Last week, the second of two unions that has been in tense contract negotiations with the Bay Area Rapid Transit (BART) system approved the costly and unfair agreement BART officials offered following two crippling strikes and threats of further service disruptions. Negotiations between the Service Employees International Union (SEIU) 1021 and Amalgamated Transit Union (ATU) 1555 and BART officials first boiled over in July, when union members went on strike for four and a half days, disrupting service for the 400,000 Bay Area residents who depend on it. Following court-ordered “cool down period,” during which no negotiations took place, the unions continued to threaten a second strike if BART officials didn’t submit to their demands. When BART officials failed to do so, they went on a second strike on October 18th that lasted several days.
At the heart of negotiations were demands by the union for ridiculous salary increases and BART demands that employees contribute more towards their health insurance and that employees finally begin to chip into their pension plans. For perspective, the average BART employee already received a salary of $76,551, more than the median household income in San Francisco of $71,745. Further, BART employees have only had to pay $92 per month towards their health insurance benefits, or just over $1,100 per year, regardless of the size of their family. In contrast, the average worker in San Francisco contributes $4,565 per year towards employer-sponsored family plans. In addition, BART employees contributed nothing towards their pension plan, placing the full burden of covering the costs on taxpayers and the BART system, which had to allocate $17 million last year to pay for contributions that employees should be paying.
As can be expected, these benefits already cost taxpayers and BART significant amounts of money. California Common Sense has detailed that BART was spending $58 million out of a $700 million budget before the latest negotiations. In funding its pension contributions towards CalPERS, BART is officially $187 million short in fully funding its obligations, and may be short by as much as $797 million if more conservative investment return assumptions are used (5.5% instead of 7.5% over thirty years).
In light of these unjustifiably lavish perks for BART employees and allocating increasing portions of its budget towards retirement costs, BART officials from the beginning asked unions to contribute more towards their health insurance ($144 per month) and finally contribute towards their pensions. BART was forced to agree to a four-year contract with the following changes over the prior contract:
- Employees will gradually contribute 4% of their required 8% contribution rate to their pension plan by the fourth year of the contract, meaning taxpayers will continue to pay for at least half of the contributions BART employees should be making
- Employees will receive a 15% salary increase over the four-year contract, receiving 3.72% pay increases the first three years of the contract, and a 4.22% pay increase in the fourth year of the contract
- Employees will gradually contribute more towards their health insurance, which will top out at $140 in the fourth year of their contract
The terms of the contract are estimated by BART to cost $67 million per year more than the prior contract. In one of the few cost saving measures agreed to, BART raised the vesting period for retiree medical benefits from five years to fifteen years, meaning that employees will need to be employed with the agency for a decade longer in order to be eligible for the benefit.
Ultimately, the agreement between BART and the unions creates a budget much more bloated than before and may set a precedent for other public employee unions without a “No Strike Clause” to use the coercive tool of service disruptions to gain leverage in contract negotiations, regardless of the cost to the communities they are supposed to be serving.
Pro-bono Consulting for Policymakers
Reason Foundation's Pension Integrity Project has helped policymakers across the country implement comprehensive public pension reform.
Sign up below to schedule an initial consultation with our team of independent actuaries and pension reform experts.