Having Their Cake and Eating It Too
There have been several underlying problems regarding the Railroad
Retirement debate which I believe must be addressed if Rail Labor is
ever going to get past this high degree of internal acrimony in which
it now finds itself. As in all battles, there are two sides to this
story. Given the level of anger privately and publicly demonstrated by
some of the leadership of the other crafts and the disinformation
being put forward by some of them, I will attempt to address these
emotional matters in the most factual, deliberate manner of which I am
capable.
One of the arguments I have heard most often against the tactics
employed by the BMWE is that we have chosen to go to members of the
other crafts to present them with our side of the story - the facts as
we see them. The leadership of the other crafts feel that such action
is heretical - that each union is an autonomous operation in which the
leadership of one craft should not tread on the organization of the
other without an express invitation.
BMWE is willing to play by those rules under most circumstances.
BMWE believes that so long as the actions of one union do not impact
the membership of BMWE, that it should keep out of the affairs of
other bona fide unions. The Balkanized nature of Rail Labor requires
each affiliate to recognize that although we may disagree with the
internal policy of another affiliate, we really have no right to judge
it or attempt to change it, so long as that internal policy does not
impact on what the BMWE membership considers in its own best
interests. In an imperfect world, we should recognize and respect each
other's sovereignty.
In the Railroad Retirement issue, however, the problem is much more
complex. In that matter, all of the crafts were bargaining for
benefits that would impact every member of every craft. Once an
agreement is reached and legislation passed, it affects all members,
whether the union leadership agreed with the deal or not.
If the leadership of the other crafts truly believed in the
autonomy principle in a multi-craft bargaining scenario, they would
not have entered into a deal and attempted to get that deal legislated
until consensus of all of the unions was attained. No matter how good
they believed the deal to be, they would have respected the position
of any union which did not support the deal, as they all knew that
once the deal was legislated it applied to all.
This was not a matter of a union making a deal whose impact was only
on its members. This was clearly a situation where any deal reached
and legislated impacted all. Yet these unions chose not only to
attempt to "roll" those not supporting the deal, but made an
agreement so that if the deal passed Congress, members of opposing
unions would only get part of the benefits of the deal. Then they
complained bitterly when BMWE decided to explain to the members of
their crafts why BMWE opposes the deal.
In effect what some leadership in the other crafts were (and are)
saying is that they will cut a deal for our people -- a deal which
BMWE considers to be a bad one for the BMWE membership -- one in which
BMWE members receive less than their members receive because of our
opposition to the bad deal - and we should not inform their members of
our views of why the deal is bad. They roll over our autonomy but
complain when we go to their members and factually explain the deal as
we see it.
This is a complex problem because each organization has its own
bargaining style and own method of doing things. Without going too
deeply into the matter, BMWE does not bargain in the same manner that
the coalition of unions does and vice versa. This compounds the
problem, but the only remedy to that is that when an issue affects the
membership of all crafts, we either don't reach agreement with the
carriers until we all do or we expect that those who disagree will go
to the members of all crafts and try to explain their position - with
total respect for the facts of the issue.
The Garden of Inaccuracies
From the beginning the BMWE has attempted to present this matter as
factually as possible. In those instances where we have made factual
errors, we have admitted them and corrected them.
And from the beginning some from the opposition coalition have
chosen to distort our position with inaccurate letters, leaflets and
statements. The first handout from the coalition was distributed with
a cover letter from the president of the United Transportation Union
and was clearly false and internally contradictory. This handout
claimed the BMWE was willing to raise Railroad Retirement taxes, give
up all future wage increases and bankrupt the Railroad Retirement
System in order to obtain 30 and 55. A BMWE leaflet responded to these
outrageous, inaccurate statements.
Other literature later published and mailed by the individual unions
to their members about the deal highlighted only the positive portions
of the deal and ignored and did not explain the windfall the railroads
were receiving from the deal. In all of our literature we explained to
our members the improvements the coalition deal provided as well as
what we considered the bad portions of the deal. Our members
overwhelmingly opposed the deal based upon the full information we
provided as did nearly all of the members of other crafts who attended
our open meetings explaining the full package.
BMWE attempted to convince Congress not to act on any legislation
proposed by the coalition because BMWE opposed the legislation and BLE
did not support it. Our position was simple - that in the past
consensus of major stakeholders was required before Congress would
amend the Railroad Retirement Act. Two major stakeholders did not
support the deal and therefore Congress should not act until all were
in agreement. This position was accepted by Congress for a couple of
months. However, the coalition which represents approximately 60 to
65% of those in the retirement system and the railroads were
eventually able to convince key members of the House Transportation
and Infrastructure Committee to sponsor their deal.
