In my prior post, I examined the cost of MTA and other New York metro area transit services in 2012. In this post, I’ll examine the trends in those costs during the 2007 to 2012 period, a time when most Americans and most New Yorkers were struggling with the Great Recession and its aftermath.
The data shows that while private sector workers have struggled, with wage gains below inflation, transit costs have soared far in excess of inflation. The result has been fare increases, service cuts, and increases in subsidies. Based on other information I have compiled for other public services, the cost of retired transit workers probably accounts for the majority of the rising burden on taxpayers and transit riders, as shown by operating costs (the soaring cost of debt service is another factor related to the capital plan). As transit workers demand even more, it is worth reviewing how much the transit systems have already taken. Commentary and a series of charts may be found below.
Before moving on to the discussion, the spreadsheet with the tables and charts is, once again, here:
Let’s pick up the discussion from the prior post with Chart 6, the percent change in operating costs per transit vehicle hour in service from 2007 to 2012.
To frame the discussion the overall inflation rate for those years was 10.7%, but if one excludes the high-paid Finance and Insurance sector (aka Wall Street), the average annual pay per private sector worker in Downstate New York increased just 8.0%. Which means in “real” inflation adjusted dollars average pay fell, a common situation throughout the U.S. private sector over the past 45 years, aside from those at the very top.
While ordinary private sector workers were falling slightly behind overall inflation, which is created in part by how much they have to pay other workers for their work, they fell far behind the cost of public transit in the New York area. On the rail side, the operating cost per vehicle hour increased 15.2% for Metro North, 15.5% for the Long Island Railroad, 21.8% for the NYC subway, 13.6% for New Jersey Transit, and 69.5% for the PATH system, all gains far in excess of overall inflation or the increase in average payroll per private sector worker.
On the bus side, the operating cost per vehicle hour increased 24.8% for New York City Transit buses and 4.8% for MTA Bus, the former private bus companies in New York City. When the MTA took over the private bus companies and started MTA Bus, the pension plans for the private bus companies were severely underfinanced, one reason the unions pushed to have the MTA assume those responsibilities. So it is possible that the pension costs of MTA Bus inflated before 2007, while those of the existing New York City Transit bus system inflated afterward.
Nassau County’s buses actually became less expensive, with a 6.8% decrease in operating costs per vehicle hour from 2007 to 2013 in the face of 10.7% inflation. The county privatized its bus system during the period. But Westchester’s bus system was already privatized in 2007, and its operating costs per vehicle hour jumped 18.4%. The increase was 15.9% for New Jersey Transit buses.
The operating cost of New York area transit services also soared by more than inflation from 2007 to 2012 when measured per employee work hour, as shown in Chart 7.
On the rail side the increase was 14.5% for MetroNorth, 14.3% for the Long Island Railroad, 17.2% for New Jersey Transit, 17.9% for the PATH system, and 17.8% for the New York City subway. The Long Island Railroad unions are threatening to strike, in part because they feel they have fallen behind subway workers. This ignores two things. How much higher their costs were than NYC subway workers to start with, as noted in the prior post . And how far they have gotten ahead of the average private sector worker who has to pay for them. Perhaps not in cash pay, but rather in the cost of their retirement benefits, inflated by political deals in the past with the cost deferred to today and tomorrow.
On the bus side, the increase in operating costs per employee work hour was 11.9% at MTA Bus, 23.5% for New York City transit, and 27.2% for New Jersey Transit. No work hour figures are available for the contracted out bus services in Nassau and Westchester Counties.
Over the decades it has typically been the case that private sector workers get ahead of public sector workers in economic booms, but public sector workers – with their steadier employment and pay – get ahead in recessions, such as the one we have had. But something more is going on here. First, aside from those at the very top most American workers have been earning less generation-by-generation, as shown most recently in the Federal Reserve Bank of St. Louis study I discussed in this post.
Until 2007 the only exception was the executive/financial class, the people that sit on each other’s board of directors and have voted each other an ever-rising share of private sector income in higher executive pay, at the expense of dividends for shareholders. Since 2007, however, the consequences of 35 years of soaring U.S. debts, public and private, have started to catch up with even those in the “one percent.” Average annual pay per worker fell 4.0% in Downstate New York’s the Finance and Insurance sector from 2007 to 2012. With employment in this sector falling as well, its total payroll in Downstate New York fell 12.8% — so far.
