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from NewsLink, Vol. 4, No. 2, Winter 2000
In the midst of winter doldrums, one story became the source of daily headlines: The Big Dig was going to cost $1.4 billion more than the $10.8 billion it had, for some time, been estimated to cost.
Ever since, we've been mired in debates about how to pay for the added cost and about what certain officials knew and when they knew it. Meanwhile, the Governor struggles to calm Wall Street, federal auditors, federal legislators and regulators, the state Senate leadership and critics who are demanding a shakeup in Big Dig management.
Consider how this latest Big Dig cost overrun came about in the first place. In 1997, the state put the Massachusetts Turnpike Authority in charge of managing the Big Dig. The Massachusetts Turnpike amounts to 135 miles of road that, on the basis of practicality as well as principle, the legislature should long ago have folded into the state highway system.
So how does a bureaucracy created years ago to run this particular stretch of highway end up managing the world's greatest public works project? The answer is that someone discovered that, while it wasn't especially needed to maintain the Turnpike, the Turnpike Authority was a great source of revenue.
Thus commuters unlucky enough to come into Boston from the West will pay $1,000 a year to pay off Big Dig debt while those coming in from the South or North will pay nothing.
There was bound to be trouble when the state vested the responsibility for completing the Big Dig on budget to the same entity that had become a major source of Big Dig financing. Inasmuch as Big Dig managers know that they can meet a cost overrun by the expedient of raising tolls, they are predictably less inclined to avoid a cost overrun in the first place.
The core problem
Massachusetts' fiscal problems go far deeper, however, than the Big Dig or the way that it's being managed. The Turnpike Authority could free up a substantial part of what it would cost to service a $1.4 billion loan just by cutting its own operating costs. Alternatively, if the state decided to finance the overrun by selling general obligation bonds, it could do so at a cost of only about $130 million a year in debt service - a rounding error for a budget that approaches $23 billion.
The core problem is our unwillingness, as a state, to control labor costs. There is no justification, particularly in light of the current crisis, for the hundreds of millions of dollars in costs that police details, project labor agreements and prevailing wage laws add to state and local construction projects. Yet, any suggestion that we address Big Dig costs by tackling these issues is dismissed as na•ve and unconstructive.
Last year BHI pointed out that the MBTA has become a virtual free ride for its passengers and a $600-million-a-year white elephant for state taxpayers. We faulted the MBTA for not raising fares and for going along with a funding plan that perpetuates its role as a pushover for transit workers and a trophy for environmentalists. But as we know from the lamented fate of Charlie on the old MTA, Massachusetts politicians get into trouble when they try to raise transit fares.
Indeed, they get into trouble too, when they try to lower transit costs. Recently, and in accordance with federal wishes, the MBTA tried to cut costs by $116 million by putting maintenance work for its commuter lines out to bid. The low bidder, Bay State Transit Service, says it can do the work with a smaller workforce. But the union-friendly Federal Transit Administration, prodded by a member of the state's own congressional delegation, insists that the current staffing levels and work rules remain in place. The FTA is threatening to withhold $70 million from a busway project if the MBTA doesn't knuckle under.
When the MBTA sought to cut costs by putting the cleaning and the maintenance of bus shelters out to bid, the state auditor rejected the contract as impermissible under the so-called Pacheco antiprivatization law. When the MBTA filed suit, the Supreme Judicial Court ruled that it lacked standing to sue.
A "prudent" tax cut
Given the complexity of these matters, it is little wonder that headlines focus on personalities and on isolated cost overruns. Taxpayers understandably chalk up the biggest part of government waste to “politics,” which is to say, to something beyond their control.
This fall, however, the voters will have a chance to take control. They will have a chance to approve ballot measures that would mandate tax cuts in the neighborhood of $1-2 billion.
One of these measures would cut the personal income tax to 5%. Opponents claim that it would be “imprudent,” especially in the light of the current crisis, to approve a tax cut that would add “only” a few hundred dollars a year to the average household budget.
In fact, this tax cut would be a boon to the economy, adding some 74,000 new jobs, $948 million in capital spending and $3.475 billion in payrolls. But the broad economic benefits may not be the most important argument in favor of this initiative. The most important argument may be that taxpayers should not be expected to forgo a tax cut in the name of deliberate overspending on big-ticket state transit projects.
The Big Dig might offer taxpayers great theatre. A tax cut in November would, however, give them something to take to the bank.
NewsLink is the quarterly newsletter of the Beacon Hill Institute for Public Policy Research at Suffolk University. © 1996-2002. All rights reserved.
