Transit analysts and advocates have engaged recently in an interesting, if wonky, battle over the state of the MTA’s finances. Taken as a whole, these arguments lead to the conclusion the MTA is both over- and under-funded. It doesn’t have enough money but can’t spend the copious billions it does have efficiently or quickly enough to warrant giving it more. It is stuck between a proverbial rock and a hard place.
On the one hand, the MTA has access to around $30 billion in capital funding (though the dollars will materialize through debt service and other questionable financial practices), and on the other hand, $30 billion at the MTA’s current spending levels and efficiencies isn’t enough for the agency to do everything that needs doing. Two recent articles underscore these tensions, but the fix remains elusive.
The first comes from The Post. Former MTA Chairman Peter Kalikow had some unkind words for his one-time ally Gov. Andrew Cuomo over MTA financing:
“It’s not right. Cuomo is wrong. He’s nickled an dimed the MTA on the capital program,” Kalikow told The Post, in rare criticism of the governor from a former MTA chair. He said while Albany has promised $8.3 billion toward in the $27 billion five-year capital plan, the state has handed over less than two billion dollars of the promised funds so far. “They have not funded it properly,” Kalikow said. “If you get Prendergast the money needed, he could do the job.”
It’s not quite clear how much Kalikow wants, but there is a sentiment that the MTA needs more than $30 billion to keep things running smoothly. One problem with that argument is that the MTA’s spending practices are woefully inefficient, and cost control is something I’ve covered extensively in the past. The other is that it isn’t clear if the MTA can spend more than what it has. After a while, there are only so many qualified contractors in New York City who can do the work the MTA funds. But the former point is more important than the latter. Should the MTA get more money before it improves its spending practices?
The second article is even wonkier. Here’s The Wall Street Journal on how recent accounting changes have exposed the MTA’s long-term pension obligations:
New accounting rules are shining a light on more than $7 billion in pension liabilities facing the Metropolitan Transportation Authority. While the disclosures won’t force the MTA to raise tolls or cut service, they quantify the authority’s tab for commitments to pay retirees, and some critics detect a mounting potential burden on riders and taxpayers. “I would hope there would be some sticker shock” with the pension-cost reporting, said Charles Brecher, director of research at the Citizens Budget Commission, a civic group based in Manhattan. “You want to inform people about the cost of these promises.”
The MTA pays steeper costs for employee pensions and other retirement benefits than its peers in London and Paris, Moody’s Investors Service analysts said in March report. For each ride, the MTA paid $3.06 in overall personnel costs in 2014, compared with $1.05 for Paris and 75 cents for London, according to the report. Nearly $1 of every MTA ride goes to health care, pension and retirement costs…
the MTA’s labor-related costs could reduce its budget flexibility and compete with capital improvements, the Moody’s report noted. An MTA spokeswoman said the market understands the authority’s cost structure “and still rates our bonds highly.” A downgrade in the MTA’s bond ratings could increase its borrowing costs…The relatively high cost of the MTA’s pension liabilities could increase pressure to raise fares and tolls or cut service. “If you have some downturn in your revenues, those are expenses you can’t cut so all the cuts have to come out what’s left of your budget,” said Marcia Van Wagner, a Moody’s analyst.
The MTA’s pension costs have been a long-standing issue that few people like to take up because of the explosive nature of issue. In the article, TWU President John Samuelsen defends the MTA’s pensions for its drivers as part of a “dignified retirement.” He doesn’t address how workers pad their pensions through overtime in their final years or how employers across the nation outside of the public sector have essentially eliminated pensions entirely. Rather, he offers us this defense of the job: “They,” he said of financial analysts, “would pee themselves if they had to drive a bus up Utica Avenue for an eight-hour shift.” It’s part of a straw-man argument that cuts both ways.
The MTA’s pension obligations are a part of a broader conversation about how the MTA spends its money. The pension dollars will eventually come out of fare revenue, and the fares will go up to support pensions. Meanwhile, the capital dollars — which should fund more than they do — are bandied about by politicians as part of a game. The MTA can’t spend the money it has wisely and can’t access the dollars it needs properly. Talk about being stuck between a rock and a hard place.
