Lane Jensen returns

Lane Jensen returns

Thursday, March 15, 2012

THE BUDGET MESS

This post was originally on Portland A-Foot and it spells out  CLEARLY why we are in a budget mess at Trimet and should be read by people that are interested in facts not rhetoric as our general manager is so fond of spewing:

The financial problem has been a long time in the making. Ask any employee of TriMet’s Training Department, and you can discover that this is a hole dug by TriMet management a long time ago. Three decades ago, full retirement was at age 62, with a 20 year vesting for Union employees. The pension was tiny. But there was the promise of improving seniority over time, and health care in retirement. Employees could retire early at age 55, but with a much-reduced pension — out of compassion for drivers who developed health problems and could no longer drive. It was hard to survive retirement at 55 with no social security until 62, and a tiny pension. TriMet is not part of PERS.
The big change came when management demanded part time drivers be included in the contract. This was implemented in such a way that all new drivers must start out part time. Combine the low starting wage with short hours, and it turns out that young people with a family can’t afford to work as bus drivers. New hires tended to be empty nesters in their 40′s, 50′s, and even 60′s looking for a pension and health care. Over time, the full retirement age was dropped to 58, with a 10-year vesting period, and during Tom Walsh’s rule as GM, the pension was raised to a fairer level, but still far below PERS. The contract also required that the pensions, but not the retiree health care, be fully funded, something to be phased in over a 40 year period. Subsequent policy has been to bring the pension fund to full funding over a 20 year period. The pension fund would have been well on the way to full funding, if not for the massive drop in the stock market, which is now in recovery.
The problem, now coming home to roost, is that TriMet has promised to pay full health care for life for a 55 year old retiree with 10 years of service, and there are a lot of folks retiring at 10 years.
TriMet’s offer to the Union, recently thrown out by the ERB, took a machete to this problem. If their proposal had been upheld, many senior employees would have retired, in order to take advantage of the old contract. This was a stupid idea. Once a TriMet employee reaches 55, every year they keep working saves TriMet one year of retiree health and pension payouts, at the cost of a very modest increase in eventual pension. If TriMet could keep most employees working until 65, they would save a huge amount, because the health care cost for retirees 65 and over is paid in large part by Medicare.
Where TriMet should be engaging the Union is in trying to work out an agreement that gradually vests the full cost of retiree health care over significantly more than 10 years, and that adjusts the agreement about part time drivers so that older full time drivers can choose part time work without losing seniority, thereby allowing new hires a greater opportunity to work a full 40 or more hours per week. This would bring in employees at a younger age, allowing the cost of pensions and health care to be amortized over something like 30 years, rather than 10 years. While still allowing early retirement at 55, there should be an incentive to work up to age 65.
If your Mercer interviewee is so sharp about employee benefits, why doesn’t she understand the above concepts? Did management fail to clue her in? Did she just not ask questions? I am sorry to be submitting this so late after the interview, but these are important issues that management and the TriMet Board seems not to understand.
Comment of the month: How TriMet accidentally wrecked its budget | Portland Afoot

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