Metro Needs a Pension Trust Plan, Too
By November 5, 2015 0 1079
Two weeks ago, the representatives from Maryland on the Washington Metropolitan Area Transit Authority board of directors invoked a jurisdictional veto to prevent a proposal to create a trust to address WMATA’s $1.5 billion unfunded Other Post-Employment Benefits liability. This action, while claimed to be done in the name of safety, is an irresponsible risk for the future viability of the system.
As a bit of history, the board initially voted to establish a trust to fund this OPEB liability in 2010. However, after five and a half years, the trust still hasn’t been created. In March 2014, the board voted to allocate $4 million to a still-unestablished OPEB trust as part of the fiscal 2015 budget. Then, in May 2015 the board voted to allocate an additional $11 million to the unestablished trust.
I’ve read comments of support for Maryland’s veto that WMATA shouldn’t be funding pensions when the reliability issues are so great. While I agree that WMATA has significant work to do to improve the reliability of the system, this action doesn’t save any money by “sticking it to retirees” or something absurd like that.
WMATA is bound to continue to pay tens of millions of dollars a year out of fare revenue and jurisdictional subsidies towards these OPEB obligations. In fiscal 2014, WMATA paid $38 million in OPEB liabilities directly from operating funds. That pay-as-you-go number will continue to rise quickly, unless an irrevocable trust is established to dedicate and invest funds to meet future liabilities.
The reason for the safety and infrastructure issues that WMATA is facing, is a lack of required funding five and even 10 years ago, not the use of several million dollars this year to address the ticking time bomb of a future pension liability. The lack of funding from all of the jurisdictions, and the lack of responsible fiscal management from the board of directors over the past decade, has left us in the crippling position we are in today.
The solution is not to again delay the responsible management of future liabilities, as we have done for many years on the preventative maintenance side, as well as the pension liability side. Refusing to commit a small amount of money to a known future problem, is every bit as much a failure in leadership as not funding preventative maintenance at a station because we haven’t experienced any problems there this year.
Public transit is a critical component of our region’s future. As chairman of the Finance Committee, I have asked WMATA staff to present a budget proposal for the next 20 years that expresses future costs for unfunded pension liabilities, deferred maintenance, safety recommendations, and implementation of the Momentum plan. Funding the future OPEB liability is the issue at hand today, but preventative maintenance, infrastructure improvements, and system expansion are all similar actions that will require us to be responsible stewards of both current and future taxpayers’ and riders’ money.
Jack Evans is the District Council member for Ward 2, representing Georgetown and other neighborhoods since 1991.