Baruch’s E.S. Savas has a good piece in today’s Post on introducing competitive contracting to the New York City and downstate public-bus system. As the MTA cuts routes, the state, the MTA, the city, or some combination thereof should bundle the axed routes and put them out to bid to private-sector contractors, who would compete on providing services for the lowest subsidy. The government would continue to set fares, stops, and safety rules, but not bus-driver or support-staff wages.

Savas and E.J. McMahon did a great study on the topic of competitive contracting a few years back, finding that a 20 percent cost reduction — a reasonable estimate in light of Europe’s savings on similar initiatives — would save $340 million annually, nearly the amount of the MTA’s current operating deficit.

There’s another advantage to bus-service contracting, too. Weakening the MTA’s monopoly on nearly all transit services would mean that the MTA’s unions don’t have as strong a hold on New York’s economy. Subway workers could go on strike, but buses would still run, like in London.

Please read more about why buses are a good candidate for contracting — as opposed to, say, subway lines — here. And read Savas’s piece in City Journal’s special 2009 New York issue here (it’s in the first orange box).