Las Vegas Sun

March 29, 2024

Should privatization be aggressively pursued?

By Sandra Tiffany

Sen. Sandra Tiffany, a Las Vegas Republican, is assistant majority whip in the Senate. She also sits on the Senate Finance Committee.

Our state's economic situation is fragile. The Governor's Task Force on Tax Policy is estimating budget deficits in the hundreds of millions over the next two to five years. We have a responsibility to examine every opportunity to cut costs.

One option we must consider is privatization of government services. Privatization can save the state millions, while improving the efficiency and quality of services.

Privatization can take three forms.

First, there is outsourcing -- the most common form of privatization where the government contracts with private companies to perform government services. This approach allows the government to keep control of the service by remaining the financier and manager of the service, while the service itself is provided privately.

The second form is complete privatization, where the government transfers all ownership, assets, enterprises or responsibilities related to a particular service to the private sector.

The third form is managed competition. Managed competition is relatively new. It is where a government agency competes directly with the private sector by submitting a work proposal and competitive bid to provide the service. The government may then award the contract to the agency or the private bidder.

Nevada has substantial experience in outsourcing. We contract for services such as computer network design, public works, printing and supplies. Nevada also outsources its prison system -- health care for the prisons.

But we have almost no experience with complete privatization -- an exception is workers' compensation -- or managed competition. However, we can privatize in many more areas, including the veterans' nursing home in Las Vegas and mental health hospitals.

It is imperative that Nevada consider, and possibly adopt, additional forms of privatization where greater ownership and responsibility is vested with private providers. This could include printing services, motor vehicle registration and the state motor pool operations. Such privatization could save us millions of dollars.

In 1993 Texas created a council whose primary purpose was to evaluate each new government service and to determine, based upon the economic benefit to the taxpayer, if that service should be outsourced, completely privatized or handled within a state agency.

In only eight years the Texas council saved the state $65 million by fully privatizing many key services! And Texas isn't the only state that recognizes the importance of privatization as a method to save the state money. Alaska, Georgia, Michigan and New York have all created boards or commissions to address privatization and public/private competition.

In the 2001-2002 legislative interim, Nevada began to explore the option of privatization. The Legislative Commission's Subcommittee to Study Competition Between Local Governments and Private Enterprises heard about the possibility of privatization in a host of different services, including health care, telecommunications and construction. The subcommittee recognized the need to cut costs and improve efficiency, but also recognized the need to ensure that any cost-cutting measure maximizes benefit.

As such, several suggestions were made for privatization, including four proposed bills the subcommittee will submit this session to the Legislature. These proposed bills aim at streamlining and simplifying procedures for outsourcing public works projects and creating definitive guidelines for evaluating the effects of public/private competition and privatization upon the state's budget.

Nevada is moving in the right direction. It is examining the option of privatization as a way to cut costs and improve efficiency. But Nevada still has a long way to go. Privatization can been a boon to our state. It can cut millions in expenses and improve the quality and efficiency of government services.

By Chris Giunchigliani

Assemblywoman Chris Giunchigliani, a Las Vegas Democrat, is vice chairwoman of the Assembly Ways and Means Committee and sits on the Commerce & Labor Committee.

It seems that whenever there is a budget crisis "privatization" or "contracting out" become the buzzwords of the day. One should be cautious, however, when moving toward privatizing.

We should always be mindful that government collects taxes and is responsible for accounting for their use. As legislators, we have an obligation to ensure that we spend every tax dollar wisely and efficiently. That is always important, but never more important than at a time like this when we are facing severe shortfalls in funding.

Government is not "for profit," but those companies with whom the government "contracts out" often are "for-profit" entities. When making a decision to privatize or contract out, it is imperative that we make sure that the "for profit" company will not overly benefit and that the government will truly save money over the long haul.

Some people also assume privatizing means less cost to the taxpayer. While it may be cheaper at the beginning, the quality of service frequently suffers and often the costs rise.

I served on an interim committee that studied the issue of privatization in 1992, and we published a report on the subject. After a year of testimony and research the committee recommended against privatizing state services.

We did make some recommendations that made the government more efficient, such as consolidating information services and payroll systems. We reviewed the method of issuing bids for private companies, again to make sure we had the best process in place for accurately determining which company could best meet our needs. We suggested that state agencies should be allowed to bid competitively.

Over the years, however, the Legislature has privatized some services or programs.

When we voted to locate the women's prison in Southern Nevada, the Legislature also said it had to be privatized. But I opposed this because there was no discussion of open bids and how safety of our citizens would be protected.

Now the private contractor says it is no longer making a profit, so new bids were put out and are being reviewed.

Medical services at the Ely Prison are handled through a private contractor. Problems containing medical costs arose, however, resulting in the most expensive, catastrophic cases being shifted to the state.

The Summit View Youth Center was a privately run facility. It was closed because of cost overruns, poor management and alleged physical and sexual abuse. This will now become a state-run facility. These problems cost the taxpayer.

Currently, with the budget crisis, we are hearing from some legislators that we should privatize the motor pool, print shop and veterans' home.

The motor pool agency has already initiated a review of whether to privatize rentals. The print shop was audited in 2002 and its rates were found to be 34 percent less than the private sector. And, in my opinion, we shouldn't even be considering privatizing the veterans' home. I, along with many others, have serious concerns about the level of service that would be provided to the men and women who fought for this country. On the other hand, I am promoting restructuring our state health plan by changing it from a self-insured plan. What worked for many health plans in the '80s isn't working now, and the state has had to bail out the plan at the cost of about $44 million.

The plan is bleeding, and we need to do surgery -- not apply bandages. The amount of money we have had to put into this plan has prevented us from giving decent salary increases to state employees.

It's time to open up the bids to as many private health care vendors who want to bid and have them design a workable, efficient health plan. In this case, privatization may work.

I believe, when it comes to privatizing services, our state has been responsive and open to competition, while being responsible to our taxpayers. It is critical that we continue to do so.

It is easy to throw out buzzwords, but the truly difficult job lies in being willing to say no to quick fixes. Remember, if it sounds too good to be true, it probably is. The same saying is true for privatizing most government services.

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