The concept of privatization is relatively simple: a shifting of a government-provided service or aspects of it to a private business subject to the rigors of a competitive marketplace. In many cases, similar services are already being provided more efficiently in the private sector.
Privatization is an important option for state and local governments facing massive budget deficits. Privatization has been successful in streamlining government services, reducing costs, and creating more private-sector jobs. State and local governments across the country already have privatized thousands of services and have successfully made government services more effective and efficient.
A study by the Reason Foundation found privatization typically brings a cost savings of 20 to 50 percent. It can help remedy deficits while preventing deeper service cuts or tax hikes, providing better-quality services at a lower cost.
The Heartland Institute’s “Ten Principles of Privatization” cautions that “privatization is just a policy tool—a means of accomplishing a goal in changing services from public to private. Like any tool, you get the right result if you use it the right way. If badly conceived, structured, or executed, privatization can fail, like any other policy, with great cost to the taxpayers.”
State and local government officials should seriously consider privatization as part of the solution to their fiscal problems and to make existing services more efficient.
For more information, read The Heartland Institute's Ten Principles of Privatization (PDF).