In a letter to the New York Post this morning and again later today in an Upper West Side protest, City Council Speaker Christine Quinn repeated her demand that the MTA spend $100 million in money earmarked for capital investments on its operating expenses instead. Specifically, Quinn wants the MTA to spend the money on keeping free student fares instead of asking kids to pay half-fares starting this fall.

Most egregiously, Quinn tried to use rarefied “public-finance theory” to justify her 70s-style proposal as a fiscally sound idea. “Using current-year revenue for current-year operating expenses is nothing like the 1970s practice of using borrowed funds for operations,” Quinn wrote.

Part of the “current-year” money to which Quinn refers is $1.3 billion the MTA got from Washington last year as part of the February 2009 stimulus. Quinn correctly notes that the Obama administration said that transit authorities could use 10 percent of their stimulus money for operating deficits.

But just because Obama said it, doesn’t make it good public-finance theory. To Quinn’s argument that her proposal is different from what New York did in the 70s: sorry, nope.

Quinn would only be correct if the MTA’s next $28 billion or so five-year capital plan were fully funded. In that case, extra current-year money from Washington would be just that: extra current-year money.

But the MTA’s capital budget for the next five years has at least a $10 billion hole. If the MTA uses $100 million of the scant funds that it does have on operating expenses, that decision would leave the authority with two choices: cut capital investment by $100 million, or borrow another $100 million.

However you slice it, it’s the same: borrowing (indirectly) to pay for operating expenses, or irresponsibly slashing construction and maintenance projects to pay them instead.

The same goes for Quinn’s proposal that the MTA spend some of its own modest $50 million annual pay-as-you-go capital spending funds — that is, its non-borrowed money for capital  — on operating spending instead. If the MTA doesn’t use this money for capital, it has to borrow more for capital purposes, or cut capital investments.

Plus, the reason that outgoing MTA CFO Gary Dellaverson has tried to push the MTA to devote $50 million for capital spending is that in a few years, debt-service costs are supposed to rise quite suddenly. Dellaverson wanted to get the agency accustomed to paying some of those costs now — so it wouldn’t be surprised later.

It’s nice that Quinn is worried about the MTA’s proposal to force students to start paying half fares. But the MTA is taking this step only because the state and city — mostly the state –have slashed the subsidies to the MTA that cover the free fares.

Why has the state cut its spending here? Partly because the state spends so much on  bloated public-worker salaries and pensions that it just can’t afford free subway and bus fares for the kids.

If Quinn is so worried, then, she should call on Gov. Paterson and the state legislature to take a page from E.J.’s new blueprint for a better state budget. A pay freeze for state workers would save $328 million next year alone. Such a freeze would give Albany plenty of room to restore its MTA student-fare subsidies over two years — a cost of $93 million — without tapping into $100 million in capital-investment money.

Or if Quinn has her mind set on forcing the MTA to fund this cost itself, perhaps she should hold a rally to call upon the MTA’s unionized New York City workers into voluntarily taking a wage freeze for this year and last, saving $145 million.

That’s also more than enough to restore student discounts without grabbing money from the capital plan so that more ceilings can fall down on the students’ heads (the kids can’t win).

Otherwise, it’s all just feigned outrage.