GAO Report Examines Privatization-Lessons Learned by State and Local Governments

The Government Accountants Journal, Summer 1997 | Go to article overview

GAO Report Examines Privatization-Lessons Learned by State and Local Governments


Background

Congressman Scott Klug (R-WI) asked the U.S. General Accounting Office (GAO) to look atthe privatization efforts of states and cities, because unlike the federal government, most states and cities must balance their budgets. These governments, particularly states, perform functions similar to those of the federal government and are widely viewed as laboratories for innovation and change. Furthermore,there has been a dramatic increase in recent privatization efforts in both states and cities, a trend that will no doubt continue given forthcoming efforts such as state-run welfare programs.

Results in Brief

The six governments GAO visited were Georgia, Massachusetts, Michigan, NewYork, Virginia and the city of Indianapolis. Each tailored their approaches to privatization to their particular political, economic and labor environments. GAO identified six lessons, highlighted in Figure 1, learned in implementing privatization initiatives that were generally common to all six governments.

First, privatization can best be introduced and sustained when it is championed by a committed political leader, such as the governor or mayor. In one case, state legislators and the governor worked in concert to introduce privatization. These leaders built internal and external support for privatization initiatives, and adjusted implementation strategies when barriers to privatization arose.

Second, governments need to establish an organizational and analytical structure to implement the privatization effort. This structure can include commissions, staff offices and analytical frameworks for privatization decision-making. For example, five of the six governments established governmentwide commissions to identify privatization opportunities among government activities and to set policies to guide privatization initiatives.

Third, governments may need to enact legislative changes and/or reduce resources available to government agencies in order to encourage privatization. Georgia, for example, enacted legislation to reform the state's civil service and to reduce the operating funds of state agencies. Virginia reduced the size of the state's work force and enacted legislation to establish an independent state council to foster privatization efforts. These actions, officials told GAO, enhanced privatization and sent a signal to managers and employees that political leaders were serious about implementing privatization.

Fourth, reliable and complete cost data on government activities is needed to assess the overall performance of activities targeted for privatization, to support informed privatization decisions and to make these decisions easier to implement and justify to potential critics. …

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