“Hell hath no fury like a bureaucrat scorned.” – Milton Friedman
For years I have been preaching the value of outsourcing most of the services provided by government to the private sector. As Ronald Reagan once said “government should not provide any service that they can buy in the Yellow Pages.” This applies to all levels of government: city, county, state and federal.
By creating staff in-house, a governmental agency is not only being inefficient it is creating debt for the taxpayers. For years governmental agencies have been building bloated staffs to do what is available just by looking in the yellow book.
The reason hey do this is because over the years the myth has been pushed on us that only government employees could provide services such as: public works engineering, trash collection, legal services, infrastructure maintenance, tree trimming, financial services, police, fire fighting, water delivery, air traffic control, airports, schools, and many other services the people of a community or the nation desire and are willing to pay for.
Over the years these bureaucratic public employees have garnered support from the politicians (mainly the Democrat party) and formed unions, like the AFGE, AFSCME and numerous teachers unions that now control most government workers and the agencies they work for.
Daniel Disalova states a good case against government unions and public sector employment in a 2010 article in National Affairs “Since the middle of the 20th century, organized labor in America has undergone two transformations with major implications for the nation's politics. The first is the dramatic decline in overall union membership. In 1955, organized labor represented one-third of the non-agricultural work force; today, it represents just 12.3%. The second transformation, however, is even more significant: the change in the composition of the unionized work force.”
“As private-sector unions have withered, public-sector unions have grown dramatically. The Bureau of Labor Statistics reports that, in 2009, for the first time ever, more public-sector employees (7.9 million) than private-sector employees (7.4 million) belonged to unions. Today, unionized workers are more likely to be teachers, librarians, trash collectors, policemen, or firefighters than they are to be carpenters, electricians, plumbers, auto workers, or coal miners.”
“The rise of government-worker unionism has also combined with the broader transformation of the American economy to produce a sharp divergence between public – and private-sector employment. In today's public sector, good pay, generous benefits, and job security make possible a stable middle-class existence for nearly everyone from janitors to jailors. In the private economy, meanwhile, cutthroat competition, increased income inequality, and layoffs squeeze the middle class. This discrepancy indicates how poorly the middle class has fared in recent decades in the private economy, which is home to 80% of American jobs. But it also highlights the increased benefits of government work, and shines a spotlight on the gains public-sector unions have secured for their members. Perhaps this success helps explain why, on average, 39% of state- and local-government employees belong to unions. (Differences in state and local laws of course mean that the percentage varies from state to state; New York tops the chart with roughly 70% of state employees in unions, while many Southern right-to-work states hover in the single digits.)”
Disalova continues; “Since public-sector unions began to develop in earnest, their importance in political campaigns has grown by leaps and bounds. Starting from almost nothing in the 1960s, government-workers' unions now far exceed private-sector unions in political contributions. According to the Center for Responsive Politics, from 1989 to 2004, the AFSCME was the biggest spender in America, giving nearly $40 million to candidates in federal elections (98.5% of it to Democrats). It is important to stress that this was spending on federal elections; the union represents mostly state and local workers. But given the magnitude of federal contributions to state budgets, the AFSCME is heavily involved in electioneering to shape Washington's spending in ways that protect public workers and the supply of government services. And so over that 15-year period, the AFSCME was willing and able to outspend any other organization in the country.”
“The political influence of public-sector unions is probably greatest, however, in low-turnout elections to school boards and state and local offices, and in votes to decide ballot initiatives and referenda. For example, two of the top five biggest spenders in Wisconsin's 2003 and 2004 state elections were the Wisconsin Education Association Council and the AFSCME-affiliated Wisconsin “PEOPLE Conference. Only the state Republican Party and two other political action committees — those belonging to the National Association of Realtors and SBC / Ameritech — spent more. The same is true in state after state, as unions work to exert control over the very governments that employs their members.”
“This political dimension of public-sector unionism also changes the substantive priorities and demands of the unions themselves. Although private-sector unions in the United States have engaged in leftist "social activism," they have mostly concentrated their efforts on securing the best wages, benefits, pensions, and working conditions for their members: "pure and simple unionism," as longtime American Federation of Labor president Samuel Gompers used to call it. Rarely do they demand more hiring, since — given the constant private-sector imperative to keep operating costs minimal — increasing the number of a company's employees can limit wage and benefit increases for the workers already on the company's payroll.”
“By contrast, as economist Richard Freeman has written, "public sector unions can be viewed as using their political power to raise demand for public services, as well as using their bargaining power to fight for higher wages." The millions spent by public-employee unions on ballot measures in states like California and Oregon, for instance, almost always support the options that would lead to higher taxes and more government spending. The California Teachers Association, for example, spent $57 million in 2005 to defeat referenda that would have reduced union power and checked government growth. And the political influence of such massive spending is of course only amplified by the get-out-the-vote efforts of the unions and their members. This power of government-workers' unions to increase (and then sustain) levels of employment through the political process helps explain why, for instance, the city of Buffalo, New York, had the same number of public workers in 2006 as it did in 1950 — despite having lost half of its population (and thus a significant amount of the demand for public services).”
