Home MTA Economics How much is that labor agreement in the window?

How much is that labor agreement in the window?

by Benjamin Kabak

For the past few years, through the tenures of three different MTA heads, “net zero” had become a mantra. Without a net-zero labor increase, the MTA’s budget would be deeply in the red with the costs expected to fall on the riders in the form of service cuts, fare hikes or both. As late as February, the MTA warned of steep fare hikes if they couldn’t toe the net-zero line. The Citizens Budget Commission has long since endorsed the approach, and the MTA and TWU were at war.

Then, suddenly, it was election season, and the MTA and TWU were, with the help of Gov. Andrew Cuomo, shaking hands and best buds. Without exacting much in the way of labor reform — and certainly without anything close to net-zero — the MTA gave the TWU a new contract with only a few concessions. The raises — 8 percent over five years — are deserved, and there are some givebacks. But ultimately, the MTA’s labor costs are going to increase by $411 million through 2016. That ain’t net-zero.

In a document released yesterday to bond investors [pdf], the MTA offered the public its first glimpse at the ramifications of the deal. The Memorandum of Understanding won’t be released until after the TWU votes on it, and such a vote isn’t likely until after next week’s MTA Board meeting. So what we know is that the MTA is on the hook for a lot of money. The deal includes retroactive payments of $126 million and a current bump in labor expenses of around $55 million. In 2015 and 2016, the MTA expects to spend $116 million and $114 million respectively, though some experts — notably Nicole Gelinas — believes these estimates to be low.

To cover some of the costs, the new deal includes an increase in the amount of employee contributions to health and other benefits as well as a new “wage progression schedule.” Still, someone has to come up with $411 million, and MTA Chairman and CEO Tom Prendergast insists it won’t fail to the fare paying public this time around. So how is the MTA going to pay? Read it (and weep):

MTA anticipates that the onetime payment for retroactive wages in 2014 will be funded from monies derived from released 2013 general reserves budgeted for voluntary deposits to the MTA Long Island Rail Road Plan for Additional Pensions that would have reduced the unfunded liability and future expenses. Increases in current year and annual ongoing costs are anticipated to be paid from funds budgeted for voluntary deposits to the MTA Long Island Rail Road Plan for Additional Pensions, and a portion of monies earmarked for voluntary deposit into the OPEB trust for future retiree healthcare costs.

It gets better. If other unions that do not have contracts in place sign similar deals, the MTA would have to find another $300 million. This money, the agency says, will come from voluntary deposits into the OPEB trust and a reduction of PAYGO capital funds of approximately $70 million. To say this doesn’t fall on the riders is sleight of hand accounting. In fact, this entire budget is sleight hand accounting.

But now we know: The MTA is robbing future riders to pay for the present. It doesn’t bother Cuomo because he’ll be gone from Albany before the bill comes due, but for the rest of us, this isn’t a good deal. We may not pay now because the MTA will keep those looming fare hikes low, but give it a few years. We the riders will be paying then or else the system will suffer.

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Matthew April 24, 2014 - 1:10 am

When will we get a public advocate for the MTA?!?

Larry Littlefield April 24, 2014 - 9:17 am

They don’t care, because future generations will pay for it.

Younger TWU workers will be paid less in their early years, to generate raises for Generation Greed members cashing in and moving out.

The retiree health trust fund will be raided. Does that mean in the future retiree health benefits will go away, or mass transit? As long as they are not affected, Generation Greed does not care.

As far as I’m concerned, the TWU is now in the evil bin with the rest of the unions. As for MTA management? Planning to live in NY long term? Learn to ride a bike.

Larry Littlefield April 24, 2014 - 9:55 am

May I say further that the big issue is generational equity, and what you see here is just one of a million decisions created by the same values. You see transit, others see education, other see other infrastructure, still others old age entitlements that younger generations will not get. But the meta issue is the same.


And the catch phrase is Generation Greed. Start using it, even if you are in it. Especially if you are in it. Stand up for your own children against your peers.

Bolwerk April 24, 2014 - 1:38 pm

Just curious, but what do you think the contours of Generation Greed are?
People like Paul Ryan already are Gen Xers.

Larry Littlefield April 24, 2014 - 2:17 pm

The first half of the baby boom and those before, roughly those born 1930 to 1958 or so.

Which was followed by Generation Apathy, including those my age. “Let’s just worry about ourselves because we’re screwed anyway.” Which is why you get folks like Ryan. Folks my age and in Gen X are going to find out how apathy worked out.

nbluth April 24, 2014 - 10:30 am

You mean to tell me that unions seek maximize rent extraction rather than minimize taxpayer expenditure? Next you’re gonna be saying that engineering consulting firms extract as much profit as possible rather than build efficient infrastructure! I’m shocked I tell you, shocked! Who knew that in the absence oversight these actors would pursue their own self interest???

Josh April 25, 2014 - 12:04 pm

If I’m not mistaken, the point of the article isn’t that the TWU seek the maximum compensation they can, but, rather, that the MTA and Cuomo caved in to their demands rather than stand up for the rest of the public in the manner that they should, boasting about the fact that it wouldn’t lead to additional fare hikes in the near future while burying the fact (highlighted in the block quote above) that the money to pay for these raises would instead be essentially borrowed from the MTA’s future obligations. They’re screwing future riders to look good now.

Nathanael April 25, 2014 - 2:40 pm

Look to other cities and states. What’s being done in most states is to cancel the municipal pensions, retroactively. This is, unsurprisingly, popular.

So the MTA is funding these wage increases by not funding the LIRR pension plan… what do you think will happen to the LIRR pension plan in the long run?

One wonders if this is actually Cuomo’s plan.

Larry Littlefield April 26, 2014 - 7:43 am

The only way this future selling deal, yet another future selling deal, is anything but yet another outrage is if the TWU agreed to take over running the LIRR, which would be well and fairly terminated.

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