The TCU Legislative Department hopes everyone had a fun and safe holiday season and wishes you the best in this New Year!
And to ring in 2016, we wanted to provide a recap of the happenings in DC last month.
This past December there was much to celebrate for TCU members as Santa arrived a bit early, packing just the right amount of legislative eggnog to satisfy the lobbying world and send DC into holiday hibernation. Between the passage of the Surface Transportation bill (FAST Act) and the two-year delay of the healthcare excise tax, many of our members can rest assured that their jobs and benefits will continue for [at least] the near future.
It wasn’t easy, however. TCU’s legislative team worked diligently with our coalition partners in both the rail and labor communities to convince a mostly anti-labor Congress not to gut the various provisions that our membership relies on.
Surface Transportation Bill (a.k.a. FAST Act)
Last month, Congress passed – and President Obama signed – the first long-term Surface Transportation bill in a decade. After years of patch fixes and short-term extensions, Congress was finally able to cobble together a strong, five-year, $305 billion package. Importantly, the bill includes large increases in transit spending – a much needed lift for many of our members working on commuter lines – as well as a five-year reauthorization for Amtrak.
As you may know, there was a lot of discussion on Capitol Hill around the Highway Trust Fund (HTF), which acts as a primary source of funding for many of our nation’s highway and transit programs, and that is funded by gasoline tax revenue. The major issue in recent years has been the large shortfall of revenue in the fund, which many blame on the fact that the gas tax hasn’t being raised since 1993. And though a long-term fix – such as increasing the gas tax – was avoided, Congress was able to find other funds to supplement the authorization shortfall.
The final legislation provides increases for many industries, and that includes our nation’s transit programs. And while we are still fall short of the robust investments necessary for a strong, 21st century economy, an 18% increase in transit funding for the next five years has many breathing a large sigh of relief. This will come as welcome news for our members working on commuter railroads and metro transit systems.
The Amtrak Reauthorization was long-debated on Capitol Hill. Early last year we saw progress as both the House and Senate had passed their own versions, but many worried as the momentum seemed to fade by late summer. Seeing the FAST Act as a good vehicle to include the Amtrak language, legislators worked out the final details between themselves. The result is a good-not-great reauthorization for Amtrak:
- Funding – The bill increases funding for Amtrak over the next five years, though only slightly. The legislation authorizes $8.05 billion over the next five years, increasing from $1.45 billion in 2016 to $1.8 billion per year in 2020.
- Separate Accounts – The bill mandates that Amtrak create two accounts for funding: one for the Northeast Corridor (NEC) and one for the rest of the national network. And while Amtrak is allowed to transfer funds between the two accounts, they must first notify their Board and then provide a report as to why the transfer was needed. Presumably, this was put in place by legislators to highlight the profitability of the NEC vs. the rest of the network. We will be watching this process/procedure closely as it goes into effect.
- Food and Beverage – The bill requires that Amtrak eliminate any operating losses from food and beverage service in the next five years. TCU lobbied hard against this provision as many of our members are the very employees that provide that service on Amtrak. Fortunately, we were successful in negotiating a clause that protects the jobs of TCU’s food and beverage workers. The language stipulates that no employee, working on the date of enactment, will be involuntarily separated as part of the plan to eliminate losses.
- Competition – There was a concerted effort by many in Congress to allow greater competition on Amtrak’s routes. At the urging of TCU and other rail labor unions, competition was limited down to acceptable levels. The final language allows for competition on three long-distance routes, and stipulates that the petitioners must be a rail carrier that owns the infrastructure, a rail carrier with an agreement with the carrier that owns the infrastructure, or a state (or group of states) with written agreement with the rail carrier. In short, the only entities that can compete for three of Amtrak’s long-distance routes are rail carriers (freight railroads) and/or states. The bill also states that a competitor must operate the route with only 90% of the subsidies that Amtrak received for the previous year. And the language also includes robust job protections for those working on those routes.
The FAST Act also creates three new grant programs for various railroad-related projects that total $2.2 billion over the next five years. These programs include grants for infrastructure improvements, passenger rail investments, workforce training and development, and rail-related research. Importantly, rail labor-related non-profits may apply for research grants under this legislation.
New Starts Funding
In a smaller but crucial win, the Federal Transit Administration’s New Starts program will be expanded and clarified to allow Amtrak to receive grants from the program. This will aid the much-needed Gateway Project, which aims to build and expand the rail infrastructure between Newark, NJ and New York City. Completion of the Gateway Project is highly anticipated by riders of both New Jersey Transit and Amtrak’s NEC. With the current infrastructure at or near capacity, delays have been mounting and commuter patience thinning.
The FAST Act bundled many of TCU’s priorities (Amtrak, transit, policy changes, etc.) into one large bill, and passed it in a largely bipartisan way. This bundle-and-pass method is frequently used on Capitol Hill, but not usually for transportation legislation.
Excise Tax Relief
In what was debatably the most impactful legislative change last December, Congress provided relief in the form of a two-year delay of the Excise Tax on quality health benefits. Deceptively called the “Cadillac Tax” by its proponents, we like to call the tax what it really is: a Middle Class Health Benefits Tax (see Rep. Joe Courtney, D-CT).
Whatever the name, the reality is that it would severely impact the health benefits of many TCU members by placing a 40% tax on benefits over a certain threshold. It was estimated that a quarter of employers nationwide currently offer a plan that would be affected, and that number would climb to half of all employers by 2023.
How does this affect health benefits? Well, when employers are incentivized to lower the costs of health benefits, they will; but the price of care at the doctor stays the same. And that shortfall will be coming out of workers in the form of higher out-of-pocket costs. Essentially, instead of the employer picking up most-or-all of the tab at doctor’s office, more people will be footing the bill themselves.
Why are TCU members affected? First we have to look at a bit of the history of labor economics: as wages stagnated in the U.S. economy-wide (see figure A), labor unions sought gains where they could, mostly in the form of greater health benefits. This made sense as the costs associated with healthcare were increasing much faster than the middle class could afford. Fast forward to today, and the excise tax is poised to penalize the gains workers had previously achieved at the bargaining table.
The resulting situation for TCU and its members has been a complete “gumming up” of the collective bargaining process as employers try to prepare for the tax going into effect.
So, how can we fix it? TCU is actively pushing for a full repeal of the tax. Fortunately, most of the candidates for President – both Democrat and Republican – have publicly opposed the excise tax and have called for its repeal, which is why the latest delay of the tax is so important. An extra two-year cushion to 2020 will provide relief while giving us time to plead our case before a new Administration; one that will be more likely to support a full repeal of the tax itself.