Questions to Ask Before Privatizing Government Functions: A “Good Government” Checklist

Saturday, June 4, 2011 at 1:12 AM by

Governor Walker has proposed a number of initiatives to privatize government functions or to make it easier to do so. One of those proposals, privatization of much of the “income maintenance” system for handling BadgerCare and Food Share applications and renewals, has suffered a couple of significant setbacks in recent weeks — most recently in the June 2nd Audit Bureau report.  However, those obstacles may only be small speed bumps in the Walker Administration’s efforts to downsize government by turning over more government functions to the private sector.

Since privatization is likely to be an ongoing topic of debate in Wisconsin in the next year or two, we thought it would be useful to share a list of 10 basic questions developed by In the Public Interest (ITPI) to help policymakers, the public and the media debate privatization proposals.

Wisconsin doesn’t have an especially large public sector. In fact, as a recently-updated Budget Project paper indicates, only seven other states have fewer public sector employees relative to the size of the state population. Nevertheless, Governor Walker seems to be intent upon further reducing the size of government and turning over a number of government functions to the private sector.

In the Public Interest suggests that public officials, advocates and the media ask the following ten simple questions – and get the answers – before any final decision on privatization. It’s a test to see if these deals will help, or hurt, the public interest:

1. Does the contract limit our democratic rights? — “Non-compete” clauses and so-called “compensation clauses” in contracts limit or eliminate our ability — for decades – to make public decisions to improve our cities, our transportation systems and many other public services.

2. Will we still have the right to know?  We often lose the right to know important details about public services when private contractors take over.

3. Are there perverse incentives that could work against our public policy goals? For example, prison contracts are based on the number of full prison beds. So more people in prison is good for business – but may not be good for society.

4. How will we hold the contractors accountable to the public? When public agencies don’t have enough staff to regularly monitor the contracts, the public loses.

5. Do we have a Plan B? Cancelled contracts (from poor service, bankruptcies, etc.) can cost taxpayers millions and then they have to re-create an in-house team with experience and expertise.

6. Will all the outsourced jobs have health care benefits?  Privatization proponents frequently promise cost savings that come from turning jobs with health benefits into ones that don’t have health care. That’s irresponsible and simply shifts costs to someone else – usually the taxpayers.

7. If a private company thinks they can make money owning our parking lots, why can’t we? 
Desperate for cash, cities and states are selling off assets and programs (i.e. parking lots, recycling) that are actually money makers.

8. What are the limits on the private contractor’s ability to raise fees, tolls or rates?  Public officials think that they don’t get blamed when the private contractor raises rates. They’re wrong.

9. 50 years? 75 years? You’re kidding?  A lot could change in 50 years – from where we live and work, to how much we drive and much more. Beware of financial projections that predict an unknowable future.

10. Have you read the contract? (the devil is always in the details)  Contracts often have provisions that impact things we all care about – from environmental protection to neighborhood services and everything in between. Take the time and read the contract because once it’s signed, it’s too late to change.

ITPI’s Guide to Evaluating Asset Privatization gives a much more detailed list of questions to ask before selling off our road, bridge, parking lots or government buildings. In coming months, ITPI will produce a similar guide for evaluating proposals to privatize public services.

To follow privatization issues in our state, see ITPI’s Wisconsin webpage.

Jon Peacock

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