PRESIDENT'S CORNER
by James M. Sweeney, President-Business Manager
Indiana Governor Mitch Daniels OKs Illiana Expressway
On March 18, 2010, Indiana Governor Mitch Daniels signed into law legislation authorizing the state to enter into a “public-private partnership” to build the Indiana leg of the Illiana Expressway. As you may all recall, the Illiana Expressway is the eight-lane highway proposed to link Interstate 65 in Indiana to Interstate 57 and then I-55 in Illinois—potentially over 38 miles in total of brand new highway construction built, entirely in Local 150’s jurisdiction. The cost of the project is enormous—probably over a billion dollars in construction costs alone, not counting land acquisition. Private ownership of infrastructure and other public assets is becoming more common these days as the costs of building them and servicing the debt soars. It is for these reasons and the current state of government resources that the project will not happen without private investment money. But when it does happen, it is all jobs for Operating Engineers.
Government authorization for private investment in roads is a political problem that Local 150 has devoted significant resources to solving. As Financial Secretary Dave Fagan more fully explains in his article this month, the fate of the legislation authorizing the state of Indiana to join in a public-private partnership was by no means certain. In fact, at one point, it looked like it was dead. But through a lot of hard work on Local 150’s part, and the appearance of our Indiana members at several key public hearings, the legislation was revived, approved by both Houses of the Indiana legislature, and signed into law by Governor Daniels. I know everybody has heard me talk about this before, but this legislation is yet another example of the importance of political activity by Local 150 members. The impact of registering to vote, calling elected representatives, sending them postcards, and contributing to the PAC funds cannot be overstated. It is also a terrific example of the importance of bipartisan political work by both the Union and our elected officials in Indiana. There has been a lot of rhetoric in the past year about the inability of the Republicans and Democrats to work together in Washington, but back home in Indiana, representatives from both sides of the aisle rolled up their shirt sleeves, with the leadership of Republican Governor Daniels, got the job done.
The next step in the process of getting the Illiana Expressway accomplished is enacting public-private partnership legislation in Illinois. We have met with dozens of local and state officials such as the South Suburban Mayor and Manager’s Association trying to get everybody on the same page, and we think we are getting closer. We also backed Adam Baumgartner (son of Local 150 member Mark) to run for the Illinois Senate in the primary against anti-growth candidate Judy Ogalla. This win means that we now have two candidates- Baumgartner and incumbent Toi Hutchinson- who are pro-growth. They both support the Illiana and the proposed south suburban airport, projects which would provide years of work for Local 150 members.
At the AFL-CIO winter meetings, Dave Fagan and I planned to meet with Illinois legislative leaders Michael Madigan, John Cullerton, and Governor Pat Quinn about the project. The meeting ended up with 20 people, several representing institutional investors, including a number of pension funds. A logical private source of capital for construction is some of the really big pension funds, which can then look to long-run stable returns to fund retirement benefits. All who attended expressed great enthusiasm. In fact, by the time we got back from the AFL-CIO, the Illinois officials had already started the proposed legislation through committee. It is my understanding that right now in Illinois, we are waiting for an additional study from a consultant called the Cambridge Group to report on the value of extending the project all the way to I-55. As of now, Illinois legislators are working up a bill that mirrors the one approved in Indiana, and we have commitments from the legislative leadership and Governor Quinn to support it. The Illiana Expressway may still be years away, but a project this size does not get done overnight, and will likely provide work for Operating Engineers for many years to come.
Perhaps the best current example of a long-term project that provides jobs for Local 150 members is the ongoing multi-faceted expansion of O’Hare Airport. Last month, I attended a ribbon-cutting ceremony at the invitation of Mayor Richard M. Daley to launch the latest phase of the project. Meanwhile, members employed by D.M.D., Brandenburg, McDonough, and American Demolition began taking down about 500 houses and commercial buildings in Bensenville to clear the way for a new runway at O’Hare. This is a piece of the O’Hare expansion puzzle—moving the airport outside of its original boundaries for the first time—that had been stalled for years by opposition from the Village. Remember that Local 150 supported Bensenville Mayor Frank Soto in his bid for the office last year. A part of Soto’s campaign platform was ending the lawsuits between the Village and the O’Hare Modernization Project, allowing the airport to expand. In addition to the members who are performing demolition, there are currently dozens of members at work on this expansion project pushing dirt, building runways, and erecting new cargo buildings. Once again, political work by Local 150 helped get the project back on track.
More good news work-wise is in the anticipated April IDOT lettings of another 300-plus projects in Illinois. This letting was put in jeopardy last month when the ratings agencies downgraded the bond rating for the State of Illinois. The downgrade made it harder to borrow the money necessary to finance these projects, and IDOT initially pulled them off the calendar. We worked hard to convince the State that it was a mistake to pull these lettings, and the Legislature’s quick action in reforming the public employee pension system ended up saving the state $100 million in interest that now goes to these projects instead of Wall Street. These projects add another $1 billion to the state roadwork picture for this year. It may end up being the biggest letting in state history, even bigger than the one in January.
