Rendell Should Use Privatization Solution

by Paul Kengor

From the Pittsburgh Post-Gazette ~ January 17, 2003

             Democrat Ed Rendell is about to be inaugurated as governor of Pennsylvania. During the campaign, Rendell promised he would be the kind of governor that both Democrats and Republicans would like. Here’s a way for him to show that he’ll be a governor who focuses on solutions, and it’s fully consistent with his track record in Philadelphia and with good government generally: privatization.

            Privatization occurs when a government service is turned over to a private entity, typically a company or a non-profit organization. Most privatization involves management, not overall ownership of a service or asset. For example, prison privatization in Pennsylvania means that a private management group or company is contracted to run a prison, but is not awarded ownership.

            Studies find that the average savings from privatization – savings mean less subsidization by taxpayers – range from 20-50%. Privatization usually works because private entities specialize in management and also compete everyday against others. This forces them to continually strive for maximum efficiency.

            Privatization has historically been viewed as a conservative Republican idea. To be sure, conservatives wholeheartedly embrace it. In recent years, however, some of the biggest practitioners of privatization have been big city Democrats like Richard Daley of Chicago and Michael White of Cleveland. In a way, that’s not a surprise: American cities, long the stranglehold of Democratic politicians, long bloated and debt ridden, are a target-rich environment for slashing government and turning many of its functions over to the private sector. Philadelphia was no exception.

            When Rendell became mayor of Philadelphia in 1992, he inherited a fiscal disaster, painfully underscored by a $200-million deficit and a bond rating lowered to junk status. Within five years of his mayorship the deficit became a surplus. A sizable chunk of the savings came from privatization.

Rendell privatized 49 services, generating $275 million in savings. The list is impressive, from privatized golf courses and print shops to parking garages and prison services. He looked everywhere. The Mann Music Center. The Betsy Ross House. Sludge hauling and disposal. Towing of stolen vehicles. Automobile claims. Readings of automatic water meters. Art museum maintenance and custodial services. At Fairmont Park, there was the trolley, turf maintenance, the equestrian center, and historical houses. He privatized case management at the Office of Emergency Shelter and Services.

Some of the savings were huge. Philadelphia saved $26.6 million solely through privatization of the Philadelphia nursing home – a 54% cost reduction.

This was innovative. It was Independence Day for the City of Philadelphia.

            While nowhere near as bad as Philadelphia, the state of Pennsylvania is involved in many things that should be turned over to the private sector. The state could use a dose of this new version of Philadelphia freedom.

            Rendell is just the person to administer it. He has a Nixon-goes-to-China credibility on the issue. Only Nixon the commie-hater could shake the hands of the Chinese in 1972. Had George McGovern done so, he would have been dubbed a pinko. Likewise, only a Democrat like Rendell can challenge the alliance between the state’s powerful public-sector unions and the Democratic Party. Any large-scale privatization will need to be carried out by a Democrat like Rendell. He can bring along Democrats in a way that a Republican governor could not.

            What could be privatized in the state of Pennsylvania?

            I was asked that question a few years back by a group in the Ridge administration that was looking for options. Here are just a few ideas -- some are minor, some aren’t, but they all add up:

            When it comes to Pennsylvania’s roads, a variety of functions could be delegated to private providers, such as paving, patching, maintenance, sweeping, line painting. The design, installation, and repair of streetlights could be contracted, as could bridge painting. Tollbooths on the turnpike might be an option. There are also non-educational services at a number of state schools that could be privatized. A fine example that already took place is food service at the Thaddeus Stevens School of Technology, which generated not just better food by $540,000 in savings over five years, a 25% cost reduction. There are four state veterans’ homes that are replete with internal services that could be privatized. The state owns endless buildings, within which a number of services could be contracted out, from custodial service to cafeteria service to microfilming to printing and copying to even outright management of the buildings themselves.

            One no-brainer for privatization is the 757 liquor stores owned and operated by the state of Pennsylvania. There is no reason that the state needs to be in the business of selling alcohol to its citizens. These stores should be privatized.

            Rendell knows what to do. As in Philadelphia, he needs to initially work behind-the-scenes, assembling a few individuals to comprehensively examine what the state owns and operates. He then needs to ask the critical question: Does the Commonwealth of Pennsylvania really need to be doing this? Beyond that, he must then consider alternative providers in the private sector.

            Rendell also knows that the unions will resist him all the way. He has been there before.

The state has a rare opportunity in Rendell, which it didn’t have in Ridge: a Democratic governor who has more direct experience in privatization than almost any other government official in the country. He can make a major difference in Pennsylvania government – a rightsizing revolution.

    Paul Kengor is associate professor of political science at Grove City College. He is also president of the Shenango Institute for Public Policy. His forthcoming book is Reagan, God, and the Evil Empire.