Reason Foundation

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http://www.reason.org/news/show/kansas-privatization-study

Reason Foundation

Kansas Policy Institute & Reason Foundation

Better Service. Better Price.

How privatization can streamline government, improve services, and reduce costs for Kansas taxpayers

Leonard Gilroy, Harris Kenny and Todd Davidson
January 28, 2013

In May 2012, Kansas Governor Sam Brownback signed a historic tax reform package into law that lowered income tax rates across the board, increased tax deductions and exemptions, and enacted other changes that, in total, create a more competitive tax environment in the state as a result. Kansas will be better positioned amongst its peers in terms of economic growth and job creation.

Section one explains the fiscal impact of these tax reforms. One analysis finds a one-time spending reduction of approximately 8.5 percent, or just over $500 million, is all that is needed for implementation. Another analysis finds that short-term cuts will need to approach $700 million.

Both studies agree that policymakers will need to find near-term savings in the budget. Finding savings becomes manageable when one considers that government spending has increased dramatically in Kansas in recent years. For example, from 2003 to 2012 general fund spending increased nearly $2 billion, or 48 percent. Prior to recent spending hikes core functions of government were provided at much lower levels of spending. In this study, Kansas Policy Institute and Reason Foundation provide a range of possible reforms, namely public- private partnerships and privatization, for Kansas’ policymakers to consider.

Section two outlines policy tools, such as contracting, franchising and divesting. It then outlines potential benefits of these policy tools, including lower costs, improved service quality, enhanced risk management, innovation, accommodating fluctuating peak demand, timeliness, and access to outside expertise. It goes on to explain where these benefits can be leveraged across a broad range of policy areas in state and local government and highlights recent success stories across the United States.

Section three provides specific opportunities by policy area, including non-instructional K-12 services, parks operations and maintenance, solid waste collection, real property inventory management, correctional services, infrastructure, roads, K-12 infrastructure, parking infrastructure and asset management, water and wastewater, public buildings infrastructure, facility and grounds maintenance, and higher education facilities and services. The opportunities proposed throughout this section include corresponding case studies.

Section four details lessons learned from public-private partnership and privatization reforms. Privatization is a powerful tool, but implementing it in practice—taking potential opportunities from concept through to contract—is neither easy nor linear. Best practices demonstrate that there is no standard “cookie cutter” approach, as every context is unique, and the tool itself is, by design, malleable and can be adapted to specific circumstances. Decades of successful privatization experiences have shown that, when implemented properly with transparency, accountability and with the delivery of high-performance services in mind, the likelihood of achieving success is greatly enhanced. Finally, it’s important to differentiate myths and facts when considering public-private partnerships and privatization, which are amorphous concepts that can often be misunderstood.

Kansas policymakers, like their peers around the U.S., must confront the “new normal” in governance, one based on a constrained fiscal environment with looming cost increases and challenges in areas like healthcare and pensions. Meanwhile taxpayers want government to deliver better service at a better price.

While not a panacea, these tools are being used at all levels of government to improve public service delivery and reduce costs by driving greater efficiency. With proper attention to best practices, due diligence, and case studies in implementation, policymakers can use privatization as a powerful way to streamline government, improve services, and lower costs for taxpayers.


Leonard Gilroy is Director of Government Reform

Harris Kenny is Policy Analyst

Todd Davidson is Fiscal Policy Analyst

This Study's Materials


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