19 comments
“For each ride, the MTA paid $3.06 in overall personnel costs in 2014, compared with $1.05 for Paris and 75 cents for London, according to the report.”
This is a stupid comparison. The UK and France have much larger state contributions to health care and pensions. The right comparison would be to the CTA, MBTA, DC Metro, SEPTA, etc. I haven’t seen figures from the last couple of years, but the MTA has generally been in the middle of the pack.
From the article.
“To be sure, as the report noted, French and British taxpayers foot more of the bill for social-welfare benefits such as health care and pensions.”
That’s the point. EVERYONE IS EQUAL there. You don’t have some politically connected groups with one year in retirement for each year worked, while others get far less (Social Security at 67, Medicare at 65, both likely to face cuts).
The French system requires much higher taxes than unionized MTA employees would be willing to pay for the serfs to have what the French get, let alone what they do. And it is still underfunded, requiring cuts for EVERYONE because they are ALL IN THE SAME BOAT.
It’s the executive/financial class, the political/union class, and the serfs.
State contributions paid for by…payroll taxes on workers, including at transit agencies!
And even if we’re assuming that agencies pay nothing for healthcare and pension (which is…not true), how does that explain London’s personnel costs being $0.75 per ride and the MTA’s being $3.06? You really think that 80% of labor outlays goes to benefits??
The right comparison would be to the CTA, MBTA, DC Metro, SEPTA, etc. I haven’t seen figures from the last couple of years, but the MTA has generally been in the middle of the pack.
Of course the MTA would prefer to be compared to a bunch of smaller American cities’ systems, with less crowding and the same poor management.
Yeah, actually, given what I know about the COMPLETE DISASTER of our health care funding NON-SYSTEM in the US, I think 80% of labor outlays goes to benefits.
We need single-payer health care and we need it about 100 years ago.
Pensions are more of an burden for the NYC schools, the NYPD, the NYFD, the LIRR and Metro North than NYC transit.
That said, they deal they have is one year in retirement for each year worked. But the real crusher was the retroactive increase of 2000, which drastically increased the pensions of the long-retired — those who went on strike, cashed in, and had the system fall apart while fares soared. A 25/55 pension plan is very expensive if you pay for it over the whole 25. It is crushing if you suddenly increase benefits, meaning there is no prior money earning returns to pay for it.
“The right comparison would be to the CTA, MBTA, DC Metro, SEPTA, etc.”
Not the serfs? The executive/financial class only compares itself to itself too. The one percent and the five percent.
In any event, for some non-ideological data from the Census Bureau over 40 years for all pensions (NYCT is part of the NYC pension system).
https://larrylittlefield.wordpress.com/2015/06/30/sold-out-futures-public-employee-pensions-census-of-governments-data/
Also, never forget that while debts, rather than pensions, are probably going to destroy the transit system this time around, a retroactively awarded 20/50 pension was a big part of what destroyed the subway system in the 1970s, as chronicled in this book.
https://www.amazon.com/While-America-Aged-Bankrupted-Financial/dp/1594201676
The “horrific misery” of having to work until 55 years old, and one year for each year in retirement, was imposed on newly hired employees, but it still took the pension fund decades to recover from the earlier deal. But when it did, those massive pension increases for the 20/50 crowd went through.
And then, as the first workers hired under Tier IV approached age 50 and were faced with having to work five years longer than those hired previously, the TWU went on strike in 2003. Even though its members are paid vastly more, retirement benefits included, then the tax and farepaying serfs who fund them.
Meanwhile, the LIRR pensions are vastly more expensive due in part to all the disability fraud LIRR workers and managers seem to have thought themselves entitled to over the years. A mafia, not a railroad.
Moreover, compiling that database was a massive job. The Census Bureau’s governments division has stopped producing its “DAC-REX” files of all data items for all years by state, I had to download and move into place very data item for every state for every year after 2008. As well as every year for the City of New York.
