In designing and implementing a comprehensive privatization plan, a combination of different privatization techniques can be used. To achieve maximum gains from privatization, careful attention must be paid to the privatization method chosen. Over 20 different privatization techniques have been identified, and some methods will be far more appropriate than others depending on the area of privatization.[9]

CONTRACTING OUT

Contracting out the provision of public services to the private sector is by far the most common form of privatization, and there are substantial contracting out possibilities in nearly every department of state government. In the past, departments of human services, general government support services, and transportation have been the most likely to contract with the private sector. In recent years, however, states have begun to explore contracting out possibilities in previously off-limit areas of government such as corrections and education. The operation of state facilities such as computer data centers, parks, and recreational facilities can also be contracted out to private firms.

VOUCHERS

In government functions where outputs and performance standards are subjective and not easily identifiable, vouchers often make better sense than contracting out. In such human services as day care, employment training, housing, education, and care for the disabled, for instance, vouchers are often the most appropriate form of privatization.

ASSET SALES AND LEASES

Another privatization option for cash-strapped state governments is selling or leasing governmental assets such as roads, airports, or other state-owned enterprises. This form of privatization is more prevalent in Europe and Latin America than in the United States because national governments have owned many enterprises that have always been run by the private sector in the United States. Nevertheless, cities and states own substantial infrastructure assets that could be sold to the private sector. An April 1992 Reason Foundation study found that cities and states own over 90,000 infrastructure assets that could be sold off, ranging from airports and wastewater treatment plants to parking structures and turnpikes. The total value of these assets is estimated at more than $220 billion. (see Table 1)

TABLE 1

SALABLE STATE AND MUNICIPAL ENTERPRISES

Enterprise Type

Estimated  Number

Estimated Market Value (Billions $)

Airports (Commercial)

87

29.0

Electric Utilities

2,010

16.7

Gas Utilities

800

2.0

Highways and Bridges

n/a

95.0

Parking Structures

37,500

6.6

Ports

45

11.4

Turnpikes

8

7.4

Water Systems

34,461

23.9

Wastewater Facilities

15,300

30.8

Waste-to-Energy Plants

77

4.0

Total Estimated

 

$226.8

SOURCE: Reason Foundation, “Mining the Government Balance Sheet,” Policy Insight, No. 139, April 1992.


EXECUTIVE ORDER ON INFRASTRUCTURE PRIVATIZATION

Previously, federal regulations served as a major barrier to selling infrastructure like airports because local governments were required to pay back the lion's share of the proceeds from the sale to the federal government as repayment of grants. However,

President Bush's April 30, 1992 Executive Order on Infrastructure Privatization removed many of the obstacles and financial disincentives for selling off city and state assets that were financed in part with federal money. With the new order, the state or city first recoups all its project

costs, the federal government gets back its grant awards minus depreciation, and the state or State Privatization city keeps the remainder, Programs

VOLUNTEERS

Many states rely heavily on volunteers for different services provided at state parks. Volunteers can also be used for social and health services.

SERVICE SHEDDING

State policymakers, now forced to take a hard look at all levels of government, are concluding that states over the last 30 years have gotten involved in providing many services and activities that could be left to the private sector to provide. Shedding services to the private sector is often a good management technique for policymakers.

SELF-HELP

Community groups and neighborhood organizations take over a service or government asset such as a local park. The new providers of the service directly benefit from the service.

PUBLIC-PRIVATE PARTNERSHIPS

The private sector forms partnerships with the public sector by providing facilities, infrastructure, or services for or in conjunction with a government entity. Example: providing equipment, buildings, maintenance services and utilities or land to government enterprises such as schools.

PRIVATE INFRASTRUCTURE DEVELOPMENT AND OPERATION

The private sector builds, finances and operates public infrastructure such as roads and airports, and recovers its investment through user fees.

DEREGULATION

State regulations are eliminated from a government-monopolized service to allow private delivery of the service.