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In Final Hours, M.T.A. Took Big Pension Risk
By Steven Greenhouse, The
New York Times
December 22, 2005
On the final day of intense negotiations, the Metropolitan Transportation Authority, it turns out, greatly altered what it had called its final offer, to address many of the objections of the transit workers' union. The authority improved its earlier wage proposals, dropped its demand for concessions on health benefits and stopped calling for an increase in the retirement age, to 62 from 55.
But then, just hours before the strike deadline, the authority's chairman, Peter S. Kalikow, put forward a surprise demand that stunned the union. Seeking to rein in the authority's soaring pension costs, he asked that all new transit workers contribute 6 percent of their wages toward their pensions, up from the 2 percent that current workers pay. The union balked, and then shut down the nation's largest transit system for the first time in a quarter-century.
Yet for all the rage and bluster that followed, this war was declared over a pension proposal that would have saved the transit authority less than $20 million over the next three years.
It seemed a small figure, considering that the city says that every day of the strike will cost its businesses hundreds of millions of dollars in lost revenues. But the authority contends that it must act now to prevent a "tidal wave" of pension outlays if costs are not brought under control.
Roger Toussaint, the president of the union, Local 100 of the Transport Workers Union, said the pension proposal, made Monday night just before the 12:01 a.m. strike deadline, would effectively cut the wages of new workers by 4 percent."They're trying to beat down wages for our new workers," Mr. Toussaint said yesterday.
In the days immediately before the strike deadline, the union kept hammering the point that the authority's pension demands would save little over the life of a three-year contract.
Indeed, not just Mr. Toussaint but some other New Yorkers are questioning whether it was worthwhile for the authority to go to war over the issue when the authority's pension demands would apparently save less over the next three years than what the New York City Police Department will spend on extra overtime during the first two days of the strike.
"What they'd be saving on pensions is a pittance," Mr. Toussaint said.
Robert Linn, a former New York City labor commissioner, questioned the transportation authority's decision - with the backing of the mayor and governor - to go to the mat over pensions with a union that can exact huge pain on the city in a year when the authority was enjoying a $1 billion surplus.
"They might have picked a union that was more willing to consider the subject," Mr. Linn said. "It not just the considerable economic power of this union, it's also the timing," just before Christmas. "It's tremendously problematic."
Gary J. Dellaverson, the authority's director of labor relations, said he and the authority's other negotiators had tried to be flexible in making the pension offer.
"We tried to remold our position, to be reflective of their issues and still be consistent with our finances and our bargaining goals - what we considered a good faith effort to close the deal," he said.
Labor negotiations resemble high-stakes poker, and it was not until a few hours before the strike deadline that the authority 's chairman, Mr. Kalikow, showed his hand, making an offer far different from what he had previously said was his final offer.
With the transit workers' union demanding raises above inflation, Mr. Kalikow raised his wage offer so that raises would average 3.5 percent a year for three years, up from 3 percent in his previous offer. Responding to the union's demand that he not raise the retirement age, Mr. Kalikow also dropped his proposal that future transit workers not qualify for a full pension until age 62, up from 55 for current workers.
But then he put his new demand on the table, that new workers contribute 6 percent of their wages to finance their pensions - a demand that clashed with Mr. Toussaint's oft-repeated refusal to sell out the "unborn," meaning new workers.
Mr. Dellaverson declined to spell out how much that proposal would save each year. "Pension changes always have small effects at the beginning and grow over time," he said.
John J. Murphy, a pension expert and former executive director of the New York City Employees' Retirement System, said he computed that the authority's pension proposal would have a modest saving at first: $2.25 million in the first year, $4.8 million in the second year and $7.8 million in the third year.
But he said the plan would achieve significant savings, more than $160 million in the first 10 years, with some officials estimating that it would save more than $80 million a year after 20 years.
Mr. Dellaverson said it was important for the authority to try to control its pension outlays even in a year when it had a surplus. The authority's pension outlays for the transit workers have soared to $453 million this year, triple the amount in 2002.
"If you know a tidal wave is coming and you can still play around in the surf because it's not here yet, anyone would think that's foolishness," Mr. Dellaverson said.
That wave, he suggested, is a continued rise in pension costs and the authority's forecast of a $1 billion deficit in 2009.
Mr. Dellaverson said the week of negotiations at the Grand Hyatt hotel in Midtown were unusual because the union made hardly any firm counteroffers. "The longer you wait to start to address the problem," he said, "the more dramatic the changes must be to address them."
He said the union made no new offer countering the authority's pension offers. The union, he said, asked for an 8 percent raise a year, without ever specifying how many years of 8 percent raises it wanted.
He said that just before negotiations broke off on Monday, "We made another offer, even though the union had never countered our earlier offer," he said. "From a tactical standpoint, it's unusual in my little business."
Several union officials said Mr. Toussaint was often reluctant to make a new proposal - for instance, lowering a wage demand - because the clamorous dissidents in the union might seize on such a move to accuse him of selling out.
E. J. McMahon, a budgetary expert at the Manhattan Institute who favors reducing government pension costs, said there were wise and unwise aspects to the authority's focus on pensions in the bargaining.
"On one hand, the transit workers are the hardest union to bring this up with," he said. "On the other hand, this has really put a spotlight on the pension issue."
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