AUTHOR’S NOTE: PLEASE SEE BELOW FOR IMPORTANT CORRECTIONS TO THIS POST IN BOLD.

In May, after months of turmoil, Albany agreed to a new package of taxes for the state-run Metropolitan Transportation Authority (MTA) totalling $1.8 billion annually, to help close what were becoming permanent structural budget deficits.

During the bailout debate, I warned that

“what New York really needs is for [Governor] Paterson and Mayor Bloomberg to stand together to ask the MTA’s labor unions for concessions. If the agency doesn’t get anything here, the MTA’s labor costs will rise by $700 million in three years’ time, consuming much of the funds from the proposed payroll tax” that ultimately became the biggest chunk of the new revenues, at $1.5 billion annually.

Yesterday’s arbitration decision regarding the MTA’s new three-year labor contract with the Transport Workers Union makes this dire prediction closer to becoming a fact.

The 11.3 percent raises that arbitrators awarded the TWU over the next three years will add $465* million to the MTA’s labor costs alone (and in time, they’ll also push up pension costs).

Even if the revenues from the MTA’s bailout grow at 4.8 percent annually (the historical growth rate of the downstate region’s personal-income take, which makes up the bulk of the bailout through the payroll tax), the bailout will provide the MTA with $1.98 billion annually by the end of 2011.

New York City Transit, responsible for shouldering the vast majority of the costs of the new labor agreement, comprises nearly 65 percent of the MTA’s annual operating spending; if it receives a commensurate benefit from the bailout funds, that share would be $1.29 billion.

So there you have it.

All that drama over the bailout — and by 2011, the cumulative wages provided for in the new labor agreement will have consumed more than 30 percent of the hard-won new funds for this yearand, on an ongoing basis, will continue to consume at least 21 percent of future bailout funds.

The bailout exacts a price on the economy, because a new tax on jobs discourages jobs. But for this price, we’re not getting anything back in reform.

Remember: transit-union workers are paid nearly $65,000 annually, with overtime. Nobody is talking about rolling back wages to minimum wage or implementing coal-mine conditions, and nobody should.

This is a matter of having political spine to stand up — ever so slightly — to powerful and well-paid special interests.

*In the original version of this post, I made two errors that largely cancelled each other out. I neglected to subtract labor costs to be borne by other divisions of the MTA, including the Long Island Rail Road and Metro North, and I similarly neglected to address the fact that New York City Transit, which will shoulder the bulk of the costs of the new agreement, will not receive all bailout monies.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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