September 18, 2017 | by AJ Skiera Print

Photo Credit: Lane Turner / Boston Globe Staff

The Boston area’s Massachusetts Bay Transportation Authority (MBTA or the T) serves 1.3 million commuters who rely on the system to get to work each day. Institutional and operational issues led to the system’s virtual shut down for several weeks in early 2015, leaving thousands of riders in the lurch and taking a devastating toll on the regional economy. This prompted Pioneer Institute for Public Policy Research, an Atlas Network partner based in Boston, to take action by offering actionable, commonsense reforms to the MBTA’s finances, governance, and operations in order to bring costs under control, improve efficiency, and enhance performance and reliability.

Introducing Oversight

“Both operationally and financially, the MBTA was spiraling out of control,” said Jim Stergios, executive director of Pioneer Institute. “In 2015, winter storms had, in effect, forced the shutdown of a large portion of its service for six weeks, long after the snow and ice melted. Deep deficits at the T brought about talk of higher taxes and fares to further subsidize its operations. Pioneer Institute launched the concept of a fiscal control board to take over operations and introduce privatization programs, that had been, in large part, prohibited by state law.”

Pioneer’s multiyear mission to “Fix the T” has gained significant traction. Its proposals dominated the public dialogue as public support for reform grew thanks to the attention its proposals received in both social and traditional media. The institute’s package of reforms began to garner editorial endorsements from news outlets, which was followed by support from state legislators of both major political parties. A special panel commissioned by the Governor to make recommendations on reforming the MBTA included many of Pioneer’s proposals in its action plan.

Critical mass was achieved in July 2015 when the overwhelmingly Democratic legislature passed into law Pioneer’s idea to create a Fiscal and Management Control Board, which would govern the MBTA for no fewer than three years and be tasked with examining and revamping the efficiency of Greater Boston’s transportation system. The law was signed by Governor Charlie Baker, a former Pioneer executive director, and he appointed Steve Poftak, Pioneer’s former research director, to the newly created board.

The board got to work immediately, investigating several areas of MBTA operations including procurement and contracting, capital planning, debt, and a massive infrastructure maintenance backlog. One of the board’s initial findings was that the T’s projected operating budget gap would exceed $420 million by 2020. Pioneer followed that announcement with a policy brief identifying three immediate measures the MBTA should take to save money and increase efficiency, one such measure being to competitively procure bus maintenance, which was by itself projected to save nearly $50 million annually.

Privatization

Another potential area for reform was the so-called Pacheco Law, which is the nation’s strictest anti-privatization legislation. The decades-old statute restricts state agencies from outsourcing work currently done by public employees. A July 2015 Pioneer report estimated that the Pacheco Law had cost the state at least $450 million dating back to 1997. The main beneficiaries of the Pacheco Law’s costly provisions were unionized employees, which may be why powerful MBTA unions objected to Pioneer Institute’s recommendation to give the T an exemption from the law. Members of those same unions protested outside Pioneer’s office and launched radio ads attacking the think tank.

Mary Connaughton, Pioneer’s director of government transparency and director of finance and administration, was featured in a radio ad rebutting the union attacks. Throughout the wider campaign to fix the T, Pioneer’s print, radio, and TV appearances reached a circulation of over 100 million, and it garnered more than 200,000 social media impressions. Over 2,000 people downloaded Pioneer’s reports on the MBTA.

A compromise that exempted the MBTA from the Pacheco Law for three years was included in the state budget. As a result, the MBTA implemented public-private partnerships that have saved millions and dramatically improved efficiency. A June 2017 state Senate effort to essentially rescind the exemption failed. Pioneer’s sustained advocacy is continuing to shape the overhaul of the MBTA and has contributed substantially to getting the T back on track.

Lasting Impact

“In just over two years, Pioneer’s work on outsourcing has led to the privatization of warehouse operations, cash handling facility, and paratransit service known as The Ride,” said Stergios. “We hope three bus maintenance facilities will be next. The ability to privatize also had a secondary impact: leveraging management’s ability to outsource to negotiate more favorable terms with Local 589, the T’s largest union. The control board has been successful at closing what would have been an operating deficit of $335 million in 2017, improving union work rules, and shining a light on the MBTA’s failing pension plan. With greater efficiency, there is much more money available to be invested in the core service, which will allow the T to do things like double capacity on its most traveled corridor, the Red Line.”

The pension is another major area targeted for reform. A recent Pioneer report found that, absent reform, the cost of funding the MBTA pension system will be $1.485 billion over the next 18 years. Pioneer has offered four options the Fiscal and Management Control Board could seek from the Massachusetts Legislature:

  1. An 18-year, $1.485 billion funding guarantee
  2. Reform legislation that includes a mandate to restructure the pension agreement as a standard Social Security/pension contract (currently MBTA pension benefits are not reduced to account for receipt of Social Security benefits)
  3. Replacing the MBTA’s final and binding arbitration law with a new system that would allow the Fiscal and Management Control Board to approve or reject an arbitrator’s decision based on whether the T can afford whatever is decided
  4. Declare that the MBTA Retirement Fund as currently structured is insolvent

In addition to Pioneer Institute’s research on the MBTA pension system’s pitfalls, it has also produced a wellspring of research on T operations, financial condition, and governance.

Pioneer Institute’s research and experience has resulted in its work being referenced in numerous prominent local news outlets, like The Boston Globe, Boston Herald, and Boston Business Journal.

“The T, for Pioneer, is also a great demonstration project for the power of markets to improve service, save money, and provide new avenues to improve mobility and economic opportunity,” Stergios concluded. Pioneer’s work on the MBTA has Stergios feeling optimistic about the system’s future: “Much work remains, including reforms to improve the T’s on-time performance, increase market pricing at transit parking facilities, and enhance privately provided ferry services, but management is now well-equipped to address the problems that have plagued the T for decades. Riders feel their voice is being heard and those who rely on the T to get to work, go to the doctors’ offices, or home to their families each night have a sense that improving their experience is high on the agenda, leading to enhanced public trust.”

Pioneer Institute seeks to improve the quality of life in Massachusetts through civic discourse and intellectually rigorous, data-driven public policy solutions based on free market principles, individual liberty and responsibility, and the ideal of effective, limited, and accountable government. It is a long-standing partner of Atlas Network and, among other programs, participated in Lights, Camera, Liberty! in 2015.

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AJ has a bachelor's degree in history and political science from the University of Miami (FL). Learn More about AJ Skiera >