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Scot Lehigh

Pacheco law drives up costs; Baker alone declares war on it

By Scot Lehigh
May 7, 2010

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WELCOME TO round two of the Great Spring Reform Joust.

Last week, readers may recall, Republican gubernatorial hopeful Charlie Baker saddled a high horse and vowed to lead a charge to revamp state government. Things took a turn toward the unconvincing, however, when the self-styled taxpayers’ champion proved less resolute than the Democratic incumbent on several difficult police reforms.

Having regrouped, Baker galloped back up Beacon Hill this week and threw down a good-government gauntlet: 13 ideas, dubbed “The Baker’s Dozen,’’ for cutting costs and streamlining operations. One led him into the realm of risible; questioned, Baker declared he’d require proof of residency even for those seeking help at a homeless shelter.

But others of his proposals were serious stuff. Today, let’s focus on something that hasn’t gotten much attention of late: The need to repeal the so-called Pacheco law, the misguided statute that effectively ended the state’s experiment with hiring private-sector firms to deliver public services. By requiring that a bidding company’s price be judged against the expense of having state workers provide those services “in the most cost-efficient manner,’’ that law erects a high and thoroughly unrealistic hurdle to tapping the private sector.

“It stifles creativity in state government, which is a huge problem,’’ Baker says.

Now, it’s obvious why public employees and their unions oppose contracting out: It often means a loss of public-sector jobs. But the function of state government isn’t to maintain the public payroll at a certain level. Rather, it’s to perform essential functions and provide necessary services. It hardly need be said that that should be done as efficiently as possible.

Privatization provides a prod in that direction. Under one model, companies and government workers bid against each other for the right to deliver services. If the public-sector workers prevail, the work often gets done more cost effectively than it previously was. If the private sector can do things for less, the state can reduce or redirect its workforce.

“Repealing or amending the Pacheco law would produce large and growing savings year after year,’’ says Michael Widmer, president of the Massachusetts Taxpayers Foundation. “States and municipalities across the country have shown that competitive bidding can save money and improve services.’’

According to the pro-privatization Reason Foundation, Florida saved more than $550 million over eight years under former Governor Jeb Bush. Virginia, meanwhile, was able to deliver the same services for $40 million a year less than the projected public-sector cost.

Leonard Gilroy, Reason’s director of government reform, says savings from contracting out typically range from 5 to 20 percent of previous service-delivery costs. Based on the experience elsewhere, the Pioneer Institute, the market-oriented think tank where Baker once worked, estimates Massachusetts could save at least $55 million a year. Building on that, Baker puts the potential savings at $75 million to $100 million a year. Even colleagues of state Senator Marc Pacheco, the law’s proud papa, seem to realize it’s poor public policy; last year, they finally loosened its strictures a bit.

But when queried about the Pacheco law and privatization last week, Governor Patrick took a more skeptical view than Baker about contracting out. Noting that the state has long used private firms for things like road and bridge work, the governor said that “it’s not apparent to me that we have in every case saved money or gotten efficiencies.’’

“Obviously if there is a smarter, better way to do it in the private sector, we ought to do it in the private sector,’’ Patrick continued. “But there are some things for which government is supposed to be responsible, and in those cases, we ought to be accountable for making it effective and efficient.’’ Independent candidate Tim Cahill seems every bit as unenthusiastic on the issue.

Patrick’s carefully modulated position overlooks this reality: With Pacheco on the books, it’s difficult even to explore the efficiencies that could come from contracting out, much less realize them. On this one, the verdict is easy: When it comes to pursuing the savings possible through privatization, Baker is clearly the most determined of the major candidates.

Scot Lehigh’s e-mail address is lehigh@globe.com.

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