Abstract:
How to fill a sudden, massive budget deficit with least damage to the public and the long term well-being of the agency? That complex question was at the heart of the dilemma faced in 2010 by Jay Walder, incoming CEO of New York's Metropolitan Transportation Authority. This action-forcing case provides the basic organizational, financial, and political context of the MTA at this historical juncture and background about Walder and his goals for the authority. It then plunges into a consideration of the options Walder and his executive team considered. The case organizes these options into five categories: increases to revenue, organizational efficiencies, administrative cuts, service cuts, and labor cuts. It introduces some general considerations (certain vs. uncertain cuts, one-time vs. recurring cuts), then gives pros and cons of the different ideas on the table, as Walder, his team, and a few outside stakeholders perceived them. The action-forcing structure of the case cuts the story off before Walder has made any decisions, allowing students to offer their own analyses and recommendations as if they were part of Walder's executive team. Among the most controversial questions: Should the MTA go to the legislature for help? Raise fares? Cut a subsidy for public school children? Use a share of federal stimulus funds for operations instead of capital costs? Cut subway and bus service? Reduce service to the disabled? Reduce cleaning and maintenance service? Try to negotiate union concessions in exchange for layoffs?
This case is accompanied by a 16:20 min. video supplement where Jay Walder lays out the vision he had as he took on the job of leading the Metropolitan Transit Authority and talks about some of the key challenges he faced during his tenure, including dealing with unforeseen budgetary shortfalls and upgrading the infrastructure. Walder also reflects on the broader issue of funding for transit systems and how it needs to be reframed.
Learning Objective:
This case, appropriate for either a strategic management class or a transportation class, teaches how to bring analytic rigor to the unpleasant, but commonplace, challenge of public sector budget-cutting. By focusing on a visible, essential public service, students grapple with high stakes decisions and political constraints. The case can also support a discussion of the way the MTA--and US public transportation, in general--is financed.
