May
15

The MTA’s pension and benefits problems

By

When the MTA Board passed a new fare structure earlier this week, the leaders of the transit agency stressed the fact that the so-called cuts to the public — fewer trains, less frequent service — would be voted down soon as well. The officials though also made clear that numerous positions within the MTA would not be filled. The station agent program, in particular, is slated for termination, and with it comes the elimination of over 800 jobs.

While many of these spots will be flat-out eliminated, a good number of MTA positions will be eliminated through attrition. As workers retire, the positions will remain vacant, not to be filled until and unless the MTA finds a sound financial footing.

This is an interesting way to eliminate jobs, but there is seemingly more at work than simply a reduction in workforce. Some MTA watchers believe this reduction-by-attrition method says more about the MTA’s future pensive obligations than anything else.

Nicole Gelinas is a fellow at the Manhattan Institute and an editor at City Journal. For the last few months, she — and few other transit watchers — has tackled the uncomfortable issue of the labor unions’ relationships with the MTA. Gelinas feels that much of the MTA’s supposed Doomsday could have been avoided had the transportation authority been willing to take a harder line in negotiations with its workers.

Most recently, Gelinas tackled just that topic in a Wall Street Journal column. She wrote:

The blunt truth is that New York City and state spent the good years giving its public employees generous raises, without asking for benefits concessions in return. City benefits costs, too, have piled up to an unsustainable $13 billion annually. That’s a third of the city’s tax revenue. Political leaders did nothing about it. When the transit union went on strike nearly four years ago to protect its pension benefits, Gov. George Pataki caved in and kept the status quo.

Gov. David Paterson and Gov. Pataki before him (let’s just leave out the farce of Eliot Spitzer) didn’t even need the unions’ cooperation to reduce pensions costs for new workers. Lawmakers could have passed legislation that would have cut benefits and increased contributions without union input. They didn’t.

Instead the state expanded its Medicaid program, which now costs the city $5.6 billion a year, up 44% over the past seven years. The city, under Mayor Michael Bloomberg, similarly ramped up education spending by 70% to nearly $21 billion. Education spending has shot up 42% faster than spending on the MTA, even though public-school enrollment shrank while MTA ridership soared.

This April column is but the tip of the iceberg. In December, Gelinas called upon transit unions to sacrifice some of the financial upper hand. She wants the union workers to contribute more to their pension and health care plans and believes that a wage freeze would not be inappropriate. In March, she wrote about runaway pension costs.

The real issue here is one of a political cognitive dissonance. New Yorkers are, by and large, pro-labor, pro-union Democrats. Gelinas raises issues that don’t fit that bill, but they are ones transit advocates should consider. At a time when everyone else is being asked to shoulder the costs of our transit system, shouldn’t the unions contribute as well?



Categories : MTA

33 Responses to “The MTA’s pension and benefits problems”

  1. Alon Levy says:

    Ah, yes, City Journal. The venerable newspaper that publishes Heather MacDonald’s hateful screeds against black people, and that complains about the third-world, “Their fecundity has eclipsed our gluttony” (link).

    And lest you think Gelinas is better than this lot, her article about the mortgage crisis complains about high spending in Arizona, Nevada, and Florida and blames it for the crisis, even as its graph shows that Florida’s spending grew more slowly than its population… but to Gelinas’s credit, she doesn’t seem to hate people who aren’t like her – she just doesn’t care about them.

    • rhywun says:

      So, you disagree with the hypothesis that states should spend within their means, rather than continue to throw money around like it’s Christmas Day and assume that it’s someone else’s problem?

      • Alon Levy says:

        No, I disagree with the hypothesis that the mortgage crisis was caused by hyper-spending, especially when one of its main centers, Florida, had slower spending growth than population growth.

        • Nicole says:

          Dear Alon,

          Please find, in my article, where I blamed the mortgage crisis on excessive state spending.

          • Alon Levy says:

            You went on and on about the rise in spending in Arizona, Florida, and Nevada, even though Texas had almost the same rise and has none of the same problems. You say things like,

            But during the boom times, elected officials in Arizona, Florida, and Nevada took a page out of the old states’ playbook, driving up spending at an unsustainable pace. Now that the growth of the low-tax states has hit a wall, shattering revenues, they face a tough choice: they can raise taxes to fund permanently higher costs, or they can aggressively cut spending.