Meanwhile, just as those in the executive/financial class cut corporate politics deals to inflate each other’s pay, so those in the political/union class cut deals in Albany to inflate each other’s pensions, most notably in the year 2000 during the peak of a stock market bubble. It was asserted that ordinary people would lose nothing, because Wall Street would pay for it all, but the actual cost was merely hidden and deferred – to the present and the future. So while the transit unions complain about their cash pay, the total amount others are being made to pay them – including retirement benefits – is soaring. The same dynamic – soaring public employee retirement costs — is pushing up taxes and leading to service cuts in public transit (and other public services) all over the country.
So how have the serfs, those private sector workers whose pay is set by what the market will bear not by political deals in state capitals or executive suites, been affected in the New York area?
Lets look at one quick service indicator: the Vehicles Operated in Maximum Service (as at rush hour), as shown in Chart 8.
The data shows a very small decline in vehicles operated on the NYC subway, a small increase in service on the Long Island Railroad, and big increases in service on MetroNorth, the PATH system and New Jersey Transit commuter rail (at least in FY 2012, before hurricane Sandy).
The cutbacks have come in bus service, here and elsewhere in the country. The privitization of Nassau County’s bus system was accompanied by complaints about service cuts, and its vehicles operated in maximum service fell by 11.5%. Similar service complaints accompanied the privitization of the Boston area’s commuter rail service, despite a 7.2% increase in VOMS. Metro Boston is testing the idea that it is easier for the government to fire contractors who don’t do their jobs than it is to fire unionized employees who don’t do their jobs, and has elected to bring on a new contractor. The old contractor is suing.
The similarly private Westchester Bee Line saw its VOMS fall by 4.6% from 2007 to 2012. But decreases in bus service were not confined to private operators. Although New Jersey Transit increased rush hour vehicles by 2.2%, within New York City the decreases were 7.7% for the MTA Bus Company and 3.2% for New York City Transit buses. And outside the metro area the Chicago Transit Authority cut rush hour bus service by 14.5%, and the Los Angeles County Metropolitan Transportation Authority put through a 16.8% cut, as both cities struggled with soaring pension costs. In metro Pittsburgh, the proposed cuts were even deeper.
With service cuts have come fare increases far in excess of inflation, as shown in Chart 9.
The average fare per unlinked trip increased 33.4% on the New York City subway, triple the inflation rate, from 2007 to 2012. The increases for other local rail systems were 18.2% for MetroNorth, 27.6% on the Long Island Railroad, 32.3% for New Jersey Transit commuter rail, 43.5% for the PATH system, and 55.0% for the Staten Island Railroad as a result of charging those who ride to and from both St. George and Tompkinsville rather than St. George alone.
For surface transit, there was a cut in the average fare on New York City paratransit, but only because that service’s revenues are now shared with the subway as a result of only taking people as far as the nearest handicapped accessible station rather than direct to their destination. The two privately operating bus systems, in Nassau and Suffolk counties, increased their average fare per trip by less than the inflation rate from 2007 to 2012. But within New York City the increases were 15.8% for the MTA Bus Company, and 20.1% for New York City Transit buses. New Jersey Transit’s average fare per unlinked trip rose 27.5%.
It is true that from 1995 to 2002 New York City transit riders benefitted from a huge cut in inflation-adjusted fares as a result of the introduction of the Metrocard, with free bus-to-subway transfers, the Metrocard purchase discount, and monthly unlimited cards, something the commuter railroads already had. This big cut in fares, however, was not offset by a big increase in tax subsidies or efficiencies. It was paid for by debt. Thus the Straphangers Campaign served as a hugely effective advocate of the interest of past New York City transit riders against the interests of current and future transit riders. The reduction in savings from unlimited cards during the recession, relative to the base fare, is the likely reason the average fare increased more for subway riders than for bus riders.
