Paul J. Gessing
In theory, at least, government should always perform its functions as cheaply and cost-efficiently as possible. Altruistic government workers always have our best interests in mind, right? Unfortunately, for a variety of reasons, that is not always the case.
The first and most important reason why government is not efficient is that governments, and by extension, government workers, do not have the same incentives as do their analogs in the private sector. In the private sector, innovation and efficiency are the keys to success. That’s because a company’s customers can easily leave them for someone else’s superior product. In one sense, when companies like Blockbuster Video close their doors, it is a failure, but only of that particular business or business model.
In the broader scheme of things, it is a success because Americans now get our movies more cheaply and easily elsewhere. This is a good, not a bad, thing in terms of overall living standards.
Unfortunately, government rarely leaves a particular line of work no matter how inefficiently it does the job. That is not to say that we should simply abandon core functions of government like law enforcement, but it is obvious, especially in a time of constrained budgets both in government and in New Mexico households, that some work now done by governments could be done better and/or more cheaply in the private sector.
The ‘Yellow Pages Test’
Former Indianapolis Mayor Stephen Goldsmith, one of the foremost advocates for outsourcing in the nation, was recently named deputy mayor for operations by New York Mayor Michael Bloomberg. The idea is to bring his skill at cutting costs and improving efficiency to the Big Apple, which faces a multi-billion dollar budget gap.
Goldsmith’s leading innovation is the “Yellow Pages Test.” According to Goldsmith, “if the phone book lists three companies that provide a certain service, government should probably not be in that business.” As mayor of Indianapolis, Goldsmith identified $400 million in savings and opened up over five dozen city services – including trash collection, pothole repair and wastewater services – to competitive bidding.
We should consider similar steps in New Mexico, and I’d add to that list maintenance of government buildings, golf course maintenance, parks and recreational maintenance, and even airport maintenance. Why? According to the Reason Foundation, a nonprofit organization that works on privatization issues, a review of over 100 studies of privatization showed that cost savings ranged between 5 and 50 percent depending upon the scope and type of service.
As a conservative rule of thumb, cost savings through privatization typically range between 5 and 20 percent, on average. This could add up to real savings, particularly in this time of state and local budget deficits.
Doing it the right way
Of course, there are right ways and wrong ways to do this. It is important to give the government workers who are currently doing the job a fair shot at continuing to do the work by bidding against their private-sector counterparts. It is also important, no matter who wins the final bid, to properly manage the provision of that government service in order to ensure that taxpayers are getting the most for their money.
It would seem that current government workers should have no reason to fear such competition. After all, if there is no waste and inefficiency currently in government service provision, they’ll easily win any bids. If this is not the case, then why aren’t government workers doing everything they can to do their jobs as cheaply and well as they could be?
No special laws need to be passed in order to use private-sector providers to make government services more efficient and generate big savings for taxpayers. Unfortunately, as pointed out above, government workers are experts at leveraging their collective power to influence government officials.
The question that we as taxpayers and our political leaders must ask is whether all workers in our society should serve their customers or whether government workers are a protected class, immune from market forces and competition.
Gessing is president of New Mexico’s Rio Grande Foundation, an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.