            I was wrong to say that you’re blaming the mortgage crisis on high spending, but you are certainly saying that high spending is hurting these states’ economies. If you’re not, then I’m not sure why you concentrate on these three states, when Texas had almost the same spending growth and is possibly the state least affected by the mortgage + financial crisis. North Carolina had a fairly high spending growth as well, at 21%, and is doing pretty well, especially considering the collapse of the Charlotte-based financial industry.

  2. Fairness says:

    I’m disgusted by the fact that Ben is mentioning this horrible writer from the NYPost’s editorial pages. She has proven to be nothing more than a right wing, anti-labor, fanatical republican.

    Ben it’s very interesting to me that you are so anti-labor yet you run a transit blog. It is labor that makes this a 24/7 city and makes the transit system run and move more people than ever with less employees than ever.

    • petey says:

      kudos to fairness and alon for their comments. a writer for the city journal, the post, and the WSJ finds a problem with unions? what a surprise. i remember during the last strike, the harpies from the media were so certain that “the people” would revile the TWU that they went out and did live interviews. and the actual people, on camera, supported the TWU. one said she was happy to walk to manhattan from brooklyn, as the union was standing up for all working people. a rare happy moment from the past years.

  3. Rhywun says:

    My heavens, we’re hostile to alternate viewpoints today. Here’s one: how would you like your taxes raised to the point where it would actually *pay* for all the services we give out?

  4. Nicole says:

    Dear Alon,

    Thank you for your comment.

    Regarding Florida, the state-spending article clearly states that Florida has increased its “off balance sheet” spending by vast amounts by using taxpayer subsidy of property insurance to encourage building in unsustainable areas. (This growth strategy is not very environmentally friendly nor transit-friendly, by the way.) In NV and AZ, on-the-books spending has clearly outpaced population/inflation by double digits.

    I know that state spending is not the topic here, but you are trying to use this article to impugn my credibility on the MTA, rather than debate the merits of labor reform within the MTA using the data I have provided, which is a strange tactic to use.

    I will write more regarding Ben’s thoughtful post this afternoon.

    • Alon Levy says:

      re labor reform, the problem is that the data you use doesn’t align with the conclusion. You say that “Five years ago, the MTA’s labor costs were $5 billion. Now they are nearly $7 billion. The big drivers have been pension and health-care costs, up 42%.” Health care costs are exploding nationwide – per capita health spending in the US went from $4,200 in 2002 to $7,000 in 2007. And for those of us who believe past contracts should be honored, rather than broken at the whim of a legislature supported by populist frenzy, cutting pension benefits to current retirees is a non-starter. 30-year-old workers can get another job, but what’s a 65-year-old ex-worker going to do?

      There are other weird things in the article – for example, you suggest having the legislature unilaterally change the contract. Fine, but the union’s going to strike in response; the legislature had better be prepared for dealing with that. You compare the MTA with the public school system, which has seen rising teacher salaries, while calling for wage freezes at the MTA. And your comment about the Ravitch plan is “what the governor wants is to impose $2 billion in new taxes and fees… It’s hard to see how that will help create jobs in New York” – no evidence is presented. (Besides which, what does the Ravitch plan have to do with labor?)

      And as for Florida, tax subsidies either count as spending or they don’t. If they don’t, then you can use Tax Foundation data, which says that in fiscal 2007, Florida ranked 49th in per capita spending, Arizona 41st, and Nevada 47th. The rise in spending in Arizona and Nevada was from an already low base. It wasn’t even that big – between 2002 and 2007, per capita spending rose 27% in Arizona, 22% in Nevada, and 20% in Texas. I don’t think there’s a tipping point at 21%.

      • Nicole says:

        I have never said or written that any current contract should be broken or abrogated. Contract law is important.

        The legislature should change the terms for future employees only, as I have clearly noted in all of my writing.

        The reality is that, absent labor reform, rising labor costs, by three years’ time, would eat up one-third of revenue from the Ravitch plan.

        This cannot be helped, because, as said above, we cannot change the terms of past promises. But we must do something about the future.

        If future contracts look like current contracts, the MTA can only cut labor costs by cutting people.

