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Runaway Pensions Squeeze Mass Transit

Bloated pension and union labor costs are threatening public transportation across the country, says a story in the Wall Street Journal. Budget shortfalls have pushed transit agencies from Pittsburgh to Detroit to consider massive cuts and fare increases. Many have begged cities and states for help, but given current municipal and state budgets, there’s not much help to be had, and even if there were, governments are reluctant to send any more money to public transit agencies until they deal with the causes of their budgetary woes.

Those causes are familiar. Pensions and other benefits, in many cases dictated by union agreements, are eating up more and more of the budgets. When faced with the choice between cutting labor costs (which in many cases requires wresting concessions from unions) or cutting service, many transit agencies are opting to cut service.

Allegheny County in Pennsylvania is a particularly instructive example:

Retiree health care, pensions and the like, a problem for many transit systems, made up 19% of the 2011 operating budget of Allegheny County’s system, up from 6% in 2003. The port authority—which lost millions of dollars in anticipated state funding when the federal government in 2010 rejected a plan to put tolls on Interstate 80—faces annual medical costs of $11,112 per retiree, compared with $7,054 at the agency that runs Philadelphia’s larger system. […]

“Unless the union is willing to make major concessions on their retiree benefits and current wages, I don’t think you’ll ever solve this problem,” said Jake Haulk, president of the institute, who said he doubts there would be much support for more taxes to boost transit funding.

Similar scenarios are playing out, albeit on a smaller scale, in cities and towns around the country.

This is a shame. American towns and cities need mass transit. Public transportation is a boon to local economies and can help cities revitalize neglected areas. The young, the poor, and the elderly need the mobility public transit provides. For those who drive, less mass transit means more cars on the road, which will exacerbate the already serious problems of congestion and pollution in more crowded cities.

But for public transit to work, fares must be cheap; trains and buses do no good for the poor, the young, and the old if they are priced out of the system. Keeping fares cheap means keeping costs down, or subsidies up—and there simply isn’t any more money at the federal, state or local level for massive and perpetually rising subsidies. That means that labor costs are one of the few remaining areas where companies can look to cut operating costs.

What this means is crystal clear: First, big time rule changes to increase productivity, mixed with wage and pension reforms; transit agencies can also look for ways to cut capital costs by favoring buses and, at most, light rail rather than subways and other large multibillion dollar projects. Easier said than done, perhaps, but our cities are too reliant on mass transit to let things fall apart, and this path offers the best chance of keeping it alive in the future.

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  • OJFL

    This is what people fail to acknowledge. The only reason governments cannot invest more in infrastructure, which politicians like to say is “crumbling”, is because of the growth of government spending in transfer payments and labor obligations. And it will only get worse over time.

  • Mrs. Davis

    Talk about a business in need of privatization and deregulation!

  • Michael Lewyn

    Not wrong but complicated. On the one hand transit unions suck money out of transit agencies (bad) but on the other hand they support transit spending (good) when no one else is really willing to fight for it. It seems to me this is a “can’t live with them, can’t live without them” relationship.

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