As we stated in last month's JOURNAL, Congressman Oberstar
attempted to broker a deal between BMWE, BLE, the other Unions and the
railroads in which we could retire with an actuarially reduced benefit
at age 58 with an improved GA-46000 policy. Congressman Oberstar was
constrained by the bad deal the other crafts had reached with the
railroads and felt he would have to support, and probably sponsor, the
coalition legislation if BMWE and BLE chose not to accept the
proposal. BMWE leadership agreed to raise the proposal to the BMWE
general chairmen and Grand Lodge officers.
A conference call was conducted and the BWME leadership group
rejected the proposal because BMWE members would not be able to afford
to retire at age 58 with an actuarially reduced benefit. However, even
before BWME reported this to Congressman Oberstar, the railroads
rejected the offer. Congressman Oberstar asked BMWE to again consider
his proposal prior to raising it to the railroads again. Another
conference call was conducted and the same BWME leadership structure
again rejected the offer for the same reason.
The Transportation Communications Union, in an inaccurate May 9,
2000 letter referred to in more detail below, claims that BMWE only
reported in its JOURNAL and on its website that the railroads rejected
the Oberstar offer, but the BMWE rejection was clearly reported in
last month's JOURNAL along with the railroads' refusal of that offer.
During this time frame, the BMWE received a copy of draft
legislation which may become the bill which Congressman Oberstar would
sponsor. At the time of our meetings with Oberstar, we had not fully
evaluated the draft Railroad Retirement legislation because we
received it contemporaneously with the meetings. Subsequent to those
meetings, after having time to give it closer analysis, we realized
that the bill differed substantially from what we understood the deal
to be regarding investment practices. The bill clearly subjected Tier
I, the Social Security Equivalent Benefit Account, to private
investment.
BMWE continued lobbying at that time and held meetings with
numerous Congressmen and Senators. We met with Senator Kennedy's
office on April 10, 2000 and with Senator Roth's staff on April 12,
2000. We raised our objections to the proposed bill, including an
objection that Tier I should not be subject to private investment
until the Social Security issue is dealt with in Congress.
Tier I is nearly identical to Social Security and should not be used
as a pilot or precedent for handling Social Security, especially given
the fact that the deal includes that once the Railroad Retirement
Account reaches six times the amount it pays out in benefits, the
railroads get half of the savings. Senator Roth's staff fully
understood this as did Senator Kennedy's once they read the draft
legislation. They told us they would let us know what the Senators
intended to do about the legislation prior to their taking any action.
At this time, we came into possession of two letters - one an April
10, 2000 letter from UTU to all U.S. Senators claiming that Senators
Roth, Kennedy and Jeffords are expected to sponsor the draft
legislation in the near future and claiming that the Railroad
Retirement Board supports the legislation. The other one is from TCU
to Congress also claiming the Railroad Retirement Board is supporting
the legislation.
The coalition at that time was expecting the draft legislation to
move quickly, as Congressmen Schuster, Oberstar, Petri and Rahall from
the House Transportation and Infrastructure Committee had apparently
agreed to sponsor it. When we contacted Senators Roth, Kennedy and
Jeffords asking if they were supporting or sponsoring the bill, they
said they had made no decision at that time. They also advised they
were being contacted by other Senators who had seen the UTU letter and
they were informing those Senators that they had not made a decision
yet. And when we contacted the Railroad Retirement Board, they said
their response was a reinforcement of their policy of
"neutrality."
In another letter written by the coalition chiefs to Senator Roth,
Chairman of the Senate Finance Committee, the Chiefs accused the BMWE
of setting up Congressman Oberstar by refusing to accept the offer
which the coalition claims was initiated by BMWE. Obviously BMWE did
not set up Congressman Oberstar. BMWE raised the Oberstar proposal to
its leadership structure and it was rejected.
Additionally, the coalition letter to Senator Roth does not tell
the Senator that the railroads also rejected Oberstar's offer. As BMWE
had met with Senator's Roth staff prior to the coalition's letter to
him and informed him that the railroads and the BWME rejected
Congressman Oberstar's settlement proposal, we did not respond to
their letter to him, which was also inaccurate in other ways. BMWE
leadership actually believes the Roth letter from the coalition is
helpful to our position because it is so inaccurate about facts which
Senator Roth knows the truth about, that it makes the signers of the
letter appear to lack credibility.
