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Fiscal Focus: Privatization


Why the Public Should Invest As Ohioans, we expect public services to be established for the common good.  Privatizing our services – through sale of government assets or paying private business to do tasks government has done in the past – risks placing profit motives over the needs of our community.  Despite any initial financial benefit from the sale of a public asset, the expected quality of service, effects on workers, and financial ramifications over time need to be taken into account.  Long-term solutions – like stable and secure revenue sources – not short-term fixes, should be our goal.

The Current Reality In recent years, Ohioans have seen privatization of prisons and schools, as well as our state economic development efforts with JobsOhio and parking at Ohio State University (OSU).  Each of these actions brings promises of tax savings and improved services.  But, charter schools’ performance remains low, Ohio’s recently privatized prison has raised concerns for health and safety, JobsOhio lacks basic accountability, and the OSU parking sale leaves major long-term financial questions.

Looking more closely at JobsOhio, created in 2011 under Governor Kasich, is instructive. When Ohio invests in development, social services, or other areas of public concern, Ohioans must have accountability and an ability to weigh in on the use of our investment.  As a private organization, much of JobsOhio’s work is done beyond the scope of public input and scrutiny. For example, they invested public dollars into a company that was previously found guilty of Medicaid fraud. Regardless of the wisdom of this particular investment, shouldn’t the public have the ability to review this expense? Because of privatization, Ohioans lack oversight and there is little accountability.

In another example, our neighbors in Indiana privatized their turnpike in 2006.  The state received over $3 billion for a 75-year lease.  That money will be gone within the next 5 years, and beginning in 2016, the turnpike can increase tolls in every year of the lease.  The foreign companies that own the Indiana turnpike garner their profits from higher tolls, less maintenance, and lower salaries and benefits for employees. In instances like these, the quality of service rarely is increased.

The 2014-15 Budget We are likely to hear a lot more about privatization in the next budget, including our turnpike, prisons, and schools.  While we expect other privatization efforts to be discussed, these three will top the list in the budget. We should not sacrifice quality of service, transparency, or the public interest for quick cash.

People for the American Way have developed a list of 10 questions that should be considered prior to any efforts to privatize essential public services.  These should be taken seriously in Ohio as we debate policies around privatizing public services.

The Ohio turnpike discussions are arguably the most talked about issue related to privatization.  Immediate money from a sale will undoubtedly intoxicate legislators, particularly as the Ohio Department of Transportation has delayed many crucial highway projects across the state.  But, amongst many concerns, a sale or lease of the turnpike for 50 or 100 years will leave Ohioans vulnerable to changing needs in our state.  This vulnerability is exacerbated because some road privatization efforts have non-compete clauses limiting infrastructure development for generations.  Such contract limitations could also include a state takeover provision that requires the government to be on the hook for the losses.

Prison privatization has been largely unsuccessful. Governor Kasich did privatize one formerly publicly run prison in Ohio, but ODRC has delayed other privatization efforts over public concerns.  Private prisons limit the staff numbers, benefits, and salaries.  Some private prisons lack enough trained staff to maintain a safe and secure facility.  The companies often overcrowd the prisons, because most states have a “per-prisoner” payment schedule.  Finally, the prison will cut the most helpful services – mental health treatment, education, job training, and counseling.

Education is another government service being privatized.  Charter schools are set up by private entities, often corporations.  These entities receive money based on each student that they enroll and this is money pulled out of our public school system.  Despite performance measures far below traditional public schools – 70% of public schools rate excellent or above, compared to only 16% of charters – policymakers continue to push this system of privatization.

As we move forward with the debate of public and private services, we need to remember that the 21% cut to the state income tax since 2005 has caused many financial constraints for the state.  Ohio does not need to sell all of our assets and long-term investments this year.  We can restore budget shortfalls by keeping public investments and ensuring stable and secure revenue sources.

Speak Up! If you would like to get involved as the state budget nears and our advocacy increases, please follow us on Facebook, Twitter, or sign up for our emails. Please read our past Fiscal Focus article on Education or State Parks and stay on the look out for the next articles on corrections, health care, and the arts!

If you’re interested in additional information on state parks in the state budget or have any other related question, please contact us.

#FiscalFocus #Privatization

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