Advancing People and Privatization

At its core, privatization is about people. It is about government being considerate of its constituents by a) funding only those functions that it absolutely has to through the onerous mechanism of taxation, and b) working in the most cost-effective way possible in areas where it is involved.

Five years ago the Mackinac Center for Public Policy published a study entitled Advancing Civil Society: A State Budget to Strengthen Michigan Culture. In it, the Center drew a distinction between political society and civil society. A political society places responsibility for meeting a wide range of human needs on the institutions of government. The people of Michigan elect public officials who, through statutes and administrative bureaucracies, design programs that attempt to respond to perceived problems.

By contrast, a civil society is a society of individuals and families, private institutions and voluntary associations, religious groups, and commercial firms, which join hands and take upon their own shoulders the task of satisfying their own needs and the needs of their communities. A civil society sees danger in the coercive powers of government, and therefore only allows government a limited role, preferring to operate in an environment that is free to the widest extent possible.

Privatization is a major vehicle through which Michigan can transform itself from a coercive, politicized society into a civil society whose outstanding trait is its voluntarism and resourcefulness in solving problems on its own.

The Mackinac Center study recommended a total of $2.5 billion in spending cuts representing 7.5 percent of the total state budget. Much of the savings were derived from privatizing functions then being performed by the state government or eliminating them altogether as functions properly belonging to the private sector.

The $2.5 billion total was made up of a host of the kinds of small, seemingly insignificant items which, added together, wind up costing state and local government a substantial sum.

For example, the Mackinac Center discovered that the Michigan Department of Natural Resources was spending $52,000 of the taxpayers' money each year publishing a periodical called Natural Resources Magazine. The publication reported on areas of interest already covered by many private sector publications, Michigan being a very outdoors-minded and environmentally conscious state.

Since publication of the Mackinac Center's report five years ago, the Department has ceased publishing the magazine. First it contracted the task out to a private vendor, and the venture failed. Then the state, to its credit, did not attempt to revive it.

Another recommendation called for the sale of Michigan fish hatcheries, which at that time were receiving an annual appropriation of $6,804,000. Gov. Engler's recommended budget for fish production for fiscal year 2001-02 is $6,874,400, nearly the same as in 1996. But why is the government involved in hatching fish in the first place? This is a service that could be contracted out-and with great success-to the private sector. The state of Michigan more than likely could reduce its costs by doing the same.

The same goes for Michigan's Hunting Access Program, which leases private lands throughout southern Michigan for public hunting. This year's appropriation is $400,000, 26 percent higher than its cost in 1995-1996.

It is hard to underestimate the popularity of hunting in Michigan. Still, this is another clear example of the intrusion of political society. The state is interfering in an area where private individuals can and do perform the same activity through voluntary means. Every year thousands of Michigan hunters reach mutually beneficial agreements with private landowners regarding their desire to hunt on the landowners' property. There is no reason to believe hunting would suffer if this program were eliminated.

Did you know that your tax dollars support a government-owned-and-run conference center? The MacMullan Conference Center is a hotel/lodge located on Higgins Lake in mid-Michigan. It is used by a wide variety of governmental agencies for overnight training sessions and conferences. The annual grant received by MacMullan from the state averages about $1.2 million. A state statute dictates who may use the Center and includes publicly funded educational groups; religious schools; groups with an environmental focus; and municipal, state, and federal agencies. It can sleep 135 people per night and averages about 15,000 guests per year. Conference Center rates run a minimum of $61.75 per night and include three meals and use of meeting rooms and audio-visual equipment.

Even if the Center could turn a profit as a state-run business it should be sold off to private investors. Why? It is simply not a proper function of government. Nationwide recreation and convention center businesses are very competitive and would have little difficulty assuming the responsibilities of running this operation for profit.

The state also operates a development program for docks and harbors to encourage tourist-related economic development. The program currently is spending money on several locations around Michigan's Great Lakes shoreline. In addition, the state runs an extensive public-access sites program that acquires, develops and maintains public docks and launching sites for small craft throughout the state, including sites on the Great Lakes.

The state should sell its larger docking facilities to private firms and end its involvement in this area. The appropriation for these programs vaulted from $2.1 million in fiscal 1995-1996 to $8.9 million in the 2000-2001 budget year. Gov. Engler has recommended a smaller appropriation ($6 million) for 2001-2002, but there's no reason why the taxpayers should finance something that is a private-sector responsibility.

Private Forest Development is a program that provides financial assistance to private landowners in hopes of facilitating wise ecological use of their property. The program administers the Commercial Forest Act as well as certain federal grants. This line item in the state budget has increased 18 percent since 1995-1996, a fairly mild increase compared to other programs. Still, the issue is not just money, it is whether this is an area where the government should be involved.

Private landowners, many financially well off, should be responsible for the stewardship of their own land, and have a financial incentive to be so. They can rely on a variety of private-sector environmental, agricultural and educational organizations for information regarding the best ecological methods. Michigan citizens should not be required to subsidize private landowners; this is yet another program that should be eliminated.

Funds to pay for these programs come from a variety of sources and tend to fall into a few categories. They include federal funds (taxed from the whole country, sent to Washington, and sent to Lansing), interdepartmental grants (funds are transferred from one department to another), general fund/general purpose (a budget fund over which lawmakers have the most discretion), and special revenue which can be comprised of many different types of state revenue.

In some cases, eliminating such programs may mean refusing federal funds, which are sometimes seen as "free" money because the money is received from taxpayers outside the state. But in actuality, even federal funds come from the citizens of Michigan, as well as from millions of other taxpayers outside the state. If Michigan is going to undertake significant budget reforms it cannot exempt federally funded programs from the reform process.

Privatization is no longer a new concept. Governments, not only in the United States but in other countries as well, now have decades of experience getting out of enterprises where they had no business operating in the first place.

Michael LaFaive is managing editor of Michigan Privatization Report.

Joseph Overton is senior vice president with the Mackinac Center for Public Policy.