July | August 2017





CSG Seeks State Input for Privatization Study

By Alex Combs, Katherine Meade and Kimberly Mills, CSG Research Assistants
Privatization has long held a prominent place in state governments as a viable management decision. States have been exploring or implementing new privatization initiatives every year for more than a decade.
West Virginia, for instance, is considering using private firms to complete construction of a major highway project. Indiana recently voted to use an outside third-party insurer to administer annuity payments for its public retirement system. And Florida has heavily privatized its corrections services.
Still, privatization continues to be highly controversial among elected leaders, civil servants and the public at large. Although only a relatively small share of state agency services have been privatized—about 5 percent in most cases as of 2003—the transfer of public goods and services to the private sector represents a fundamental debate concerning the role of government versus the private sector. This debate is unlikely to be settled soon.
A broad conclusion about whether privatization should be a strategy states employ more in the future also is unlikely. There are many variables involved in such a decision, many of which differ among states, leading to varying degrees of success, diverse experiences and mixed results.
“The recent trends in reducing or increasing the private prison corporations comes from the states gaining experience in contracts, some expanded and some contracted,” said Gerry Gaes, former director of research for the Bureau of Prisons. “That experience and the lowered level of prisoners have decreased many states’ usage (of privatization).”
The Council of State Governments is once again exploring states’ use of privatization and its effects as well as the factors that change them. This study will explore:
  • Changes in state privatization trends during the past five to10 years;
  • The prevailing reasons for privatization, and the procedures and/or mechanisms in place to manage decisions;
  • Analysis of whether the initiatives achieved their intended goals, such as cost savings;
  • Common state practices that lead to success; and
  • Unintended consequences.
CSG is asking state officials to spend 10-15 minutes of their time to complete a survey to help provide a better understanding of privatization. This survey is an update and expansion to one used in 2003—the last time CSG conducted a study on privatization. CSG will send the survey to several departments and agencies in each state in the next few weeks.
The information will be integral in providing state governments a more complete understanding of trends, the effects of and best practices in privatization. For more information or to make comments about this study, please contact Kimberly Mills at (859) 244-8255 or kmills@csg.org.



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