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How Pa. can prevent the next SEPTA strike

Ban walkouts and expose transit to market forces.

By Elizabeth Bryan

and Katrina Anderson

Transportation strikes are not new to Philadelphia; SEPTA workers have gone on strike nine times since 1975. The latest example, which ended yesterday, was anything but a fight for the working class. The union's demands were well beyond the means of SEPTA and state taxpayers.

The typical SEPTA union employee earns $52,000 per year - $15,000 more than the median annual salary of Philadelphia workers. The city's unemployment rate reached 11 percent in September, and the number of jobless residents had almost doubled since December 2007. But while taxpayers were losing their jobs and taking pay cuts, SEPTA's largest union was demanding a raise and increased pension contributions.

Like those of most local government entities, SEPTA's pension plans are severely underfunded. They will likely require a local tax hike in the coming years just to pay current benefits. So this was hardly the time to put benefit increases on the backs of taxpayers.

Governments, unlike businesses, don't face market pressures to keep labor costs down. When public employees stop offering their (monopolized) services, politicians feel pressure to meet union demands - usually at taxpayer expense - to get public services operating again.

SEPTA has used this leverage well. The agency is facing a $120 million deficit next year, but instead of controlling costs, it has lobbied successfully for increases in state subsidies - and been rewarded for poor money management. Most recently, it benefitted from Act 44 of 2007, which depends on I-80 tolls (which are in doubt) and higher turnpike tolls to fund mass transit.

How can Pennsylvania lawmakers get out of this mess? The first step is to open Philadelphia mass transit to competitive contracting, in which private companies would compete to operate SEPTA's network. Los Angeles, San Francisco, and Boston are among the cities that already employ competitive contracting of transit services. About 15 percent of commuter rail services in the United States are competitively contracted.

The practice has reduced operating costs on average by about 35 percent. Las Vegas' system, the largest fully contracted one in the country, costs about 30 percent less than systems of similar size.

The state also should undo regulations that require transportation providers (taxis, vans, buses, etc.) to apply for a license from the Pennsylvania Utility Commission. The process requires applicants to demonstrate that they are safe and will meet "a clear transportation need not being met." Meanwhile, existing transportation companies can petition the commission to withhold new licenses.

This system protects existing providers from competition and keeps prices high. Removing the restrictions would create more competition, improve service, and lower prices.

Transit agencies also should be forced to depend more on local customers and less on state subsidies. Increasing their reliance on fares would discourage inefficiency, as riders would pay the cost of transit and therefore demand better, more efficient service, reducing waste and keeping costs down. State subsidies should be put toward vouchers for low-income riders, creating a true marketplace.

Finally, Pennsylvania needs to adopt legislation like New York's Taylor Law, which prohibits strikes by public employees. New York's public employees are allowed to voice their concerns through mediation and arbitration, but strikes may be punished with jail time and fines.

Elected officials should not be held hostage by unions demanding ransom in the form of higher taxes and subsidies. Pennsylvania needs laws that prevent unionized government employees from shutting down public services and allow the private sector to compete in the mass-transit market. Such reforms would create a more efficient system, saving money for transit users and taxpayers.