing out the revenue increases directly related to the MTA plan (DMV fees
and the payroll tax), all other receipts are projected to grow by little more than 1% in FYE
2011 and FYE 2012, and 3.8% in FYE 2013. As a result, we can expect minimal growth
in STOA outside the MTA.

                       Projected Cash Receipts Special Revenue Funds
                                 FYE 2010 – 2013 (000,000's)
                      Tax or Fee        FYE10       FYE11       FYE12       FYE13
                   Sales and Use           663         684         722         768
                   Motor Fuel              105         108         108         109
                   DMV Fees                349         454         457         440
                   Corp. Franchise         458         436         430         447
                   Corp/Utilities          209         196         201         206
                   Insurance               245         299         302         304
                   Bank                    150         157         163         196
                   Petroleum Bus.          509         490         491         493
                   Payroll Tax           1,498       1,568       1,632       1,711
                                Total    4,186       4,392       4,506       4,674

In fact, the projections for local assistance spending for transportation bear this out. By
once again discounting the positive impact of new MTA assistance, we see that
spending is projected to increase by only 3.5% in total over the next three state fiscal
years.

                  Projected Local Assistance Spending for Transportation
                               FYE 2010 – 2013 (000,000's)
                    Tax or Fee           FYE10       FYE11       FYE12       FYE13
                General Fund               100.3       100.0        99.6        99.6
                Special Revenue          4,193.4     4,421.9     4,512.1     4,608.4
                           Sub-Total     4,293.7     4,521.9     4,611.7     4,708.0
                Less New MTA
                Payroll Tax             (1,498.0)   (1,568.0)   (1,632.0)   (1,711.0)
                Other Fees/Taxes          (161.1)     (270.5)     (270.5)     (270.5)
                               Total      2,634.6     2,683.4     2,709.2     2,726.5

Strategy Points

The decrease in receipts from the existing taxes and fees that fund STOA is the primary
culprit in both reduced STOA appropriations for FYE 2010 and the deferral of some
STOA payments, perhaps into FYE 2011. But even before this particular revenue crisis
developed, it was clear that revenues generated by existing transportation-related taxes
and fees would be insufficient in the long term to fund STOA as well as the entire
NYSDOT and MTA capital and operating needs. The MTA’s funding package of new
taxes and fees was a response to this revenue crisis, but it only addressed one portion
of the overall New York State transportation funding puzzle. For example, General Fund
transfers to the Dedicated Highway and Bridge Trust Fund are expected to total over
$2.9 billion for state fiscal years 2010 to 2013, a consequence of dedicated revenues
falling far short of the amounts needed to fund an acceptable construction program and
meet huge debt service requirements.




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The new state and MTA multi-year transportation capital plans will have to address this
difficult problem. The starting point must be a concerted effort by the state and all its
transportation interests to gain a favorable authorization for the federal surface
transportation program. Without a good idea as to the extent of the federal effort over the
next six or seven years, we will just be guessing as to what the state must do to provide
new resources to meet needs.

When the multi-year plan development begins in earnest, NYPTA advocates that a
statewide public transportation plan be prepared to address the capital and operating
needs of both the MTA and non-MTA public transit systems. In this way, all transit
interests can benefit from a comprehensive assessment of MTOAF and DMTTF, which
are the funding sources that provide aid to the MTA and non-MTA systems alike.
Extracting the non-MTA systems from the NYSDOT plan will help planners focus on the
Dedicated Highway and Bridge Trust Fund, which funds every element of the plan
except the transit.

Summary

The First Quarter Update to the budget shows a continuing decline in the revenues that
support STOA. However, the Division of Budget has not further reduced STOA
disbursements commensurate with these most recent revenue losses. Rather, they have
opted to sustain STOA at appropriated levels by reducing MTOAF and DMTTF fund
balances and spending down available cash. This is a strategy with a near term positive
impact but potential long term negative consequences if revenues do not recover
quickly. In fact, state aid projections in the budget report strongly suggest that a nearly
no-growth non-MTA STOA scenario is likely for the next three years.

Prepared by: Rick Swist
             NYPTA Director of Policy and Strategy
             August 5, 2009




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