(Justin Sullivan/Getty Images)

Cash-strapped state and local governments are increasingly looking to privatization as a way to cut costs. But opponents, such as California Assemblyman Roger Dickinson, say state workers are more dedicated and get the job done better than outside contractors. Dickinson has introduced a bill to that effect, called a “Public Employees Bill of Rights.” We debate the costs and benefits of privatizing public services.

Guests:
Roger Dickinson, California assemblyman (D) representing the 9th District
Jon Ortiz, reporter, blogger and columnist covering state workers for the Sacramento Bee
Robert Smith, reporter for Planet Money
Donald Cohen, chair of In the Public Interest, a non-profit resource center
Adrian Moore, vice president of policy at the Reason Foundation, a free market think tank based in Los Angeles

  • tiggeroo02

    Oh ya, those state employee votes.

    Roger Dickinson intends
    to run for reelection in the newly-drawn 7th Assembly District, which has about 50 percent overlap with his old Assembly district,
    as well as with his old supervisorial district.
     

    Dickinson
    served on the Sacramento County Board of Supervisors from 1994 until
    being elected to the Assembly last November — a long time in the era of
    term limits in the state Legislature.

    The new 7th district also has some overlap with the 5th
    Assembly District, currently represented by 
    fellow freshman Assemblyman Richard Pan, D-Natomas.. Most importantly, it
    includes Pan’s home. For months, Sacramento political watchers have been
    speculating that Pan and Dickinson could face off in a Democratic
    primary.

     
     

  • Joe

    Because jobs for life and pension spiking isn’t enough…
    (This from a moderate Democrat).

    Is Mr. Dickinson getting or soliciting campaign donations from Unions representing state employees?

  • Frank

    This bill just seems tone deaf for the current political environment.  I support public employees, but with their wages and benefits under attack across the nation, a bill perceived as expanding their rights in other areas just seems to give ammunition to those who are attacking public unions

  • tiggeroo02

    Public service bargaining units are not unions.

    The members do not risk what legitimate union members (farmworkers, miners, factory workers, etc.) do when organizing against the power of capital.

    MOUs are approved in back-alley deals between the DPA, the legislature, and the well-financed executive directors of the public service bargaining units.

  • Rilke

    Privatization is theft of public assets by cronies of politicians, and these assets are sold for a fraction of their value and the result is that prices often double for whatever services were offered, while the parasitic cronies who took over give themselves huge salaries. Services rarely improve with privatization and frequently become worse while costs to government often increase. Just look at the private security complex, the private military contractors, etc.

  • Guest

    Using expensive public employees for government services will only aggravate our budget situation.  This will drive the need for higher taxes and cuts to much needed welfare programs.  If it is cheaper to use public employees then there really is no need for this bill.

  • Andersten1

    Private sector particpation in government services like water often accentuates efficiencies and innovations that govt simply can’t do. What’s lacking is honest translarent regulations to mandate the open kimono of full disclosure that is now available on the internet. Water is essentially a business with costs and fees that never match unless a comprehensive regulatory system exists. In california, water is a fighting issue that make lawyers rich. We need govt leadership to fix this liquid game.

  • Gil

    Bell California is a perfect example of how dedicated public employees are to the welfare of the comunity.  I think the recent fiasco in stockton is another perfect example.  Government does good work for smoe specific areas like adminitering public policy but managing business types of endeavors is not their best use.

  • Joe

    This is not all or nothing.  Some services can be better supplied by government, others by contractors.  This is how things are done in many areas of government.  Banning one or another will hamstring providing services, as well as negotiations with either unions or private companies.

    There needs to be flexibility in the system, which means the ban should not be approved.  There is such an enormous area in between this law and Colorado Springs, yet you’re ignoring it and the flexibility it brings…

  • Greg

    Like any private company working for another company the government needs to have contracts with penalties and incentives for private contractors. The contractor needs to know they will never get another government contact unless they do the job right.

    • Carol Douglass

      I agree with you. I wish that the public didn’t think that being a public/government employee means automatically that you are swimming in money and that when you retire you will continue to have a “generous,” “fat” retirement pension. When my daughter, a high school teacher, eventually retires, she will immediately be dropped into poverty, even though she pays a very large amount of her salary out each month to contribute to her retirement. She will not get social security, of course, and now there is a movement to halve the amount of social security the spouse will get when a teacher retires. Already, she makes barely enough to make ends meets, buys all her and her two children’s clothes at thrift stores, and has to worry constantly about unexpected expenses. Also, by the way, she pays nearly $500 a month for the family’s medical insurance, even though supposedly being a teacher means you get “great” benefits.
        I think people need to educate themselves in detail about how government employees really live.

