Today’s Globe has another in what has become a series of editorials on transportation policy. Today’s editorial made some key points that are worth looking at.
The idea of “reform before revenue” will not solve the mess we are in. Reforms should and must take place, but without additional revenues this system will crash and burn.
But what seems smart to accountants looks like suicide to elected officials amid a recession. Legislators and the Patrick administration alike have taken to using the phrase “reform before revenue.” Well and good. But the situation is so dire that the discussion will have to proceed on multiple fronts at once.
The Globe editorial advocates on several fronts, advocating things that make sense but are still hard to achieve. Some of the points made: “Reform Wherever Possibe”, and “Stop Avoiding Hard Choices”. Lets just focus in on that avoiding hard choices and reform part of the editorial. The Globe specifically points to the retirement benefits over at the MBTA.
Simply merging one agency into another won’t make intractable problems go away. Current MBTA benefits make retiring after 23 years more attractive to many employees than continuing to work. Eliminating such perverse incentives would save $1.1 billion over 20 years, the state’s Transportation Finance Commission estimated last year. But doing so will require T officials, lawmakers, and Patrick to stand up to powerful unions.
Now that would be a reform that would make people think that the system was indeed going to change. Lets look at what the Massachusetts Transportation Finance Commission had to say on this subject.
One of the key cost drivers facing the MBTA is the very generous package of retirement benefits – both pensions and health care.Most pension plans allow an employee to retire at an earlier age, but with a reduced benefit.However, MBTA employees may retire and immediately collect full benefits after 23 years ofservice, regardless of their age. The result is that the MBTA may be carrying retirees, with full pensions, for three or four decades – in many cases longer than the employee actually paid into the system. In fact, the retirement benefits package makes it more attractive to retire early than to stay
employed. MBTA retirees are able to match the take-home pay of their most lucrative years
while they were still working because MBTA pensions are state tax-free. Furthermore, they
are eligible to receive Social Security with no offset from their pension payments. Over the
past three years about 10 percent of new (non-disability) retirees are under 50 years of age
and almost one-third are under 55.
Health care costs are a particular problem. The MBTA’s health care costs are 34 percent
higher than the median surveyed transit agency for single premiums and 44 percent higher
for family premiums. The combination of early retirement and 100 percent employer-paid
health care premiums for retirees with no co-pays puts enormous pressure on the MBTA’s
health care budget. It is striking that retirees account for almost half of the MBTA’s health
care costs, and even more striking that almost two-thirds of the MBTA’s retiree health care
costs are spent on retirees who are under age 65. These are the most expensive years to
cover – costs are escalating because of age, but the retirees are not yet eligible for
Medicare. It is critical for the MBTA to gain control over these escalating health care costs.
I realize that the focus is on the Turnpike, but the MBTA is also ready to implode. How do we ask for additional toll money, gas tax money, or fare increases at the T when this type of ridiculous benefit is not modified. It simply gives credence to those who oppose a reasonable effort to broadly solve our transportation problems by saying that all revenue increases are a giveaway to the public unions.
The Globe also advocates “no gimmicks” and “leveling with people”. What concepts! But the Globe neatly encapsulated what has put us in this mess to start with in looking to the future.
Many of today’s woes can be traced to conflict avoidance – underestimating the cost of the Big Dig; giving in to unrealistic demands by public employees; dealing with spiraling costs by deferring maintenance and borrowing more money.
And since we can no longer defer maintenance to avoid revealing the true cost of ownership to the public, and since we cannot borrow more money to defer true costs to the future, the day of reckoning is here and now. We all await the Governor’s plan, but the Globe editorial has it dead right. That plan should take some political risk, and not engage in kicking the can down the road, which is how we ended up here in the first place. Reform the system more than cosmetically, and then show the public what the true cost of ownership is. Anything less would be doomed to ultimate failure. Read the Globe editorial here.
Bill Manzi.com 