Optimism springs eternal, and so it was that I went to Governor Patrick’s budget announcement on Wednesday holding out a glimmer of hope that we might see a proposed reform of the Pacheco law.
Why? Because last year, we saw an eye-opening example of the savings the state might realize without that anti-privatization law. It came in the form of a report by former Massachusetts Inspector General Gregory Sullivan, now research director at the Pioneer Institute, about the MBTA’s high bus-maintenance costs.
Here’s one illustrative example. Because of capacity issues, the MBTA was able to sidestep the Pacheco law and contract out for an overhaul of part of its bus fleet. Under one $31.5 million pact, 193 buses were loaded onto flat-bed trucks and transported to Owosso, Mich., for mid-life rehabs. Despite transportation expenses, the T estimated it would cost $17 million less to have the work done in Michigan than to do it in-house.
With that experience in mind, I asked the governor if his new budget proposed any changes in the Pacheco law. Patrick tossed my question to Transportation Secretary Richard Davey. Davey deflected, citing other things that MassDOT was doing in search of savings.
The simple answer, though, is no. And that’s a shame.
Why? Well, consider Patrick’s budget.
His spending plan gets some important things right. It proposes an additional $163 million for the (mostly) nonprofit network that delivers many of the state’s human services. There’s $32 million more for the crisis-rocked Department of Children and Families, and an added $68 million aimed at keeping tuition and fees at state colleges from rising.
The governor’s blueprint would mean continued tight times elsewhere, however. One big example: Though local aid is down some $400 million from its 2008 levels, Patrick has only proposed level-funding that account. And one small one: The Massachusetts Cultural Council, whose grants and programs enrich life in the Bay State, would suffer a 13 percent cut.
But even if fiscal times weren’t tight, the state should still be exploring more efficient ways to deliver services. Sullivan’s Pioneer study concluded that the MBTA alone could save more than $40 million a year just by bringing its maintenance costs in line with the average for comparable transit agencies elsewhere.
No one has a hard estimate for how much could be saved by letting private companies compete for the right to deliver more state services, but Sullivan believes that, at a minimum, it would be $100 million a year. Michael Widmer, president of the Massachusetts Taxpayers Foundation, thinks that over time, those savings could grow to hundreds of millions annually.
What surprises me is the mentality that says state government shouldn’t price-shop. Why not? The labor market, after all, is the way this country sets wages for most work. Certainly if you’re having major renovations done to your home, it’s smart to seek an assortment of bids. That gives you an accurate idea of the price range. And if there’s money to be saved without sacrificing quality, who would voluntarily pay more?
But the Pacheco law has effectively shut down those efforts. The process the law establishes for any possible contracting out is so cumbersome — the auditor’s guide to how it works runs 20 pages — that it alone would serve as a deterrent. The problems don’t stop there, however. The law stipulates that companies competing for state work must give their employees the same basic wage and the same percentage contribution to their health care coverage as the state workers get. In other words, Pacheco eliminates competition on the basis of wages, in effect declaring that the public sector, and not the labor market, should set the appropriate pay rate for any work public employees currently do.
Then there’s this hurdle: The statute requires that the price a company would charge must be compared not to the state’s actual expense but to what that cost would be if public employees performed the work “in the most cost-efficient manner.”
No wonder, then, that the Pacheco law is considered the strictest anti-privatization statute in the nation.
It’s too bad that Patrick doesn’t have more of a reform impulse here. Yes, it would take a struggle to repeal the Pacheco law — but the extra services that could be provided by stretching state dollars could be an important and lasting part of his legacy.