      • Forget how public employees live. Let’s instead look at how often they quit and move to the private sector. The very low quit rate, compared to the private sector, is very strong evidence that public employees are in fact better off than private employees with similar skill sets.

        • Bradley Potts

           It seems you really don’t understand how the public employee compensation model works.  1) Generally speaking, the public employees take a major hit to their paychecks in exchange for the delayed benefits of their retirement packages.  This pretty much locks them into a permanent relationship w/ their state employers because if they leave, they’ll miss out on that for which they made 20% – 30% front-end salary sacrifices.  2) If the statistic you refer to has any basis in fact, then it doesn’t take into account all the people who are qualified and licensed teachers who’ve simply avoided taking a public education job in the 1st place.  3) I suspect your job-quitting statistic may have applied 1 or 2 years ago, but now that the cuts are actually happening, we will likely see a flood of public employees seeking private sector jobs — after all, that is what the Tea Baggers are aiming for, right?

          • Mat

            Your first point is evidence that public pensions should be replaced with generous 401(k) style plans so public employees don’t have to stay in a low paying job they hate just so they can get the retirement they earned.

          • CalifBeachbum

            Data from the U.S. Census Bureau similarly show that the average annual salary of a California state government employee was $53,958, nearly 32 percent greater than the average private sector worker ($40,991)…. Moreover, data from the Bureau of Economic Analysis illustrate that average state and local government compensation has been increasing at a faster rate than average private sector compensation over the past 30 years.

            Private sector workers tend to be more productive. As Cato Institute Director of Tax Policy Studies Chris Edwards notes in a recent paper, according to the U.S. Bureau of Labor Statistics (BLS) National Compensation Survey, private-sector employees worked an average of 2,050 hours in 2008, 12 percent more than the 1,825 hours worked by the average public-sector employee.

          • “Generally speaking, the public employees take a major hit to their paychecks in exchange for the delayed benefits of their retirement packages.  This pretty much locks them into a permanent relationship w/ their state employers because if they leave, they’ll miss out on that for which they made 20% – 30% front-end salary sacrifices.”

            That is a very good point which I had not considered. I don’t think it nullifies my point, but it does weaken the argument. I think your prediction is also a good predictor of which of us is right. If such deep cuts in pensions (and perhaps even more the fear of future cuts as “the promise is broken”) generate an exodus from the public to private sector, you will have been quite right. On the other hand, if the public sector retains its lower quit-rate, you were only pointing to a marginal effect. I look forward to seeing what happens.
            “If the statistic you refer to has any basis in fact, then it doesn’t take into account all the people who are qualified and licensed teachers who’ve simply avoided taking a public education job in the 1st place.”

            Of course. But then again, the reverse is also true. (people in the public sector who never joined the private sector) It’s not a perfect proof, but it is strong evidence not-withstanding your point above.

            “after all, that is what the Tea Baggers are aiming for, right?”

            I dunno. You’ll have to ask them.

  • Bradley Potts

    Hi Michael et al,

    Thank you for your show.

    It’s time for privatization advocates to be honest about this whole
    conversation of shrinking government by privatizing community assets.

    #1)  Basic economic theory makes it clear that economies of scale favor
    larger organizations and in this case that would be the government
    entity.  In real world examples, this is put to use in mergers and
    acquisitions and basic business growth models. 

    #2) Basic economic theory also makes it clear that the point of every
    business is to make a profit.  Because government entities are forbidden
    from making profits, excess monies are turned into employee benefits,
    improved infrastructure, or support other government systems that are
    operating at a loss.  In the privatized world, businesses meet their
    profit motive by squeezing employee benefits and certainly not by
    spreading other excess monies to other needy government agencies. 
    Private corps will  meet shareholder profit requirements by cutting
    costs

    #3) Responsiveness is critical to public entities because their jobs are
    called “public service jobs” and their jobs depend on serving the
    public, whereas the private corporations are economically motivated to
    keep profits up by limiting the costs of inefficient and non-productive
    public interface.

    #4) The general public will pay for services one way or another. 
    Schools are a great example.  When I was a kid, sports, art, and music
    were basic parts of our schooling, and now as a parent I confirm that
    those pieces are missing from my kid’s school and we have to pay
    extraordinary amounts for the kid to get these extracurricular
    activities.  We are paying much more in the private sector.

    #5) Municipal utilities generally don’t grow at the rate of growth in the
    consumer marketplace, so growing profits will only happen by cutting
    costs or cutting services.

  • Ajgilb

    People are upset with the lack of accountability for government employees. In the private sector you fail and you the company fails. In the public sector you fail and they raise taxes. Anyone who has opened a small business and had to get permits and alike will leave the experience thinking these people should be fired.Government workers need to be helpful, serve and they will be rewarded with the people’s support and respect.

