VI. A Public Choice Analysis

Will Michigan's successful use of private child care agencies to care for the majority of the state's neglect and abuse wards continue? Let us construct a model of public decision-making for privatization in general and then adapt that analysis to the question of the choice between public and private delivery of child foster care services.

In the public choice model of policy decisions, interested parties interact in political markets to shape government action in a way which maximizes their benefit. Manipulating policy is especially important to those who benefit from government programs and who may seek to expand employment opportunities, obtain higher payment rates or bar competitors from the market.

In such a political market, there is a battle for public "share of mind," the definition for market share in our public choice model. All actors seek to influence public opinion and legislative actions, judicial opinions and executive decisions. On the one hand, the interest of those who directly benefit from government programs tend to have concentrated power in these markets. The interest of taxpayers tends to be diluted, since the cost of any one type of government service usually represents a very small share of an individual's tax bill.

Privatization, whether for something as small as municipal trash pickup or as large as a major state program, provides an interesting case for public choice analysis. There is usually a group of parties which feel threatened by privatization because of the potential loss of economic benefit, but the interests of taxpayers and others who may benefit from privatization also compete for public share of mind. Whether privatization can be success-fully applied to any specific government activity depends on which interests prevail in this battle for market share.

Current state policy makers in Lansing support continuing the use of private child foster care agencies to provide services to a large share of children removed from their natural homes due to abuse and neglect. These decision makers include Governor Engler, key state legislators, judges, and DSS Director Gerald Miller. At this time, private child care agencies service more than 60% of child foster care placements. In a public choice model, the interests of taxpayers are best served by continuing to pursue privatization of foster care. Private child care agencies deliver the best care at the lowest price, state decision makers agree.

However, an interesting aspect of competition in the debate over privatization into new activities is spillover of the terms of debate in these new areas into some activities where privatization of services is already well established. Interest groups such as DSS employees, public sector union representatives, and other beneficiaries of public child foster care provision all stand to gain from a reversal of current policy if they can offset private providers' share of public mind.

However, we have demonstrated that it is clearly more cost-effective to taxpayers for child foster care services to be delivered by private agencies. In the face of tight budgets and understaffed state programs, rejecting the services offered by private agencies in the name of "saving money" carries with it the grave risk of not only not saving money, but also of not saving children.