Pittsburgh, PA – The Port Authority Board of Directors today approved a $350.2 million Fiscal Year 2009 Operating Budget that assumes a minimum of $10 million in cost reductions will be achieved through the collective bargaining process with ATU Local 85, the Authority’s largest labor union. Dependent upon these savings, the operating budget also assumes that no fare increases or service cuts will be necessary in FY 2009.
“The Collective Bargaining Agreements negotiated this year must take major steps toward reining in healthcare and post-retirement benefits costs,” said Mr. Guy Mattola, Chairman of the Port Authority Board’s Planning & Development Committee. “Taxpayers, transit riders, and Port Authority management and non-represented employees have all done their part to preserve affordable, accessible public transit in AlleghenyCounty.”
On June 15, 2007, Port Authority implemented a 15% county-wide service reduction and on January 1, 2008 raised the base fare from $1.75 to $2.00. Also beginning January 1, 2008, a 10% drink tax and a $2.00 car rental tax were instituted in AlleghenyCounty to provide local funding for public transportation. On July 1, 2007, Port Authority implemented the following actions for non-union and Port Authority Police employees:
- Accelerated the departure of employees in a Deferred Retirement Option Program
- Eliminated “lifetime healthcare” for those retiring after June 30, 2007
- Changed the “buy-back” of previous employment time to only military years of service and instituted a 10-year vesting period
- Eliminated a $500 monthly pension supplement
- Increased employees’ healthcare contributions to 2 percent of annual salary in Fiscal Year 2008 and 3 percent in FY 2009
- Fiscal Year 2008 salaries frozen
- The CEO’s salary frozen through June 2009 (amounting to a three-year freeze) and elimination of his deferred compensation contribution by the Authority
- All senior management position salaries frozen through June 2008 (amounting to a two-year freeze) and elimination of their deferred compensation contribution by the Authority
- Eliminated use of accrued sick leave toward pension service
- Reduced the number of senior managers from eight to five
“Taxpayers and transit riders cannot be expected to continue to fund a healthcare and post retirement benefits package that is far more generous than the national average and is far more than county employees and regional taxpayers receive,” said Ms. Joan Ellenbogen, Chairwoman of the Board’s Stakeholder Relations Committee. “Represented employees have been asked to accept a fair contract with wage and benefits concessions comparable to those in place for non-union, management and Police Association employees.”
Port Authority’s healthcare costs have risen from $38.8 million in FY 2002 to a projected $67.9 million in FY 2009 (75% increase) and pension contributions have increased from $1.2 million to $16 million during the same time period.
“Soon Port Authority’s healthcare costs will be greater than its payroll,” said Mr. Jeff Letwin, Chairman of the Board’s Performance Oversight Committee. “These costs will continue to grow at a rapid rate and are simply unsustainable.”
Further exacerbating Port Authority’s financial concerns is the sky rocketing cost of diesel fuel. Diesel fuel prices will rise from $2.28 a gallon in FY 2008 to $4.15 (or more) a gallon in FY 2009. Every penny increase in the cost of diesel fuel adds $80,000 in expense to Port Authority’s budget.
“The costs that we have control over, we have addressed and we continue to seek ways to reduce our expenses,” said Port Authority CEO Stephen Bland. “Non-represented employees’ wages have been frozen, they are paying more for their healthcare and have sacrificed post-retirement healthcare benefits. We have locked in our diesel fuel costs, raised fares and cut service. Dedicated funding has been identified at the state and local level. There is only one piece of the puzzle left and that can only be accomplished through collective bargaining.”
Another budget fact facing Port Authority is that funding levels in Act 44, the state Public Transit Assistance fund that supports transit operating assistance, asset improvement, capital improvements, new initiatives and programs of statewide significance, are projected to grow at less than inflation and could provide reduced funding for the Authority in subsequent years.
“While Act 44 is a dedicated, predictable and transparent source of funding, it is not a windfall and will grow at less than the rate of inflation,” said Mr. Bland. “We value and appreciate the vision and courage of our elected leadership in advancing Act 44 and local dedicated transit funding; and look forward to working with them through our Connect ’09 process toward designing the type of transit system that can recognize the growth in funding that is possible through system redesign and improved cost efficiency.”
As recommended by the Transportation Funding and Reform Commission, Act 44 funding is linked to need and performance and is designed to strengthen accountability and reward cost effectiveness and operating and financial efficiency.
“Without a minimum of $10 million in contract concessions in Fiscal Year 2009 and $20 million in succeeding years, Port Authority will be forced to significantly cut service, raise fares and layoff employees in 2009 and every year thereafter until transit service eventually becomes insufficient to adequately serve the region's mobility needs,” said Mr. Bland.
The Port Authority Board today also adopted a $241.7 million Capital Budget which includes funding for construction of the North Shore Connector and for the purchase of 100 new buses, among other state of good repair projects. Funding for those projects comes primarily from the federal government and cannot be used to offset Operating Budget deficits.