Thursday, October 08, 2009

CTA plans $120 million in cuts, efficiencies

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As part of developing his budget recommendations for 2010, Chicago Transit Authority President Richard L. Rodriguez has announced a series of internal cost cutting measures and efficiencies aimed at reducing a projected $300-million revenue shortfall that has resulted from lower than expected tax revenues.

 

In 2010, the CTA will again be deferring merit pay increases and will be instituting more furlough days and unpaid holidays for non-union employees. In addition, it will eliminate at least 70 non-union jobs, and reduce intern and fellows programs for a combined savings of approximately $21.6 million. In addition, by scaling back contracts, reducing expenditures and hedging fuel, the CTA estimates it can save another $10.5 million. Finally, by transferring $90 million of eligible capital funds to the operating budget for preventive maintenance, the CTA can reduce its shortfall by a total of $122 million.

 

"Like everyone else, CTA has been hit hard by the recession. Our primary revenue sources-sales taxes, real estate taxes and fares-are all tied to the health of the economy," said Rodriguez. "Public funding has been especially weak. This year, CTA's tax-funded revenues were 34-percent lower than anticipated when the budget was developed and next year will be even worse. We have to make the tough management decisions and continue to cut costs internally. That means that we will be expecting additional sacrifices from our employees next year."

The CTA has been carefully managing its budget through ongoing belt-tightening steps that include aggressive management of overtime, a hiring freeze on non-essential personnel, reducing all department budgets, using strategic capital investments to lower operating costs, such as replacing aging buses with more fuel efficient hybrids, and requiring furlough and unpaid days for management.

In 2009, the CTA required up to six unpaid days off for management and deferred raises for non-union employees. In 2010, pay increases for non-union employees will be deferred once again. They also will be required to take additional furlough days and won't be paid for the CTA's six regularly scheduled holidays. The number of required furlough days will be determined on a sliding scale based on salary, with higher earning employees required to take 12 days and other employees required to take either eight or four furlough days depending on their salaries. Rodriguez said that the furlough days and unpaid holidays are equivalent to a 10% salary reduction for non-union employees.

"I know this will be a very unpopular decision with employees, but furlough days are the new reality for both the public and private sectors," said Rodriguez. "In this economy, where taxpayers, our riders and the general public are all suffering, the responsible thing is for CTA to do all it can to cut internally before considering steps that would impact riders. Reducing costs is a critical step necessary to balance the 2010 budget. Personnel costs comprise nearly 70 percent of the CTA's operating expenses and must be part of any budget balancing strategy."

Rodriguez said he is also exploring other ways to reduce labor costs. Although layoffs over the past few years have reduced the workforce by more than 400 positions, Rodriguez has challenged management to cut deeper. The plan announced today will restructure certain areas to eliminate at least 70 more non-union positions and streamline management ranks as well as outsource select services and reduce intern and fellows programs. With the proposed job reductions, CTA will have reduced its non-union workforce by 17 percent since 2007.

Further labor savings and transfer of state capital funds to operating could potentially bridge the remaining budget gap. Rodriguez said that he was reluctant to borrow money from the capital budget but given the size of the projected shortfall, it was important to exhaust all internal avenues to bridge the gap.

"We were careful to maintain a sufficient capital budget to deal with our most urgent needs," he said. Because additional state capital funds are expected due to the recent mini-capital bill and state capital program, CTA is also seeking authorization to use a portion of those funds to further reduce its operating shortfall.

The CTA continues to benefit from efficiencies that were implemented following a 2007 report by the Illinois Auditor General including implementing a performance management program to track key performance metrics and reprioritizing the capital program to move the system to a state of good repair. Initiatives have included replacing aging buses that are costly to maintain with more efficient hybrid technology, improving cleanliness throughout the system and aggressively tackling deteriorating tracks that result in slow zones.

Some recommendations from the report would require modifications in union agreements and the CTA is still pursuing relevant labor changes. Rodriguez said he is reaching out to the CTA's unions to ask their cooperation in reducing costs for 2010. Union members received a 3.0 percent wage increase in 2009 and are scheduled to receive a 3.5 percent increase in 2010. Nearly 90 percent of the CTA's workforce is unionized.

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