`Worst-Case Test' for Market Ideas

A FREE-market think tank in liberal "Taxachusetts"?

It sounds as likely as a pacifist in the Pentagon or an atheist in the Vatican. But suspend disbelief for a second.

The Pioneer Institute for Public Policy Research, based in Boston, really does exist. It really is dedicated to a less-government-is-better philosophy. And it has scored a few notable successes in increasing the efficiency of one of the United States' most pervasive state governments.

Fact: Last year, the Massachusetts Department of Health and Human Services began privatizing pharmacies at 22 state-run hospitals. Although the privatization plan hasn't been completed, it already has saved the state $3 million. The impetus for the change came from one of the winning entries in Pioneer's annual "Better Government Competition" - a contest that seeks the public's input to improve the efficiency of state government.

Fact: Massachusetts also has contracted out the collection and processing of child-support payments. While this move hasn't saved any money yet, state officials say it has improved collections from "deadbeat dads." This idea, too, came from the Better Government Competition.

Fact: In 1992, Pioneer released "Reinventing the Schools: A Radical Plan for Boston," by institute co-director Steven Wilson. The book has become a leading study cited by proponents of a school-choice bill being considered in the state Senate.

With its steady drumbeat of reports and studies, Pioneer is at the forefront of a growing number of free-market think tanks that have popped up at the state level in the past decade. (See the story at left.)

PIONEER has had more success than many other state think tanks because it has had the good fortune to work closely with a governor who shares its free-market principles.

Since being elected in 1990, Gov. William Weld (R) has tried to downsize state government and reduce the taxes of Massachusetts residents. As part of his controversial reforms, he has privatized some state services.

The privatizations have drawn heavy fire from political opponents, who charge that they are not cost-efficient and that they reward politically connected contractors. But Governor Weld's reforms have been emulated in many other states.

Weld has often turned for ideas to the Pioneer Institute, even going so far as to order state bureaucrats to cooperate with researchers gathering information for the think tank's studies.

"We can work our hardest to reform state government but we still depend on groups like the Pioneer Institute and those who have participated in their Better Government Competition to keep a watchful eye and keep the suggestions flowing in abundance," Lt. Gov. Paul Cellucci told a Pioneer luncheon recently.

But skeptics scoff at some of Pioneer's notions. For example, one of the winners of the Better Government Competition suggested privatizing Boston's Logan Airport - an idea that never got off the runway.

"What if the [privatized] business fails?" asks Tom O'Connor, communications director for the Association of State, County, and Municipal Employees (AFSCME), Council 93. "If it's a vital institution [like the airport], we couldn't allow it to be shut down for even 24 hours. So the government would be obligated to step in and subsidize the company."

Such objections don't faze Lovett (Pete) Peters, the retired gas and oil industry executive who founded Pioneer. Mr. Peters, a disciple of the free-market Austrian School of Economics, got together with 40 friends in 1987 and offered to start a public-policy oriented think tank to combat the prevailing liberal orthodoxies of Massachusetts. Within three months, his well-heeled friends anted up $160,000. Peters chipped in $20,000 of his own, and the Pioneer Institute was born.

Sitting in the institute's offices near downtown Boston, Peters explains Pioneer's origins. "Massachusetts voters, according to the polls, are the most left-leaning of any state in the union. And Massachusetts academicians, journalists, and clergymen are way to the left of the voters," Peters expounds. "Our mission is to change the intellectual climate of Massachusetts...."

He continues: "We do studies on the problems of Massachusetts and publish them, because academicians, journalists, and clergymen pay attention to the ideas of other academicians."

BUT why in the Bay State - the home turf of liberal Democrats like former Gov. Michael Dukakis and US Sen. Edward Kennedy?

Conna Craig, the institute's associate director, says she views the institute's ambitious mission as a sort of worst-case test of capitalist principles.

"If we can generate public interest in privatization in Massachusetts - a state that's long depended on government solutions - it can be done anywhere," she says. "Massachusetts can be a laboratory for engaging people's interest in market-driven policies. We can go from the `Massachusetts Miracle' to the Massachusetts Market."

Pioneer itself seems to have thrived in the free market. Its budget - made up of donations from individuals, foundations, and such blue-chip corporations as Merrill Lynch & Company and Coopers & Lybrand - has risen steadily. Last year, Pioneer took in almost $600,000; this year it hopes to hit the $1 million mark.

The money funds studies of Massachusetts state government by independent scholars. The think-tankers insist that their studies do not have predetermined conclusions. Their only requirement is that a commissioned work be analytically rigorous enough to pass muster by a peer-review panel of academics.

But Mr. O'Connor, the union official, notes that virtually every Pioneer study challenges the state bureaucracy and suggests how privatization can deliver better services for less money. He adds that "privatization for the sake of privatization" is "snake oil."

Snake oil or not, the Weld administration has bought a lot of what Pioneer sells. Besides the two ideas from last year's Better Government Competition that already have been adopted, six others are in various stages of implementation.

This year's competition, which focused on environmental programs, produced other ideas the state is studying. The one that won the most public attention is a proposal to save the taxpayers $200 million by modifying the way a state agency is cleaning up polluted Boston Harbor.

"These award-winning proposals offer extremely good ideas for us to chew on," says Susan Tierney, the state secretary of environmental affairs.

Part of Pioneer's influence can be attributed to one man: Charles Baker, one of the think tank's first directors. When Weld was elected governor, Mr. Baker went from outsider to policymaker, becoming first undersecretary and now secretary of health and human services.

"Baker gives us a lot of credibility," Mr. Wilson, the institute's co-director, says. "The governor through Charlie knows what we stand for, and he knows he's likely to encounter proposals from us that are philosophically consistent with his own administration."