LWVUS StudyLWVDenver Presentation

2012

www.lwv.org/member-resources/privatization

Concepts

“We have government of the people, by the bureaucracy, for the bureaucracy.”

one of the most influential economists of the 20th century.

“"His radical idea that governments should spend money they don't have may have saved capitalism.“ Times Magazine, 1999

Milton Friedman, Nobel Prize in Economics, 1971

John Maynard Keynes,

The purpose of this study is to identify policies and parameters that should be considered when any governmental entity is planning to undertake some type of privatization process.

Purpose of Study

Scope of Privatization StudyThe purpose of this study is to identify

those parameters and policy issues to be considered in connection with proposals to transfer federal, state, or local government services, assets, and/or function to the private sector. It will review the stated goals and the community impact of such transfers and identify strategies to ensure transparency, accountability, and preservation of the common good.

Don’t Panic

ConceptsPrivatization: The Public Policy

Debate

Privatization is a movement to deregulate private industry and/or transfer many government services, assets and functions to the private sector.

Definition of PrivatizationClassicTotal transfer of assets and authority from

the government sector to the for profit or nonprofit sector

Purposes: Shrink government; Reduce risk and cost Reason: Often a response to economic downturn;

Ideology

Definition of PrivatizationModified

Private sector provision of a service once/also provided by government along with private sector funding (Proprietary colleges)

Private sector provision of a service with public sector funding (Direct funding for a private college; Private trash collection paid for by tax revenue)

Public sector provision of a service with private sector funding (Student tuition at public colleges)

DefinitionDeregulation

…the lessening of regulatory provisions that govern individuals, entities, and systems.

DefinitionsDecentralization

Moving the authority for a function from a central agency to an agency closest to where the activity is actually performed.

Privatizing Actions• deregulating – reducing regulations (often used as a defining

characteristic of privatization),• contracting with the private sector to purchase a service (road

construction), • establishing incentives to encourage the private sector to

provide a service, • abandoning or shedding of services, • reducing demand for a service, • establishing quasi-public organizations (government enterprise,

charters), • establishing separate corporations - profit and nonprofit

(authority), • supplying temporary help on the part of the private sector,

• issuing vouchers (K-12 education), • issuing waivers, • selling or giving away government owned assets, • establishing franchises, • leasing, • subsidizing or making available grants to the private

sector, • relying on user fees rather than tax dollars to fund a

service (hunting licenses), • discontinuing subsidies to public entities (almost

doing this with public higher education in Colorado), • providing joint funding, • establishing public/private partnerships, and• setting up consumer self-help processes, or using

volunteers

SummaryFor the purposes of this study, privatization can

be considered as occurring any time the government gives up some amount of control in any of several different ways. Examples include: Authorities (Regional Transportation District)Charters (K-12 schools)Deregulation (Higher education procurement in

Colorado)Transfer of assets to a private entity (Workers

Compensation/Pinnacol)Contracting with for profit or nonprofit entities (e.g.,

building contractors, social services)Turning over a service (provision of, funding of) to an

other than government entity

HistoryShift from central control to less central

control – late 1960s/early 1970sEnd of “regulatory capitalism” (Yergin 1998,

8) – regulatory backlashReducing the size of governmentRevitalizing entrepreneurial spiritRestoring influence of market forcesReducing taxes

Recent Examples of Privatization or Suggestions to PrivatizeSocial SecurityMedicareStudent loansMilitary serviceHighways, roads, and

bridgesCorrectionsEducationLibraries

ParksCourt services Free TradeEliminate food safetyEliminate

environmental safetyEstablish a flat taxEliminate Workers

Compensation

Sale of Conrail, government owned/operated rail system

Use of private entities for military support services

Deregulation of airline, natural gas, electrical and telecommunications industries

Attributes Attached to Public EntitiesPart of stateGeographic boundariesPublic actionPublic welfarePublic as beneficiaries Public accountabilityBase on certain principles: e.g., Equality,

Security, Fairness, Safety

Attributes Attached to Private (nonprofit and for profit) Entities

Part of the economyNo boundaries except those self imposedPrivate action/Operated by individualsIndividual freedomPrivately held assetsBenefits individuals

What should the government do?

Public SafetyDefenseJusticeProtect public health/environmentEducationEnsure democracyOther?

Major Issues in Privatization: Transparency and Accountability

Sunshine Laws

Freedom of Information Act

Community Engagement

Can these requirements be applied to privatization?

Some thoughts on Choosing Privatization

How can a community vision be developed?What are the goals and which form

(government/privatization) would best achieve the goals?

Which concept would best achieve quality?Which is the least costly while still

maintaining other goals?How will personnel be affected?What is the political resistance?What are the legal constraints?Which provides more choice?What are the risks and hazards?

Reading List - LWVUSConsensus Questions – IntroductionStrategies for Best Practice State Level Privatization 2011Privatization: The Public Policy DebateThe Legal Framework of Transparency and

Accountability within the Context of Privatization

Reading List - LWVUSDeregulation of RailroadsPrivatization of a Publicly Owned Waste

Water Treatment PlantSubcontracting Public EducationPrivatization of Prisons

Reading List – Other Decentralization in U.S. Public Higher

Education – Sections on Governance, Privatization and Deregulation and Choosing Privatization (Larson 2003)

Government Privatization: History, Examples, and Issues (Commission on Government Forecasting and Accountability 2006)

Privatization: Lessons Learned by State and Local Governments (U.S. General Accounting Office 1997)

The Meaning of Privatization (Starr 1988)

Comments & Questions