CTA cash crunch redux, preview

Recent noises from Madigan’s office have pointed the way towards an even steeper CTA funding crisis this fall. A “Trib editorial”:http://www.chicagotribune.com/news/opinion/chi-0607030175jul03,1,1899216.story?coll=chi-opinionfront-hed sums it up:

bq. The CTA created the problem by financing operations with money that should have gone to pensions. That avoided a shutdown of mass transit, but only deepened the agency’s financial problems. The CTA won’t get out of this mess just by pinching pennies. That $200 million is an annual obligation nearly four times as big as the 2006 deficit that caused the CTA to threaten doomsday cuts. It represents about 20 percent of the CTA’s $1.04 billion operating budget for this year.

The proximate causes of CTA’s funding problems are higher labor costs, in the form of the distinctly un-sexy pension and health care budgets. The pension crisis isn’t unique by any means to CTA or even to “Illinois”:http://www.heartland.org/Article.cfm?artId=17026, which has only managed to balance its past few budgets by raiding its own pension funds. Public pension funds across the country “are foundering”:http://www.businessweek.com/magazine/content/05_24/b3937081.htm. If new reporting requirements that give a fuller (or perhaps unnecessarily dire) view of liabilities are correct, the total obligations that state/local taxpayers owe to public sector retirees could dwarf the much better publicized crisis in Social Security. Meanwhile, health care costs (particularly for retirees) are hamstringing not just governments, but Corporate America as well; hence Obama’s idea of “a federal bailout of the Big Three’s retiree health plans”:http://gristmill.grist.org/story/2006/2/8/1392/77402 in return for stricter environmental standards. In short, the problem isn’t unique to CTA or even to transit; these are systemic problems endemic to America’s half-baked social welfare system. It’s just that this time, they affect a public utility necessary to the region’s economic life.

Last year, Livable City in San Francisco brainstormed “a list of potential funding mechanisms”:http://livablecity.org/campaigns/munifunding.html that could be used to close Muni’s operating budget deficit. Muni benefits from being a part of the SF City/County government, so many of Livable City’s strategies center around increasing parking rates. Others, however, note local governments’ statutory abilities to raise vehicle registration fees and gas taxes.

In Boston last month, the MBTA was distributing “a booklet”:http://www.mbta.com/traveling_t/fare_increase_information.asp outlining a steep fare hike in the works for T riders. Ever since I last lived in Boston, the T has been on a downward spiral of fare hikes and funding cuts, precipitated by “a reform of its funding formula”:http://www.pihp.com/pihp/archives/2006/05/forward_funding.php that amounted to a steep cut in state subsidies. What seems to be different in Boston, though, is that the level of cynicism, animosity, and distrust among the media and the community toward the transit authority seems much lower than in Chicago; even “Boston Magazine”:http://bostonmagazine.com/articles/boston_magazine_fare_and_balanced (like most city magazines, read mostly in the prosperous suburbs) carried a satirical op-ed suggesting that fares for “urban commuters who’ve been watching, with something approaching horror, their beloved public transit system fall apart before their eyes” remain static while jacking suburbanites’ commuter rail fares 80%. The suburbanites would be “pacified with free crap… baubles, shiny things, whatever.” Maybe it’s because their tolerance of taxes is higher, or because the T has a more open process, or something.

One thought on “CTA cash crunch redux, preview

  1. comment left on pension story at CTDN.

    I agree: this is vastly oversimplified. Public pensions are a ticking time bomb all across this nation; Springfield (yes, IDOT!) has underfunded its pensions to the tune of $41 BILLION. One recent report called Illinois government pensions “the nation’s worst, plagued by debt and scandal.”

    The article does not back up its tacit claim that CTA is not underfunded. That fact is absolutely clear from the Auditor General’s report. Indeed, the stupid decisions made earlier that led to today’s pension crisis were made in order to cover prior years’ underfunded operating costs: the pension holidays were taken in part to shift dollars to operating funding, and similarly the early retirement scheme was put in place in order to shift operating costs (i.e., payroll) onto the pension fund.

    It’s impossible for CTA to unilaterally change its pension contributions, as well. Unlike United Airlines, a public agency is prohibited from tossing its pensions overboard, or from not fulfilling its past promises to its employees. I agree that compensation needs to be reviewed and that management has to take a harder line with the unions in future negotiations, but what’s done is done.

    Incomplete information like that presented here merely serves to further attitudes like “fed up”‘s — attitudes which threaten the future economic viability of not just Chicago but all of Illinois.

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