The trouble with net zeroBy
The MTA’s budget is a curious thing. It’s a multi-billion-dollar behemoth with nearly no room for maneuvering. While a recent uptick in the economy has resulted in a slight surplus and a rosier outlook, recent developments from Long Island have cast a shadow over a key fundamental assumption. That assumption is the net-zero labor increase, and that development is a substantial award from a Presidential Emergency Board to the United Transportation Union.
The story is a familiar one: The UTU and MTA had been at odds over wage increases and a long-term contract. The MTA wanted to hold the line at a net-zero wage increase with raises in out-years and benefits contributions from retirees. The UTU didn’t want to embrace any of that. So under the Railway Labor Act, President Obama ordered a PEB to convene, and the award issue arrived last Saturday. It was bad news for the MTA though the award is non-binding.
The three board members recommended that the LIRR pay wage increase totaling 18.4 percent over six years (2.9 percent per year) and employees begin contributing to health insurance premium costs. After factoring in the recommended employee health insurance contributions, the board’s recommendations would still produce net wage increases of 2.5 percent per year…
The board’s wage recommendations are retroactive to the first year of the contract dispute, which has been ongoing for more than three years. The board rejected MTA’s demand that workers accept three years of net zero wage increases, followed by two, two-percent increases over five years. The board also rejected MTA’s demand for major concessions in pensions, including a permanent five percent employee contribution. The PEB also rejected MTA’s demand that retirees begin paying for health insurance and that railroad retirement disability pensions be offset by LIRR’s pension payments.
PEB recommendations include that employees begin contributing to health insurance premium costs, beginning at one percent of 40 hours straight-time pay, at the contract’s opening date of June 16, 2010, and increasing by .25 percent increments each year thereafter. MTA had proposed larger employee contributions, while the affected unions had proposed no contributions from current employees.
Procedurally, the MTA and UTU now have 30 days — or until January 20 — to work out a deal, and then either party can request a second PEB hearing. Following that hearing, absent an agreement, the unions could legally strike. This clearly differs from the situation with the TWU, as the Taylor Law prevents such a strike, but Local 100 leaders are supporting the UTU in any action it may take.
From a substantive point, the key line in the PEB report it this: “It simply cannot be concluded that the MTA’s current financial position is one in which it is unable to pay for wage adjustments that are otherwise warranted.” In deciding as much, the Board pointed to Pay-As-You-Go resources and the MTA’s ability to borrow more money for wage increases. This is analysis that seems to exist in a short-term vacuum with no nod to context, but it’s also an argument we’ve heard before in the labor context.
For the MTA, this is a tough one. The Board has already announced that planned fare hikes in 2015 and 2017 will be lower than expected, but again, that decision rested on an net-zero wage increase. As the LIRR and UTU head toward a compromise, the MTA’s options will narrow, and staffing reductions may become necessary. Worker morale across the board is low, and strife between the unionized workers and management would be tremendously costly to riders.
We’ve seen this movie end before. The MTA’s budget outlook improves; labor demands increase; riders pay more. Until there is a fundamental change in work rules, pension contributions or labor practices, it always ends the same.