New Report Highlights Continued Growth of Privatization

Published December 1, 2004
18th Annual Privatization Report Covers Wide Range of Topics
The Reason Foundation’s recently released 18th Annual Privatization Report includes chapters on the following topics:
Federal Update
State Privatization Update
Public Safety
Education Trends
Philadelphia’s School Privatization Produces Student Achievement Gains
Water and Wastewater
Columbia Basin Water Transactions Program
The North American Blackout Report: A “More Rules” Solution
Human Resources
Outsourcing Human Resources Management
Tax and Spending Limits
A Taxpayer Bill of Rights (TABOR): Challenging the ‘Girly Men’ in Our
Offshore Outsourcing
Air Transportation
Surface Transportation
Competitive Participation in U.S. Public Transport: Special vs. the Public Interest
Privatizing Welfare Eligibility

The September 29 flight of SpaceShipOne blasted through any preconceived notions people may have had of what the private sector can do in a traditionally government-provided service, marking a new era for space travel and a new era for privatization.

SpaceShipOne became the world’s first privately funded and engineered space flight. The September 29 flight from the Mojave Desert in California marked the ship’s second flight into space in a week, winning investors the $10 million Ansari X Prize.

Banner Year for Privatization

A new report from the Los Angeles-based Reason Foundation shows 2004 has been a banner year for privatization at the state level. A slowing economy and fewer new revenues opened the doors to more privatization as governors and legislatures across the country either expanded current initiatives or created new ones.

The Council of State Governments (CSG) conducted a national survey of state government officials to identify recent privatization trends. That survey showed a continued increase in and reliance on privatization. In addition, nearly half of the respondents noted privatization is expected to continue to increase over the next five years. The major factors behind that projected increase in privatization activity include cost savings, a lack of expertise and personnel within government agencies, improved quality, and increased flexibility and speed of delivery.

In California, privatization and competition were centerpieces of Governor Arnold Schwarzenegger’s (R) California Performance Review (CPR), conducted over five months by 275 volunteers and released in July 2004. Beyond efforts to expand the use of privatization in local public schools (which failed and did not make it into the final budget), hundreds of recommendations were made in the CPR to subject services to competition and expand the use of public-private partnerships.

In addition, the review report also calls for the creation of a California Competitive Government Panel to assist state agencies in identifying opportunities to use competition and strategies for overcoming barriers to its application.

In Florida, Governor Jeb Bush (R) signed an executive order directing the state’s Department of Management Services to create a Center for Efficient Government authorized to conduct a statewide evaluation of Florida’s privatization efforts.

The new center also was directed to “identify opportunities for additional outsourcing initiatives, and oversee execution of future outsourcing projects.” Among its many duties and activities, the center has developed a centralized “gate process” to evaluate the best sources to use in delivering services. That process consists of a robust set of standards, templates, and guidelines and a transparent method of managing each stage of any outsourcing initiative.

Additional Initiatives on the Way

South Carolina Gov. Mark Sanford (R) also stepped into the privatization fray, promoting five projects in the last budget cycle. Although none of the five is guaranteed to be enacted, Sanford has put them in motion. In addition, the governor is reportedly considering a number of other such projects for the upcoming budget cycle and has entertained the concept of initiating a process similar to Florida’s.

It was the General Assembly that got into the privatization act in Virginia. This year’s legislative session saw many privatization-related bills passed, spearheaded by Delegate Chris Saxman (R-Staunton), who chairs the bipartisan cost-cutting caucus.

Perhaps the most noteworthy of the Virginia bills was HB 1043, the Competitive Government Act, which requires every state agency to analyze its workforce and identify competition opportunities.

Geoffrey F. Segal ([email protected]) is director of privatization and government reform studies at the Reason Foundation.

For more information …

The Reason Foundation’s 18th Annual Privatization Report is available online at