A plan by the cash-strapped MTA to reduce bus and subway service is one step closer to becoming a reality.

The MTA finanance committee approved wide-ranging service reductions on Monday, which are said to include the elimination of the W and Z subway lines and the cancellation of more than 20 bus lines. The service cuts are being implemented in order to close a $400 million budget gap.

Also on the chopping block, the elimination of discounted student fares. Officials have said the cuts will be similar to those proposed in the "doomsday budget" the authority had proposed before the state bailout.

It was reported last week that a state aid cut and payroll tax error caused a financial mess for the MTA, which could worsen in the future if a reported repeat of the state funding cut appears in next year's budget.

Adding to the agency's woes, the MTA lost its appeal of wage arbitration on Friday when a State Supreme Court judge ruled to support a 11.5 percent increase over three years for the Transit Workers Union.The MTA says wage hikes will add hundreds of millions of dollars to the budget.

Cuts expected to be proposed include eliminating the W and Z subway lines, cutting parts of the G and M lines and scaling back service on dozens of bus routes. Several stations in lower Manhattan would close and train service would be cut back in the early morning hours.

On the island, service to the Long Island Rail Road and Long Island Bus riders would be slashed.

Causing the most controversy, the plan also includes raising student fares to half-price in 2010 and full fares the following year.

550,000 students currently get a free or discounted MetroCard from the city. As part of Mayor Bloomberg's education reforms neighborhood high schools in many neighborhoods have been eliminated in recent years, causing some students to travel for up to 90 minutes by public transportation. Students are currently eligible for free or discounted MetroCards depending on their age and how far he or she lives from school.

The MTA board will meet Wednesday to pass an $11 billion budget.