Cutback Management during the Great Recession

• Author: Suzanne M. Leland,Olga V. Smirnova
• Published date: 01 December 2014
• Date: 01 December 2014
• DOI: http://doi.org/10.1177/0160323X14564777
• Subject Matter: Articles

Article

Cutback Management during

the Great Recession:

The Case of Transit Agencies

and Contracting Out

Olga V. Smirnova

1

and Suzanne M. Leland

2

Abstract

The following study looks at both qualitative and quantitative data collected from surveys of transit

agency managers during and after the Great Recession to see if managers report changes in service

provision arrangements in response to fiscal pressure. We investigate whether contracting out

services is used as a method of cutback management. We find that the majority of agencies are

unable to respond to current economic situation by changing service arrangements because of

various and sometimes costly constraints such as state law, the level of competition in the bidding

process, and length of contracts.

Keywords

recession, contracting out, transit, fiscal constraints

Introduction

The 2007–2009 recession, deemed ‘‘the Great

Recession,’’

1

was the longest and deepest reces-

sion in the U.S. history since the World War II

(Bureau of LaborStatistics [BLS] 2012; Labonte

2010). It caused massive budget deficits at all

levels of government, but stateand local govern-

ments in particular were hit hard because of the

limitations on their ability to borrow for operat-

ing costs. Public bus service, operated by cities,

counties, and special purpose governments, was

no exception. Transit agencies, unlike other

local governments, depend more heavily on

sales taxes, federal and state allocations, and

user fees than the traditional property tax. Since

these revenue sources are more vulnerable to an

economic downturn than the property tax, the

expectation would be that public transit would

be hit even harder by the Great Recession.

Contracting out has long been viewed as a

cutback mechanism (Winston and Shirley

1998). Competition between private companies

should lead to cost savings (Savas 2005;

Brown, Potoski, and Slyke 2006), economies

of scale (Wassenaar, Groot, and Gradus

2013), and improve the quality of services for

government. Since contracting out is very com-

mon in the transit industry, it is logical that the

1

Department of Political Science, East Carolina University,

Greenville, NC, USA

2

Department of Political Science and Public Administra-

tion, University of North Carolina at Charlotte, Charlotte,

NC, USA

Corresponding Author:

Olga V. Smirnova, East Carolina University, 10 St. Brewster

A, Greenville, NC 27858, USA.

Email: smirnovao@ecu.edu

State and Local GovernmentReview

2014, Vol. 46(4) 272-281

ªThe Author(s) 2014

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DOI: 10.1177/0160323X14564777

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