Recently, three coalition letters have expanded the tactic of
inaccuracy by making disrespectful and sometimes nasty attacks on the
BMWE and the BLE. I referred to two of them briefly above. One of the
letters was sent by the Rail Chiefs to BLE President Ed Dubroski in
response to legitimate questions he asked about whether the proposed
legislation they are supporting allows Tier I assets to be invested.
A second letter, also signed by the coalition Rail Chiefs, to
Senator Roth was simply an inaccurate attack on BLE and BMWE which
actually gave the impression the coalition chiefs didn't understand
the draft legislation they are supporting. This impression was caused
because the letter included their response to Dubroski's letter in
which they denied their legislation subjects Tier I funds to private
investment. The fact is, their draft legislation does subject Tier I
to private investments and Senator Roth's staff knows it.
A third letter was from TCU President Scardeletti and parroted most of
the inaccuracies in the Roth and Dubroski letters and made up some
others. I don't intend to respond to most of the inaccuracies in their
letters because we have responded previously.
The deal gives the railroads too much - a 3.44% tax cut as of
January 1, 2003 worth approximately $430 million per year plus half of
future overages in further tax cuts when the fund contains more than
six times the amount it pays out yearly in benefits - for benefits
which we don't think are worth as much.
Even if we were getting benefits equal to the tax cuts the
railroads receive, we would still oppose the deal because we believe
that the railroads' tax contribution is part of our total compensation
(with total compensation being equal to wages, benefits and pension),
as the railroads themselves argue before every Presidential Emergency
Board.
But even beyond that disagreement, if those who signed the letters
believe what they said in them, they don't understand the draft
legislation being circulated by the staffs of key Congressional
committees and being pushed by the coalition to their members for
passage which supposedly translates their deal into legislative
language.
The TCU letter states that TCU has not provided its members with
the draft legislation because it will probably be changed in the
legislative process. However, it is that draft legislation the
coalition is currently asking its members to support on their websites
and in letters to their members. Although the TCU states the draft may
change, it is telling its members to support the bill. Unless TCU is
willing to accept any modification made to its draft in the
legislative process, it must be telling its members to support the
draft currently being circulated.
And that bill, despite the protestations of the coalition, merges
the Social Security Equivalent Benefit Account (Tier I) into the
Railroad Retirement Account (which includes Tier II) and allows its
assets to be invested by an investment board which will be created by
the draft legislation called the Railroad Retirement Account
Investment Board. The coalition may not mean to allow Tier I funds to
be privately invested, but the legislation they are currently asking
their members to support clearly and definitely merges the assets of
Tier I with the assets of Tier II and allows the Investment Board to
invest it under an undefined "prudent man" standard.
We chose not to respond to this point when they wrote to Senator
Roth because Senator Roth's staff members fully understand that Tier I
(SSEB) would be merged into Tier II (Railroad Retirement Account) and
subject to investment in the private sector. When BMWE was involved in
the negotiations, the only portion of Railroad Retirement funds
considered for investment purposes were those contained in Tier II
(the private pension-like component of Railroad Retirement). And only
up to 50% of the Tier II fund would have been invested at that time.
By changing these conservative investment assumptions and allowing
Tier I to be merged into Tier II subject to private investment, the
coalition has put itself into the debate over how Social Security
should be invested. It would have been much easier to convince
Congress to pass a bill in which 50% of the private pension component
of Railroad Retirement (Tier II) could be privately invested. But when
they changed those conservative assumptions to allow for private
investment of the Social Security Equivalent Benefit (Tier I) also,
the coalition subjected the Railroad Retirement legislation to all who
have varying agendas in the Social Security battle.
BMWE believes that there should be no change in how Tier I is or
can be invested until after the Social Security issue is resolved.
However it is this flawed tactical legislative decision by the
coalition, acquiescing to what the railroads wanted from the
beginning, that has caused their bill to be held up in Congress.
The coalition letter to Senator Roth and the Scardeletti letter
also makes another critically inaccurate statement. In both of the
letters, they claim the surviving spouse benefit, which is part of
their deal with the railroads, is unaffordable if the investment
components of their bill are not enacted. This is simply untrue.
