Restructuring State and Local Services: Ideas, Proposals, and Experiments.

• Author: Guajardo, Salomon
• Position: Review

Raphaelson, Arnold, H., editor. Westport, Connecticut: Praeger Publishers, 1998. (154 pp)

Reviewed by Salomon Guajardo, Ph. D., Manager of Public Policy and Research, GFOA Research Center.

Privatizing state and local government services in the United States is not new. Historically, government privatization efforts have transferred the management and operation of core services (e.g., refuse collection, street cleaning) to either private or non-profit providers. In recent years, government privatization efforts have attempted to transfer administrative functions (e.g., collection of delinquent real estate taxes) and social services (e.g., education and health) to private and nonprofit providers.

Restructuring State and Local Services provides a comprehensive look at the privatization of state and local government. The book's critical chapters are 6, 7, and 8. In Chapter 6, Philip K. Porter and James F. Dewey discuss privatization theory and the incentive structure that private firms have in producing efficient and effective services. Porter and Dewey assert that the private enterprises outperform public agencies because private enterprises have direct control of inputs and only need to monitor production costs. In order to survive, private firms must continuously improve efficiency and reduce costs. By contrast, the authors suggest that, government enterprises are socially owned and have a different incentive structure which provides opportunities for organizational inefficiency, low workforce productivity, and costly service delivery. To provide services more efficiently to state and local residents, Porter and Dewey recommend the privatization of public services that have the greatest opportunity to succeed.

E. S. Savas states in Chapter 7 that privatization is the surest and most lasting way to reduce government budget deficits and boost government productivity. Savas suggests that state and local governments rely on a "prudent" privatization strategy - one that relies on private and nonprofit enterprises, market forces, and competition for providing services to taxpayers. Savas suggests that "prudent" privatization is achieved through competitive contracting and franchises, vouchers, asset sales, withdrawing for commercial activities, and regulating private firms so that they can compete with public agencies. According to Savas...