        This doesn’t make any sense from the consumer’s perspective. A subway rider would rather have a token booth clerk earning retail wages competitive in New York City — i.e. what the Gap, etc. pays for similar skills — rather than have no token booth clerk at all.

        Currently, booth clerks earn an average of $24, plus benefits that add another $12 or so an hour.

        They can retire at the age of 55, and they get health benefits that are nearly free.

        Such benefits are not available in the private sector anymore.

        Of course, skilled workers — track workers, conductors, etc. — should be paid competitive wages, likely what they earn now. We see, in the Colgan Air disaster, what happens when the private sector takes cost-cutting to extremes.

        But there must be a middle ground.

        Public-sector workers should not expect benefits that are no longer available anywhere else unless they are willing to pay for them. It is unacceptable for taxpayers to shoulder this open-ended liability for benefits that they cannot expect themselves.

        This is not a matter of whether people work hard or not. Of course transit workers work hard — just like people do in the private sector, where such benefits are not available.

        More generally — transit advocates should decide whether they are advocates for a twenty-first-century mass-transit system, or advocates for a mechanism through which taxpayers dispense money to politically connected unions.

        When they don’t speak up against the latter, they are only hurting transit.

        Transit advocates who don’t speak up about our fraudulent Medicaid plan, similarly, are only hurting the transit system, as well.

        A dollar that goes to a politically connected Medicaid contractor is a dollar that does not go to transit. It is an open secret that our program is so expensive because it is an avenue for billions of dollars worth of fraud.

        I do hope that the next person who dismisses me by calling me a fanatical Republican, etc., will at least do everyone courtesy of answering this one question at the same time:

        Should a token-booth clerk, whose job duties are similar to that of a retail worker, have the privilege of retiring at the age of 55, and have the privilege of paying next to nothing for healthcare for life, with those benefits paid for by the actual New York City retail worker in the form of higher fares and worse service?

        Thank you.

        • Alon Levy says:

          Most workers get health insurance from their employers. The insurance is sometimes terrible, but it’s there; for the alternative jobs that exist for trackworkers, sandhogs, train operators, etc., the insurance is usually very good. It’ll cost a lot less to provide such insurance if American health care had the same costs as French health care, but it doesn’t.

          Token booth clerics aren’t the majority of MTA workers. They’re a holdover from a previous era, and the MTA is going ahead with slashing them while retaining other jobs. In principle the MTA could provide a two-tiered insurance policy, with better rates for trackworkers and worse ones for token booth clerics, but I doubt the cost savings would be worth it. In principle the MTA can treat all of its workers the same way Wal-Mart does, but you should expect it to lead to lower productivity, more accidents, and hog farm-style lawsuits.

          As for the legislature, it’s up to the union to choose how to react. It could strike in response to the new laws – thw hole point of a union is that . Some unions have accepted slashing benefits for new workers – after all, old-style unions exist to protect existing employees, not new ones – but not all have.

          I’m not labeling you as a radical Republican, by the way – just as someone who justifies the official Manhattan Institute line. It’s just that overall, the article that Ben quotes from comes off as trying to justify previously held conservative beliefs, rather than starting from the evidence and concluding that conservative solutions are right. (The gratuitous dig at the Ravitch Plan is the main example – Ravitch recommended bridge tolls, a new payroll tax, and staff cuts; of these, two made it through and one was dropped because of legislative stupidity.)

  5. Ed says:

    The MTA’s pension problems are an absolute nightmare waiting to happen and explode – read Littlefield’s analysis for a detailed and depressing take

    http://bit.ly/sE6r3

    • Fairness says:

      It’s not a MTA issue with the pensions it’s a NYS issue. Employees of the MTA aren’t all under the same pension system. TA employees are under the city pension plan and the LIRR and MNR get federal pensions.

      It has been reported many times that TA employees pay into there pensions for there enitire career while uniformed services only pay in for 10 years. And they retire earlier and get MUCH better retirement packages. It seems to me that the TA workers get shortchanged by being part of NYCERS. They aren’t city employees so I never understood why they are part of the city pension system. But now I so understand because they need the money that they contribute to take care of the NYPD and NYFD retirees.

