It appears that the Port Authority and the union representing bus and trolley operators will not reach a new labor agreement by midnight Monday, when the current contract expires.

The impasse will set into motion a two-month fact-finding process, starting with formally notifying the Pennsylvania Labor Relations Board.

Barring unforeseen acts by either management or labor to provoke a job disruption, normal service should continue through the summer for passengers, who account for about 230,000 daily rides.

The near future became clearer yesterday at the Port Authority's monthly board meeting, when directors approved a $350.2 million operating budget for the fiscal year that begins Tuesday, the same day that the 2,400 members of Local 85, Amalgamated Transit Union, will begin working under a contract extension.

The budget assumes that a minimum of $10 million in cost reductions will be achieved through collective bargaining for the last six months of the fiscal year. The budget further assumes no contract will be in place -- or at least that no contract savings will be realized -- for the first six months through Dec. 31.

"Nothing is 100 percent, but I'd say we're not very close," authority Chief Executive Officer Steve Bland said of a settlement. He said he wasn't sure if the two groups had "knocked too many items off the list" of contract changes and demands sought by the two sides during face-to-face talks that began in March.

Local 85 President Patrick McMahon was equally pessimistic. "Talks are going slow ... not much is happening," he said.

After sitting in on yesterday morning's board meeting, he headed to a meeting with state mediators. The authority's negotiating team met separately with the mediators on Tuesday. As of yesterday afternoon, no meetings were planned for the weekend.

Mr. McMahon said authority negotiators have been fixated on pensions, health care insurance for active and retired employees and related retirement and benefits issues.

"If they can't move off of that, [a contract is] not going to happen," he said, accusing authority officials of "playing the blame game as if their financial problems are all our fault, that we're overpaid. We'll continue to go to the table and do what we have to do."

Barring a contract, Mr. Bland said he'll contact the labor relations board on Tuesday about the impasse. The board is expected to appoint a fact-finder at its July 15 meeting.

Both sides present and argue their cases verbally and in writing, and the fact-finder recommends a settlement -- all within a 45-day period.

The authority and union then have 15 days to accept or reject the settlement.

Both sides must ratify the fact-finder's proposal as a whole, not in part, to reach a new contract through that process, which has never happened at the Port Authority.

As a result, Mr. McMahon said, he regards fact-finding as a waste of time and money.

Mr. Bland said he views the process as clarifying issues and validating positions, like the authority's contention that legacy costs are out of control and will soon consume more of the budget than wages.

If fact-finding fails, the two sides usually resume negotiations under state and sometimes federal mediation. At that point, parts of the fact-finding report on which they can agree typically become the basis for working to resolve remaining issues.

Local 85 members can vote to authorize a strike after fact-finding ends. The last strike occurred in 1992, went on for 28 days and required a court order to end.

Mr. McMahon also yesterday criticized Allegheny County Chief Executive Dan Onorato, who has insisted that Local 85 make major concessions as a condition of releasing county money to the transit agency.

If Mr. Onorato freed $27.3 million that the county is withholding, the authority would end the current fiscal year with a $10 million surplus, Mr. McMahon claimed.

"Instead, he's holding us hostage," he said. "Nobody wants to see this settled more than us. It's our work, our livelihood. We want a decent job with decent pay and to be able to someday retire with dignity. If they want to fight, we'll fight."