4 Myths About ALPA’s Major Contingency Fund
By: Capt. Randy Helling, ALPA Vice President–Finance/Treasurer, and Kevin Cuddihy, Contributing Writer
ALPA’s Major Contingency Fund (MCF) is often referred to as our “War Chest,” and it’s an extremely valuable resource for our union. But beyond knowing these facts, what else do you know about the MCF? You might have heard a reference to it in passing, or maybe you’ve read a press release about a master executive council (MEC)—it might have even been yours—receiving an allocation from the fund. But what does this mean? What is the allocation for? And where exactly does it come from?
In order to better familiarize ALPA members about this most strategic asset, let’s debunk a few myths surrounding the fund, its uses, and its strength.
Myth 1. The MCF covers all costs associated with a strike, including lost wages
Per Section 60 of ALPA’s Administrative Manual, “The MCF may be properly used to provide funding to MECs (a) in advanced stages of negotiations to fund communications-related activities, including strike preparedness, Pilot-to-Pilot and Family Awareness projects, and (b) during strikes to fund MEC activities.”
The purpose of the grant is to help prepare the MEC and the pilots for end-stage negotiations and potentially a strike. This grant isn’t something used in lieu of MEC funds. Rather, reimbursement from the MCF “shall occur only after all MEC funds…are exhausted,” per the Administrative Manual. The simple rule is “self-help first.”
As for lost wages during a strike? Those are only paid out from a special dues assessment levied on the entire membership. As noted in a May 2010 Air Line Pilot article, “The intent of the 1985 [Board of Directors] and ALPA policy is that individual strike benefits are separate from the MCF, paid to individual striking members by a national assessment of ALPA members authorized by the Board of Directors or the members themselves.”
Myth 2. The MCF is only available for costs associated with negotiations and strike preparation
While funding needs for negotiations in advanced stages and strike preparedness initially led to the creation of the fund, the stated purpose of the fund was broad. The resolution establishing the MCF said that the fund was to be used “to build the financial strength and resources of ALPA to provide the strongest and most effective union and collective-bargaining representation on matters of urgent concern to the membership.”
In the 1990s, the role of the MCF was explicitly expanded with an amendment to ALPA’s Constitution and By-Laws to include “issues of urgent concern that significantly and adversely affect the airline piloting profession and which cannot be funded by normal Association budgeting practices and policies, including defense of the integrity of the Association.”
The October 2015 Report of the Major Contingency Fund Review Committee, which was prepared for the Executive Board, examined historical MCF funding and found four nonstrike-preparedness general areas where the MCF has been called into play, including
- litigation and settlements,
- capitalization of other funds (including Kitty Hawk), and
- other expenditures (including mainly interest on debt and unforeseen advocacy campaigns).
To assist in the stabilization and growth of the MCF, all organizing expenses and premiums for Kitty Hawk (ALPA’s wholly owned, captive insurance company) are now funded by ALPA’s Administrative & Support Account. Certain litigation and reimbursable expenses incurred by Strike Oversight Board members are still funded by the MCF.
That’s it, though. The Administrative Manual clearly states, “The Major Contingency Fund shall not be utilized under any conditions as a source of funding for past or current budgeted operational expenses, unless specifically authorized by the Executive Board.” The MCF remains a very specific resource.
Myth 3. All money in the MCF is allocated directly from dues dollars
This was the case when the MCF was created, but not as much today. The 1985 Board of Directors special session (see “MCF: The Origin Story”) voted to increase dues by a full percent, from 1.35 to 2.35 percent, to create the War Chest. However, the MCF dues’ allocation eventually went away over the course of 10 years, and the percentage of dues dollars going into the MCF hit zero in 1995. And through 2015, that’s how it stood. As the May 2010 Air Line Pilot article explained, “Expenditures since 1994 have been solely funded from investment returns and the sale of real estate.”
However, from 2006 through 2015, the funds in the MCF dwindled from $86.4 million to $42.9 million. This was partly attributed to use, as more MECs were spending more and more time in negotiations, and partly to the significant losses and poor returns on investments during the extended downturn in the economy. The MCF Review Committee Report in 2015 recommended reestablishing an annual recapitalization of the MCF, and ALPA’s annual budget began including $500,000 allocated directly from dues—the first time since 1994 that this has happened. Each year, the Executive Board has made additional capital contributions from operating surpluses of the Administrative & Support Account, and has also transferred $7 million from the Operating Contingency Fund, thanks to that fund’s growth and stability. The MCF Review Committee recommended a $100 million target level for the fund, so identifying recapitalization opportunities will remain a priority in the coming years.
Myth 4. The amount of an MCF grant to a pilot group is somewhat random and always used in full
Nope. There’s a specific formula that dictates the maximum amount of a grant, and it’s quite simply based on the number of active and apprentice members in your pilot group. With 1–250 members, your allocation is a maximum of $500,000; 251–500, it’s $1 million; 501–2,000, it’s $2 million; 2,001–4,000, it’s $2.5 million; and 4,001-plus it’s $5 million. The allocation’s first important use is as a show of ALPA unity—that the entire union stands behind this one pilot group and we’re putting our money where our mouth is, so to speak. It lets every management know that ALPA members have the funds necessary for the fight and as such can even influence the speed of negotiations. But should negotiations falter, it provides backing and support when and where it’s needed most.
There’s also a duty to spend ALPA’s money wisely and responsibly. MECs must receive approval for expenditures from an appointed Strike Oversight Board and, as stated, must use MEC funds before tapping into the MCF. They also must have a strategic plan, communications plan, and financial operating plan. The entire allocation amount may not necessarily be withdrawn from the MCF. The length and timing of negotiations can significantly impact an MEC’s monetary needs, leading to varied usage. For example, one MEC used roughly half of its $1 million MCF allocation to assist with its negotiations and strike preparedness, while another—thanks to a significant MEC account surplus—didn’t even touch a penny. But both knew the funds were there if and when they were needed.
ALPA’s Major Contingency Fund remains one of our top resources in contract negotiations. Over the years, it’s been utilized to help numerous pilot groups gain successful agreements with managements. And it will continue to be a strategic asset for the Association for years to come so that we can provide the strongest and most effective union and collective-bargaining representation for our members.
MCF: The Origin Story
In 1985, ALPA celebrated a major victory. A 29-day strike by United Airlines pilots showcased their unity and resulted in a new contract, all the while fighting management’s attempts to break the union. However, the strike was costly. The Association spent $10 million, and coming on the heels of the Continental strike of 1983–1985, ALPA’s general membership fund was drained.
ALPA leaders called a special session of the Board of Directors in 1985 in an effort to prepare the Association to face future financial challenges. As then-treasurer Capt. Jack Magee put it, “We can go out here battered and bruised and find a shade tree in the backyard to lie under and lick our wounds and provide only the most perfunctory day-to-day representation” or ALPA could raise the money needed to meet the next unknown threat.
Agenda Item 2 in this special session was the answer. And after debate, ALPA’s Board of Directors passed the resolution to increase member dues by 1 percent—from 1.35 to 2.35 percent of pilot income—and establish the Major Contingency Fund (MCF).
However, once the resolution was passed it still needed to be approved by the membership—and the members passed the measure overwhelmingly. Over the course of the next decade, $158 million of dues contribution fed the MCF, helping countless pilot groups in their efforts toward a new contract and establishing one of the union’s greatest strategic assets.