The biggest compromise between the Democratic Legislature and Republican Gov. Charlie Baker in this year's budget is on the future of the MBTA and the Democrats are giving Baker a lot of what he wants.

Chief among the items lawmakers signed off on Wednesday when they approved a $38.1 billion budget bill to pay for state services in fiscal year 2016 is the "toolkit" of authority handed to Baker to allow him to manage and fix the beleaguered transit system.

"We felt it necessary that we had to give the governor some real strong tools that he can use to turn things around," House Speaker Robert DeLeo said at a press conference shortly before his House voted 159-1 in favor of the bill.

The bill grants the MBTA a three-year exemption from the so-called "Pacheco law," a contract vetting process that Baker says has been stifling cost-saving privatization efforts at the agency for years.

"This wasn't about privatizing the T. It wasn't about laying off scores of people. This was about using the opportunity to contract services out to enterprises and entities that are already out there that would be happy to engage with the commonwealth where it can be done in a most effective way and probably in a way that it works better for the travelle, better for the taxpayer and, I would argue, better for the T," Baker said at his own press conference Wednesday.

The Pacheco law concession was a much harder pill to swallow for the Senate, where Senate President Pro Tempore Marc Pacheco (D-Taunton) saw his namesake legislation gutted by a six-member conference committee he wasn't a part of. A member of that committee, Sen. Sal DiDomenico (D-Everett) told WGBH News that relaxing the privatization rules for the MBTA was one of the hardest parts to see negotiated away in the effort to reconcile with the House.

"We put it on the books to protect the taxpayers of the commonwealth," Pacheco said on the floor of the Senate Wednesday during debate on the budget.

Pacheco also got a little personal when describing Baker's histroy of trying to defeat the law. According to Pacheco's floor remarks, Baker "did everything he could to stop that law from coming on the books," in 1993.

The House overwhelmingly approved the budget. Five of the 33 Senate Democrats initially voted against the plan due to objections over the Pacheco law provision, but the budget eventually passed the Senate unanimously.

The "Pacheco law" has been a favorite of labor unions and their Democratic allies since it was adopted over 20 years ago. DeLeo supported Baker's initial plan for a five-year MBTA exemption, but was satisfied with the three-year plan.

"We were going to have to make sacrifices. Everyone was going to have to make a sacrifice whether from the management perspective, whether from the legislator perspective or from the union perspective," DeLeo said.

The Legislature did throw Baker one curveball by adopting the Senate's prefered version of a fiscal control board to govern the MBTA. Instead of giving Baker's Transportation secretary direct chairmanship power over the new fiscal board, lawmakers gave Baker a board that will only be made up of his own hand-picked members.

"The fiscal management control board that they came out with which is not exactly what we asked for, but as I've said many times, this is a democracy. I don't always expect to get much of what we want on anything . But I do think that they did the one thing that was most important to me, was that they created an entity that will focus solely on the T operations, governance, financial performance and all the rest inside the larger DOT," Baker said.


Baker Received And Baker Gave


Baker climbed on board with legislative Democrats who want to use tax revenue from major corporations to pay for tax credits for poor working families.

Baker didn't seem to have a problem with the Democrats' plan to pay for the Earned Income Tax Credit by eliminating the FAS 109 tax loophole that benefits only 20 of the top companies doing business in the state.

"I'm excited that the Legislature chose to expand the EITC and we'll look forward to signing that," Baker said at a press conference Wednesday.

The loophole has never actually been used to grant corporations a little tax relief since it's been suspended every single year since it was adopted.

"FAS 109 has never been implemented here in Massachusetts, so therefor, using, basically, taking what has been standing practice and using that as a mechanism to fund the earned income tax credit, I think that's a good thing and I don't believe it's a tax increase. Net-net on these two measures. The people of Massachusetts are going to be better off," Baker said.

The Senate had wanted to pay for the working families tax credit by freezing the income tax and preventing it from falling as it is expected to do. That method was a nonstarter for Baker and House Speaker Robert DeLeo.

"The concern that relative to the income tax is that a commitment was made to allow for the rollback of the income tax to five percent. We wanted to continue with that commitment. We thought that was very important but at the same time we wanted to find an alternative way to pay for the earned income tax credit," Rep. Brian Dempsey, DeLeo's top budget chief said.

The House overwhelmingly approved the budget plan, with only one Democrat voting off. Five Senate Democrats initially voted against the plan due to objections over privatization of MBTA services, but the budget eventually passed the Senate .