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Report says MBTA financial system ‘off the rails’

Taxpayers group presses for audit, some privatization

Dina Rudick/Globe Staff/Globe Staff

A Beacon Hill watchdog group, in a sharply worded report set for release Wednesday, is calling on the state to halt funding for MBTA expansion projects for the rest of the year, commission an independent audit of the T, and allow for more privatization of services.

The Massachusetts Taxpayers Foundation’s 55-page paper, “T: The End of Its Line,” describes “an uncontrolled financial system that has gone off the rails” with costs growing faster than revenues.

The business-backed group argues the state should not invest more in the system until it has a better understanding of the scope of the agency’s problems. And it calls for a series of management reforms.


“What we’re suggesting is that the problems facing the T are so pervasive that it’s not the case that marginal reforms or biting around the edges will work,” said Eileen McAnneny, president of the Massachusetts Taxpayers Foundation. “It will require a fundamental change to how the T operates.”

The report comes in the wake of brutal winter storms that at times brought the MBTA to a standstill, exposing decades of deterioration and injecting new life into a long-running debate over the fiscal health of the nation’s fifth-largest public transit system.

Panels assembled by former governors Mitt Romney and Deval Patrick both pointed to substantial underinvestment in the system. But there have long been concerns about the T’s management and spending practices, too.

Governor Charlie Baker, who has also raised doubts about agency spending, assembled an expert panel of his own last month to review the past research, scour the T’s balance sheet, and make recommendations by the end of March.

“Fixing both the short- and long-term problems facing our public transportation system will require meaningful reforms to operations, structure, and priorities at the MBTA,” Baker said Tuesday night, in a statement on the Massachusetts Taxpayers Foundation report. “It’s clear that continuing down the same road will only yield the same unacceptable results, and our administration will review the study, which raises serious questions about the MBTA’s current financial model.”


The Massachusetts Bay Transportation Authority declined to comment Tuesday, referring questions to Transportation Secretary Stephanie Pollack, who deferred to the governor’s office.

Lawmakers have passed several rounds of reform.

In 2000, the Legislature gave the MBTA a dedicated portion of the state’s sales tax revenue and put $3.3 billion in public transit debt on the agency’s books. But the sales tax fell short of expectations and the T has faced a series of budget shortfalls amid escalating health care and pension costs, among other expenses.

In 2009, lawmakers voted to shift MBTA workers into the state employee insurance program, curbing benefits that were among the most generous in the public sector. The Legislature also cut retirement benefits for new T employees.

But as the Taxpayers Foundation report notes, pension benefits are still richer for MBTA retirees than for other state employees. And the retirement age is lower — 55, instead of 62 for most state workers.

The transit agency’s retirees also qualify for Social Security, unlike other former state workers who rely solely on their pensions. The report calls for lawmakers to end Social Security eligibility so the agency will no longer have to make employer contributions to the system — contributions expected to reach $36 million this fiscal year.


Wages have been another cost-driver in the MBTA’s $1.9 billion budget. And the Taxpayers Foundation report calls on the Legislature to end binding arbitration for T workers when contract negotiations stall.

The process allowed the Carmen’s Union to win a 10.4 percent raise over four years in its most recent contract — a less-than-eye-popping figure but higher than the 7 percent increase the MBTA negotiated with other unions.

Ending binding arbitration and Social Security eligibility and putting a two-year moratorium on the so-called Pacheco Law, which makes it difficult to privatize public services, would all be heavy lifts politically.

But McAnneny, of the Taxpayers Foundation, said this winter’s crisis might make the changes possible: “I think, given the scope of the issues facing the T, people would be amenable to at least having that discussion.”

The foundation, which began working on the report before this winter’s storms, reserves its sharpest language for the T’s management of a maintenance and upkeep backlog that has reached $6.7 billion.

While acknowledging the funding shortfalls that have made it difficult for the agency to stay on top of repairs, the report called the agency’s failure to provide continual, detailed updates on the backlog “an enormous management failing.” And it said the state should withhold additional funding until the T provides a clear picture of its needs.

The report, like previous critiques of the T, also raises concerns about plans for pricey expansion projects such as the proposed South Coast Rail extension to Fall River and New Bedford, which would cost an estimated $2.3 billion.


The Taxpayers Foundation, which says the true cost of the South Coast extension would be higher, asks the state to freeze contracts for preliminary work on that sort of expansion while it gets a handle on operating and maintenance costs associated with new service and identifies realistic revenue streams.

The foundation has previously advocated for more transportation funding. And on Tuesday, McAnneny emphasized that the group is not opposed to more revenue.

Globe staff reporter Nicole Dungca contributed to this report. Scharfenberg can be reached at