2002 NLPES-Fall Training Conference Notes
Privatization: Where Are We Now? Saturday, September 21, 2002
This session presented information on the recent history and trends
in the privatization of government functions in four states: Florida, Colorado,
Kansas, and Mississippi. The session was introduced and moderated by James
Barber of Mississippi and included presentations by panelists from the
legislative performance evaluation or auditing entities in the four states.
Introduction - The value of government contracts with private
organizations is up 65% since 1996 and is estimated to total $400 billion
in 2001. In a recent survey within government, researchers found positive
perceptions of privatization efforts with respondents believing it results
in: 1) cost savings, 2) less red tape, and, 3) higher quality of service.
Florida - A 1998 senate study found 30% of appropriations were
used for contracting services with private organizations. The following
functions are high users of private services: transportation, highway design
and maintenance, and welfare and prisons. Gary VanLandingham, the presenter
from Florida, pointed out the potential benefits of privatization, which
include:
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Cost savings
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Gaining special expertise
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Handling workload peaks
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Shifting start-up costs through lease-purchase agreements.
The potential risks include:
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Accountability concerns and access to records
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Tendency for contractors to want "the easy cases," for example, in prisons
or healthcare
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Costs can actually end up higher due to government not knowing its actual
cost for comparison purposes.
The solutions to these potential risks can be handled through good contract
development.
Mr. VanLandingham believes auditors need to advise policy makers on
whether it is appropriate to privatize the service, whether privatization
will save money or improve service, and whether it worked. He also cautioned
that our own audit functions could be targets for privatization, so we
need good measures of cost and performance for our organizations.
Colorado - Heather Moritz of Colorado described the climate for
privatization as "cool" in Colorado. The state has a very specific civil
service provision in its constitution that has had the effect of preventing
privatization if it causes a permanent civil service employee to lose a
position. Thus, it has been easier in Colorado to privatize new or expansion
functions. The Office of the Auditor published a report in 1991 on how
to assess whether to privatize a function. Colorado has had some successes
in privatization-as well as a near riot in the prison system when a new
prison contracted with a private organization for food service.
Kansas - Leo Hafner reported that Kansas has come 'full-circle'
in its approach to privatization; from an ad hoc basis to systematic privatization
efforts, and back to an ad hoc approach. Kansas has privatized many major
government functions including financial audits, prison programs such as
inmate healthcare, education, and food services; and many functions out
of the Social and Rehabilitative Services agency, including foster care,
adoptions, and family preservation services. The weights and measures function
and child support collection are also privatized, as well as three major
transportation functions. The Kansas Legislative Division of Post Audit
has confronted major challenges in past audits of privatized functions,
especially in obtaining access to information and records. Currently, Kansas
is still favorable to privatization, but proceeds with more caution than
in prior years.
Mississippi - Results have been mixed in privatizing government
functions in Mississippi. Larry Whiting reported that many transportation
and food service functions have been privatized for a long time. In the
1990s, Mississippi had a Republican Governor and Lieutenant Governor for
the first time in 100 years, and they began an effort to identify a potential
pool of functions for privatization. In 1992, a report to the Legislature
identified 93 programs and 22 services that could be privatized, at a value
of $946 million in operating costs. Not long after, a Gubernatorial Executive
Order mandated the privatization of child support enforcement. The legislature
approved a test program in two counties, and found the state operation
cost to be less than that of the contractor, Maximus. There is legislative
interest in the privatization of prisons as Mississippi is under court
order for overcrowding. However, a study to arrive at accurate figures
for current inmate cost per day was done prior to a privatization effort.
 2002
Fall Training Conference Notes
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