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Privatization Trend at Local Level 

Advocates often describe privatization in glowing terms as an overwhelming and irreversible trend. At every level of government, privatization has been a hot topic for discussion and debate, often raised as a quick fix for public organizations seen to be in need of “reinvention.” Given the highly visible marketing efforts of corporations in the education sector today, there is no denying that education support professionals are a targeted class.

In light of all of the promotional and contracting activity on the part of contract-seeking companies, one would think that the share of services provided by public employees would have declined markedly during the 1990s. However, while contracting out continues to pose a significant threat to public services, knowledgeable observers have actually been somewhat moderate in their assessment of the “trend” toward a higher level of privatization for government services in general. For example, a Department of Labor task force that examined the operations of a variety of innovative local government organizations reported that “although the level of discussion of, and interest in, contracting out is quite substantial, any increase is far less dramatic than the level of discussion and popular reporting suggests.” [i]

In educational institutions, the level of privatization is substantial, but some recent evidence gives a mixed picture about recent trends in contracting activity. In its Annual privatization/Contract Services Survey, American School & University recently reported that “school districts and colleges are slowly reducing their use of outsourcing, preferring instead to keep the operation of (education support) services in-house.” In that survey, the percentage of school districts reporting that they don’t outsource any services increased to 23 percent in 2001 from 21.7 percent in 1999 and 12.3 percent in 1997. At colleges and universities, 6 percent did not outsource any services, compared with 5.3 percent in 1999.” [ii]

The American School & University study states that “those institutions that do outsource (education support) services are not as enamored with the practice as in years past. The percentage of school districts that privatize five or more services dropped to 9 percent from 15 percent two years ago,” a number that had shrunk to 34 percent from 44 percent for colleges and universities in the same years. [iii] According to the survey, “public service and accountability were listed by both school districts and colleges as the primary reasons why outsourcing… was not practiced, and why operations remained or were brought back in-house” [iv]

For local government, recent studies suggest that similar trends are taking place. While a significant amount of contracting out is taking place in local government, overall levels of privatization have remained somewhat stable or have grown only slowly. An explanation for this can be found in a recent study of local government contracting activity by Cornell University researchers. Examining survey data from the International City/County Management Association, they found that “privatization has risen only slightly from 22% (of all local government services) in 1992 to 24% in 1997 and that rise has not been steady.” Further, they found that for every eight services contracted out during that time period, five were contracted back in, showing that “dissatisfaction with contracting out is present and causes governments to bring services back in house.” [v] Thus, much of the trend towards more privatization has been reversed by those who tried it and didn’t like it.

Endnotes

[i] U.S. Secretary of Labor’s Task Force on Excellence in State and Local Government Through Labor-Management Cooperation, Working Together for Public Service, Washington: U.S. Department of Labor, May 1996, pp.47-48.
[ii] Agron, Joe. “Keeping it Close to Home”, American School & University, September 2001, p.24. (see www.asumag.com)
[iii] ibid.
[iv] ibid, p.28.
[v] Warner, Mildred and Hefetz, Amir, “Privatization and the Market Structuring Role of Local Government,” Cornell University Department of City and Regional Planning Working Paper #197, December 2000; Presented at Economic Policy Institute’s Conference on Privatization, January 11, 2000, Washington D.C., pp. 1, 12.