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It was the 1970s and Britain was the “sick man of Europe.” Labor unions had toppled one Conservative government and were bullying the existing Labour Party one. Then came the “Winter of Discontent,” when strike after strike by government employee unions left the dead unburied and garbage piled high in the streets. But that led to the election of Margaret Thatcher as Prime Minister and an eclipse of labor union power. The current strike by employees of the Bay Area Rapid Transit (BART) subway system in the San Francisco area suggests California may be heading down that road — but with no Thatcher (or Reagan)-like savior in sight.
In Britain, government unions had enabled unsustainable industries to go on well beyond their point of no economic return. From coal mining to auto manufacturing, industries with little to no prospects for long-term survival had been kept alive by taxpayer subsidies. This led to higher wages for union members, which in turn fueled crippling inflation.
BART is not that different. The fact is that outside a very small number of hyper-dense cities such as Hong Kong, Tokyo, or New York, passenger rail is a money pit. According to the most recent audited financial statement, during Fiscal Years 2010-2012, BART’s operating losses totaled nearly $800 million over the three-year period.
Only about 5 percent of Bay Area residents rely on BART to get to work while 70 percent drive. And most transit commuters take buses, which are operated by other agencies. This explains why dire predictions of “Carmageddon” during the last BART strike proved overblown. Inconvenience, yes; catastrophe, no.
Given the transit provider’s inability to raise adequate revenue from its users, it must rely on a variety of federal, state, and local taxes, grants, and bonds to fund its operations and investments. BART officials estimate the system will need $15 billion in new investment over the next 15 to 20 years, which means that annual capital contributions will need to nearly triple from their current levels.
Labor costs remain one of BART’s largest and least flexible budget expenses. To put it in perspective, in FY 2012, BART collected just over $360 million from customers, yet paid employees nearly $380 million. Even before paying vendors for supplies, equipment, and energy, San Francisco’s rail transit system is already in the red.
Union officials simply refuse to accept this reality. In their view, the system is already exploiting them and they refuse to budge on such issues as flexibility on working hours. Some transit workers work a four-day, 10-hours-a-day schedule, while other work five days at eight hours a day. BART officials want the flexibility to change this to reduce costs. The union says no, hence this second strike in four months.
BART General Manager Grace Crunican told USA Today, “We are not going to agree to something we can’t afford. We have to protect the aging system for our workers and the public.” Unfortunately, for the public, both the transit system and the union collective bargaining system are well past retirement age.
If California is to avoid repeating the experience of 1970s Britain, it must face some realities. Government unions will have to be told that the days of jobs for life and overly generous retirement benefits are over. And government industries like BART will have to be told that the days of their being kept alive by taxpayer subsidies are over as well. If BART is to have a future, it is one where it can cover its own costs.
Sadly for California, there does not appear to be a Thatcher- or Reagan-like figure in California’s political horizon. California is therefore likely to continue down the road that Britain turned back from. If you want to see where that road ends up, look at Greece.