EDITOR’S NOTE: Below are excerpts from the dissenting opinion released yester day by arbitration-panel member Dall W. Forsythe, who served as budget director under Democratic Gov. Mario Cuomo.
I BELIEVE that my colleagues have made a fundamental error by adhering to the October 2008 draft memorandum of agreement [between the MTA and the TWU] as a starting point and benchmark for this Award.
The economic free-fall may have finally bottomed out, but New York’s economy remains badly damaged. The effects on the finances of the MTA, the state and the city have been severe.
For example, in New York City, the center of the MTA’s service area, taxes on real-estate transactions are still falling. These taxes are an important source of support for the MTA’s budget.
The city’s employment base has also been hard-hit. Between October and June, the city economy has lost approximately 97,100 jobs; the unemployment rate has risen from 6.2 percent to 9.5 percent.
A damaged economy means diminished ability to pay by the MTA and the governments which subsidize it. And it is likely to be several years before the state and city fully regain their fiscal hea1th.
As the economy has slowed, consumer prices have stopped rising and begun to decline. Last October, the consumer price index (as measured by CPI-W for the New York metropolitan area) was higher than its level of a year earlier by 4.6 percent.
But in May of 2009, the CPI-W fell from the level of the previous year by 0.3 percent, the first year-over-year drop since 1956. In June, the year-over-year decline was even larger, at 0.8 percent,
When consumer prices are actually declining, wage settlements at the levels proposed by the majority would produce unprecedented inflation-adjusted wage increases for the TWU membership.
The union contends that New York City’s labor settlements should serve as pattern for this award. In my view, no pattern can apply in this unprecedented economic environment: We should treat the TWU-MTA award as the first independent settlement to reflect the current downturn.
Two important issues would remain unresolved in my formulation: the proposed cap on health-insurance contributions by workers, and management’s hope to move forward on one-person train operations, an initiative which can have a transformational impact.
The provision to cap union contributions for health benefits has impact and salience beyond its economic value. It reflects a key concession by the TWU after the strike of 2005 and provides protection against sky-rocketing costs of health benefits. A reasonable settlement would lay aside both key issues to be revisited by the new leadership teams of the MTA and the TWU.
Finally, I believe that the wage increases required by this Award are simply too high in this environment of economic decline and flat or falling consumer prices.
The economy has not turned the corner, although it is shrinking more slowly than earlier in the year, and the risks to the city, state and MTA’s finances are still extraordinary — in my view, the worst since the fiscal crisis of 1975.
The MTA’s budget now includes a reserve for wage increases of 1.47 percent and 1.87 percent for 2009 and 2010. A settlement at those budgeted levels would not put additional pressure on the riding public by requiring additional fare increases or scheduled service reductions. A settlement above those levels, like the one established by the Majority Award, will require additional cost-cutting and reductions in positions, including additional job losses for represented workers.
The settlement advocated by the Majority will require additional gap-closing actions by the MTA, and those actions will be substantial in the second and third years of the contract.
At the end of the Award period, TWU wages will be 11.28 percent higher than now. In my judgment, that “going-out” rate is likely to provide an unreasonable windfall in the form of unprecedented inflation-adjusted wage increases.
It will also constitute a significant burden for the future MTA budget, which is still likely to be under economic stress when this Award expires in January 2012.