“We believe the T’s pension system cannot survive as a standalone entity,” Baker said, noting that its assets had declined by $89 million in the past year alone.

In a wide-ranging speech Wednesday, marking one year since a fiscal control board took over the Massachusetts Bay Transportation Authority, Baker said the $1.5 billion fund was in a “free fall” that could threaten its ability to pay retirement benefits for 11,700 current and former transit workers.

Governor Charlie Baker said the MBTA pension fund, plagued by a widening gap between its assets and obligations, should be managed by the larger state retirement system.


The pension fund has come under intense scrutiny in recent years for failing to disclose losses in a fraudulent hedge fund and running its operation in secrecy, despite receiving tens of millions of dollars annually from taxpayers.

Baker said he will ask the Legislature next year to act so the MBTA fund can be managed by the $60 billion retirement system for the state’s public employees and teachers. The administration has said the state fund has lower costs and better oversight than the T fund.

Steve Crawford, a spokesman for the T’s pension board, said in a statement, “The fund is always willing to examine anything that might improve performance.”

Baker, speaking at the State House, highlighted a long list of areas in which the transit authority itself must still cut costs and boost performance, from its operating budget to worker abuse of overtime to problem-plagued contracts.

Baker said the MBTA has not been underfunded, but “poorly led and horribly managed” — and is still in “very tough shape.”

Across the beleaguered transit system, Baker said, more change is needed to improve service for riders. But he cited progress he says the administration has made, particularly in management of the long-troubled authority.


He pointed to examples such as redesigning the planned Green Line extension, which had gone over budget by nearly $1 billion, and plans to double spending on signals, switches, tracks, and other infrastructure.

The MBTA has stopped the growth of its budget, he said, and cut down on driver absenteeism since the record-breaking snowstorms of early 2015. The T also is looking to privatize an inefficient warehouse operation and cash collections found lacking in security.

“Turnarounds — and this is a turnaround — take years,” Baker said. “We have a very long way to go.”

The T’s unions oppose outsourcing the work.

“There is no magic wand to cure the lack of investment of the past 20-plus years,” Boston Carmen’s Union president James O’Brien said in a statement. “And privatization certainly does not guarantee cost savings or improved service for riders.”

Some transit advocates were critical of aspects of the speech, particularly Baker’s assertion that the T was not underfunded, citing a panel of experts he convened in 2015. In fact, the panel’s report said the MBTA needs both reform and revenue.

“The revenue needed in order to ensure the Commonwealth has a vibrant transit system across the state — that’s a conversation that needs to continue,” said Joshua Ostroff, interim director for Transportation for Massachusetts, a Boston nonprofit that advocates for more public transit. “That can’t wait for us to solve all the management problems.”

Regarding the pension fund, Baker suggested there were other potential changes in store. He said the average employee who is eligible to retire today from the T will have contributed $47,000 to the pension over his or her career and stands to receive more than $1 million in benefits.


After a recent round of reforms, Baker said, new employees contribute $67,000. “Still a huge problem,’’ he said.

He did not offer details on how the Legislature would go about allowing the T pension to be managed by the state fund, officially known as the Pension Reserves Investment Trust. He said the administration would be conducting a legal review of the process.

Last year, the system’s unfunded liabilities jumped $126 million, to nearly $942 million, according to a financial report released this week. While the T’s investments could theoretically be taken over by the state fund, its liabilities would remain its own.

The fund’s dealings have been mostly private for decades. But Baker last month signed into law a broad new public records bill that includes the T pension fund. Days later, the fund’s executive director, Michael Mulhern — a retired MBTA general manager — announced plans to resign, after a decade on the job.

The pension was the subject of a critical report last year by Wall Street whistle-blower Harry Markopolos and Boston University professor Mark Williams. The pension board said a consultant’s report refuted the allegations in the report.

However, the fund has made some changes since the report to more accurately reflect its financial obligations, such as updating old mortality assumptions and lowering the fund’s target rate of return. The fund also had been assuming that 100 percent of the employees were male.


Nicole Dungca can be reached at nicole.dungca@globe.com. Follow her on Twitter @ndungca. Beth Healy

can be reached at beth.healy@globe.com.

Follow her on Twitter @HealyBeth.