State Departments Advised to Look for Opportunities to Privatize

The Corbett administration wants more government operations privatized to save money in the 2012-13 budget cycle.

This directive was included in budget guidelines the administration released in August to help departments prepare for next year’s budget. 

“If a product or service that state government is currently providing can be found in the Yellow Pages and can be done less expensively by the private sector, then the commonwealth should consider offering that product or service in a different manner,” reads a portion of the guidelines. 

Through the guidelines, the administration advises departments to assess responsibilities and functions with the goal of identifying potential opportunities for outsourcing and privatization. Gov. Tom Corbett also has formed a commission to study potential privatization opportunities, which will meet for the first time in a few weeks. 

Advocates of smaller government said the state should privatize some jobs in state prisons, health services and information technology, because buying those services from the private sector is more cost effective. 

“For a long time, state government has operated without asking very basic questions about what government should be doing,” said Matt Brouillette, president and CEO of the Commonwealth Foundation, a Harrisburg-based conservative think tank. “The governor is rightfully saying that we’re not raising taxes, so we have to look at efficiencies and how to get government out of what the private sector can do more efficiently.” 

Brouillette said privatization is only one form of outsourcing the administration could consider. Public-private partnerships, in which the state continues to own a service, but contracts with the private sector for the operation, is another option. 

Such an arrangement could be considered for state parks and mass transit systems, he said.

The Commonwealth Foundation released a guide on “Yellow Pages Government” earlier this year. 

Stephen Herzenberg, an economist with the Keystone Research Center, a Harrisburg-based liberal think tank, said privatization should be considered in situations where there are cost efficiencies in the private sector, and not simply to back up the philosophical positions of the Corbett administration. 

“We think they are on the right track when they are asking about cost-effectiveness,” Herzenberg said. “But contracting out is not an end to itself. The goal is having high quality public services that are cost effective.” 

Herzenberg said governments have been bringing more services in-house in recent years; a sign that savings through privatization are not assured. 

The major privatization issue facing the Corbett administration is the potential sale of the state liquor stores, being led by House Majority Leader Mike Turzai, R-Allegheny. However, the budget guidelines make no specific mention of the plan to privatize the state liquor system, and a separate Corbett-created commission is tackling that issue. 

When it comes to other services that could be privatized or outsourced, the administration is identifying what can be consolidated, leased or sold, said Dan Egan, spokesman for the state Office of Administration. 

"We want to make sure that we’re being thoughtful about it and not just flailing around,” Egan said. “Sometimes you have to have a higher viewpoint to see where various agencies or departments might be able to combine or eliminate services.” 

Egan acknowledged that privatization or consolidation of government operations would involve the displacement of some state employees. 

The Corbett administration also is instructing departments and agencies to eliminate vacant positions and fill essential jobs in the new budget guidelines. 

David Fillman, executive director of Council 13 of the American Federation of State, County and Municipal Employees, or AFSCME, which represents the majority of state government workers, said he was unaware of any specific plans to privatize state government operations, but the Corbett administration would have to present plans to the union before they could move ahead. 

“When the numbers start getting firmer, we want to sit down with them--which we will--to determine if there are services we can better provide,” Fillman said. 

The union contracts give the public employee unions the ability to limit or block certain potential changes that would affect state workers, he said.