November 9, 2011
The Chicago Transit Authority Board will vote on CTA President Forrest Claypool’s FY2012 Budget Recommendations on November 15, 2011. The proposed $1.2 billion operating budget closes a preliminary budget shortfall of approximately $277 million, which was driven by $81 million in expenditure increases and the loss of $196 million in one-time revenues used during FY2011.
The CTA plans to close more than half of the budget shortfall by cutting personnel costs with labor reforms that are contingent on the cooperation of labor unions and arbitrators. If the negotiations fail to produce $160 million worth of annualized expenditure savings, the CTA will need to make service cuts or impose revenue increases mid-year to close the budget gap.
The following graph shows the CTA’s position count and labor costs for the past ten years. Since FY2003 administrative positions have declined by 303 positions, or 26.5%, Scheduled Transit Operators (STO) have declined by 947 positions, or 16.5%, and non-STO operations positions have declined by 1,260, or 26.0%. During the same time period, labor costs have increased by $215.2 million, or by 32.2%. The drop in FY2012 labor appropriations is due to the anticipated savings from labor reform and work rule changes budgeted for the latter half of FY2012.
In order to maintain current service levels and fares for the first half of 2012 while negotiating labor changes, the CTA will reduce the pension obligation bond (POB) debt service payment made from the operating budget in FY2012. In October 2011 the CTA replaced $78 million held in reserves for POB debt service with a $4.7 million surety bond, thus freeing up a net $73.3 million to be applied to the FY2012 debt service payment. This action will produce a one-time operating budget savings of $73.3 million. If the CTA fails to achieve $160 million in annualized labor savings during 2012, the one-time savings on debt service payments will leave a significant gap to fill in future budgets.
The CTA’s total POB debt service obligation will rise to $141.4 million in FY2012 from $131.4 million annually between FY2009 and FY2011. The obligation will increase by $15.2 million in FY2013 and remain level at that amount through maturity in FY2040.
The following graph illustrates the projected employer pension bond debt service and pension contribution and employee pension contributions required to meet the 50-year schedule set by state legislation in 2006 and 2008. The pension contribution projection is recalculated annually. The current projection shows total employer contributions, including debt service on the 2008 pension obligation bond, will reach a high of 31.4% of payroll in 2014.
For more information about the CTA’s FY2012 proposed budget, see the Civic Federation’s recently published budget analysis of the CTA FY2012 President’s Budget Recommendations.