With politicians and straphangers already groaning at the idea, the MTA formally proposed a fare hike to its board as part of its preliminary 2009 budget this morning.

The agency is looking to increase revenues from fares and tolls to cover a growing budget gap of nearly $1 billion as a result of a $200 million increase in fuel costs and a drop in real estate tax revenue.

If passed in December, the 8-percent hike would take effect in July 2009, with another 5-percent increase following in January 2011.

MTA executives said making the decision was not an easy one — but they were left with little choice.

"The last thing we want to do is be up here right now asking for this contribution," said MTA Executive Director and Chief Executive Officer Elliot "Lee" Sander.

"I think we can say that we're very upset. Who would want to, in our position, go and do this sort of thing," said MTA Chairman Dale Hemmerdinger. "This is not something that people in public service want to do, but fuel costs have gone up. We can't do anything about that."

The comments came as little comfort to rider advocacy groups.

"We had the same reaction as all riders. Like, how could this possibly be? This is only the second time in the 104-year history of the transit system that back-to-back fare hikes have been recommended," said attorney Gene Russianoff of the New York Public Interest Research Group's Straphangers Campaign. "The problem is, their finances are bleak and we have to figure out how to try to deal with them."

The MTA is also looking for an additional $300 million from the city and the state, but Mayor Michael Bloomberg said yesterday that the city cannot afford to chip in any more. He said that if city agencies can tighten their belts, so can the MTA.

"If we can cut five percent this year and two and a half percent last year and we'll have to have further cuts, then the MTA has got to find a way to do that," said Bloomberg. "Anybody who tells me they have got a $10 million budget and they can't find ways to cut five percent, that's just poor management. You have to have ways to do that."

MTA has already cut costs by 6 percent over the last four years, and some MTA board members feel further agency cuts could be made.

"I think we need to redouble efforts here at the agency to find every nickel, every quarter we can," said MTA Vice Chairman Andrew Saul.

"There are a lot of things that are totally unnecessary in the MTA," said board member Norman Seabrook. "And to ask people -- mom and pop -- to come out of their pockets one more time for a fare increase is just unacceptable to me."

But some officials say further budget cuts will not cover costs.

"Yeah we'll tighten our belts. But you've got to have some answers that remotely approach the magnitude of the problem," said board member Norman Brown.

Another way the MTA is looking to increase its revenue is through expanding advertising. The agency said it is considering a partnership with CNN that would put monitors in stations. The monitors would broadcast the news station, similar to what is currently available at many airports.

The agency is thinking about a pilot program within the next two years that would put the monitors in six stations.

"We will able to use them for our purposes in terms of getting the message out, but have the potential of giving us revenue -- similar to what you see in the airports," said Sander.

Governor David Paterson has commissioned a panel led by former MTA Chairman Richard Ravitch to recommend cost-cutting measures.

"I'd like the Ravitch Commission to be given a chance to finish doing its work before we come to any conclusions about whether or not we need a fare hike," said the governor.

Yet another money-saving measure discussed today was a pilot program that assigns managers to specific subway lines in an effort to save money and improve service.

Last year, the MTA put a general manager in charge of the Number 7 and L lines. Now it says it will give all 23 lines their own boss in the fall.

The general managers will manage construction projects and figure out how to reorganize train schedules to minimize delays.

Programming Note: MTA Executive Director and CEO Elliot "Lee" Sander will be a guest on "Inside City Hall" this evening, which airs at 7 and 10 p.m.