LWVUS Study
LWVDenver Presentation
2012
www.lwv.org/member-resources/privatization
Concepts
John Maynard Keynes,
Milton Friedman, Nobel Prize
in Economics, 1971
“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
Purpose of Study
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.
Scope of Privatization Study
 The 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
Concepts
 Privatization: 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 Privatization
 Classic
 Total transfer of assets and authority from the
government sector to the for profit or nonprofit sector
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Purposes: Shrink government; Reduce risk and cost
Reason: Often a response to economic downturn; Ideology
Definition of Privatization
 Modified
 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)
Definition
 Deregulation
…the lessening of regulatory provisions
that govern individuals, entities, and
systems.
Definitions
 Decentralization
Moving the authority for a function from
a central agency to an agency closest to
where the activity is actually
performed.
Privatizing Actions
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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,
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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
Summary
 For 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
History
 Shift from central control to less central control – late
1960s/early 1970s
 End of “regulatory capitalism” (Yergin 1998, 8) –
regulatory backlash
 Reducing the size of government
 Revitalizing entrepreneurial spirit
 Restoring influence of market forces
 Reducing taxes
Recent Examples of
Privatization or Suggestions to
Privatize
 Social Security
 Parks
 Medicare
 Court services
 Student loans
 Free Trade
 Military service
 Eliminate food safety
 Highways, roads, and
 Eliminate environmental
bridges
 Corrections
 Education
 Libraries
safety
 Establish a flat tax
 Eliminate 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 Entities
 Part of state
 Geographic boundaries
 Public action
 Public welfare
 Public as beneficiaries
 Public accountability
 Base on certain principles: e.g., Equality, Security,
Fairness, Safety
Attributes Attached to Private
(nonprofit and for profit)
Entities
 Part of the economy
 No boundaries except those self imposed
 Private action/Operated by individuals
 Individual freedom
 Privately held assets
 Benefits individuals
What should the government do?
 Public Safety
 Defense
 Justice
 Protect public health/environment
 Education
 Ensure democracy
 Other?
Does government have to do these things
itself?
What is the balance between government,
business, and civil society?
How can the balance best be fostered?
The public agenda of privatization requires a
close examination of the proper relationship
between government, business and civil society.
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 - LWVUS
 Consensus Questions – Introduction
 Strategies for Best Practice
 State Level Privatization 2011
 Privatization: The Public Policy Debate
 The Legal Framework of Transparency and
Accountability within the Context of Privatization
Reading List - LWVUS
 Deregulation of Railroads
 Privatization of a Publicly Owned Waste Water
Treatment Plant
 Subcontracting Public Education
 Privatization 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