  6. Rhywun says:

    I’m getting a little tired of hearing the argument that because the MTA’s unions aren’t the most generous unions in the world, one isn’t allowed to criticize them.

    Not all of us are “union” people. Especially public unions who periodically, and illegally, go on strike and bring the city to a standstill, in order to increase their benefits which are already far more generous than the average worker.

    Finally: let the other side speak, please, without shouting them down.

  7. Whatever says:

    Typical attempt of painting MTA’s blue collar work force as undeserving of their benefits. Seriously stop spreading this garbage.

    • Nicole says:

      Again, never have I written that any worker is “undeserving.”

      It is interesting that people will make up their own arguments and shout them down, rather than respond to the points actually made.

      In this day and age, should public-sector workers be able to retire at 55 with fully guaranteed benefits?

      If so, is an uncompetitive transit system an acceptable price to pay? And is it OK to ask the MTA’s working-class customers to pay more to fund these benefits?

      • petey says:

        “In this day and age, should public-sector workers be able to retire at 55 with fully guaranteed benefits?”

        yes.

    • Rhywun says:

      It is the city’s job to negotiate wages and benefits for these workers. As a city taxpayer, I am perfectly entitled to express my opinions on this matter, so no I will NOT “stop spreading this garbage”.

  8. Al W says:

    Thanks for posting this Ben. Sometimes, we need to be reminded that there are multiple elephants in the room.

  9. AlexB says:

    Whoa! I got to this post from a link from the post from today, May 18th. Fantastic comments.

    Doesn’t it all boil down to how we define economic justice? Some people (Nicole) define it as what the market will bear. Justice is the intersection of supply and demand in the labor market. Paying more than that is unfair for everyone else in that market, particularly if it’s on the back of the taxpayer. The best way to raise wages is to increase the demand for labor, not to require arbitrarily that we spend more on it.

    On the other side is the notion that economic fairness is more tied to a living wage and cradle to the grave support. In this notion, the role of the government is to promote the ideal of employment, not take advantage of the reality on the ground. After all, the gov’t is by and for the people, not for the bottom line. Ticket booth workers get paid more than Gap workers because Gap workers are not being treated fairly, for example.

    I think the everyday New Yorker who supported the TWU during the strike did so because they were tired of seeing their own benefits and/or standard of living go down (even though supporting the TWU made their own costs go up.) Freakonomics makes the interesting point somewhere that the everyday person is more likely to toss a coin to a beggar than the bossman, but I guess you don’t get the be the boss by giving your stuff away.

    So the question boils down to: Do you think the MTA should pay its employees what it can to save taxpayer $$ or should it use more taxpayer $$ to change the standard of compensation for the low skilled and/or moderately skilled workforce? Is it possible to provide a living wage and an efficient transit system at a reasonable cost?

  10. Mark says:

    I think the average man on the street is likely to support TWU demands because he doesn’t really comprehend the packages that MTA workers are getting, especially versus the packages that non-MTA workers (private sector) are getting.
    An MTA worker retiring at 55 and receiving pension benefits until he dies, assume that is the average life expectancy in the US, has a *pension* benefit of just over US$1 mln. That does not include health benefits, which could easily tack on another few hundred thousand.
    Take into consideration that an MTA worker’s paycheck does not equal a private sector paycheck, as they contribute very little (I think 10%) to the cost of their pension while private sector workers contribute over half of the cost of their pension, if their employer helps out at all, and health care benefits are also heavily subsidized. So their bottom line, while they are working, is greater at every income level than a corresponding private sector worker.
    I believe that if the average man on the street were asked whether the TWU’s demands were fair and had that knowledge he would think otherwise. The ‘Fourth Estate’ -the press -does an extrmely poor job of educating the public as to what is being done with their tax dollars.
    But given the current economic situation, the lower tax bases, sinking stock market and spiralling health care costs, what the TWU is actually doing is cannibalizing their own future. No system can sustain itself under such a huge burden, so given the overly generos packages that have been given to workers over the last few decades and the impossibility of raising tax revenue materially, either these benefits will have to be slashed for future workers or MTA staffing will have to plummet.

  11. Joe says:

    Since the take over of the private bus co 5 years ago and some of the non rep employees still have no pension at all, and still get MUCH less pay then there MTA counterparts in which they work side by side with.

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