Solving PAT’s Financial Woes

Member Group : Allegheny Institute

(January 30, 2012)–The ongoing saga of the financial morass at the
Port Authority (PAT) has developed an interesting twist. Governor
Corbett, through a spokesperson, has responded to PAT’s entreaties
for a hefty boost in money from the Commonwealth to cover an
impending $64 million deficit by telling PAT that, "they should look
to their own resources to come up with a solution."

In response to the Governor’s comments, PAT’s Executive Director
stated, "If this is a local problem why was there an executive order
creating a transportation funding commission?" And he further argued
that the problems could be fixed by changing the way Pennsylvania
pays for transportation programs. Presumably, that means raising
taxes or fees to generate additional funds for mass transit.

Weighing in separately, the head of the transit workers union said,
"The answers to solving the transit funding crisis lie in
Harrisburg." Adding, "It is not a local issue as the good Governor
has said."

Who is right? Clearly, the Governor is right in the sense that $64
million more in state funds is not the appropriate or reasonable
answer to what ails PAT. One of the biggest problems for PAT has
been the willingness of previous governors to come up with last
minute bailouts that have conditioned the unions and management to
believe the state will somehow always find the money needed to fill
budget gaps just before the spending cuts have to be made. And right
on schedule the authority and transit supporters have gone into full
lobbying mode to try to persuade or embarrass the Legislature and the
Governor into abandoning their opposition and allocating the
requested funds.

While the Governor is undoubtedly correct in the view that more state
funds are not the correct answer to PAT’s shortfall, it is important
to realize that because PAT is a state created entity operating under
state laws, the Commonwealth has a vital interest in seeing the
Authority carry out its mission of providing transit services as
efficiently and as cost effectively as possible. As the situation
currently stands PAT is simply incapable of serving the people of
Allegheny County with efficient, cost effective bus service. It is
saddled with enormous and growing legacy costs for retirees,
extraordinarily generous wages and benefits for current workers and
substantial debt service expenditures.

Earlier service reductions have improved ridership per bus trip but
they have not cut into the factors driving overall costs ever higher.
The Authority simply cannot survive without ever increasing state
allocations to pay for a rising tide of benefits for people who are
no longer working and providing service. It is patently unreasonable
to force state taxpayers to pay endlessly to cover the costs of PAT’s
excessively generous contracts they had no say in negotiating.

Still, the state cannot sit idly by and watch labor contracts and
promises made to retirees over the years cripple mass transit in
Allegheny County, which is the almost certain outcome of the fiscal
path PAT has been traveling. Several steps can be taken to ensure
that costs can be driven down and that service is available to as
many riders as possible. But these steps require immediate action by
the Governor and Legislature.

First, end PAT’s monopoly over transit service in Allegheny County to
allow regional transit agencies to offer service on routes where it
makes economic sense and to allow private carriers to begin service
on routes abandoned or severely cut back by PAT, all without having
to ask PAT’s permission. Second, end the right of public transit
workers to strike–a major source of the massive problems now being
faced by PAT. Third, amend state laws to allow PAT to declare
bankruptcy to deal with its legacy cost problems. Fourth, require PAT
to freeze hiring and begin a process of privatizing service as other
transit agencies in the region and around the country have done with
a goal of 50 percent outsourced in five years.

Finally, to reduce the devastating amount of impending service
reductions, the Commonwealth could offer, on a one time basis for
fiscal 2012-2013, a dollar in additional funds for every dollar in
immediate but permanent and irreversible costs cuts achieved though
retiree and current employee concessions by July 2012.

There are no easy ways out of this calamitously awful situation. But
for the state government simply to cave in and hand over more money
without serious changes at PAT would be foolhardy and would merely
guarantee another round of even heavier lobbying and stalling for
time next year.

In short, the Governor is right to stand firm against sending more
money. However, the state does bear considerable responsibility for
creating the circumstances under which PAT has careened its way into
the condition it finds itself. And that means the state must grapple
with the underlying causes of PAT’s problems and work diligently to
make the interests of transit users and taxpayers who provide the
generous subsidies the highest priority–not the unions, not the
management, not the vendors, not the Board. Until that happens, the
story of PAT will become more woeful and taxpayers will be saddled
with a bigger and bigger load in return for no improvement in, or
availability of, service. It is time to grasp the nettle and deal
with this long running, seemingly intractable situation.

Jake Haulk, Ph.D., President

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