Based on press reports over the weekend, there seems to be some confusion in understanding the magnitude of savings the Port Authority would have enjoyed had the union not rejected the fact finder’s report. Understandable, given that the issue involves confusing terms like present value and GASB 45. (Jim Ritchie takes a valiant run at it in Sunday’s Tribune Review.) Let me offer my own vastly oversimplified comparison that might shed some light on it.

Suppose you’re living paycheck to paycheck with no savings. Every penny that comes in goes out for food, utilities, gasoline, etc. Yet the roof of your house continues to disintegrate. You will need to replace it by next summer, or your house will collapse. Yet, you don’t have money to set aside each month to save up for a new roof. The only way to pay for the new roof would be to take out a loan and pay for it by cutting your food budget in half, which means you and your family would have to skip dinner every night.

Now suppose someone came along and had a spray treatment you could put on your roof that would not only extend the life of the roof, but would make it cheaper to replace when you eventually had to replace it. The only catch: it would cost $20 cash, right now. Even though you don’t really have an extra $20 available, you’d find it somehow because the benefits of the offer are too good to pass up.

How much money have you saved? Well, you have to spend an extra $20 that you didn’t expect. And from one perspective, there really any “savings” on the roof, because that’s a bill you weren’t paying anyway — yet. And the deal didn’t do anything to solve your immediate problem of living paycheck to paycheck, struggling every day to make ends meet.

But the real question is this: For $20 did you avoid an impending financial disaster? Absolutely.

The Port Authority would not have seen much out-of-pocket cash savings in the early years of the proposed contract, partly because of the 3% wage increases and partly because so many drivers would have retired immediately to preserve the old benefits, immediately increasing payments for pension and retiree healthcare and the like. But the deal would have immediately reduced the Port Authority’s liability for retiree healthcare costs (the “leaky roof”) and made the problem manageable. Over the three year life of the contract, cash savings and avoid liabilities (like the leaky roof, bills that otherwise would have come due eventually) totaled almost $90 million.

That’s serious savings.

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