In a move the Metropolitan Transportation Authority says will further hurt its bottom line, a State Supreme Court judge has ruled against the agency in an arbitration dispute with the Transport Workers Union.

The MTA had appealed an arbitrator's decision awarding transit workers an 11.5 percent raise over three years, but the judge said the pay hikes can go forward.

The agency said the ruling will add hundreds of millions of dollars to its upcoming budget, which is already facing a $340 million shortfall.

The MTA released a statement which says in part, "The ruling will have severe financial impacts on the MTA budget, coming on the heels of a State budget cut and reduction in payroll tax proceeds. Unfortunately, the magnitude of these changes makes it increasingly difficult to limit the impact this budget will have on the MTA, our employees and customers."

The judge's ruling comes as the MTA is considering major service changes to plug the budget gap -- including eliminating the W and Z subway lines, and cutting service on several bus routes.

The agency is expected to lay out its full list of proposed cuts Monday.