When Beacon Hill policy makers crafted a rescue plan for the MBTA after its failure under the dire conditions of the winter of 2015, one key measure was granting the transit agency a three-year reprieve from the so-called Pacheco Law. That ill-advised statute, with its cumbersome process, makes it very difficult for state government or state agencies to contract with private companies for services performed by state workers. The Baker administration promised to use its new powers judiciously, while organized labor bewailed the decision as a sell-out of MBTA workers.
Well, the preliminary results are in. After just two years of Pacheco freedom, the T says it has put in place changes estimated to save $400 million over 10 years. A major part of the new savings is attributable to the contract agreement the T reached with the Boston Carmen’s Union, Local 589, in December. The T estimates that pact will save it $10 million next year, ramping up to a $24 million savings in 2021, reducing projected costs from $368 million to $344 million. Over a decade, those total savings are pegged at $218 million.
Those savings would have been hard to imagine under Pacheco. Pre-waiver, the carmen’s union was notoriously resistant to change, and from a union perspective, understandably so: Foot-dragging often led to binding arbitration, which resulted in better contracts than the carmen could have won at the bargaining table. As private sector firms and workers know, competition has a way of prodding unwanted but nonetheless necessary changes in behavior. Certainly the T’s Pacheco exemption has made the carmen’s union more willing to adapt, accommodate, and compromise.
The union’s priority was protecting its current members from layoffs and preserving its core work. In exchange for such consideration and a higher health fund payment, the carmen gave up one scheduled raise, took smaller raises over the next several years, and agreed to accrue overtime on a weekly rather than a daily basis and to accept a lower initial-year’s pay scale for new hires.
In two of the areas where work has been contracted out to private firms — the money-handling operation and the warehouse functions — substantial saving are also being realized. The total cost of the T’s money operation is on its way to a projected drop from $11.8 million to $3.6 million in the first year, now that it’s being done by Brink’s. The contract to have Mancon Inc. run the warehouse operation will save $4 million annually, a 40 percent cost reduction.
“The Pacheco waiver has been a huge win for taxpayers and riders,” says Brian Shortsleeve, until recently the T’s acting general manager, and now a member of the T’s Fiscal and Management Control Board. “It has enabled the MBTA to modernize our operations in key areas and reduce our operating deficits in a very significant way.”
One who has scrutinized the T’s estimated saving is former state inspector general Greg Sullivan, now director of research at the market-oriented Pioneer Institute.
“I think they are legitimate,” he says of the T’s projections.
The T will soon be considering proposals for an area where costs are badly out-of-whack: bus maintenance. That has IAM Local 264, the machinists’ union, up in arms and trying to rally political support to pressure the T’s Fiscal and Management Control Board to back off. But though outsourcing some bus maintenance work would mark a change for the T, it’s not unusual in the public transportation sector. Indeed, all of the other 15 regional transit agencies in Massachusetts are required by law to contract with private firms not just for bus repair and maintenance but for route-driving as well. Further, in a labor market like Boston’s, it’s not as though you can hire members of a skilled profession like machinists on the cheap.
There, contracting out some bus maintenance would no doubt mean that some current T machinists end up working for a private-sector firm. There also could be some layoffs. Still, much of the hoped-for savings will come from more flexible staffing models, purchasing economies of scale, and other private-sector efficiencies.
Senate policy makers want independent confirmation of the T’s reported saving and improved processes before extending the waiver, which expires next year. That’s fair — but if those savings and improvements are confirmed, lawmakers shouldn’t blanch at making the T’s Pacheco law exemption permanent. This experiment in Pacheco freedom shows the folly of legislative efforts to shield public-sector workers from private-sector competition. Real savings — money that can pay for other needs in our ailing infrastructure system — can be garnered when contracting out is an option.