Our Jobs are at Stake

The privatization of public services is the most significant threat to the job security of public employees. The State’s increasing use of private contractors to perform public services puts our jobs in jeopardy and limits promotional opportunities for our members. The privatization of public services undermines organized labor and can result in jobs without health, pension and other benefits.

 

The Privatization of Public Services Has Increased Drastically and this Trend is Expected to Continue

The privatization of public services is a phenomenon that has confronted public employees in all jurisdictions and at all levels of government for decades. Beginning with the tax revolts of the late 1970’s and the subsequent election of Ronald Reagan as President in 1980, public opinion became more anti-government and anti-public employee. Federal support for public programs declined, and state and local governments found themselves with significant responsibilities, but fewer dollars to pay for them. At the same time federal support for public services was being severely curtailed out of Washington D.C., anti-government advocates used the deteriorating fiscal condition in many jurisdictions to push their agenda for privatization.

In the last two decades, public employers have expanded their use of the private sector to deliver public services, as well as to finance, operate and manage various public responsibilities. And, the political and economic circumstances at all levels of government have improved the climate for privatization efforts and worsened the long-term outlook for the public sector.

 

Services Once Viewed as the Sole Responsibility of Government are Now Subject to Privatization

Private firms have made in-roads in delivering services once viewed without question as the sole responsibility of the public sector. Criminal justice services (including the operation and management of prisons and jails), police protection and health care services to mentally disabled citizens are services now being provided throughout the country by private vendors. Even public education has come under fire as conservatives promote voucher systems and unrestricted "choice" schemes in order to create new incentives for expanded private involvement in elementary and secondary education. The lure of lucrative contracts and high profits continue to attract private industry to compete for our jobs at every level of government.

The trend of increasing the privatization of public services can be seen at all levels of government. Privatization initiatives by the federal government have included the sale of Conrail and the National Consumer Cooperative Bank. Local municipalities have increasingly privatized refuse collection, vehicle towing and storage, street maintenance, transportation and health care. State agencies involved with health services, mental health, corrections, higher education and Medicaid are increasingly privatizing the provision of their services.

A recent study by the Council on State Governments (CSG) revealed that 91.7 % of respondents from state legislative service agencies believe that privatization activities will increase in the next five years.

Unfortunately, our members are not exempt from this trend. To the contrary, Governor Pataki, on his very first day in office, issued an executive order mandating a hiring freeze upon all state agencies. The intention is not necessarily to cut services but to transfer the provision of services to the private sector. To further this goal, in a later executive order, Governor Pataki established a commission to study the feasibility of the privatization of government assets and services. The administration explicitly stated its position that "it is imperative that this State reduce the size of its government" and rely on the private sector to both decrease the cost of the services delivered by government and improve the quality of those services.

 

Expected Cost Savings from Privatization are Seldom Realized

While decreased costs are used to justify the privatization of public work, the reality is that decisions are often made to privatize government services without analyzing the comparative costs of performing the service in-house. The CSG study determined that overall, states initiate privatization projects without standard decision-making, monitoring or evaluation processes.

Here in New York, State Comptroller Carl McCall recently issued a report criticizing the Department of Transportation (DOT) for failing to demonstrate that its widespread use of consultant engineers had provided services in a cost effective manner. Comptroller McCall concluded that DOT had not justified its decision to privatize certain projects rather than perform the projects with in-house staff.

When contracts are evaluated for their cost savings, often times costs associated with supervising and auditing the contract are not included in the analysis. In addition, cost overruns are often not considered. For this reason, a public sector union in New Jersey has criticized the Whitman administration for misleading taxpayers on the cost-saving merits of privatization. Because private contractors underbid projects and tack on costs later, the union is demanding that the state provide information revealing what projects had been bid for initially, and what they actually cost later with overruns.

Studies reveal that expected cost savings from privatization are generally not realized. According to a recent Gartner Group poll, the benefits of outsourcing have consistently failed to meet the expectations of the government and private sector officials, and significant cost reduction was seen by less than a quarter of those surveyed.

 

Decisions to Privatize are often based on Politics, not Careful Analysis

Decisions to privatize are often based on politics and rhetoric, not a careful analysis of whether moving the service to the private sector will result in a real benefit. The increased support of the political leadership was given as the second most important reason for the increase in privatization in the CGS poll of state officials.

Because the support of the political leadership is a crucial factor in the increase in privatization, our successful fight against privatization will require that we arm ourselves with facts to show that assumptions about cost savings are not accurate and that we use our political strength to influence decision makers at the highest levels.