The Pension Gap

One of the surprising issues to come out of the whole MTA strike brouhaha is that one of the sticking points is the pension funding and operations going forward. And what has been reported isn't always conveying the full picture of things:

Like all government workers in New York, MTA employees are entitled to retirement benefits that are extravagant by private-sector standards. Roger Toussaint's members also enjoy a pension perk that is the envy of non-uniformed municipal workers: the ability to retire at half pay at age 55 after just 25 years on the job (known as 55/25).

To cover such benefits, the authority has run up an unfunded pension liability of more than $1 billion. While skyrocketing pension costs are stressing every level of government, the MTA represents New York's most acute pension-funding problem.

MTA management has asked the union to agree to increase the retirement age to 62 and to slightly increase (from 2 to 3 percent) the miniscule employee contribution to the pension fund. Because the state Constitution guarantees current pension benefits for current government employees, the change would only affect transit workers hired in the future.

But — as the TWU has pointed out in a formal complaint to a state labor board — the MTA's attempt to negotiate pension changes as part of the new contract flies in the face of the state Taylor Law, which makes it clear that "terms and conditions of employment" subject to negotiation with government unions "shall not include any benefits provided by or to be provided by a public retirement system, or payments to a fund or insurer to provide an income for retirees, or payment to retirees or their beneficiaries." (Indeed, as if to drive home the point, the same law says any negotiated deal on retirement benefits "shall be void.")

Pension benefits for government employees in New York are set in state law, not labor agreements. For that reason, the MTA actually hasn't been seeking Toussaint's agreement to change contract language — rather, the authority wants the union's permission to ask Gov. George Pataki and the state Legislature to change the law.

So, talking about the pension as part of negotations is off limits under the same Taylor Law that prohibits public employees from striking. All the MTA is asking is that the union give permission to the Governor and Legislature to change the pension funding/benefits structure going forward.

Even this is a lose-lose proposition for taxpayers since the legislators and governor aren't going to cross the same unions that get out the vote for the legislators. It's an empty gesture at fiscal sanity. And it puts the whole idea that the MTA would give 5% raises in each of the next three years (and still being rejected by the TWU) some additional context. It's fiscally reckless to provide those raises, knowing that the legislature will not act on reducing the pension burden on the MTA, which was forced to spend $500 million of the $1 billion 'surplus' just to shore up the pension plan. Imagine what that $500 million could have done. And then realize that the $1 billion never really existed in the first place, and that the MTA is still playing with other people's money. The taxpayers.