Pension costs cited as Metro service threat
Metro’s rising pension costs threaten its future operating position, potentially hampering its ability to provide service if the agency fails to rein in unfunded retirement and health-care liabilities, according to a report from the Government Accountability Office.
The 53-page report raises concerns about Metro’s nearly $3 billion in unfunded retirement and health-care costs, and notes that its $4.7 billion in total pension liabilities represents about 6.5 times what the agency spends annually on salaries and wages.
Metro’s annual pension costs grew by an average of nearly 19 percent from 2006 to 2017, the federal report said, making pensions the agency’s fastestgrowing workforce cost as its total labor costs grew about 3 percent a year.
With the scale of the obligations, the report posits that in the event of an unfavorable financial market, Metro could be backed into a corner to cover its obligations. The scale of the pension liabilities means that a drop of less than one percentage point in Metro’s investment return on its pension fund could squeeze its operating budget to the point that the agency would need to reduce service or ask the jurisdictions that fund it to cover the shortfall.
“Due to their relative size, proportion of retirees compared to active members, and investment decisions, these pension plans pose significant risk to [the Washington Metropolitan Area Transit Authority’s] financial operations, yet WMATA has not fully assessed the risks,” the GAO concluded. “Without comprehensive information on the risks facing its pension plans, WMATA may not be prepared for economic scenarios that could increase its required contributions to an extent that might jeopardize its ability to provide some transit service.”