News and Features: Features
Gov. Patrick is winning political points reining in the compensation of state authority executives, but some question his motivations and the long-range value of his actions
July 06, 2011
It’s 7:30 a.m. The MBTA’s Richard Davey is standing just inside the Roxbury Crossing station, sipping his coffee while getting an earful from a woman worried about security on Orange Line trains now that the number of operators has been cut from two to one. After she heads off to catch her train, another woman steps up, wanting to know if Davey really intends to force mothers to fold up their strollers when they get on buses. Then there’s the coffee shop next door leasing space from the T; its roof is leaking.
Davey, who has overseen the T and other state transit operations for more than a year, is spending several hours on this rainy mid-May morning listening to the concerns of everyday users of the T. He seems to enjoy the give and take, perhaps because it’s a break from the intractable problems facing him back at the office, where he oversees close to 6,000 employees and a budget of $1.6 billion. Davey’s job is to transport about 1.3 million people every weekday on a bus, subway, and commuter rail system that is old, prone to breakdowns, and effectively broke.
It’s one of the toughest jobs in state government and definitely one of the most important. The T keeps the eastern Massachusetts economy moving and is critical to the livelihoods of area residents and businesses. Yet the 38-year-old Davey is paid $145,000 a year, a figure that seems remarkably small compared to his responsibilities. Indeed, it’s less than what he was making in his previous job at the private company managing the T’s commuter rail network. It’s also $110,000 less than his predecessor at the T made, even though Davey has taken on more responsibility.
Compared to 13 other managers of similar-size transit systems around the country, Davey’s salary is far and away the lowest—$132,000 below the average. At Bunker Hill Community College, Davey’s salary would make him the fourth-highest paid employee on the payroll. Many University of Massachusetts professors and even some assistant professors, not to mention deans and provosts, earn more money than Davey. Some of Davey’s own employees earn more than he does.
His job perks aren’t very generous either. He receives no car allowance, he pays for his own T commute to and from work, and on his last vacation he even took a side trip to South Korea—on his own dime—to visit a factory building new locomotives for the authority.
“I didn’t take the job for the money,” Davey says with an earnest smile.
Davey is one of the faces of the Patrick administration’s campaign to rein in the state’s quasi-public authorities and bring the salaries and perks of their top officials more in line with the rest of state government. It’s a good, old-fashioned house-cleaning. Two authorities have been eliminated and six authority chiefs have been ousted. The governor and his aides say the cozy culture of entitlement that once existed at the state’s quasi-public authorities is now dead.
But there is a growing chorus of people inside and outside the administration who see the governor’s move against the state’s authorities as good politics but bad public policy. They say the proverbial nationwide search to fill important authority posts with the best possible candidate has degenerated into a hunt for someone who will do the job for less. They worry that authorities, set up purposefully to be independent of the political process and operate more like public enterprise businesses, are being turned into wholly owned subsidiaries of the administration. And they say the crusade for lower salaries is just political cover for a governor trying to centralize control in his administration, as he did previously with transportation and education, and fill key authority posts with his own people.
Indeed, Patrick seems to have a split personality when it comes to authorities. He has forced out or lowered the pay of every authority executive earning more than $250,000 a year—with one exception. Dr. Susan Windham-Bannister, who heads the Massachusetts Life Sciences Center, the one authority Patrick played a personal role in creating, is earning $285,000 a year managing an agency with just seven employees and an annual budget of $2.5 million. Two of her employees earn more than Davey makes at the T.
| Stephen Crosby, dean of the McCormack School at Umass Boston|
Stephen Crosby, the dean of the McCormack School at the University of Massachusetts Boston and the person Patrick chose last year to lead a commission analyzing compensation at quasi-public authorities, is a big believer in paying people what they’re worth. He says the juxtaposition of the pay of Davey and Windham-Bannister shows how outrageously low Davey’s salary is. But he says it’s incredibly difficult to pay competitive salaries in the public sector. “It’s a soft spot in democracy,” he says. “Setting high levels of compensation in the public sector is something where democracy has a problem.”
A “privilege” to serve
Jay Gonzalez, the governor’s secretary of administration and finance, says the old adage that you get what you pay for doesn’t always apply in state government. He, for example, makes $150,000 a year reporting to a governor making $10,000 less than he does. The salaries of both men are far less than what they used to earn in the private sector, but he says that’s the way government works.
“I came into state government knowing that the public sector is different and I was going to sacrifice some compensation versus what I was getting in the private sector in order to have the privilege of working in the public sector,” he says. “For anyone who has these positions, it is a privilege, an opportunity to serve the public in a unique way.”
