Pensions, insurance would cost more

By Jon Hilkevitch
Tribune transportation reporter

May 22, 2007

CTA officials uncorked proposals Monday to save an estimated $32 million a year by requiring transit agency employees and retirees to pay more toward pensions and health insurance.

The reforms, contained in legislation that will be distributed to state lawmakers Tuesday in Springfield, rely on approval to issue more than $1.5 billion in bonds to help pay for pension and health-care funding shortfalls, Chicago Transit Authority officials told the Chicago Tribune's editorial board.

"Our current retirement and health-care benefits are too rich for what we can afford," CTA Chairwoman Carole Brown said.

The reforms, combined with bonding authority and state approval of $110 million in additional operating subsidies, would solve the transit agency's immediate problems, officials said. But the agency needs almost $6 billion in capital-improvement funds to bring the transit system up to a state of good repair, they said.

The CTA pension plan would create a defined contribution plan for new CTA employees. Existing CTA employees would keep their traditional defined benefits plan, but they would be required to double their contributions.

Defined contribution plans guarantee a set level of contribution, and the latter guarantees a level of payments for life.

The goal is to ensure that the employee pension fund is 90 percent funded by 2058, as required under legislation recently enacted by the General Assembly. The fund has enough money to cover only about 34 percent of liabilities.

The plan will attempt to reduce health-care benefits for CTA retirees. Unions will retain collective-bargaining rights over benefits of current employees. CTA labor unions immediately labeled the proposed changes as unfair, particularly to future employees, and vowed to fight.

"We allowed the CTA to skip pension payments for a number of years, and now it has come back to haunt us," said Rick Harris, president of Amalgamated Transit Union Local 308, which represents CTA rail employees.

The effort to rein in employee benefits is the latest overture to show state lawmakers that the transit agency deserves increased funding.

Brown and new CTA President Ron Huberman are expected to release a contingency plan Thursday containing fare increases and service cuts that would be implemented as early as July if lawmakers deny its request for $110 million.

Labor employee benefit costs represent more than 70 percent of the CTA's operating budget, officials said. Unless those costs are lowered, the transit agency must raise fares and cut service. By law, the farebox must fund half of the agency's operating budget, with state subsidies covering the remaining 50 percent.

The CTA plan would create a defined contribution plan for CTA employees hired after Jan. 1, 2008. New employees would contribute 3 percent of their salary toward the plan, and the CTA would contribute 6 percent.