Don’t just look at the charts or read the post. Download the spreadsheet and look at those tables, which record the extent to which each state (and the City of New York and the rest of New York State separately” have futures that are sold out by past pension increases/underfunding, debts, and inadequate past infrastructure construction.
It’s what Generation Greed doesn’t want discussed at the state/local level. To go along with everything under Omertà at the federal level, and in the private sector.
We are facing a serious problem in this country when these pension costs really come fully due. Many arguments against universal healthcare or state-funded pensions revolve around “I don’t want to pay for XYZ for someone else”
Sooner or later, the rabble are going to realize they’re *already* paying for those other people, have been for some time, and worse, they could be paying less.
As a worker in the private sector, I’m responsible for paying the “socialist” pensions of public sector workers, *AND* 100% funding my own retirement. And yet, we argue in favor of this system? Why don’t we all pay a small amount for all of us to have some basic retirement, and if we can save more, we can do that in private as well.
If we had only known 240 years ago the depths of stupidity that one could argue for in the name of “freedom”
“Why don’t we all pay a small amount for all of us to have some basic retirement, and if we can save more, we can do that in private as well.”
It’s known as Social Security and Medicare. But those under 58 or so are likely to end up with medical marijuana followed by legal assisted suicide, because Generation Greed didn’t want to pay for the former and was against any limitations on the latter (for themselves) no matter how costly and useless.
So what do we do — shaft the public employees who were promised pensions as part of labor negotiations, going back years or decades? Stiffing people out of their promised pensions is not a solution. And the fact that lots of other workers no longer get pensions is not a reason to take them away from anyone else; that’s race-to-the-bottom thinking, and a prime reason that the standard of living for the middle class has eroded as much as it has in recent decades.
That sort of language make sense in other states, where pensions were never retroactively increased and pension funds are in trouble because of taxpayer underfunding. Not in New York, where taxpayers have paid more for pensions than anyone else.
“Labor negotiations going back decades?”
Pensions were specifically excluded from labor negotiations by the Taylor law. What did the workers who suddenly had their pensions increased in 2000 do for the extra money when they were ALREADY RETIRED?
The article is about the MTA as a whole, and I expect the LIRR and Metro North pensions, which aren’t reported about as part of general data, are worse than we know.
Meanwhile, never forget that the TWU went on strike in 2003 to have pensions retroactively increased AGAIN so that its members would only have to work for 20 years before getting pensions.
“That’s race-to-the-bottom thinking.”
If everyone had what the TWU and other public unions had, it wouldn’t be worth as much, because everything would cost more. Unionized public employees vote to cut the pay and benefits of private sector workers every time they go shopping. And the were against Obamacare on “I’ve got mine jack” grounds.
No it wouldn’t and no they didn’t.
Yes they did, via AFSCME in Washington, as a result of the tax on gold plate insurance plans intended to curb health care cost inflation and subsidize health insurance for those getting nothing at the time.
What’s the main CPI since Obamacare was implemented and the more specialized healthcare index? How long do we have to wait for the effects to be measurable?
Obamacare caused a one-time drop in premiums. Premiums promptly started rising at 10-20% every year again. And health care plans got worse and worse.
Obamacare was a total failure, with one exception: the Medicaid expansion, which worked great.
Single-payer works. All this other crap doesn’t.
Yes it would. Corporations are greedy. Cut into their bottom line through exorbitant pension costs, and you think they’ll just write it off like a charity? Nah, they’ll find a way to make *you* pay for it.
London and Paris aren’t exactly right-wing dystopias, yet their pension costs are 1/4 to 1/3 what they are in NYC. It’s not a race-to-the-bottom. It’s a race to reasonableness, a race to not bankrupting public transit. Enough is enough.
And this is why the MTA unions are scum whose power needs to be broken. We pay TRIPLE the pension costs of Paris, and four times more than London. We’re talking about progressive, liberal cities here—not Texas or Alabama. The MTA unions are too powerful and the politicians are too beholden to them. The unions are in no way progressive—they make life miserable for the working class commuter by sapping the MTA’s finances, all in order to fund Cadillac pensions for a select, lucky few who can get MTA jobs. It’s sick.