Gonzalez says jobs at the quasi-public authorities should be no different. Sure, Gonzalez says, the quasis were established with their own boards and their own salary structures to make them independent of state government. Many of them are financially independent and receive no state money. But Gonzalez says the quasi-public authorities are still public and also a part of state government.
“The concern was that they had veered a little too far to their independent side and a little too far away from the public side,” he says. “It’s important that we are all working together toward common objectives, that we’re all rowing in the same direction.”
Gonzalez says hefty salaries came to symbolize how far the quasis had strayed. Many top authority chiefs were making $250,000 to $300,000 a year with perks unheard of in government. Tom Kinton at Massport stored up $450,000 of unused sick and vacation time. James Rooney at the Massachusetts Convention Center Authority is working on his second pension. Most of the authority chiefs were sitting on fat severance packages that paid them big bucks if they were removed before their contracts were up.
“The poster child was Ben Caswell at HEFA,” says Gonzalez. Caswell earned a salary of $225,000 running the state’s Health and Educational Facilities Authority, plus deferred compensation of $67,500, a bonus of $14,583, a $5,000 car allowance, a T pass, and a health club membership. He also was promised a severance payment equal to as much as three years of salary if he was dismissed without cause.
“There were some absolutely ridiculous aspects of his benefit package,” says Gonzalez, who worked in the bond business before joining state government. “I will guarantee you you do not need to pay somebody what Ben Caswell was paid to get a qualified person to do that job.”
But what should someone running an authority be paid?
Gonzalez says each situation is different, but before negotiating a salary authority boards should do salary comparisons with authorities in other states, companies and nonprofits in the private sector, and state government. “One of the positions that should be looked at as a comparable for a CEO at a quasi-public authority should be me and other CFOs in state government,” Gonzalez says. He also says if a quasi can hire someone who is willing to work for less, it should. “It’s a sacrifice they make for the opportunity to serve,” he says. “We owe it to taxpayers to take advantage of that.”
The administration has overhauled the major quasi-public authorities, but there are nearly 30 smaller ones left that haven’t been touched. I ask Gonzalez which authority is next in line for review.
“None come to mind personally,” he says.
Secretary of administration and finance Jay Gonzalez
What about the Life Sciences Center, an authority Patrick created and on whose board Gonzalez sits? Does the governor feel Windham-Bannister’s salary is out of whack?
“That’s what we need to assess,” he says, noting Windham-Bannister was hired before Crosby’s report on authority compensation was completed. “When her contract comes up, that’s something we need to look at.”
But Windham-Bannister doesn’t have a set-length contract. She serves at the pleasure of the board and can be terminated at any time, something Gonzalez should know as a member of that board. I ask him if Windham-Bannister’s salary goes untouched because she heads an authority created by Patrick, while the other authority heads were targeted because they were brought on board by appointees of prior administrations.
“The process we’ve been going through is not to put our guys in,” Gonzalez says testily. “That’s not what this is about. It’s about getting good people in who are going to work together with the administration and others to further the mission.”
The Patrick administration hasn’t always been so concerned about excessive pay at quasi-public authorities. That concern evolved over time, and took serious root after the governor’s efforts to place a political supporter in a high-paying job at one of the authorities blew up in a damaging patronage controversy.
In May 2008, Windham-Bannister was named to the top job at the state’s Life Science’s Center. No one raised concerns about her $285,000 salary at the time, even though two of Patrick’s top lieutenants headed the board that selected her.
Nearly a year later, according to administration emails and court documents, Patrick administration officials began lobbying behind the scenes to place then-state Sen. Marian Walsh, an early political supporter of the governor, in the No. 2 position at the Health and Educational Facilities Authority at a salary of $175,000.
Caswell, HEFA’s executive director at the time, says in court filings that he resisted the hiring of Walsh because the position had been vacant for 12 years and she had little experience in finance. But he claims Allen Larson, HEFA’s chairman, insisted Walsh be hired. His lawsuit quotes Larson as saying Gonzalez “feels dirty about this but Patrick called him into his office and demanded to know why this was not done already and told him to get it done.”
At a March 12, 2009, board meeting, HEFA voted to hire Walsh, subject to a final approval the following month. The announcement set off a firestorm of protest that Patrick was engaging in exactly the sort of patronage politics that he had pledged to end during his run for governor.
Twelve days later, Patrick called in Crosby from UMass and asked him to review compensation at all the state’s quasi-public authorities. In a statement, the governor said recent criticism regarding compensation at HEFA “has drawn attention to the tension that exists between salaries appropriate to attract and retain talent and the sense of shared sacrifice the public demands in times like these.” He said Walsh, “a respected and qualified individual recently hired at HEFA, will lead by example by voluntarily reducing her annual salary from $175,000 to $120,000. She will work to lead the reform efforts at the agency to generate savings.”
