BOSTON — The MBTA expects to save more than $450 million over the next decade through privatization made possible under a waiver from the so-called Pacheco Law, according to a report that is fueling calls by Beacon Hill watchdogs to scrap the law.
The 25-year-old law — named after its author, Sen. Marc Pacheco, D-Taunton — requires privatization of state government services to be vetted by the state auditor's office. It was suspended by Gov. Charlie Baker and the Legislature in 2015 to give the MBTA a three-year window to privatize services to cut costs. The waiver expired in June.
The MBTA’s report praised several privatization initiatives such as hiring a third-party administrator to manage overtime expenses and absenteeism; contracting out money operations; outsourcing warehouse and logistics work; and hiring private companies to operate a call center and provide customer service agents in MBTA stations.
Officials with the Massachusetts Bay Transportation Authority said savings from the waiver helped the transit agency balance its operating budget for the first time in a decade. They also cited $218 million in savings from wage and work-rule concessions by the Carmen’s Union Local 589, the T's largest labor union, as part of a 2016 contract renewal.
But the report said the benefits of suspending the union-backed Pacheco Law "extend well beyond actual and projected operating dollars saved."
"Even when it does not result in outsourcing, the availability of the waiver has caused the (T) — and its unions — to examine and rethink internal processes and operations in ways that had rarely, if ever, happened before," it stated.
Fiscal watchdogs such as the conservative Pioneer Institute say the report shows the T should continue its privatization efforts.
"It was proven to be effective, so the Legislature really should have extended it," said Greg Sullivan, Pioneer's research director and a former state inspector general who has studied the fiscal impact of the law. "No other jurisdiction in the country has such a rule on the books."
He said the suspension of the Pacheco Law played a key role in reducing the MBTA's cost structure over the past three years, while forcing its unions to make major concessions.
"They got a lot of fruit — not just the low-hanging fruit — but the kind you have to go up the ladder to get," he said. "But they didn't get it all."
Other groups, such as the Massachusetts Fiscal Alliance, argue that the law should be scrapped altogether.
"It should be repealed," said Paul Craney, a board member and spokesman for the group. "It has been an utter disaster for the MBTA that has done nothing but stifle innovation."
Even so, the Baker administration decided against pushing for an extension of the waiver in the Democratic-controlled Legislature, where support for the law is strong.
Savings 'just an excuse'
A move to extend the waiver would also inflame union leaders, who argue it should never have been granted in the first place and reject claims by T officials that it has saved money and improved service.
"They talk about savings but it's just an excuse to privatize," said Michael Vartabedian, spokesman for the International Association of Machinists Local 264, a union representing 400 bus maintenance machinists. "This is really about corporate greed and allowing private companies to make a profit on the backs of taxpayers at the expense of the workers."
Vartabedian’s union protested plans to outsource work at several MBTA bus garages, including one in Lynn, which were ultimately abandoned after they agreed to a new contract.
"The public doesn't realize the damage that privatization does to the T," he said. "You're putting a vital public service into the hands of profit-driven companies."
Pacheco himself recently offered a spirited defense of keeping his namesake law in place, arguing that the T has failed to demonstrate the benefits of its waiver.
"The MBTA report refers to ambiguous 'improvements' and anticipated 'savings' without breaking down any of its underlying calculations," he wrote in an op-ed piece in several newspapers. "In the absence of a transparent public process, we cannot rely on reckless speculation to determine the true cost of privatization."
He cautioned fellow lawmakers against granting another waiver.
"Contracts must be vetted with proper checks and balances," he wrote. "That evaluation does not happen without statutory taxpayer protections in place."
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at firstname.lastname@example.org.