Strange But True Tales of Privatization

Those in favor of privatization have a new slogan: "Privatization saves puppies." It's true. When Kansas City privatized its animal shelter, it knew it would...
by | March 3, 2010 AT 3:00 AM

Those in favor of privatization have a new slogan: "Privatization saves puppies."

It's true. When Kansas City privatized its animal shelter, it knew it would reduce costs from roughly $800,000 to $625,000 -- a savings of more than 20 percent. It didn't know it would also be saving the lives of many of our furry friends.

In the past, a trip to the Kansas City animal shelter was a death sentence for more than 5,000 cats and dogs a year. But according to the Kansas City Star , since contracting with Veterinary Management Corporation in March 2008, the euthanasia rate of strays has dropped by 30 percent. The new operator has increased adoptions from about 100 per month to about 300 per month.

Thanks to a successful partnership between the city and a private provider, Fluffy gets a new lease on life, and taxpayers save some cash.

Facing tough budget times, public officials are increasingly turning to privatization. Take, for example, the U.S. Senate. They found that privatization not only costs less, but also tastes better.

Despite limited competition in the Capitol building, between 1993 and 2008, the Senate Restaurants, as the food service network is known, lost $18 million and, more important to senators, continued to serve lousy food, epitomized by its daily offering of navy bean soup.

In June of 2008, the Senate restaurant needed yet another infusion of taxpayer cash, so in what the Washington Post described as "a late-night voice vote," the Senate quietly turned over operation of its restaurant to a private provider. The transition was led by California Senator Dianne Feinstein, who, according to the Post, "rolled her eyes and took a deep breath before explaining the ordeal that the Senate Restaurants had become for her." Said Feinstein, "It's clearly not the sort of thing that I ran for the Senate to do."

Despite the ideological discomfort, the demands of the stomach won out.

Sometimes ideology has to take a back seat to reality. Back in the 1990s, the Libyan government was losing millions in subsidies for its state-run camel-breeding operation. Care to guess how Muammar Gaddafi, hardly a market zealot, solved the camel-breeding crisis? Yep, he privatized it. Gaddafi shifted the 6,000 camels to the private sector and let competition work.

Many have criticized the recent Bush administration for pushing an outsourcing agenda, even in areas in which there wasn't a competitive market. A private monopoly, or a private provider chosen for political considerations rather than performance, can produce problems just as readily as a struggling public agency.

But outsourcing is an important tool for those dealing with problematic public agencies.

In New Mexico, former Governor Gary Johnson inherited a prison system with significant, enduring problems. As he described it in an interview with "In New Mexico we had over 600 prisoners housed out of state, we were under a federal court order -- federal consent decree -- regarding our prisons and how they should be run," says Johnson.

As governor, Johnson expanded New Mexico's use of private firms to run state correctional facilities. "Comparing apples to apples, the private side produced the same goods and services for two-thirds the price. To me that was good government."

In the aftermath of Hurricane Katrina in New Orleans, roughly half the public schools came under independent operators, and since then, test scores have shown improvement. As with New Mexico's prisons, the "public" still funds operations, but private operators provide the service.

It turns out even the local public library can go private. In Yarmouth Port, Massachusetts, budget shortfalls meant the library was open just 16 hours per week. In response, operation of the town's library was turned over to a private, non-profit library association. The newly independent library raised private funds and expanded to 24 hours per week.

Privatization won't always work. But when public-sector agencies are broken and stuck in a cycle of ineffectiveness, bringing in new management is a strategy that should be considered. Privatizing the dog pound, the Senate's soup kitchen and Libya's camel-breeding farms may sound humorous, but they represent real management headaches for public managers. They also were over-consuming taxpayer dollars.

Dysfunctional agencies don't work well for anyone and can be notoriously resistant to change. Sometimes a new operator is just the thing to breathe new life into a moribund operation. Just ask Fluffy.