    • Bradley Potts

      Right, you make a good point.  In the privatized model, the utility must be a monopoly, which means that failed companies leave the municipality without a service provider.  That means the municipality must scramble to find a new provider and renegotiate its contracts at a higher cost, similar to raising taxes.  Water is a critical subject because humans can only live about 3 days without it, so the municipally provided services implies far greater stability.

      • CalifBeachbum

        Brad, a monopoly is not true privatization, not even close. It is not much different than government in that they are not competitive and are regulated by government agencies. They have no real incentive to be either cost conscious or provide the best service for the customer. In this type of monopolistic environment costs and salaries are often excessive as compared to that in a truly competitive business.

        http://taxdollars.ocregister.com/2011/09/14/almost-70-of-water-workers-earned-100k/97282/

  • I can’t believe the gall of the congressman coming on the show and telling us this is about the fact that public employees are cheaper and more efficient. His bill is called a “Public Employee Bill of Rights”. This betrays the fact that his focus is on helping public employees, not saving money and providing services.

  • althink

    San Diego has introduced a managed competition method for outsourcing existing services done by city workers. Recently the practice was applied to street sweeping. City workers “won” the contract over private bids by proposing to reduce their staff and changing work rules. Clearly the out-sourcing process saved money but why had these savings not previously been implemented? Please comment.

    • CalifBeachbum

      Because the agenda of union-controlled politicians is to do whatever they can to increase the amount of tax revenue flowing into the government, and increase the amount of dues revenue flowing into the coffers of government worker unions.

  • Carol Douglass

    Very interesting show, as always. What I haven’t heard addressed so far is an issue that is at the heart of the Occupy movement, and the heart of public attitudes these days–and that is that while Colorado Springs, a very wealthy and conservative community, may very well be able to afford to pay for their own streetlights and lawn-mowing services, many if not most communities in this country would simply not be able to afford to pay for those services, or for any other of the services that our taxes are supposed to pay for. In other words, communities of less wealth–or no wealth to speak of–than Colorado Springs, or Beverly Hills or Brentwood or Pacific Heights would have greatly reduced services for roads, parks, safety, garbage pickup, you name it, if government were more privatized.
       It’s that sharing of taxes from both the poor and the wealthy that to a point evens out the public services between wealthy and medium and poor communities. I don’t understand why anyone thinks it is fair or reasonable to have services only if the people around you have enough money after eating, living, getting sick and so on to pay for those things. Isn’t that supposed to be a component of a democracy? I know the US thinks everything that helps people with less money than A Lot is tantamount to Communism, but at the same time people talk about “family values” and Christian beliefs. Frankly, I think the prevailing attitude in the US today is, “I’ve got mine, screw you.” Sorry to be crude, but that is how it seems.

    • Bradley Potts

       Right on, and well put.  Parents struggle with the concept of one’s place in a civilized community with their 12 year-olds.

      Sadly, we’ve lost the ideals and willingness to personally step up to the plate that the generation that ended the Great Depression and stopped the forces of fascism in WWII possessed.  Privatization is a critical step in achieving a fascistic state and without a crackpot like Hitler, the more refined New World Order marches us step-by-step backwards towards that very frightening reality.

  • Privatizers Suck!

    How can privatization advocation push their agenda in the face of so many high cost failures such as huge cost overruns in information technology, violations of prisoners’ rights by costly private prison operators, parking privatization fiascoes in Chicago, and Big Corporate Brother traffic light cameras in numerous cities around the country?  Because failure is big bucks for the corporate sector while we all pay. Arizona even sold its state capitol to Wall Street investors, then had to buy it back.

    • Tough Love

      You’ve got to be kidding.  The CA corrections system is the poster child of financial rape of the Taxpayers.  There is no more appropriate candidate for Privatization than CA corrections …. the savings would easily top 50% of current costs !

  • Privatizers Suck!

    Privatizers Suck!                                            How can privatization advocates push their agenda in the face of so many high cost failures such as huge cost overruns in information technology, violations of prisoners’ rights by costly private prison operators, parking privatization fiascoes in Chicago, and Big Corporate Brother traffic light cameras in numerous cities around the country? Because failure is big bucks for the corporate sector while we all pay. Arizona even sold its state capitol to Wall Street investors, then had to buy it back.

  • Maureen

    Michael, I suggest you consider a show about the “success story” cited by your guest, Adrian Moore. The Richmond Wastewater Treatment Plant was mismanaged by a private firm, Veolia Water, to the degree that raw sludge had to be trucked to EBMUD (a public utility) for over a year.