If you accept the numbers the coalition is presenting, the total
deal provides 6.56% - a 3.28% tax cut for the railroads and a 3.28%
increase in benefits for those on Railroad Retirement. Although BMWE
challenges these numbers, we will accept them to demonstrate that a
stand-alone surviving spouse benefit can pass this year with no tax
increase.
What prompted the railroads to come to labor initially for changes
in Railroad Retirement is the fact the trust fund is flush and getting
better under the current funding levels. Presently there is more than
six times the amount of money in the fund than is paid out in
benefits. This is without increased investment income.
According to the experts retained by the railroad and the only
expert retained by labor, if 50% of the Tier II fund is privately
invested, there would be a 2% increase in investment income. If you
deduct that 2% from the 6.56% the deal is worth according to the
coalition, it means that there is presently a 4.56% per year overage
going into the fund based upon the current contribution levels. The
cost of providing the surviving spouse benefit proposed by BMWE (the
identical benefit to the one proposed by the coalition, except the
surviving spouse would be eligible to collect at age 58-1/2 instead of
60) is under 1% according to the Railroad Retirement Board actuary.
This means that Congress could pass legislation to take care of the
critical problem facing surviving spouses without raising taxes and
wait until the parties resolve their other differences before again
acting on Railroad Retirement. The coalition chiefs know or should
know this. Instead they are holding the surviving spouses hostage to
their deal. BMWE supports a surviving spouses stand alone bill as
described above. It is affordable and should be passed.
Another inaccuracy stated in the coalition letter to Dubroski and
embellished by the Scardeletti letter, is that BMWE and BLE would be
responsible if the draft legislation is defeated and retirees could
not retire on full benefits until age 62. Although BMWE would like to
take responsibility for killing the deal, because we believe it is a
bad deal - too generous to the railroads, not generous enough to our
members - we cannot.
Once Oberstar and Schuster agree to sponsor the draft bill, it
greatly increases the possibility of the proposed legislation becoming
law over our objection. However, the overreaching by the railroads
with the support of the coalition chiefs regarding private investment
of Tier I is what is holding up the bill and could kill it.
To be sure, BMWE opposes any private investment of Tier I funds,
directly or indirectly, until there is a disposition of the Social
Security issue. BMWE did not oppose investing up to 50% of Tier II
funds privately. BMWE might even have agreed to a larger percentage of
Tier II funds being invested privately. But the decision of the
coalition and the railroads to privately invest Tier I funds without a
resolution of the Social Security issue is what has caused their draft
bill to proceed from a fast to a slow pace and if it dies, it does so
due to that tactical legislative decision by the coalition.
The more the coalition denies Sections 105, 106 and 107 of their
draft bill allows Tier I funds to be invested, the less credibility
they will have in Congress. And their increasingly shrill remarks
about the BMWE for stopping a bill it opposes will not change the true
reality -- their tactical decision is causing their problems. To
paraphrase Pogo, they have met the enemy and it is them.
There are some within the coalition who may realize the truth. It
appears that nasty inaccuracy is being generated from a very few of
its leaders. One of the coalition members has chided the rest,
including himself, for signing onto the Dubroski and Roth letters and
has refused to sign onto any further letters which attack another
union. Another has refused to be included in another useless, nasty
coalition attack letter on BMWE - this one to John Sweeney. Others
have privately recognized that a disagreement over one issue should
not be translated into a holy war on all issues. But many of those
leaders have freely allowed, and continue to freely allow, the few
whose motives are personal to sign their names on increasingly
vicious, inaccurate attack letters directed at BMWE and BLE which
ultimately destroy their own credibility.
BMWE does not hold itself blameless in this debacle. But when we
said what we shouldn't have said, we apologized publicly, in writing,
and in our JOURNAL. With respect to the Railroad Retirement issue it
appears that those who sign those attack letters have no such sense of
remorse. That's their choice, but for BMWE, I pledge to struggle to
keep the high ground and fight what we consider to be a bad deal as
ethically and honestly as possible.
I do this for two reasons - first, I believe in fighting over the
facts of the issue, not giving the positive and hiding the negative
from my membership. I have yet to see a coalition union admit that as
of January 1, 2003 the railroads tax cut will allow them to reduce
contributions to Railroad Retirement by over $400 million per year or
that their proposed legislation allows private investment of Tier I.
Secondly, if I misstate the truth, I may be able to temporarily
convince my members and my colleagues that my misstatement is truth.
But I will not be able to convince those who legislate, because they
can read the draft legislation and know what it means. Such deceit
would boomerang on BMWE, just as it has boomeranged on them.
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