Competition Can Add Jobs, Cut MARTA Losses

The Atlanta Journal-Constitution published an op-ed by Foundation Vice President Benita M. Dodd on Tuesday, October 30, that proposed MARTA’s deficit be reduced through managed competition, including privatization and outsourcing at the transit agency.

Add jobs, cut losses

By Benita Dodd

The failure of MARTA, the backbone of Atlanta’s public transportation, will devastate the region’s workers and mobility. KPMG’s recent audit warns that on its current course, the transit authority is unsustainable: MARTA must cut $25 million a year. Managed competition, including privatization and outsourcing, is critical.

There are two reasons to embrace this approach. First, Harvard professor Stephen Goldsmith, as mayor of Indianapolis, identified government’s role in his “Yellow Pages” test: “If the phone book lists three companies that provide a certain service, the city probably should not be in that business.” The same should apply to MARTA: Examine whether services can be provided more efficiently by private companies.

Second, managed competition allows an agency’s existing department to place its bid for a contract — say, MARTA’s janitorial contract — alongside private vendors’ bids. The department must demonstrate that it could do the job as well as or better than a private company. Clearly, there is a need to incentivize MARTA’s workers and departments to greater efficiency. Consider that much of MARTA’s problem is union-related:

Salaries and benefits for its 4,500 employees comprise 77 percent of MARTA’s operating budget; 64 percent of employees are unionized. Five years into a pay freeze, janitorial workers (unionized) earn 46 percent more than the national private average.

Apparently the higher pay is just sickening: Annually, the high absenteeism rate forces MARTA to devote $11 million to backup staff. Workers’ comp claims are $5.5 million higher than the national public- and private-sector average, and health-care claim costs are $8.9 million higher than the national average.

Pension costs are $22 million higher.

All this in a shop where union workers pay “significantly less for medical coverage and pension costs than the national average including both public and private sectors,” KPMG notes.

KPMG also proposes privatizing payroll and human resources. Surely there’s more. Privatizing new capacity and routes is an easy option. Paratransit service is a great chance to create private-sector jobs and reduce MARTA’s costs.

Why the private sector? Private companies and vendors operate in an environment where prices, profits and losses, and customers matter. They understand success involves more than just a captive audience; they must provide a service that invites repeat business and value for money.

Naysayers will cite failures of Atlanta’s water system privatization and MARTA’s previous attempt to privatize paratransit. Both disasters are a strong reminder that government should ensure that a contract defines the expectations of each party. Agency oversight, not agency micromanagement, is required.

Managed competition will turn MARTA’s focus to providing transportation instead of preserving union jobs. The livelihoods of thousands of low-income commuters — and Atlanta’s transportation future — depend on it.

Benita Dodd is Vice President of the Georgia Public Policy Foundation.

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