Last week, the feds indicted 11 Long Island Rail Road retirees and their alleged associates in a “massive fraud scheme” to steal a billion dollars through fake disability claims. But the bigger outrage is that for decades the LIRR has held state taxpayers and riders hostage — thanks to outdated Washington labor laws.
The first inkling of the scandal came in 2008, when a press report noted that nearly every LIRR worker retired early, getting an MTA pension and a federal benefit. Looking into the anomaly, federal prosecutors unearthed evidence that at least two doctors and other “facilitators” had for years signed off on fake injuries and ailments so that workers could take their pensions.
The workers were motivated in part by New York’s crazy benefits for public workers. As the feds note, LIRR workers hired before 1988 can retire at the “relatively young” age of 50 and get MTA benefits, something that “no other commuter railroad in the United States offers.” But the workers couldn’t get their federal railroad pension until age 65 — so they resorted to fraud.
But why do LIRR workers get a federal benefit anyway?
LIRR employees enjoy special railway laws that date back in some cases to the mid-1920s. Then, railroads were privately owned, often hugely profitable, monopolies. The government figured that railroad workers were powerless to act against their fat-cat bosses.
To curtail the owners’ power, Congress enacted the Railway Labor Act, which allowed railroad workers to strike — giving them leverage over their employers. If you can strike, you can stop the money from coming in.
But public-commuter railroads, including the LIRR, no longer make money. Fares pay only about $523 million of the LIRR’s $1.7 billion in annual costs — the rest is taxpayer subsidies.
The state controls the LIRR through the MTA, with the two-year-old payroll tax that downstate employers must pay making up for the railroad’s chronic losses.
LIRR workers aren’t up against the Vanderbilts; they’re up against customers and taxpayers. To deal with the unfairness of public-sector strikes, New York outlawed such actions more than four decades ago through the Taylor Law. So subway and bus workers can’t strike (legally, anyway).
But Washington hasn’t changed its law. After a 1979 LIRR strike, then-MTA chief Richard Ravitch and then-Gov. Hugh Carey tried to cover LIRR workers under the Taylor Law. But two years later, the Supreme Court unanimously ruled that the federal law superseded the state law — and Congress hasn’t acted to change it.
Since then, the LIRR workforce has used its power to strike to thwart cost savings at every turn, guarding work rules that hurt productivity and push up overtime. In 1987, workers put commuters through an 11-day dead-of-winter strike.
Seven years later, they struck again. After two days, then-Gov. Mario Cuomo capitulated, forcing the MTA to forget about work-rule changes.
The state’s fear of an LIRR strike helps drive up the railroad’s costs. Last year, the Empire Center reported, the average LIRR worker pulled in $84,850 — not including benefits.
That’s more than anywhere at the MTA except headquarters — and 23 percent more than subway and bus workers make. Seven of the top 10 people who made more in overtime than they did in regular wages hailed from the LIRR — including one conductor who tripled his $75,390 salary. Plus, workers pay nothing for health benefits.
These costs ripple through the rest of the MTA. The state, even if it wanted to, would have a hard time being tough on one transit union without being tough on the others.
In 2008, the disability stories prompted members of Long Island’s congressional delegation to show up at a hearing held by then-state Attorney General Andrew Cuomo.
But Congress never showed much interest, so nobody fixed the problem: that railroad-labor laws don’t reflect today’s taxpayer-subsidized reality.
Long Islanders should push Congress — including Rep. Pete King — to fix this outrage. State Sen. Lee Zeldin, who has led the effort in-state to repeal the MTA’s payroll tax, should lead the effort.
The scandal isn’t what’s illegal — but what’s legal.
Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.