The Metropolitan Transportation Authority has dug itself a financial hole so deep there is no easy escape, the city’s Independent Budget Office said yesterday.

Under its current budget plan, even if the MTA raises fares and tolls and slashes service, it expects to be $1.2 billion in the red by 2008, the watchdog office reported in a fiscal brief on the transit agency. The MTA expects to take in $8.6 billion in revenues in 2004 but will probably spend $8.7 billion.

“The MTA is in a difficult situation,” the office’s chief of staff and communications director, Douglas Turetsky, said. “Unfortunately the answers are not necessarily single strokes. It is probably going to take a combination of enhancing revenues and decreasing costs to get out of this.”

The authority faces a structural deficit that will be tough to eliminate, the city office said. Among the worrisome trends its review found between now and 2008:

* Debt service with expenditures on pensions and fringe benefits are projected to increase much faster than fares, tolls, and subsidies from the city and state;

* Tax revenues set aside for the MTA are projected to decline by $150 million in 2005 and then are expected only to flatten out;

* Without an increase in fares and tolls, revenues coming into the MTA will rise by a paltry 1% annually;

* The authority is on track to have debt service costs gobble up 20% of revenues by 2008, up from 12% in 2004. The MTA’s plan for capital building raises similar alarm, because the $27.8 billion outline contains a $16.2 billion gap in financing. The MTA is short more than $11 billion for maintenance and repair, and more than $4 billion for planned expansion of the system.

“The MTA needs to be upfront about how bad things are,” the head of the City Council’s transportation committee, John Liu, said. “This isn’t just an issue of mismanagement at the MTA. This has to do with Governor Pataki eliminating subsidies, too.” Mr. Liu is a Democrat of Queens.

Everyone seems to agree that the MTA’s financial woes have grown out of more than 10 years of policies by the state, the city, and the authority itself. The state and city have whittled back subsidies, and the MTA has taken on too much debt that it now finds it can’t afford.

“The authority, along with state and local policymakers, may need to consider new revenue sources dedicated to funding the Metropolitan Transportation Authority such as tolling the East River and Harlem River bridges and a revived commuter tax,” the report from the Independent Budget Office said.

The state comptroller, Alan Hevesi, suggested last month that the agency, which runs the city’s subways, buses, bridges, and tunnels, and two railroads, among other transit entities, take a look at where it might cut around the front office.

The MTA has nearly 700 employees in its human-resources department, 443 people in legal services (while spending $10 million on outside law firms), 444 people in public relations, marketing, and its call center, and another 166 to deal with labor relations, the comptroller reported. Mr. Hevesi suggested the MTA look for cuts there as well.

The state comptroller has grumbled that the MTA’s plan for closing its budget gap in 2006 relies almost entirely on savings from service reductions and other actions that affect riders.

Instead, Mr. Hevesi said, the MTA should look at its front office. The authority has many finance, procurement, technology, and human-resource functions that overlap. The MTA has budgeted $708.9 million for those functions, but the financial plan does not have any savings from consolidating those services. The MTA’s Triborough Bridge and Tunnel Authority, which has a budget of $356 million, identified only $140,000 in savings, including the decision to cut one vacant secretarial position, the comptroller’s report said. The Long Island Bus Line, a $100 million operation, identified no savings from management improvements, the report said.

Mr. Turetsky was less confident that slashing jobs would heal what ails the authority.

“It is always easy to say there is too much administrative fat,” he said. “But even if you cut the people in the finance department, for example, in half, how much does that really get you? It doesn’t get you very far.”

In unraveling the MTA’s finances, many critics of the agency have said its decision, which Albany supported, to adopt a $17 billion capital maintenance and expansion program four years ago has put it in the financial straits it is in now.

Even at the time that was seen as financially risky. The capital plan has strapped the authority as it struggles to pay its debts. In 1995, the MTA took $169 million out of passenger fares to make its debt payments. Now the figure is more than twice that, $401 million. By 2008 the figure is expected to reach $849 million, a quarter of the income the MTA gets from fares.

The MTA’s preliminary capital program from 2005 to 2009 is valued at $27.8 billion, an increase of 38% in nominal terms over the 2000-04 program. The core program, valued at $17.2 billion, is aimed at maintaining and improving existing infrastructure and assets, such as buying new subway cars and buses, fixing stations, and tunnel lighting, among other things.