Charles Chieppo

Red ink is staining more than MBTA

By Charles Chieppo
November 12, 2009

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IN HIS recent review of the MBTA, business leader David D’Alessandro wrote: “A private firm faced with this mountain of red ink would likely fold or seek bankruptcy.’’ More sobering is the realization that the T’s financial mess is only marginally bleaker than what the Commonwealth itself faces.

The heart of the MBTA’s problems is over $8.5 billion in debt. The cost of servicing that debt will rise from $342 million this year to $525 million by fiscal 2014.

Soaring debt service is a consequence of the T pushing more than $500 million in scheduled debt payments off into the future so it could pay the bills over the last nine years. Consumers who pay with credit cards end up paying twice as much for their purchases than if they had paid cash; it’s no different for the MBTA.

Deferred maintenance is one byproduct of uncontrolled debt, and D’Alessandro found a maintenance backlog of over $3 billion. As a result, the T would have to invest $694 million annually - not $470 million as previously thought - just to keep the backlog from getting worse. More than $500 million in maintenance work currently rated “critical’’ in terms of safety remains unfunded.

The report deserves the attention it’s getting. But it’s even more important for taxpayers to realize that the state’s financial picture isn’t much better.

By virtually any measure, Massachusetts is deeper in the red than almost any other state. Its taxpayers will pay over $1.8 billion for debt service this year. But the torrent of red ink hasn’t stopped our leaders from authorizing $16 billion in new debt in less than three years.

And that’s just the beginning. Taxpayers will also fork over more than $1 billion this year to pay down the state’s $22 billion unfunded pension liability. The payments increase each year, reaching well over $2 billion by the time the liability is scheduled to be retired in 2025.

A federal regulatory change that required the Commonwealth to calculate what it owes its retirees for post-employment benefits (mostly health care) revealed yet another unfunded liability. This one is over $13 billion.

There can be little doubt that new revenue will be needed to address these overwhelming liabilities, but there isn’t a lot of wiggle room on that front either.

When Pioneer Institute calculated the tab for the state’s debt and infrastructure maintenance backlogs last year, it came to more than $12,550 for every man, woman, and child in Massachusetts. And that didn’t include some quasi-public authorities and the state’s 351 municipalities.

Clearly, citizens must confront hard choices about what we want and what we’re willing to pay for. Developing a workable answer to those questions will require either higher taxes, eliminating state programs, or both.

Of course, hard choices run directly counter to the political process. Few leaders get elected by telling voters they can’t have what they want. Once in office, elected officials’ time horizons rarely extend beyond the end of their terms. The result is a culture of immediate gratification - photo opportunities and ribbon cuttings, while debt piles up and maintenance is deferred.

The problem isn’t new. In a 1962 speech, President Kennedy said that “we must act not only for the moment but for our time.’’

He recounted the story of a man who asked his gardener to plant a tree. The gardener objected that the tree was slow-growing and would not reach maturity for 100 years. “In that case,’’ the man replied, “there is no time to lose. Plant it this afternoon.’’

Both the MBTA and the Commonwealth face a bleak financial outlook that will likely take a generation to correct. If we are to succeed, we must begin confronting those challenges today.

Charles Chieppo is the principal of Chieppo Strategies, a public policy writing and advocacy firm.

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