Saturday, April 2, 2011

The Politics of Privatization; GOP May Drive Privatization Issue Off the Political Cliff

Today's Indianapolis Star brings the front page headline about the bill progressing through the legislature which would remove legislative oversight from Governor Daniels plan to privatize the building of highways in Indiana.  Heather Gillers of the Indianapolis Star reports:
The governor would have the sole authority to create toll roads under a bill that has been quietly advancing through the Indiana legislature.

The measure, which would expire in 2015, is up for a vote in the House Roads and Transportation Committee next week. It passed the Senate 37-12 in February.

"It's that whole thing about striking while the iron is hot," said the bill's sponsor, Sen. Tom Wyss, R-Fort Wayne.

Private companies are "not going to invest a million bucks into a project and then have to wait for the General Assembly to approve it," he said. "They'll go to a state where they can do it (more expediently)."

For a four-year period, the bill would allow the governor and the Indiana Department of Transportation to launch public-private projects, including creating or converting existing highways to toll roads, without the approval of the legislature. Opponents worry it would shut voters out of government deals with private companies.

In public-private road partnerships, companies typically work with government to build or maintain a road in exchange for some benefit, such as toll collection.

The requirement that lawmakers sign off on such projects was a part of Gov. Mitch Daniels' Major Moves package, approved in 2006. The project marked the beginning of the state's use of public-private partnerships to launch major road developments.

The idea of the governor making private highway deals without consulting other elected officials troubles Rep. Terri Austin, D-Anderson, who held hearings on the 2007 Commerce Connector proposal. If Wyss' measure had been in effect at that time, she pointed out, the governor could have simply ignored public opposition.

"This would basically remove any General Assembly oversight whatsoever," Austin said. "He just gets to say, 'I want to do that. This is how I want to do it.' "
I have written on privatization on numerous occasions.  I was a big fan of privatization in the middle 1990s and have read numerous publications about the subject, including the privatization bible Reinventing Government.  I took a look back at Reinventing Government the other day and saw that the authors missed completely how privatization would work in practice.  Nowhere in the tome did they foresee the impact of long term contracts, campaign contributions, and the revolving door on bringing real market competition to the delivery of services.  The authors did not foresee the reluctance of government officials to exercise strong oversight over privatized services.   Here Govenor Daniels and Senator Wyss are asking for less government oversight, arguing that private companies don't want to have to deal with government officials questioning their decisions.

It is the market competition which privatization is supposed to bring that leads to better public services and savings for taxpayers.  Otherwise it is just government granting a monopoly to a private company.

But let's now focus on privatization as a political issue.  Governor Daniels seems to have a tin ear when it comes to the politics of the privatization issue.  The fact is the public has overwhelmingly turned against privatization and its cousin public-private partnerships.  People don't trust that their politicians are looking out for their best interests when privatizing services. They see politicians as using privatization as a new sort of patronage, a way to generate large campaign contributions from private company seeking contracts.

I was visiting with friends at the Broad Ripple Tavern the other day. The subject came up about the parking meter contract.  People were livid at the Mayor for entering into a 50 year contract, giving hundreds of millions of dollars to ACS, which also happens to be a big donor to (chiefly) Republican candidates and also employs the Mayor's chief legal advisor as a lobbyist.  If Mayor Ballard thinks that won't be an issue in his re-election campaign he would be sadly mistaken.  It will be the No. 1 issue that turns people against the Mayor.  For those of you who don't think so, see the comments section of every ACS parking contract article published by the Indianapolis Star.  People are furious with the Mayor.

While Democrats too have backed privatization, it is chiefly Republicans driving the bus.  It is a bus that is heading off the political cliff.  Republicans need to open their eyes.


Citizen Kane said...

I have my doubts how seriously upset people are my privatization and public-private partnerships. It was evident to me that it was total B.S 20 years ago - just another way to reward contributors and friends. I really hope people are waking up to it. But I am not sure that there is a large rebellion out there. There is a lot of kool-aid drinking out there and a lot of "the ends justify the means." mentality.

Had Enough Indy? said...

Take a look at I-465, I-65, and I-70 around town. INDOT has already installed EZ Pass detectors. They are the white boxes, maybe 5 by 8, affixed to poles and slanted downward at about 30 to 45 degree angle. They have round bulges at the top and bottom, making them reminiscent of scrolls.

Bradley said...

"Here Govenor Daniels and Senator Wyss are asking for less government oversight..."

Governor Daniels has been asking (or in his case demanding) less government oversight in many areas of his executive agencies for years now. The reasons are clear -- he has a little ego problem.

At Workforce Development in 2005-06, Ron Stiver (and etc.) got rid of most of the unemployment oversight unit for a period of close to a year before the U.S. DOL finally told them they were paying DWD for an oversight unit for a reason (because they want to know how well or bad each state is doing). If DWD under Daniels got their way today, they would definitely get rid of the oversight unit altogether. DWD leads constantly dislike what oversight finds wrong about their handling of unemployment insurance and say oversight is "too hard" on them or their figures are wrong and that DWD is actually not doing that badly. They are lying -- DWD has destroyed our state's unemployment system.

Another case of wanting to wipe-away oversight of state agencies occured in a little-publicized case back in 2005 when the governor and friends tried to slip a doozie into the budget bill to where the governor could install his own person as the State Examiner of the State Board of Accounts -- an agency which is divided almost equally down the middle by political party to ensure, as best as possible, audits of most public entities (including, GASP! executive agencies) are performed with as little political influence as possible (a major oversight responsibility). The governor would have been able to appoint a non-CPA with very little experience working with audits. Luckily for the state, this was avoided.

Look at all the oversight problems with IURC. Look at FSSA's numerous oversight debacles (and not just their "modernization"). Look at DOC's oversight errors. Look at many of his state agencies and see a dizzying lack of oversight -- which I believe the billions (plus) of dollars in failures/leaks/lawsuits/loss of taxpayer dollars negates all the supposed cost savings of his "shrinking" of state government he so often boasts.

And Paul, you have often mentioned the Inspector General's office and what a joke it is -- a dog and pony show by Daniels to let everyone know ethics will be followed and taxpayer dollars will be saved as long as the complaints don't hurt Daniels or his administration; and thus little is done except to stifle the presumed rabble-rousers. An Inspector General that can only investigate the agencies under their own boss only makes sense as a charade for supposed "good government" to cover the dirty deeds otherwise.

So I am not too surprised to see Daniels wants to have control over toll roads in an effort to bypass any oversight and fiscal stewardship as much as possible. After all, he has done this as much as he legally (and in some cases not legally) could throughout his two terms.

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