Report Touts Privatization Momentum

By: - April 26, 2012 12:00 am

A new report from the Reason Foundation finds that state governments are increasingly using private contractors to help provide state services as a way to deal with budget shortfalls. The libertarian think tank, which often advises state and local governments on privatization, provides a behind-the-scenes glimpse into these initiatives at various stages of development and implementation.                                                                  

The areas for which states are considering private contracts vary widely, ranging from lotteries and liquor sales to child welfare and other social services. Some of the proposals discussed seem unlikely to happen in the near future, while others are quietly being put into place in multiple states through legislative and sometimes gubernatorial action.

The report says that an increasing number of states, including Utah, Arizona, California and Hawaii, are looking seriously at privatizing their cash-strapped state parks to varying degrees, from handing over the facilities to private operators to allowing private companies to sell food or offer particular amenities. “In budget battles, parks are the perennial loser,” says Leonard Gilroy, one of the report’s authors and director of government reform at Reason. “It strengthens the argument and says, ‘hey, look, the alternative here is closure.'”

In California, where 70 state parks are scheduled to be closed, the state agency that oversees the state’s parks has issued a request for proposals (RFP) for a five-year concession contract to operate five camping and recreational areas at Valley State Parks. The move was authorized by a bill signed into law in October.

Gilroy says the United States Forest Service has successfully used this concession arrangement for more than 25 years, but the California proposal would be the first of its kind at the state level. Responses to the RFP are due May 1. The push to privatize state parks in California as given a boost in early March when the concept was endorsed by the nonpartisan Legislative Analyst’s Office.

Among the report’s other findings:

  • Connecticut and Texas enacted broad statutes authorizing public-private partnerships in infrastructure projects.
  • Illinois contracted out its state lottery operations, which is expected to generate $1 billion in additional state revenues over the next five years. Policy makers in California, New Jersey and Ohio are considering similar moves.
  • Washington became the first state since the end of Prohibition in 1932 to fully privatize the sale and distribution of liquor. Voters approved a ballot initiative in November that will take effect on June 1. Pennsylvania and Virginia are looking at similar proposals.

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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.