There was a big game of chicken from the mid-1990s on, with everyone taking more out of the MTA – the unions with the 2000 pension deal, the state which cut general tax subsidies and raided dedicated taxes, drivers with their toll freezes, the riders with their fare cuts, the contractors with their soaring costs. Who would be left to pay the price later when the bills came due? Who would be exempted from the sacrifices? That is what is under discussion now. What is clear is that transit riders and toll payers have been hit hard thus far.
The change in the percentage of operating costs covered by the fare is shown in Chart 10.
In general, service cuts and fare increases have forced transit riders to cover a higher share of operating costs. For example, for the New York City subway the share of operating costs covered by the fare increased from 67.0% in 2007 to 73.2% in 2012, a gain of 6.2 percentage points. On the rail side the local increases were 3.2 for MetroNorth, 3.7 for the LIRR, and 6.6 for New Jersey Transit. For the increasingly costly PATH system, however, the share of operating costs covered by the fare actually fell slightly.
There were larger increases for rail systems elsewhere. For the Chicago Transit Authority, the share of operating costs covered by the fare increased 14.1 percentage points. There was an increase of 13.7 for San Francisco’s Bay Area Rapid Transit and 9.4% for the Washington DC Metro. The share of subway costs covered by the fare fell in Boston, but taxpayers didn’t make up the difference, and the MBTA’s financial crisis has become severe as a result of its relatively low fares.
On the bus side, the share of operating costs covered by the fare jumped 7.0% percentage points for the privatized Nassau County bus system, 1.4 for Westchester’s Bee Line and 2.9 for New Jersey Transit buses. Within New York City however, while the share of MTA Bus operating costs covered by the fare increased 3.9 percentage points, it fell 2.1 for New York City Transit buses, the larger portion of the city’s bus system. For that entity, the fare increases and service cuts were outweighed by falling ridership, leaving subsidies higher.
In fact as shown by Chart 11, operating subsidies increased for all local transit services from 2007 to 2012, with the exception of a 23.5% decrease for Nassau County’s privatized bus system.
The operating subsidy for the largest transit system in the metro area, the New York City subway, only increased 0.4% from 2007 to 2012. When politicians ordered managers to find efficiencies, that’s where they found them. But the operating subsidiy increased 8.1% for the MetroNorth commuter railroad, 4.8% for the Long Island Railroad, 3.7% for New Jersey Transit commuter rail – and 41.9% for the PATH system. I looked at the 2007 data to see if some sort of data hiccup in 2012 might have been responsible for the sky-high cost of the PATH that year, but it turns out it was plenty expensive in 2007 too.
While subsidies to Nassau County’s bus system fell, the operating subsidy increased 10.0% for Westchester County buses, 12.8% for New Jersey Transit buses, 9.1% for the MTA Bus Company, and 23.6% for New York City Transit buses.
So in general people are paying for soaring transit operating costs, generally soaring transit employee retirement costs, in three ways – in reduced transit service, in higher fares, and in higher taxes. They are also paying for debt service, as more and more of the subsidy money goes to interest leaving less for actual transportation. For the MTA, all workers in its service area is now paying an extra ¼ percent tax on their work income. That is all private sector workers, because their employers could pass on the cost of the new tax to the employees in lower inflation-adjusted pay. Retirees don’t have to pay the tax.
All in all, with the possible exception of the former employees of Long Island Bus, transit workers have done very well at the expense of private sector workers in recent years.
That’s without any “retroactive pay” at all. The substantial increases in their compensation have come in a form the unions may currently pretend is irrelevant – retirement benefits. Yet those benefits still have to be paid for, and that is the choice the unions have made – in fact it is a choice they have dictated. In the past, when anti-government groups complained about the fact that retirement benefits for public employees were so much greater than for private sector workers, the union response was that government workers have accepted lower cash pay in exchange for those greater benefits, and the two offset. Fair enough, or at least it once was.
To make it fair again, however, cash pay would have to fall quite a bit (at least in inflation adjusted dollars) to offset the fact that the cost of public retirement benefits has soared even higher, giving private sector workers a chance to catch up. The less well of serfs have already been made to sacrifice quite a bit for the benefits they themselves often do not receive.