Washington Metropolitan Area Transit Authority (DC Metro), the tri-jurisdictional government agency that operates the transit services in the Washington D.C. metropolitan region, is facing a fiscal problem: it has a pension shortfall of $2.8 billion.
Similar to the pension crisis facing Illinois, DC Metro promised more than it could pay to its employees and is now seeking a bailout from the federal government.
Rep. Bill Foster (D-IL) said the situations in which both Illinois and DC Metro are in results of poor budgeting and financial management.
“The DC Metro system and the Illinois budget crisis are good examples of what happens when programs and facilities do not receive the funding they need from lawmakers,” Foster said in a statement to Illinois Business Daily.
Due to its inability to manage its exploding pension promises and its inability to declare bankruptcy (state governments can’t go bankrupt), Metro board Chairman Jack Evans recently proposed a federal takeover to absorb the $2.8 billion in unfunded liability and spare union employees potential pension benefit cuts.
The bailout may alleviate the concerns of uncertainty for DC Metro union employees but may be disastrous for others: taxpayers from across the nation will be forced to pay for this mismanagement. Residents who live nowhere close to Washington, D.C. will have to contribute to DC Metro’s pension fund.
Similar to what is happening in Illinois with its high property taxes, taxpayers may have to bear the burden of other people’s retirement while trying to plan for their own. Foster said residents of Illinois are already receiving very little – if any – benefits from paying federal taxes.
“The people of Illinois lose roughly $40 billion every year because we pay far more in federal taxes that we receive back in federal spending,” he said. “This redistribution of wealth to other states is a root cause of the fiscal crisis in Illinois.”
Many have argued that a federal bailout would only address the symptom and not the illness. It would not tackle the root cause of the situation but foster complacency by allowing for DC Metro’s fiscal irresponsibility to continue. Again, the problems facing DC Metro is a mirror to Illinois, whose combined unfunded pension liabilities is estimated to surge to $130 billion with only 37.6 percent of all pensions funded.
Opponents of Evans proposal alleged that if the federal government allows for a bailout, it may set a precedent for the bailout of every other pension liabilities both public and union. The cost to taxpayers would be astronomical.
Foster wished to prevent such a situation from occurring, seeking ways to alleviate the situation. He concluded that the solution is found through working together.
“In Congress, I have worked to draw attention to the funding formulas that exacerbate this problem,” he said. “Ultimately, these problems require lawmakers at every level work together to make sure we honor our commitments.”