MBTA is staring down a financial paradox
Transit authority may not be able to afford its relatively average expenditures
When Governor Charlie Baker made his regular appearance on WGBH-FM radio a few weeks ago, the conversation inevitably turned to the topic du jour: what to do about the crisis engulfing the MBTA, ravaged by days of historic storms and years of crippling budget woes?
“The thing I find so disappointing about this is everybody just says we should raise taxes,” he said, adding later, “They don’t talk about the fact that the operating budget for the T over the last seven or eight years has gone up by 50 percent.”
Baker’s math was close enough; the T’s budget has grown 44 percent in the last eight years. And the implication was clear: The agency has a spending problem.
But a Boston Globe review suggests a more complicated picture. By many measures, the MBTA’s outlays are in line with those of other large public transit systems around the country. Its spending has grown at a typical pace over the last decade. Its pension costs don’t eat up a particularly large portion of its budget. And the agency’s average hourly wage is, well, average.
But those big-picture figures, some policy makers suggest, are not enough. An expert panel established by the governor is scouring the MBTA’s balance sheet for inefficiencies. Some outside observers say they have already identified pockets of concern — many of them.
And ultimately, the T faces a paradox of sorts: Its expenses, even if reasonable, may be more than the agency can afford. Health care, energy, and other costs are outpacing revenue growth. And lawmakers and the public have been hesitant to pour substantially more money into the system.
The MBTA “can’t afford to maintain the system it now has, let alone the system some would like to have,” said Jeffrey Mullan, a former state transportation secretary under Governor Deval Patrick. “And that, to me, is the issue: What kind of a system do we want and what are we willing to pay for?”
For the moment, Beacon Hill leaders leery of tax hikes are focused squarely on MBTA management, not investment.
House Speaker Robert DeLeo says the struggling agency may need more money at some point. But for now, he told the Globe in a recent interview, “we have to make sure the whole T structure from top to bottom is performing adequately.” One of his top deputies, majority leader Ronald Mariano, put it more bluntly, telling reporters last week that “giving the T more money right now is kind of crazy.”
But a Globe analysis of 10 of the largest public transit agencies in the country shows that, for the decade spanning 2003 to 2013, the last year for which national data are available, growth in the MBTA’s operating expenses was about average.
Transit systems in New York, Washington, and San Francisco, with its MUNI buses and trolleys rumbling from the Presidio on the north side of the city to Bayview-Hunters Point to the south, increased their spending more rapidly than the MBTA. But in other metropolitan areas such as Chicago and in Philadelphia, where subways zip beneath Broad Street and the commuter rail juts into the suburbs, budgets expanded more slowly.
A Globe look at public transit wages for 2013 found a similar result. The MBTA’s average hourly pay of $29.19 was lower than figures in pricey metropolitan areas such as New York, Washington, and San Francisco, but higher than those in Chicago, New Jersey, and Philadelphia.
And research by the Conservation Law Foundation, an environmental advocacy group, found the MBTA dedicating a smaller portion of its operating budget to pension and health care costs than peer agencies in cities such as New York, Chicago, San Francisco, Washington, and Philadelphia.
“I joke it looks like the American League East in 2013,” said Rafael Mares, a senior attorney with the foundation, “with Boston on top.”
For observers who say efficiencies will get the MBTA only so far and argue that big new investments in the rusted backbone of the region’s economy are required, the focus on T spending is a sideshow.
“It’s a politically attractive distraction,” said David D’Alessandro, a former John Hancock chief executive who conducted a major review of the MBTA for then-governor Patrick in 2009. “When something’s bankrupt, it’s bankrupt.”
But if many observers say it would be hard for the MBTA to operate its current system for substantially less than its $1.9 billion budget, there are plenty who wonder if the T can more cost-efficiently deliver on individual services.
Transportation Secretary Stephanie Pollack talks about improving the T’s cost per unit, or “how much it spends to move one person one mile, to repair a bus, to provide commuter rail service.” And the governor’s MBTA commission is working with management consultant McKinsey & Company to develop better comparisons with other public transit agencies and identify places to streamline.