Four days later, the Boston Globe reported on email traffic between the Patrick administration and HEFA indicating that Patrick aides, despite earlier claims to the contrary, had orchestrated Walsh’s hiring and set her original $175,000 salary. In the ensuing furor, Walsh withdrew her name from consideration for the job.
After the Walsh fiasco, the administration’s attitude toward the quasi-public authorities hardened. In August 2009, Dan Grabauskas was fired as the general manager of the T even though he had nine months left on his five-year contract and was owed severance of $327,486.
That same month the Crosby commission released its report. Instead of lambasting high salaries at the authorities, it concluded that compensation packages “as a broad generalization” were “appropriate and reflect legitimately the context of each of their industries.” The report focused more of its attention on perks, recommending doing away with fixed contracts, excessive severance pay, guaranteed raises and bonuses, and cash payouts for banked sick time. It also said retirement benefits should be figured into salary comparisons.
But the Crosby conclusions did not deter Patrick. Over the next year and a half, Davey was hired at the T and paid $110,000 less than Grabauskas; Gonzalez appointed one of his own aides, Glen Shor, to replace Jon Kingsdale at the Health Insurance Connector Authority and paid him $88,000 less; Kinton was denied a $22,000 pay raise at Massport, forcing him out; James Rooney swallowed a $26,000 pay cut at the Convention Center Authority and the loss of $73,000 in bonus money, and Mitchell Adams was ousted from his $264,000-a-year job at the Massachusetts Technology Collaborative. HEFA was merged into MassDevelopment, and the heads of both authorities (Caswell at HEFA and Robert Culver at MassDevelopment) were booted, replaced by Boston developer Marty Jones, who is making $215,000 a year—$309,000 less than the combined salary of her two predecessors.
The governor’s top aides orchestrated most of these changes, in some cases negotiating the new pay packages with little or no input from the authority boards. Some of the aides privately grumble about trying to find good people willing to do tough and often thankless jobs for less than they could make in the private sector.
The tone of the press releases announcing each new appointment has changed over time. When Shor was named head of the Connector in April 2010, his salary and the Crosby commission weren’t even mentioned. But by the time Jones took over at MassDevelopment a year later, the press release noted her salary and effectively rewrote the conclusion of the Crosby report by saying it had “outlined a plan to address excessive salaries and benefits for executives at independent agencies.”
Who Massport hires as its next administrator will tell a lot about the Patrick administration’s commitment to downsized salaries and contracts without guaranteed lengths. Massport runs Logan Airport which, like the T, is vitally important to the state’s economy. It’s also the airport where the two 9/11 planes that flew into New York’s World Trade Center originated. At the time, Logan was run by Virginia Buckingham, a political operative who had no aviation experience when she took the job. Just three months after the tragedy, a special task force recommended that Massport hire a very experienced chief executive and give him or her a five-year contract “to provide some insulation against political influence and pressure.”
Kinton, who came up through the ranks at Massport, was appointed to the top job in 2006 and given a five-year contract, a practice the Crosby report opposes. Sources say the Massport board began maneuvering last year to lock Kinton in for another three years. The board commissioned a salary comparison survey that found Kinton’s $296,000 annual pay was $12,000 above the median for managers at airports of Logan’s size. The board wanted to raise his salary to $318,000, which would have placed him just below the 75th percentile for managers of equal-size airports.
The board shared its findings with Transportation Secretary Jeffrey Mullan early in the fall. Sources say Mullan had no problem with the salary increase, but warned that the timing wasn’t good, given the down economy. Days before the Massport board was scheduled to vote on the salary increase, Mullan privately told board members he would fight it. The pay hike was scrapped and Kinton subsequently submitted his resignation. At press time, no replacement had been announced.
The Patrick administration’s crackdown on authority salaries has generated some savings. At the Connector, for example, the hiring of Shor set off a chain reaction of staff turnover and salary reductions. The 10 highest-paid Connector employees under Kingsdale earned a total of $1.66 million, while under Shor they earn a combined $180,000 less.
MassDevelopment boasts that its merger with HEFA generated payroll savings of $2 million, but the combination also ended a competition between the two authorities that yielded significant savings for higher education institutions, a cornerstone of the state’s economy. Prior to the merger, the two authorities competed aggressively for higher ed business, but after the merger MassDevelopment adopted one fee structure for all its deals. The result was a sharply higher fee structure for higher ed institutions. Harvard University, for example, issued tax-exempt debt through HEFA twice before the merger and paid a fee of $95,000 each time. Since the merger, Harvard has completed one deal, paying a fee of $677,000.
