>ALBANY, N. Y.—New York Gov. Kathy Hochul will seek to raise payroll taxes on downstate businesses and use revenue from new casinos to bolster mass transit in New York City as part of her proposed state budget on Wednesday.
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>The Democratic governor is proposing an additional $1.3 billion a year for the Metropolitan Transportation Authority through the actions, her aides said. That includes a call for New York City to contribute roughly $500 million more to the authority, which operates subways, buses, and commuter railroads as well as bridges and tunnels.
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>The proposal would generate enough cash to help cover a budget gap caused by a loss in fare revenue from lower ridership since the Covid-19 pandemic began in 2020, officials said. The new funding would also help foot the bill for additional police patrols on the subway system that started in October amid concerns about crime.
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>A spokesman for New York City Mayor Eric Adams said increasing public transit ridership is essential to the city’s recovery and he would review the proposal.
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>MTA Chairman and Chief Executive Janno Lieber, who has been lobbying lawmakers for additional funding, said in an interview that the governor’s proposal would allow the authority to avoid service cuts but not a 5.5% fare hike that the MTA assumed in its 2023 budget.
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>Ridership on the subway system is around two-thirds of pre-pandemic levels, which analysts have said is mostly caused by white-collar employees working from home at least part of the week. Additionally, elevated crime pushed away some riders in 2022, customer surveys show. An influx of police that began in late October has reduced the crime rate, Mr. Lieber said.
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>Aides said the MTA funding plan will be included in Ms. Hochul’s proposal for an approximately $220 billion budget. The governor will negotiate with fellow Democrats who control the state Assembly and Senate to adopt a spending plan to take effect after the current fiscal year ends March 31. In November, the state projected it would finish its current fiscal year with a roughly $2 billion surplus.
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>Ms. Hochul previously said she won’t raise income taxes and announced plans to increase spending on mental health services. She said the MTA was “the lifeblood of New York City” and that the ridership shortfall was one of the lasting effects of the pandemic.
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>“It is not a short-term problem, and it is one we must face together,” she told The Wall Street Journal in a statement.
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>About half of the MTA’s revenue came from fares and tolls before the pandemic. The rest of its funds came from sales, fuel and real-estate taxes as well as direct city and state subsidies. That includes about $1.8 billion from a payroll mobility tax that state lawmakers enacted in 2009.
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>Companies in the MTA’s service area, which includes New York City, Long Island and the lower Hudson Valley, are charged 0.34% of employee wages, with exceptions for schools, libraries and small employers.
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>Under Ms. Hochul’s proposal, that tax would increase to 0.5%, generating around $800 million a year in additional revenue. For example, an employer would pay an additional $160 a year for each employee with a $100,000 annual salary.
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>Kathryn Wylde, president and chief executive of the business group Partnership for New York City, said companies were sensitive to tax levels but that support for the MTA was a priority.
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>“The big picture will matter to the business community,” she said.
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>The MTA, which recently adopted a $19.2 billion overall budget, has relied on federal Covid relief to plug deficits. Mr. Lieber said the budget calls for $400 million from operational savings, and said the governor’s plan was a balanced approach.
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>“It makes sense for the business community to help cover a portion of the cost of providing frequent, reliable transit every day, so it will be there whenever their employees are coming to work,” Mr. Lieber said.
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>Starting in 2026, Ms. Hochul is also proposing to direct revenue to the MTA from casinos in and around New York City. The state is currently soliciting proposals for gambling halls in downstate areas, and several companies are pitching casinos in the heart of Manhattan.
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>The governor’s plan to funnel casino revenue toward the MTA would require changing state law that requires tax proceeds from gambling to be spent on education, a spokeswoman for the governor said. The specific funding amounts are dependent on the license award process, the spokeswoman said.
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>Danny Pearlstein, a spokesman for the transit advocacy group Riders Alliance, said he hoped lawmakers would consider even more funding that would let the MTA expand service.
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>“The governor listened to her voters and has laid a firm foundation for the MTA’s continued survival,” he said. “We think there’s room in further negotiations to do more.”
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