Unions' questionable "savings plan" fails to address current BART deficit


Unions' questionable "savings plan" fails to address current BART deficit

A questionable proposal by BART unions to save a purported $760 million in costs over the next 25 years is not allowed under current state law and fails to address the immediate fiscal crisis BART faces.  Additionally, a professional analysis shows the concept could actually end up costing BART money.

"This seems like wishful thinking to me," BART Board President Thomas Blalock said. "It’s unclear if any savings would be realized. Our riders can’t afford to wait 25 years – we need to have savings starting ASAP."

Here are the main issues with the unions' proposal.

  • Their plan isn’t allowed under CalPERS, which is governed by state law - thus impossible for BART to implement
  • To make it legal could take years – BART needs savings today, not years from now
  • The unions use inflated numbers to reach their purported $760 million so-called "savings."
  • A detailed study shows the savings would be hundreds of millions less than the unions' claim
  • The unions' questionable "$760 million savings" wouldn’t be over 4 years – but over 25 years
  • BART is looking at what is legally available, and at best it saves BART a little money – at worst it cost BART money

A cornerstone of the unions’ proposal is to change the eligibility for a BART employee to receive lifetime health benefits for $85/month after retiring.  The unions are proposing to change the current five year vesting schedule to 15 years. Trouble is, changing it to 15 years, as the unions propose, is not an option for BART in the California Public Employees Retirement System (CalPERS). Thus, the unions are proposing to switch to a plan that CalPERS doesn’t even offer.

One union website claims, "BART Executives leave unions’ $760 million savings offer on the table." This claim is false. BART negotiators didn’t leave an offer on the table. Instead, an actuarial analysis shows the unions’ projections are hundreds of millions of dollars short of the so-called $760 million savings over 25-years because the unions artificially inflated their projections by including a medical payment cap that has already been proposed by BART at the negotiation table.  Bottom line, the District’s expert analysis, which looks at a the legal eligibility periods of 10 years and 20 years, shows BART at best saves some money and at worst loses money.
"We welcome the unions joining us in finding practical solutions that will address BART's serious fiscal deficit," Blalock said. "But we need realistic proposals that will close the budget gap sooner rather than later. We continue to hope we will reach a workable consensus at the bargaining table."

The proposal before BART’s two largest unions, the ATU and SEIU, achieves the needed $100 million in savings and includes these components:

  • Preserves base salaries
  • Provides a small wage increase in the fourth year (.75%)
  • Gives employees a $500 lump sum payment in both the second & third years of contract
  • Continues to provide lifetime health coverage for an employee and his/her entire family for just $85/mo, but caps BART's medical expenses to the Kaiser or Blue Shield HMO plans - If employees wish to choose a more expensive plan they pay the difference between Kaiser/Blue Shield HMO and the more expensive plan (Currently, BART pays virtually the full cost of the 6 medical plans offered for employees and the entire family)
  • Continues to offer free pension (BART will pay both employer & employee share of pension costs)
  • Eliminates BART's contributions to employees' secondary retirement accounts
  • Eliminates 3 vacation days and/or floating holidays each year for two years
  • Reduces BART's expenses by allowing employees to turn sick leave pay into pension credits
  • Eliminates a reasonable number of wasteful work rules and alters the "beneficial past practice" clause in the contract that gives birth to additional wasteful work rules

The average union worker makes $114,000 a year in wages and benefits. Even without an increase in salary, the cost of simply maintaining the current benefits for BART employees over the next four years accounts for nearly half of BART’s four-year shortfall. To illustrate the order of magnitude, just to maintain benefits is the equivalent to a 15% increase in total compensation. BART management has been negotiating with its five labor unions since April 1 to reach fair and equitable contracts that address BART’s financial challenges.  During that time, the four year-deficit projected at $250 million has grown by approximately $60 million because of lower than expected ridership and sales tax returns.

During the past few months, the BART Board and management have adopted measures to reduce costs, cut spending and raise revenues by more than $150 million dollars through a 6.1% fare increase, the introduction of parking fees at more East Bay stations and modestly reducing night and weekend service so the maximum wait time between trains is 20 minutes instead of 15 minutes. The BART Board needed $100 million in cost savings through labor negotiations to avoid major additional fare increases and service cuts to BART customers.
For background regarding BART’s labor negotiations, visit www.BARTlabor.com.

The BART Board of Directors will meet on Thursday, July 16, to hear an actuarial statement on potential changes to retirement benefits. You can view the notice for the meeting on the Board of Directors page.