Privatizing Public Services Doesn't Work

Outsourcing public services is in the interest of contractors, not taxpayers

Privatization of public services has been a trend in government for a couple decades. It was hatched as a Republican concept, but because it enables graft and does little to limit legislative spending powers, it soon caught on among Democrats as well.

Nashville's Corrections Corporation of America was an early adopter of the public-teat business model. They build and manage prisons, meaning governments are their only client. Gov. Haslam recently revived a CCA prison in Whiteville that his predecessor Phil Bredesen had scheduled for closure, and he has refused to release documents pertaining to negotiations of the $31 million-a-year contract.

This mockery of Haslam's professed support for open government also reveals a flaw in the theory that private firms are more efficient than public agencies: CCA has little competition and little pressure to deliver savings to governments.

When private firms get government contracts the result is rising costs, drops in quality of service, and an erosion of civil rights. Private operators do find savings, but they keep them as profit or pass them along to governors, senators, and other politicians as campaign donations and lobbying. CCA spent $262,000 on politicians last year, every cent potential savings not passed along to taxpayers.

CCA donated $5,000 to Haslam's gubernatorial campaign and $7,500 to his inauguration, with company executives contributing thousands more. They like Senators Corker and Alexander, too. Some of CCA's savings do return to government, just not through the front door. CCA gave equally, $5,000 each, to Tennessee's two political parties.

Halliburton applies the public-teat business model to many taxpayer sows, from highway construction to foreign occupations, and they often bid on projects so expansive few firms can compete. Other construction conglomerates that might have competed for Iraq contracts were shut out of the market when George W. Bush signed a no-bid, 10-year contract between Halliburton and the U.S. Army as soon as he took office.

Competition rarely materializes when public services are privatized; graft materializes.

County Mayor Tim Burchett was certain that privatizing construction of a new Carter Elementary would yield savings, but it did not, and Burchett has resorted to liquidating county assets and restructuring mortgages for quick cash. These rash moves will be losses in the long term.

There is heavy public pressure on the school board to do as much as they can with our tax dollars, and they can and do find savings and efficiencies. The mayor's interference has yielded neither. Private contractors taking over public operations have been no more successful at reducing public expenses.

Bad economic theory has yielded bloated government budgets, but for some services, the best justification for public management is philosophical. Governments are obligated to respect our rights; private interests are not. When private firms come between citizens and their government, civil rights do not always cross the barrier. Attorneys have had trouble accessing clients housed in CCA prisons, and citizens have found an accountability gap when they seek redress.

In Knox County, this gap stands between a grieving mother and justice. Forensic services have been outsourced, and Katie Granju is having trouble getting answers to questions like why her son's preliminary autopsy report was leaked to the media before the family saw it—only the tip of an iceberg of irregularities in the handling of her son's death. Both public and private officials are ignoring her inquiries, and their responsibilities are obscured by the loose arrangements among them.

Previous Medical Examiner Sandra Elkins battled from 2005 until 2008 to expose that her employer was using Knox County employees and resources to investigate deaths in adjacent counties but not sharing fees with the county. Former County Mayor Mike Ragsdale agreed to audit operations in 2006 but backed down at the last minute. The stress of whistle-blowing took its toll on Elkins. She began taking pills to sleep and relax and grew addicted. She was hospitalized after police raided her home in 2008, then fired. A rudimentary audit that year recommended changes to operations, but University Pathologists now services all of East Tennessee and still charges Knox County nearly $1 million per year.

Privatization has been bad news for citizens.