For a case study in how public-sector unions manipulate both supply and demand, consider the example of the California Correctional Peace Officers Association. Throughout the 1980s and '90s, the CCPOA lobbied the state government to increase California's prison facilities — since more prisons would obviously mean more jobs for corrections officers. And between 1980 and 2000, the Golden State constructed 22 new prisons for adults (before 1980, California had only 12 such facilities). The CCPOA also pushed for the 1994 "three strikes" sentencing law, which imposed stiff penalties on repeat offenders. The prison population exploded — and, as intended, the new prisoners required more guards. The CCPOA has been no less successful in increasing members' compensation: In 2006, the average union member made $70,000 a year, and more than $100,000 with overtime. Corrections officers can also retire with 90% of their salaries as early as age 50. Today, an amazing 11% of the state budget — more than what is spent on higher education — goes to the penal system. Governor Arnold Schwarzenegger proposed privatizing portions of the prison system to escape the unions' grip — though his proposal has so far met with predictable (union supported) political opposition.
The skyrocketing costs of public employees' pensions now present a huge challenge to state and local governments. If allowed to persist, such massive obligations will inevitably force a fundamental re-ordering of government priorities. After all, if government must spend more on pensions, it cannot spend more on schools, roads, and relief for the poor — in other words, the basic functions people expect their governments to perform. But because many states' pension commitments are constitutionally guaranteed, there is no easy way out of this financial sink hole. Recent court decisions indicate that pension obligations will have to be fulfilled even if governments declare bankruptcy — because while federal law allows bankruptcy judges to change pension and health-care packages in the private sector, it forbids such changes in public employees' agreements.
I have written numerous times about this issue, mainly from the perspective of public works engineering and architecture services. No city, county or state need have an in-house capability for these services as they can be found in the private sector. Some will use the argument that the public sector employees are better educated, better trained, more efficient and more cost-effective. That claim is pure balderdash. I and my colleagues in the private sector were educated in the same schools, licensed by the same state bureaus and have done the same work as they. This is just an argument the public sector uses to bamboozle the taxpayers and the politicians who support them and expect their contributions and votes.
Municipalities are the ones hardest hit by this issue. They have a limited or declining tax base. Due the collapse of the housing bubble many houses have been devalued creating a lowering of property tax revenues while their payrolls and pension obligations have been increasing. No business could operate this way – bankruptcy would be on the horizon. This condition also affects the public school system. In essence the honeymoon for the public sector is over.
One city in Georgia has dealt with this problem in a business-like efficient and cost-effective manner. The city of Sandy Springs has privatized all aspects of city services with the exception of police and firefighting – services which also could benefit from some degree of privatization.
Outside of the police and fire departments Sandy Springs, a city of 87,000 has a mere four employees on the public payroll. No bloated salaries, no pension liabilities and a more efficient means of delivering the services their citizens desire.
To accomplish this they retained the services of CH2M-Hill, a Colorado based engineering and program management firm. I am familiar with CH2M-Hill as I have been a subcontractor to them on several infrastructure projects in California. They are a good firm with a good reputation. Cost containment is one of their major missions.
Sandy Springs is become a model for the outsourcing of municipal services at all levels. This is how it works:
- The municipality retains the services of a program management firm like CH2M-Hill, or others through a qualifications based selection.
- The program management firm then performs a needs analysis of municipality.
- Once the needs analysis is completed a report is given to the city manager and city council, who then approve it of recommend changes
- Once the report is approved a strategic plan is developed and submitted for approval to the city manager and council.
- After approval of the strategic plan the program manager, in this case CH2M-Hill, begins subcontracting to local firms for the services the municipality desires. This subcontracting is done in two ways. If it the services are cost based services such as street repair or trash collection they are retained by competitive bids from qualified, reputable firms. If the services are professional in nature, such as civil engineering or legal, they are retained in a three-step process. The first step is to garner qualifications from firms interested in providing the services. The second step is to create a short list of qualified firms and conduct interviews. The third step is to select the “most qualified firm” and negotiate a fee schedule. If they cannot conclude successful negotiations with the most qualified firm they will move to the next firm on the list. In all my days of providing professional engineering services I have never encountered a case where the most qualified firm has not negotiated a fair and equitable contract.
- This method of outsourcing brings several benefits to the taxpayers:
- The municipality is not obligating itself to long term public sector employment contracts.
- The municipality is not incurring long term pension and health care obligations. Those obligations re left to the program manager and the subcontractors. Things like health care may be mandated in the contracts and the only impact will be the increase in legitimate, allowable overhead costs to the contractor, which will be negotiated into the contract.
- People can be fired for poor performance or malfeasance without going through union representatives of public boards.
- Staffing levels can be adjusted to fit the needs of the community or economy very quickly.
- A better class of employees can be retained
Pay for performance can be delivered by the contractors in the form of performance bonuses.
Complaints by the public are given a greater degree of service as no contractor wants to aggravate their clients. They are driven by the profit motive – no client, no profit.
I have delivered professional engineering services to cities, county and state agencies for over twenty-five years and I know this system works. It is a completive field and the clients have a plethora of good, qualified firms to choose from. There aren’t and “no bid contracts”. All contracts are given by one of the two processes listed above.
While cities across the country are cutting services, raising taxes and contemplating bankruptcy, something extraordinary is happening in a suburban community just north of Atlanta, Georgia.
Since incorporating in 2005, Sandy Springs has improved its services, invested tens of millions of dollars in infrastructure and kept taxes flat. And get this: Sandy Springs has no long-term liabilities. It has outsourced everything except police and fire fighting.
Sandy Spring is doing it right. By never letting the public sector unions in the door the politicians will have no group to go to for funds. Therefore the taxpayers will be the better for it.
You can click here for a page where there are numerous links to video reports on the success of Sandy Springs. Now let’s go for some privatization in the schools, police and fire departments.