MTA-TWU Agreement: What’s the Plan Now, Governor?

The MTA’s financial situation became much murkier yesterday as Governor Cuomo announced that retroactive raises will be part of a labor agreement between the transit authority and the Transport Workers Union.

Photo: TWU
Senior Cuomo aide Howard Glaser, MTA Chair Tom Prendergast, Governor Andrew Cuomo, and TWU Local 100 President John Samuelsen at yesterday’s announcement. Photo: TWU

Up until yesterday’s announcement, MTA leadership had insisted that the authority’s financial health depended on “three years of net-zero wage growth.” Keeping labor costs flat was the key assumption behind the MTA’s financial plan.

Now the validity of the MTA’s financial plan is in doubt.

TWU members will receive raises of one percent for the first two years and 2 percent in each of the final three years. Since employees had been working without a contract for two years, the first two years represent retroactive raises.

MTA chairman Tom Prendergast insisted that the wage deal was “within the financial plan,” and that no fare hikes or service cuts would be necessary. But it is difficult to reconcile Prendergast’s claim with the MTA’s publicly available financial information.

The wage increases will likely cost the MTA between $200 million and $300 million a year, an amount that exceeds the agency’s projected cash balance for 2014 and beyond. The MTA financial plan projected a $64 million surplus by the end of 2014, falling to $6 million by 2015 and a $255 million deficit by 2017 [PDF].

So how will the MTA balance its budget without fare hikes or service cuts? Should we assume that the MTA leadership and Governor Cuomo have a plan?

One possibility is that these wage increases will be at least partially offset by other labor-related savings. Yesterday’s agreement included higher employee contributions to health care, rising from 1.5 percent to 2 percent. But this is likely to result in less than $10 million in annual savings. Other potential sources of labor-related savings, such as work rule changes, were not mentioned.

But we don’t have the final details of the labor agreement. As Gene Russianoff of the Straphangers Campaign said in a statement, “The devil is always in the details… we reserve final judgment until we study the management-labor contract.” Perhaps other cost-saving measures will be announced in the coming weeks.

Other cost savings, not related to labor, will be difficult to achieve since the MTA has been aggressively cutting costs over the past four years. Plus, the MTA financial plan already accounted for “unidentified” efficiencies that would result in $21 million in savings in 2015, climbing to $56 million in 2017. The MTA would need to find even more savings beyond this “unidentified” target in order to balance its books.

Another possibility is that the tax revenue that is used to support transit will increase enough in coming years to pay for these higher labor costs. But if this is the case, why isn’t it reflected in the MTA’s most current financial plan?

Perhaps Governor Cuomo will increase state aid to the MTA in 2014 and beyond. While possible, Cuomo has recently been more inclined to take money from the MTA, including $30 million during the most recent budget cycle.

In any case, this is Governor Cuomo’s responsibility now. He took the opportunity to hold a press conference and tout his skills as a fiscal manager.

This isn’t to say that the Governor is wrong for granting raises to MTA employees, but rather that he was wrong for failing to plan for these raises.

He made the decision to press the MTA board to lower tolls on the Verrazano Bridge, costing the MTA $7 million. He diverted $30 million in MTA funds to cover other state responsibilities. At the time, there was grumbling that these decisions would weaken the state’s bargaining position with the TWU.

So, what’s the plan now, Governor?

  • Charles

    What’s the plan now? Raise fares and cut service? That doesn’t ever seem to cost anybody politically.

  • Congratulations to the workers for getting their much-deserved raises. And I don’t mind at all if fares go up in response to this.

    Of course, this should not be taken as a defense of Cuomo and his unconscionable raid on transit funds. If not for that, then the upcoming fare hikes would be less, and the MTA would be in much better shape for the future.

    But we need to realise that fares are extremely inexpensive, and that they can bear a great deal of increase. Most important, we who benefit from the heroic work of transit workers should never be so short-sighted as to begrudge our fare dollars being used for the raises of these people who do our City so proud.

  • Bolwerk

    The working poor and indigent, who ain’t exactly getting raises, might mind.

  • Joe R.

    Yes, exactly. For working professionals a fare increase is a rounding error. For someone making $2 an hour it could mean the difference between eating that day or not.

    Once we get rid of Metrocards maybe we should consider an income-based fare to alleviate the effects of future fare increases. If you don’t make much it could be very low (or even zero). If you make more it could be higher, perhaps up to a maximum of $5 or $6 for those making over $200K. Right now the subway fare amounts to a regressive tax on the working poor and a pittance for the very wealthy. It shouldn’t be that way.

  • This is why we need to fund transit exclusively through taxes, which in theory are progressive.

    But that ship has sailed (if you’ll pardon the metaphor which uses a different mode of transport); so we’re left with fares. Unfotunately, we as a society have become accustomed to fares that are entirely too low. Graduated yearly increases are appropriate until the fares reach a more sustainable level.

    It’s true that this hits poor people hardest. Everything with a price hits poor people hardest; for this reason I am no defender of the market. But all subway and bus users simply must begin to get used to apportioning a greater amount of money to the operation and upkeep of our great transit system.

    Income-based fares would be a great idea. Entirely undoable, given the reigning ideological orthodoxy. But a great idea.

  • Bolwerk

    Fund welfare and healthcare through taxes. Raises may be justifiable at this point, but our transit system is still overstaffed. Benefiting the people with cushy, dignified jobs at the expense of the most vulnerable people in society is just abhorrent. And that’s exactly what the “liberal” Cuomo did.

  • lop

    The subway fare should be whatever it costs to run the subway, with premiums to control crowding when necessary while system expansions are constructed, subject to practical issues regarding fare collection. The MTA should not act as a welfare agency, neither for its employees, nor for its riders. If the poor cannot then afford to get around, the answer is to increase welfare payments, funded through an equitable system of taxation.

  • Generally right. But, note that providing secure jobs with good pay and pension does not amount to acting as a welfare agency. This is what all workers everywhere should have; more power to those workers who have been able to retain this through their organised efforts. Equally important: shame on those workers who have disdain for unions and who deny the basics of the class struggle, and who are therefore complicit in their own suffering.

    Also, if we had a society that accepted the need to fund welfare at a decent level, we’d also have one that accepted the need to fund a service as essential as transit through our taxes. Both of these goals are frustrated by the same orthodoxy.

  • Andrew

    I absolutely agree – as long as the same applies to the roads and streets, including externalities.

  • Joe R.

    You also need to look at fare collection costs. There’s a veritable army of people involved maintaining the fare collection apparatus, policing fare evaders, etc. I read somewhere (although I don’t know if it’s true) that it costs the MTA more to collect fares then it gets back at the fare box. If that’s true, we’re better off with a “free” system funded via income taxes. Remember unlike normal goods and services, transportation is essential to the functioning of the economy. Moreover, we should incentivize desirable behaviors (like taking transit instead of driving) by either making transit cost less (ideally it should be funded via general taxes, not fares), or making driving cost a lot more. Right now we’re doing the opposite by indirectly subsidizing driving with free curbside parking, toll free bridges, etc.

  • Nathanael

    If the MTA manages to hold a tough line with the LIRR unions, that should make up the necessary savings.

    The LIRR unions are awful featherbedders and don’t deserve a penny:

    http://www.thelirrtoday.com/2013/10/lirr-unions-helping-or-hurting.html

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