Wiffing on “reform before revenue”

If MBTA benefits aren't really in play in the great state transportation bureaucracy overhaul, where does that leave reform before revenue?

This week, the Massachusetts Taxpayers Foundation published a study containing six recommendations that the group says would save more than $1 billion on MBTA health care costs. The foundation argues that its proposals – including basing the authority's premium contribution on its HMO plans' rates, with employees and pre-65 retirees paying the difference for a pricier preferred provider organization plan (say that three times fast) — would save more than either the Patrick administration's or the Senate's bills.

(Nearly half of the $2 billion in reforms recommended by the Transportation Finance Commission came from reductions in the T's pension and health benefits.)

The trouble with the group's recommendations, or any others that carve out gristle in the system, is that the political will to do the slicing and dicing is fraying. For evidence, look no further than the Senate's transportation reform bill.

A proposal contained in an earlier Senate bill to bring the MBTA's employee and retiree health care costs in line with state employees' benefits vanished from the version that passed last week. Instead, according to a bill summary, "the cost of MBTA health care benefits will be no greater than those provided under the GIC. Employees will be required to participate in the GIC if an actuarial study shows it to be more cost effective."

So…after undergoing reform of epic proportions, Massachusetts would have to wait for another study to decide if MBTA employee health care benefits should be brought in line with those of state employees?

The bill also proscribes "contract[ing] with another entity with the requisite objective financial and actuarial expertise to assist the secretary in conducting this evaluation." (Read the details in Section 65 of the Senate bill here.)

Andy Bagley, the Massachusetts Taxpayers Foundation's director for research, explained to me why this development is a little bit troubling:

"You do an actuarial study of the MBTA health care and the GIC and compare. And then, if MBTA health care is more expensive by a percentage, [employees would move to the GIC]. That percentage is to be determined in the regulations. Well, what’s the percentage? Is it 5 percent, 10 percent, 15, one, zero?"

"So you don’t actually even know how close the MBTA has to be to GIC, because that’s not specified. That’s going to wait down the road for somebody to then weigh in and say, 'OK what cost differential will we tolerate?' And once you get through that step, which is problematic to say the least, then the savings wouldn’t actually begin until January 2012. Well, look, it's 2009. They’ve got a $160 million problem coming in two months. Can we really wait two-and-a-half years?"

And are retirees' benefits included in the Senate bill? Uh, no: "Nothing in this section shall be construed to affect the eligibility and coverage of retired employees of the Massachusetts Turnpike Authority…"

From the Taxpayers Foundation report: 

For the 4,000-plus former employees who retired from the Authority prior to July 2008, the MBTA pays 100 percent of their health insurance premiums. Workers who retired on or after July 7, 2008 and are under age 65 pay 10 percent of the premium; those under 65 who retire after December 31, 2008 contribute 15 percent. However, after turning 65, all MBTA retirees receive free health insurance paid for by the MBTA.

Without deeper reforms, the foundation projects that MBTA health care costs will total nearly $245 million by 2016. Makes you eager to pay more at the pump, doesn't it?

Most people would argue that the T needs more revenue, but Bagley added an important caveat. If the Bay State is going to ask for more revenue, from a gas tax or other source, it has to get a handle on the cost structure of [the MBTA's] fringe benefits.

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Gabrielle Gurley

Senior Associate Editor, CommonWealth

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Gabrielle covers several beats, including mass transit, municipal government, child welfare, and energy and the environment. Her recent articles have explored municipal hiring practices in Pittsfield, public defender pay, and medical marijuana, and she has won several national journalism awards for her work. Prior to coming to CommonWealth in 2005, Gabrielle wrote for the State House News Service, The Boston Globe, and other publications. She launched her media career in broadcast journalism with C-SPAN in Washington, DC. The Philadelphia native holds degrees from Boston College and Georgetown University.

About Gabrielle Gurley

Gabrielle covers several beats, including mass transit, municipal government, child welfare, and energy and the environment. Her recent articles have explored municipal hiring practices in Pittsfield, public defender pay, and medical marijuana, and she has won several national journalism awards for her work. Prior to coming to CommonWealth in 2005, Gabrielle wrote for the State House News Service, The Boston Globe, and other publications. She launched her media career in broadcast journalism with C-SPAN in Washington, DC. The Philadelphia native holds degrees from Boston College and Georgetown University.

"If you are not willing to do reform when you talk about 'reform before revenue'," he said, "you’ve kind of missed the opportunity of a lifetime to get this straightened out." He added, "If you wiff on reforms, I don’t know how you go back and then do revenue."

We'll learn next week if the House can pull reform back from the brink. A revenue bill is expected later in the spring.