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Taxpayers on the hook for Pittsburgh transit bailout

By   /   August 22, 2012  /   No Comments

North Side Station, seen here, is part of Port Authority’s light rail network. The public transit system avoided $60 million in service cuts through a new union contract and a state bailout.

By Melissa Daniels | PA Independent

HARRISBURG — Pittsburgh’s public transit system is safe from layoffs and service cuts, thanks to a $30 million bailout from state taxpayers.

This week, Amalgamated Transit Union Local 85, the union for Port Authority employees, accepted a new four-year contract as part of an agreement with state and local government officials to address an immediate $60 million funding gap. The contract includes $15 million in annual savings through a two-year wage freeze, increased pension contributions and other benefit concessions.

The state’s $30 million commitment depended upon the union cutting its costs, state officials said. But the contract also includes unique language that keeps the state on the hook for future funding reform.

If more than 5 percent of employees are laid off, the union has a right to revert back to its previous contract. That means if the state doesn’t come up with a way to sustain funding at Port Authority, the union will give up its recently-negotiated concessions.

Frank Gamrat, a senior research associate at the Allegheny Institute, a policy research nonprofit based in Pittsburgh, said the provision “puts a gun to the head of the state” to commit funding to Port Authority to keep it afloat.

But he questioned the ability of the state to pull it off, with Pennsylvania Department of Transportation funding wrapped up in other areas and competitive legislative interests.

“It’s going to require some legislative approval to find $30 million a year to push over to Allegheny County,” he said. “And keep in mind, legislators aren’t just from Allegheny County.”

But the new contract, he said, doesn’t address the root of the problem.

Around 3,300 Port Authority retirees receiving benefits, with only 2,300 paying in, Gamrat said, a fundamental issue that means there’s not enough money to go around.

An audit from 2011 put Port Authority’s total liabilities at $589 million. Of that, $166 million is in Other Post-Employment Benefits, also known as OPEB, which are benefits for retired employees.

Gamrat said much of Port Authority’s retiree-related debt is due to a lifetime health care coverage policy that was in effect until 2008.

“Until someone addresses those problems of the legacy costs, this movie is going to get shown again,” Gamrat said, referring to potential layoffs and service cuts.

Dennis Buterbaugh, spokesman for PennDOT, said the new union contract and funding arrangement gives the state time to figure out “a permanent funding fix” for Port Authority, one that addresses long-term costs.

In the past, it wasn’t so, he said.

“Whatever the hole in their budget was, the state would fill the hole and that kind of money simply isn’t available anymore,” Buterbaugh said of past funding.

If the state was going to commit to $30 million this year, it was contingent upon “a shared solution,” he said, pointing to the union concessions.

Union employees, for example, will now contribute 10.5 percent towards pension costs as opposed to 5.5 percent.

How the state will come up with the $30 million for this year is still getting worked out, but at least $10 million will come from a reserve fund, Buterbaugh said. The rest could come through PennDOT projects coming in under bid, but it’s “still being formulated” where the funding will come from, he said.

Before the agreement was reached, Port Authority faced a 35-percent cut to transit service by September. That would’ve resulted in about 560 layoffs.

Local 85 President Steve Palonis said other than avoiding layoffs, a provision covering contract nullification was an major point in getting the membership to agree to the contract.

“I couldn’t sign off on a contract and say to my members, ‘Look, this is the best we can do and three months, five months down the road if the governor doesn’t come up with the legislative funding they’re going to lay off 560 people,’” he said.

Palonis said annual funding stopgaps aren’t enough to address Port Authority’s legacy costs, and the hope is that the state will come back with a plan.

“It can’t be a Band-Aid,” he said. “The governor has to get through a comprehensive transportation bill that has some growth in it.”

In addition to state funding, the rest of this year’s Port Authority budget gap will be met through increased pension contributions from nonunion Port Authority employees, a recent fare hike and an extra $4.5 million from Allegheny County.


Melissa formerly served as staff reporter for Watchdog.org.