Some outside observers have already pointed to areas of concern: from service expansions that have meant more equipment and staff, to the cost of The Ride, a car and van system for the disabled that has managed to curb some expenses in recent years, to pension benefits that are more generous for MBTA employees than other state workers, even after a recent round of reform.
In 2013, former Massachusetts inspector general Gregory Sullivan conducted a study for the right-leaning Pioneer Institute on bus maintenance and found that the MBTA’s costs-per-mile were the fourth highest of 379 US bus-transit agencies.
And in recent weeks, he has constructed an enormous database of cost and efficiency measures for transit agencies around the country. Criss-crossed with columns in blue and yellow and brown, the spreadsheets — still preliminary at this point — dive into obscure measures such as fringe benefit costs for workers conducting maintenance on light rail trains such as Boston’s Green Line.
His data dive suggests that the MBTA, if not way out of line with other transit agencies, is often on the high end when it comes to staffing and costs; those fringe benefits for Green Line maintenance workers appear expensive and the T pays bus drivers more per mile than most other large systems.
“It’s not that they’re cash-starved,” Sullivan said of the MBTA. “To me, they have to reprioritize their spending.”
But some of the T’s biggest problems, observers say, are the costs that weigh on large organizations of all types: wages, health care, and energy. The agency, which churns through huge amounts of electricity, gasoline, and diesel fuel, watched its annual energy costs double in the last decade from $61 million to $122 million.
A fundamental problem for the T, according to close watchers, is that while its costs rise, its main sources of revenue are capped. The MBTA is allowed to raise fares only by 5 percent every two years. And contributions from communities served by the T can go up only by 2.5 percent per year at most.
Its other major source of revenue, a dedicated portion of the state’s sales tax revenue, has been capped not by law, but by economic reality.
In 2000, the Legislature gave the T a penny on every nickel the state collects in sales tax (the ratio has changed slightly since then with a hike in the sales tax). And as part of the same package, it put billions in old public transit debt on the MBTA’s books, anticipating that the new revenue stream would allow the agency to pay it down.
But the sales tax badly underperformed. And while an alternative minimum the Legislature established — a sort of revenue floor — has cushioned the blow somewhat, the agency went years getting millions less than anticipated.
A backlog of maintenance and upkeep needs, on full display with the winter storms, has grown to $6.7 billion and counting. And cutting down on the T’s debt has proven difficult. This fiscal year, one in five dollars the agency spends will go to debt service.
Struggling to meet its obligations, the MBTA has faced a constant string of budget shortfalls, requiring a series of patches from the state Legislature. Lawmakers began pouring an additional $160 million per year into MBTA coffers in 2009.
And four years later, it passed a transportation-focused revenue package that hiked the state’s gas tax, among other things.
As lawmakers crafted the package, they pored over a budget plan showing how much the T would need to balance its books going forward: $115 million in fiscal year 2014, $135 million in 2015, $202 million in 2016, $261 million in 2017, $357 million in 2018.
For transit advocates those numbers, if not binding, are something like a covenant — a clear accounting of what the Legislature should provide year-after-year to keep a vital system going. But for some lawmakers and observers, they are a sign of runaway budget that cannot be sustained.
“I do think eventually . . . the day of reckoning will come,” said Eileen McAnneny, president of the business-backed Massachusetts Taxpayers Foundation.
That could mean significant service cuts.
Baker, for his part, has proposed $187 million in new money in his fiscal year 2016 budget — something less than the $202 million advocates were hoping for. And he’s warned that the state cannot give the agency “a blank check.”
Paul Regan, executive director of the MBTA Advisory Board, which represents the 175 cities and towns served by the agency, said he understands the call for fiscal restraint at the T in the face of a statewide budget shortfall of $1.8 billion.
But he said an agency faced with surging costs and capped revenues, an agency that limps from budget crisis to budget crisis as its infrastructure deteriorates, an agency caught in something of a downward spiral, has a “spending problem” unlike the one critics suggest.