Wednesday, June 27, 2007

CTA Labor Agreement

The big news of the day is the the CTA and its unions reached a five-year labor agreement that covers both wages and pension contributions. This agreement is a huge boost for at least the CTA's funding prospects because it takes the steam out of the argument "why bail out the CTA when we don't know whether the money is going for transit or pensions." The agreement should give the legislators some comfort that the CTA is addressing its labor cost challenges and is in a position to to make good use of more subsidies to improve service.


Under terms of the deal, the CTA’s contract with two units of the Amalgamated Transit Union that represent about 10,000 workers will be extended for five years. Workers who now don’t have a payroll deduction for health care will be required to contribute 3% of their pay for health benefits, and contributions toward pensions will double to 6% of pay from 3%.

CTA pension contributions also will double, to 12% of payroll, but part of that money will be used to pay debt service on a proposed $1.5-billion bond issue that will be used to shore up an existing CTA pension plan that has been facing insolvency.

In addition, newly hired employees will be required to work until at least age 64 to retire with full benefits, up from age 55 now. And Illinois Auditor General Bill Holland will be added as an independent voice to the boards that supervise pension and health plans.


CTA President Ron Huberman said the transit agency needs about $200 million in the coming year to help cover operating and employee pension expenses, and a sustainable source of funding that would increase that figure by 3 percent a year.

If the state provides the money, heavy service cuts that have been proposed would be averted and there would be no fare increase in the coming year, he said.

Under the proposed contract, state approval also would be needed to issue pension obligation bonds. The Illinois Auditor General would get a seat on the transit authority's pension trust. Meanwhile, a health care trust would be created to manage health care benefits.


It calls for 10,200 unionized employees represented by 17 unions to receive 3 percent pay raises during the first three years and 3.5 percent in the final two years. The CTA has also agreed to double its pension fund contribution — from 6 percent of payroll to 12 percent.

In exchange for those pay raises and a no-layoff clause, active employees will contribute 3 percent toward retiree health care and double — from 3 percent to 6 percent — -their current pension contribution.

* * *

The bottom line for CTA unions is an agreement that would force bus drivers and motormen to lose money during the first year, break even in the second and finally start making money in the third year.

Even so, Darrell Jefferson, president of the Amalgamated Transit Union Local 241, believes he can sell it to his members.

“When you look at what’s going on throughout the country — we’re living in a time now when pension plans are being crashed instead of being brought back to life. And I think we’ve done a remarkable thing here,” Jefferson said.

CTA Press Release:

The contract affects 10,200 CTA employees who make up 88 percent of the CTA workforce. The agreement covers the period of January 1, 2007 through December 31, 2011. The provisions of the award, including pension and healthcare reforms, are contingent on action from the state legislature.

Conditioning the agreement on positive action by the General Assembly is a great way to pressure the legislature into action.


Anonymous said...

Ok, but WOW, "10,200 CTA employees ... make up 88 percent of the CTA workforce" more time. That's a lot of "workforce". Where are they?

jackonthebus said...

The Crain's article does a better job of explaining how the agreement was negotiated. I didn't understand the references to the arbitrator in the Sun-Times and Tribune articles, but Crain's explains how it was a settlement of an arbitration case, instead of what happened the last time, when the CTA was waiting for the neutral to impose a settlement, but unfortunately found that it was not the one it proposed.

Apparently, by doubling the contributions to the pension fund, that knocks one item off the Auditor General's list. Concluding a labor negotiation without having it go to binding arbitration is a second. So, based on later events today, I can take down some of my 7:13 a.m. statement that Huberman "has not described a plan for addressing the[] issues" in the AG's report, but there is still more to go with the other problems (regional coordination, real estate problems, and absenteeism).

As far as the 10,200 workforce, if you are running a system with 2200 buses, maybe 200 L trains (1190 cars divided among 4, 6, and 8 car trains), attendants at 144 stations, with 3 shifts and weekends (night shift and weekends, though, being lighter) maintenance crews, street supervisors, etc., as well as permanent part time operators, it will add up. Note that the 10,200 number is only the union workforce.

jackonthebus said...
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Anonymous said...

Yes, the size of the system implies a large workforce. But where are they... who ever sees them? THey certainly cant be cleaning the trains and buses..can they?

Anonymous said...

Just because bodies are on the payroll doesn't mean that all of them are working effectively (especially if you have an absenteeism problem). Of course, CTA hasn't figured out a way for the bus to drive itself, and bus drivers, by themselves, may be 5,000 of the 10,000 (just estimating). Anyone have the actual breakdown of unionized crews and craftpersons?

Anonymous said...

Let me see if I get this new CTA labor deal straight.

As reported in the papers, a new health care trust will be created by state legislation to manage CTA retiree benefits. It is unclear if this is just health care benefits or pensions too. The new trust organization has its own board of trustees and presumably an executive director, staff and assorted consultants such as bond counsel, investment advisors, lobbyists, etc. CTA give the organization $450 million in seed money and offloads a significant retiree benefit liability from its books. The new organization has a guaranteed income stream from CTA in the form of employer contributions (public money) and authority to issue pension obligation bonds. Oh yeah, the deal is contingent on legislative approval of hundreds of millions in new funding annually for the CTA so that it can mske its employer contribution.

When the retiree benefit trust is again facing insolvency, it will be the Retiree Benefit Guaranty Corp. (RBGC) that is lobbying the legislature for more money. CTA's name will be nowhere to be found. Pretty clever.

By the way, this sounds tailor made for Stu Levine and his Bear Stearns pal Nicholas Hurtgen.