Employment Policy Research Network: Fuzzy Privatization Math

March 14, 2011- On May 31, 2010, Governor Chris Christie’s New Jersey Privatization Task Force reported that more than $210 million would be saved by privatizing work that had traditionally been performed by government workers. The report even set out specific figures for some of the cost savings it identified, while others said savings were “TBD” – “To Be Decided”.

Who crunched the numbers to show that private contractors would do a better job or at least the same job for less money than public employees? The Privatization Task Force Report says that no one did. On page 14 the report says it did no analysis “due not only to the fact that the actual cost of a privatized alternative will often not be known until the end of a full fledged competitive bidding process, but also because New Jersey state government agencies have difficulty calculating with precision the full cost of functions currently performed at the state level.” So, the sunny claims of big savings for the people of New Jersey are a guestimate, at best. and “To Be Decided” is the most accurate statement in the report.

Some people take it on faith that the private sector always does a better job for less money than government. But the most of us deciding how to provide public service is not a matter of ideology, not a team sport. We just want to solve our federal, state, and local budget problems and provide good quality services. So, for most of us, it will come as a surprise that in many cases no effort is made to show whether a private company can do government work as well as public employees.

Privatizers have often advocated using the “Yellow Pages” test – if work the government does can be found in the Yellow Pages, they claim it can be privatized. But it’s not that simple.

Just because a government and private service sound similar does not mean they are the same. Take elementary and secondary education. There are private and public schools, so private school tuition could be compared to per student costs at public schools. But the services provided by public and private schools are not the same, and those differences allow private schools to provide less expensive education, not that they all do.

The most important difference is that private schools can cherry pick, because they can chose which students to accept or reject. But, by law, public schools must accept and educate all children. Educating the next generation is of critical importance to a democracy, and achieving that goal is imposed on public – but not private – schools. That includes children whose education is very expensive, including children with disabilities and other serious problems.

If there were no public schools to ensure that all children are provided an education, we all would be the poorer for it. And when children attend private schools, public schools have less money to meet their obligations to educate all children.

So even though the yellow pages test sounds reasonable at first glance, it fails to take into account important differences between public and private services.


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