A number of other things have occurred recently of significant impact to Local 150 members, particularly concerning our fringe benefits. I am very pleased to report that with the end of the fiscal year on March 31, 2010, the MOE Pension Fund recovered a big chunk of its investment losses from a year ago. We do not have the final numbers yet, but I will report on them as soon as I can. Suffice it to say that the U.S. Stock Market recovered much of its value since the end of our fiscal year on March 31, 2009. But as important as this rebound was, it was critical to the overall health of the Pension Plan that we made the changes when we made them. One of the scariest statistics I have seen in a long time was published last month in a magazine called Institutional Investor. It reported that as of last September, 126 of the largest Taft Hartley multi-employer pension funds in the U.S. were only 56 percent funded. Obviously, the stock market collapse which started a year and a half ago is the primary cause of this problem, but it is not the only one. Fortunately, Local 150 members took the critical steps we needed to take when we did, and I think time will tell we will be all better for it.
The next most significant event concerning our fringe benefits was the passage of the healthcare reform legislation that has so dominated the news for the past year. With all the changes that were made to the House and Senate version of the different bills, it is not yet clear what the impact will be on Local 150. There is no question that some parts of the bill will mean our costs will go up. By allowing parents to keep their kids on the MOE family coverage until age 26, and eliminating lifetime caps on benefits, the MOE Health and Welfare Fund will necessarily experience cost increases. And it is still not clear what will happen to the proposed tax on “Cadillac” plans scheduled to go into effect in 2018. At the same time, much of the bill is designed to at least slow down the skyrocketing cost of healthcare that has escalated at almost 10 percent per year for the last decade with no slowdown in sight. We have directed the MOE Fund’s actuarial consultants to perform an analysis of the pros and cons of the bill, and once we get a clearer picture of what it contains and its projected impact, we will report more on this too.
Of immediate concern to Local 150 members who remain out of work is the decision by Congress to again extend the COBRA subsidy to our MOE health and welfare insurance. Remember, when you run out of banked hours, you become eligible for COBRA. For the last three calendar quarters, Local 150 has utilized stimulus money along with our own treasury dollars to bring the cost of a member’s self-pay down from $1,200 to only $200. To date, we have paid out $1,083,491.89 to help keep our out-of-work members and their families covered. We have decided to tap the Union’s reserves to pay for another quarter’s worth of coverage for our out-of-work members in the hope that as work picks up, fewer members will need this help, and we are finally beginning to see this happen. While it has been a struggle to divert more than $1 million in union treasury funds during a time when we are slashing the budget everywhere possible, the importance of keeping members insured during this time cannot be ignored.
The Health and Welfare Fund remains sound generally, with about 15 months’ worth of reserves. We have even been able to make a few modest improvements in health and welfare benefits. That is basically because we have worked hard for several years to ensure that the contribution rates we negotiate into our contracts keep up with our increasing costs.
That said, it looks like healthcare costs are going to be one of the toughest issues we will face at the bargaining table this year. The increases we negotiated in contributions to the MOE Health and Welfare Fund in 2007 and since then have gone a long way to stabilize our health and welfare benefits. But the continuous double-digit inflation in healthcare costs over the last several years combined with the severe unemployment and underemployment we have faced have made it necessary to adjust contribution rates up if we are going to keep our healthcare strong.
As Steve Cisco explains in his article in more detail, the response from employers so far is predictable: they want givebacks. They call me to complain about having no work, but when we engineered the Illinois Safe Roads Alliance advertising campaign to secure the biggest capital improvement plan in the history of the state of Illinois, we had to beg them to contribute. When we succeeded with a few dollars left over, we planned a commercial to thank legislators for their vote- a politically risky vote for money that could very well have been diverted to plug holes in other areas of the state’s broken budget. Instead of getting behind this idea, the contractors asked for their money back.
The contractors insist that they cannot afford to pay health and welfare increases, while at the same time Local 150 spends its reserves to keep our members and their families insured. The employers know that there is no housing construction going on because there is no demand for new homes (what demand there is for housing is met as homebuyers pick up the houses vacated by defaulted mortgages). Yet, they have the nerve to ask us for concessions to “get the market going again.” The contractors know that concessions from us will not sell one more new house or build one more 7-11. After making them rich for years by delivering a quality product at a fair wage, they want to use the current economic problems to take away wages, benefits, and work rules that it has taken us decades to negotiate. That is not going to happen. The only way to support consumer demand is to get people back to work at fair wages. Provide them decent healthcare and a comfortable retirement so that they are not just scraping to get by. Once people have decent jobs again, they will buy houses again.
While many stood and watched the housing market crumble, we built alliances that got work going again on roads, bridges, wind farms, and other projects. A great deal of the work that will keep our members – and these contractors- busy this year came as a result of our efforts, and we will not let them forget that. We have always done our share. Even though we were not legally required to take any action to restore our pension until 2012, we took the bull by the horns and put a dollar “in the bucket” last year. Because of this, our pension is in a much better position than many others in labor and we have saved contractors from having to pay additional taxes in the future. We instituted the Retiree Medical Savings Plan to reduce legacy costs down the road and help members get more bang for their pension dollar when they retire. We are not going to be greedy going into contract negotiations. We understand the economic conditions, but the contractors must also understand that we have pushed the boulder up the hill alone for long enough, and now it is their turn to share the burden with us.
The contractors think now is the time to take concessions from us because they think we are scared. They think we are divided. They think we are weak. We know we are not. We are ready for whatever fight they want to start. United We Stand, Divided We Fall.