MassDevelopment is also refusing to pay Caswell a $562,000 severance payment he says he is owed. Caswell is suing, and a preliminary decision by the judge indicates the law may be on his side. It’s unclear whether the private attorneys representing MassDevelopment are working for less-than-market rates since since the authority is refusing to say what it is paying its lawyers, citing attorney-client confidentiality.
Many opinions on pay
Paul Levy, who ran the Massachusetts Water Resources Authority from 1987 to 1992, says he has watched with great concern as the Patrick administration has slashed salaries at quasi-independent authorities and curbed their independence.
“The public as a whole doesn’t like the idea of people in the public sector earning private sector salaries, but I think that’s shortsighted,” he says. “One reason you create authorities is to have them outside the purview of the regular politics of state government. The goal is to attract highly competent people and attract them away from the private sector.”
Levy says he hired Dick Fox to run the Boston Harbor Project and paid him a salary that made him the second-highest paid person in state government. Levy says Fox also paid his staff well. “We had a highly paid, highly skilled project team that was comparable to the teams we were contracting with,” Levy says.
Levy says it was no coincidence the harbor cleanup came in on time and on budget. By contrast, he says, the Big Dig didn’t take the same approach and the result was in many ways a disaster. Levy says Frederick Salvucci, the transportation secretary under former governor Michael Dukakis, would vouch for that.
But Salvucci actually disagrees. He applauds Levy for hiring Fox and paying him a market-rate salary, and he acknowledges people running the Big Dig were not paid similarly. But he says the Big Dig’s problems wouldn’t have been solved by paying managers more. He says the real problem with the Big Dig was that it was handed off mid-stream during the transition from Dukakis to former governor William Weld and expertise and institutional memory were lost. That left Bechtel, the management company on the project, as the only entity with any institutional memory and, as Salvucci says, “It’s very easy to get along with yourself.”
Salvucci says it is possible to attract good people to government service jobs at lower pay if those being hired have the backing of top officials and feel they can really accomplish something, which he says didn’t happen with all the second-guessing surrounding the Big Dig. He says the T’s Davey is a good example of top-notch talent working for less. “He was attracted into a very tough job because of the excitement and the challenge of the mission. It makes it harder, but it is possible to do,” he says.
Unlike Levy and Salvucci, Crosby has never run a state authority. But he has served in the job Jay Gonzalez now has, as the state’s chief budget official, and he has probably studied government pay issues more than anyone else in Massachusetts. He played a central role in producing three reports on various aspects of government sector pay, in 2007, 2008, and 2009. The first two reports raised concerns about a growing gap between private and public sector pay, a gap that was making public service difficult for anyone except the wealthy or those already serving in government. The third report was from the commission appointed by Patrick to study whether compensation at quasi-public authorities was out of line.
Sitting in his office at UMass, Crosby—who is paid $171,000 as a university dean—remembers sitting down with Patrick prior to being appointed to head the commission. “Even at that point, I said to him, ‘I think you come into this with a predisposition that their salaries are too high and in general that salaries are really out of line. And I’m not sure I agree with you on that.’ I said that to him right up front. Frankly, I think they would have loved it if I came to that same conclusion.”
He says he and the other commission members were expecting to uncover a lot of sweetheart deals, but that’s not what they found. “There were a few freak things, but there really wasn’t much that was out of line,” he says.
Which is why Crosby has done a slow burn watching the Patrick administration as it slashes salaries and benefits while citing his report. He takes issue with the notion that authorities should be trying to hire people willing to accept less than the job is worth. He says Davey could take the job at the T because he can afford to; he has no kids and his wife is a partner at a big law firm. But Crosby asks what will happen when Davey leaves and everyone else across the country doing a similar job is making $300,000 to $500,000.
“You may have a good deputy in Massachusetts who’s making $115,000 for whom this job would be a raise, but it’s kind of an inherent market function,” he says. “In due time, there’s got to be a relationship between talent and compensation. There ought to be a relationship between authority, responsibility, accountability, experience, and compensation. That ought to be the measure.”
Crosby also worries about the administration’s control of quasi-public authority boards that are supposed to be independent. “It’s like enlightened dictatorship,” he says. “It’s fine if you’ve got a dictator who’s a good guy, but there’s no check and balance if he isn’t.”
As for what’s motivating Patrick, Crosby says he’s mystified. “I think he just wants control of the agencies. It’s about having his own people in the agencies,” he says. “I don’t know whether he genuinely believes that these people are paid too much or whether it’s punitive going with the times. That’s not really his style. It makes me think he thinks they are being paid too much, which puzzles me.”