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Senate Majority Agrees to Bail Out MTA

Payroll Tax Supported by Senator Johnson

The Metropolitan Transit Authority (MTA) has a slogan – “Going Your Way.” But it should possibly be changed to “Going in Your Pocket.”

The Senate Democratic Majority has agreed on a bailout of the MTA with a payroll tax that will be applied to all businesses in the areas the MTA serves including Nassau and Suffolk Counties.

Senate Democrats had agreed to the framework of a bailout of the MTA before its proposed massive increases take effect on June 1.

There is still expected to be a 10 percent fare increase with the bailout. However, the fare increase isn’t as drastic as the 27 percent increase that was proposed without the bailout. Instead of those who use the MTA services bearing the full brunt of the MTA’s financial troubles, the transportation agency will be subsidized by every Long Island employer with the possible exception of school districts.

The payroll tax that had been discussed includes a tax of 34 cents per $100 of payroll. When the payroll tax was first mentioned, school officials protested, saying that adding a payroll tax to school budgets would lead to increases in property taxes. State lawmakers in Albany are working out a way whereby school districts would be reimbursed for the cost of the payroll tax.

What may have been holding up the payroll tax is that all Democratic senators may not have been on board. Democratic Senator Craig Johnson initially opposed the payroll tax, but now appears ready to support it if school districts can be reimbursed their payments.

Johnson apparently did an about face on the payroll tax, which, he said, he opposed last month. On April 14, Johnson visited Anton Newspapers to discuss the state budget. He said at the time he did not trust the MTA. “It seems every time there’s a problem, the MTA cries poverty and says the only way we’re going to solve it is either Albany gives us money and bails us or we’re going to raise fares and cut service. I’m not doing an acronym bailout. There’s an AIG and, for me, it’s the MTA. I’m not going to bail out the MTA with people’s tax dollars. I don’t agree with a payroll tax.”

According to Rich Azzopardi, spokesman for Senator Johnson, Johnson will back the MTA bailout if there is language in the bill to provide a timely reimbursement for school districts. Azzopardi said Senator Johnson was initially opposed to the payroll tax because of the effect it would have on property taxpayers, but if school districts didn’t have to pay the tax, it wouldn’t affect property taxes.

Even if a payroll tax were not applied to school districts, it could still affect property taxes. Municipalities could find themselves having to raise property taxes in order to pay for the payroll tax. According to Nassau County Comptroller Howard Weitzman’s office, the county would have to pay the payroll tax and Nassau County has a substantial payroll.

In addition, all employers would be responsible for the tax, which could very well be passed on to employees. According to Senate Minority Leader Dean Skelos, the $1.5 billion payroll tax would devastate businesses, local governments, hospitals, not-for-profits and others within the 12-county MTA region. In addition, the Governor’s plan to reimburse school districts after they pay the payroll tax might never be realized since the governor would still have the authority to cut school aid to make up the difference, Skelos said.

Great Neck Public Schools Superintendent Ronald Friedman offered the following statement: “We do know that the MTA is in trouble financially, and the Governor and legislature have been working for months to arrange some sort of bailout for them. The final plan approved last week does include a payroll tax, which I do not favor, and did not place tolls on East River bridges, which I would have liked to have seen. For school districts, the bill passed last week includes a reimbursement of the payroll tax. We are hoping that the along the way, the reimbursement is truly a reimbursement, and not something that will fade away with time. I am very thankful that our own State Senator, Craig Johnson, did work relentlessly to achieve the reimbursement language for school districts. Without his efforts, there would be no reimbursement. He has given our Great Neck school community his personal assurance that he will continue his strong efforts to see that schools are held harmless from the tax by assuring the reimbursement is always forthcoming. We thank him for his hard work in this respect. I realize that something had to be done in the short term to help the MTA. As well, however, I hope that the entire operation and budget of the MTA is now forensically audited and that the audit results are used to bring real change and improvement to a system that must be better managed and have stronger oversight.”

In addition, the payroll tax will affect businesses. According to the Retail Council of New York State, the cost of the payroll tax to retain industry in Nassau County would be over $8.1 million (based on gross wages earned in 2007).

Senator Craig Johnson Stated the Following at Press Time:

“Last week, the Legislature passed difficult, but necessary, legislation to rescue the Long Island Rail Road and regional mass transit, as well as reform how the MTA functions.

“I was one of the last members of my conference to supports this package. I did so only after ensuring that our schools were held harmless from the payroll tax and that an outside forensic audit and other transparency requirements were included.

“Throughout this process, I have made clear my distrust of the MTA and my concerns about how any proposed plan would affect schools and school property taxes —- which make up roughly two thirds of the average tax bill. At the same time, we had to deal with the reality that a dependable, affordable —- and responsible —- mass transit system is vital to Long Island.

“This legislation addresses these issues and is the first step toward cleaning up the mess caused by years of mismanagement and lax oversight from previous administrations and legislative majorities.

“Under the Senate Republicans’ watch, funding for the MTA was cut and the authority was allowed to go on a fiscally irresponsible borrowing and spending spree. This caused the MTA’s debt to balloon from $8.6 billion in 1996 to $24 billion today.

“It was disappointing that, despite their role in the creation of this mess, the Senate Republicans were content to take no action on this – or any — plan. Taking their cues from their Congressional counterparts, they offered no alternative proposals, and no solutions. They only offered their opposition.

“To do nothing would have meant massive fare hikes on the Long Island Rail Road and deep service cuts. This included slashing by half the off-peak service on the Port Washington line, the complete elimination of non-Belmont Stakes service to the Belmont Park Race Track and the elimination of personnel from the Floral Park and New Hyde Park train stations.

“They knew this and yet were still content to sit on their hands.”