A Hidden Side to New Jersey’s Privatization Push

By: - November 13, 2010 12:00 am

There has been a lot of talk of privatization in New Jersey since Republican Chris Christie became governor this year. Soon after taking office, Christie appointed a task force to study outsourcing opportunities for the state. Since that group issued its recommendations in May, the idea of using contractors to enforce building codes, collect highway tolls, run state parks and perform other key functions of state government has been the subject of a hot and healthy debate.

The point of airing out these ideas, Christie said in an executive order establishing the task force, was to subject privatization plans “to a fresh, candid and independent examination.” So it came as a surprise to many in New Jersey last month when one state agency, the Department of Environmental Protection, quietly moved to contract out sensitive government work that appeared nowhere in the task force’s report.

Without fanfare, the DEP issued a request for proposals (RFP) from contractors to take over parts of the state’s land-use permitting process. Critics say the DEP appeared ready to let a private sector company decide when developers can build near wetlands or other lands protected by state law — something that has never been tried in any state. DEP officials say those fears are overblown, and have vowed not to bring any contractors on board before the end of June.

The flap over the RFP has given Christie’s critics fodder for attacking his entire privatization agenda. It’s also raised questions about the process by which privatization happens. New Jersey is a state where unions have historically been powerful enough to thwart privatization. Now, Christie’s task force has put 40 programs up for consideration, and Democratic lawmakers have been surprised to learn that the executive branch can privatize many of them without legislative approval.

Counting on savings

In all, the task force said New Jersey could save more than million a year by contracting out services to the private sector. Christie didn’t waste any time in taking that money to the bank. New Jersey’s budget for the fiscal year ending next June 30 assumes million in savings from to-be-determined privatization initiatives.

Some of the task force’s ideas, such as contracting out for highway maintenance and automating toll collection, are starting to move forward. More movement is expected after the first of the year, when union agreements prohibiting layoffs expire.

Dick Zimmer, the former Congressman who chaired the privatization task force, says New Jersey should have no problem finding the assumed savings. “In the substantial majority of cases, the cabinet official can make the decision to initiate a program and can do it under existing authority,” Zimmer says. Most of the task force’s proposals can be implemented without legislation, he adds, although he’s heard rumblings from legislators who want to change this by adding barriers to privatization and requiring more legislative review.

Those barriers would be unlikely to become law for as long as Christie is in office. But legislators do have the power to call hearings, and that’s what they did when word about the DEP’s outsourcing plans got around.

At one such hearing last month, Deputy DEP Commissioner Irene Kropp said the division’s intention was not to outsource the entire land use permitting process. Rather, the agency was hoping to use the RFP to help evaluate its options for outsourcing various pieces of the process, based on the success of a decades-old program that uses private contractors for aspects of air pollution permitting. 

Larry Ragonese, chief spokesman for the agency, says that the RFP was intended as a way to prepare for the rush of development applications that could come with an economic recovery. The agency is down to 2,850 employees from 4,000 a decade ago and might not be able to deal with the crush of work that could come with a boom in development and related permitting applications. “When permit applications come in, they also could provide jobs,” he says. “We wouldn’t want to be sitting on them and hold things up for bureaucratic reasons and not process legitimate applications.”

Michael Catania finds that hard to believe. He is a former deputy commissioner of the Department of Environmental Protection who now serves as president of Conservation Resources, a nonprofit environmental organization. He says the RFP clearly paves the way for outsourcing the bulk of the land use decision process — rather than just certain administrative or technical aspects. If most of the process were outsourced, he says, it would be difficult for the DEP personnel who would have the final say to do anything other than rubber stamp the decisions made by the contractors familiar with the application.

“It is one thing to use contractors to take some of the pressure off of DEP staff,” Catania says. “It is quite another to have outside contractors handle the whole permitting process.”

Specifically, Catania is worried about potential conflicts of interest. “Can I be a consultant and issue land use permits in the morning and fill out applications for other companies in the afternoon?” he asks. That’s not something the RFP speaks to.”

A new enterprise?

Dick Zimmer agrees that oversight is important for privatization to work. Rather than leave that responsibility to the legislature, however, his task force proposed giving it to a new state enterprise similar to ones operating in Florida and Texas. The new government body would monitor privatization processes across departments, provide detailed analyses before contracting out any services and provide ongoing assessment of the results.  

Zimmer says he’s worried that this recommendation may be doomed. There is concern within the Christie administration that creating this new office, with new state employees, would fatten the very bureaucracy that privatization is meant to trim.

Task force member John Galandak takes the opposite view. “That would really be the safeguard against the blunders that the critics of privatization have long pointed to,” says Galandak, president of the Commerce and Industry Association of New Jersey. “Those positions pay for themselves many times over.”



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Melissa Maynard

Melissa Maynard oversees the Pew state fiscal health project’s Fiscal 50 online resource, which helps policymakers understand fiscal, economic, and demographic trends affecting their states by tracking tax revenue, reserves, employment rates, Medicaid spending, and other issues important to long-term fiscal health.