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Reason Foundation

Utah Should Embrace The Yellow Pages Test

Utah's state and local governments are unfairly competing with private businesses

Leonard Gilroy and M. Royce Van Tassell
December 21, 2007

If you could go back to the drawing board and create your state or local government from scratch, would it do the same things it does today? Unfortunately for Utah taxpayers, public officials rarely ask this fundamental question.

Not satisfied with just managing education, roads, police and the other core duties that traditionally define the scope of government, public officials are creating agencies and departments that compete directly with the private sector. From servicing vehicles to running print shops, and from building convention centers to providing broadband communications services, Utah's state and local governments are cutting into the business of business.

Luckily, reform-minded policy makers on both sides of the political spectrum and across the country are increasingly questioning the wisdom of this trend. Recently the Legislature's Government Competition and Privatization Subcommittee, chaired by Sen. Howard Stephenson and Rep. Craig Frank, recommended legislation that would help state and local governments evaluate whether they are unfairly competing with private businesses.

In their simplest form, these proposals are plain old common sense, following what former Indianapolis mayor and current Harvard professor Stephen Goldsmith calls the "Yellow Pages Test." According to this test, if a service can be found in the phone book, government ought to buy it, rather than produce it in-house.

Leaders as diverse as Florida's former Republican Governor Jeb Bush, Pennsylvania's current Democratic Governor Ed Rendell, and Chicago's Democratic Mayor Richard Daley have all embraced versions of the Yellow Pages Test with great success. Gov. Bush alone achieved over $741 million in direct savings, and prevented an estimated $1.4 billion in additional taxpayer costs.

At times the Yellow Pages Test evokes strong emotional opposition from unions and special interests. This opposition is misplaced, as the savings generated Gov.'s Bush, Rendell and Mayor Daley shows.

The Yellow Pages Test doesn't delve into whether government should make laws, set policy, or provide police services. It asks a fundamental question – is it really the best use of taxpayer dollars to hire and manage public employees to cut grass, change the oil, sweep the streets, and clean government buildings, when existing businesses already perform these tasks well and almost always cheaper than government?

Too often public officials fail to count all the costs of hiring public employees and providing a service, like lawn care at government buildings. The subsidies Lehi taxpayers provide the Legacy Center, Cedar Hills taxpayers provide their golf course, and Davis county taxpayers provide the South Davis Recreation Center all testify to the inability of government-run facilities to turn a profit. Instead of improving transportation, education or police services, these taxpayer dollars subsidize services that competing private companies are providing at a fraction of the cost.

Government will always cost money; it's not designed to turn a profit. Focusing government resources on delivering the most crucial, basic services, as the Yellow Pages Test recommends, accomplishes two things. First, it helps state and local governments better succeed in those crucial, basic services. Second, it provides a greater the opportunity for entrepreneurs and businesses to expand the economic pie for everyone's benefit. Utah should follow the examples of Gov. Rendell, Mayor Daley, and Gov. Bush, and embrace the Yellow Pages Test.


Leonard Gilroy is Director of Government Reform


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