For years, the annual standoff over funding for the Chicago Transit Authority has gone like this: CTA officials moan that the state doesn’t give them enough money or authority to do their jobs. Lawmakers complain that the CTA doesn’t manage what it has effectively. The CTA threatens doomsday service cuts, lawmakers grumble about a bailout, and we end up with a budget that allows the system to limp along for another year. It’s no way to run a railroad.
The best thing that happened to mass transit riders this year was an Illinois auditor general’s report that showed both sides are right: The CTA is underfunded and mismanaged. Maybe now they can stop arguing about whose fault it is and fix it.
The crisis looms larger than ever since House Speaker Michael Madigan muscled through a bill requiring the CTA to start making huge annual contributions to its nearly bankrupt pension fund. That was a necessary mandate, but it blew a $150 million-a-year hole in the CTA’s operating budget.
Madigan told the CTA not to come crying for more money, but he knows good and well Chicagoans can’t all walk to work. So does Mayor Richard Daley, who generally keeps his distance from the CTA’s woes except to second the complaints about underfunding. Two weeks ago, Daley axed his CTA president, Frank Kruesi, a close friend for more than 30 years, because he knew lawmakers would rather watch the transit system go down in flames than give more money to Kruesi.
New CTA President Ron Huberman promises he’ll turn the CTA into a performance-based operation, starting with “a lot of slashing.” That has been a long time coming. But the CTA will have to do more than eliminate jobs. It will have to change the pay and benefit structure for the people who still work there.
The CTA’s retirement plan was only 34 percent funded as of Jan. 1, 2006, and projected to run dry in six years. The CTA got in this bind by financing operations with money that should have gone to pensions. The auditor general’s report notes that the CTA took pension “holidays” in 1994, 1995 and 1997 and has deferred more than $1 billion in contributions.
The pension disaster isn’t a simple matter of not enough money. The CTA has an overgenerous retirement plan and an outrageous retiree health-care package, far better than what other public employees get. Unlike plans that cover teachers or state and municipal workers, the CTA pension is subject to collective bargaining. The CTA regularly asks for concessions during contract negotiations, but those talks invariably end up before an arbitrator, who rejects the requests.
The CTA plays by different rules because that’s how the legislature spelled things out in 1946. Those rules need to be changed so the CTA can bring its retirement plan in line with what taxpayers can afford. The CTA needs more latitude to determine pension eligibility, contributions and benefit levels. It needs the authority to restructure its pension plan so that, for example, new hires aren’t promised the same benefits guaranteed to current employees. Under the current plan, retirees don’t even pay premiums for health-care coverage.
The 2006 law requires that the pension be 90 percent funded by 2059. CTA Chairman Carole Brown has asked the General Assembly to authorize an alternate plan, under which the CTA would sell bonds to bring the pension to 90 percent almost immediately. The plan would stabilize cash flows and reduce the annual debt service by tens of millions of dollars. But lawmakers would be wise to address the underlying problems before they resort to creative borrowing. Without structural changes to the pension plan, taxpayers will continue to pay for unreasonable and unsustainable benefits.
The CTA should have to swallow some other changes before lawmakers break out the checkbook. Many of those changes are part of an overhaul of the entire regional transit system proposed by Rep. Julie Hamos (D-Evanston), who chairs the House Mass Transit Committee. Hamos’ plan incorporates many of the suggestions contained in the auditor general’s report. It would give the Regional Transportation Authority more power over the CTA, Metra and the Pace bus system. The RTA would assume a greater role in planning and budget matters, including ordering fare increases, if necessary. It would set and enforce performance standards. It would promote regional cooperation instead of letting the three transit boards go their separate ways, fighting over riders, duplicating services and spending money on pet projects that don’t benefit the overall system.
Such reforms would help assure that taxpayer dollars are being well managed and well spent. When those conditions are met, lawmakers will have no excuse to shortchange the CTA.