    The plant is understaffed, when alarms sounded to warn of dangerous H2S gas escaping from the plant, the alarms were simply removed; tears in the digester covers allowed dangerous gas to blanket an entire neighborhood for months before the BAAQMD finally shut down digester operations; and the private company denied, denied, denied.

    Mr. Moore should look for another example of “success”, as his current example now struggles to become fully operational after years of neglect, and guess what? It will cost ratepayers millions to bring the plant up to modern standards, all with a massive profit-generating markup.

  • Bradley Potts

    Here in Alameda, as in Palo Alto, we have a municipal power provider, and both communities are pretty darn happy with the arrangement.

    Let’s talk about the private utility provider PG&E:

    The report on the San Bruno fire disaster made it clear:  PG&E’s greed and improper and missing inspections caused the fire that killed about a dozen people, and destroyed a neighborhood.  Greed forced PG&E to cut corners on materials and construction methods.  Because it is a private corp, it was very easy to skip or fake inspections, and this too was better for profits.  Until PG&E  worked itself into a major PR failure, they denied culpability and stalled any compensation to the victims of the fire.

    Now, let’s recall the early 2000’s during the Enron and rolling blackout debacle.  Gray Davis tried unsuccessfully, and lost his job for it, to recover the ill-gotten and wildly inflated profits that PG&E the utility paid to its parent holding company in New England.  PG&E the utility is legally structured to operate as a nearly zero-profit corporation, so it accomplishes this by paying all of its profits to the holding company before taxes, and thereby avoids paying taxes back to the people who are its ratepayers.  Likewise, because the company “makes no profits,” it is entitled to charge ratepayers for maintenance, upgrades, improvements, and decommissioning of any and all of its power plants — think in excess of $1 Billion for each nuke plant and PG&E is short about $500 million for the complete cost of decommissioning at just Diablo Canyon alone, which will be borne by the ratepayers.

    This holding company arrangement makes it so that PG&E won’t be able to be sued for their misdeeds in San Bruno — their assets are limited and protected.  It also means that whenever the ratepayers need a new power plant, because PG&E already siphoned its considerable monopoly profits to its parent company, PG&E the utility is entitled to hand off the cost of building that new generation facility to the ratepayers — this is a classic “heads we win, tails you lose” scenario — PG&E can never be on the hook.  It has legally ensured profits and insulation from losses, with all the risk being passed on to the state and the ratepayers.

    Privatization sounds so good for business that I want to start my own water utility.  For that to happen, the State will have to hand over the hundreds of billions of $ worth of publicly owned water infrastructure assets and water rights to me.  If the State doesn’t like how I do business, then good luck, because I will own the infrastructure and no one will have a prayer of making a credible competing bid for the services my monopoly runs.  Likewise, because humans die from thirst in about 3 days, it’s not like the State can tell my water utility to take a hike, the State is forced to accept my utility’s terms, not the other way around.

    Privatization is a sweetheart deal that will outlive generations of real human beings, and the utility will be able to take advantage of (i.e., profit from) the Northern California vs. Southern California water rights troubles we now endure.  What a nightmare.  The increased costs, reduced quality of service, and lack of accountability make privatization an incredibly bad and irreversible idea.
     

    • CalifBeachbum

      The government compels people to pay taxes and provides only one option for services, whereas corporations must persuade consumers to voluntarily purchase their products if they want to stay in business. Private sector union members understand this difference quite well, because they live with the consequences if their company fails in the market.

      PG&E is not true privatization. In fact it isn’t much different than a state agency in that it is a monopoly w/ a guaranteed minimum rate return and no pressure to be competitive or efficient. They well know that whatever they do or charge they will get away with it. A real privatized service would be chosen from many agencies/companies vying for a contract in a competitive environment w/ no government mandates (unionization, `prevailing wag, etc.. If they fail to provide the proper service level, they lose their contract and possibly their business.

  • $5828885

    There’s more accountability as a state worker.  Procedure manuals are everywhere and heads will roll if need be.  Not so much in the private sector in my experience.  The low-bidder will make up for the low bid by cutting corners or overcharging when possible.  

    • CalifBeachbum

       Yeah, right… dedicated at pension spiking by stacking up sick pay and vacation time to cash in just before retirement, bogus injuries just prior to retirement to collect a `disability bonus’ and every other scam the union has `negotiated’ into your contract. And as far as firing a state worker… good luck w/ that… the union has made that near impossible.

    • Tough Love

      BS, the Private sector workers will do an equal quality job faster and with 1/2 to 2/3 of the total compensation, the saving primarily coming from reasonable pensions & benefits, NOT the grossly excessive ones paid ALL Civil Servants.

      • sniperboy

        Private contractors frequently under bid, over promise, under deliver, and over bill in my experience.

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