Savings for Fresno: The Role of Privatization

As Fresno navigates budget challenges, privatization can lower costs and put performance, results first

Like their peers in many municipalities across the country, Fresno policymakers are currently considering what role privatization should play in addressing their current and future fiscal challenges. However, privatization is a complex subject and takes many forms, so it is helpful to have an overview of the subject in deciding how to use privatization moving forward.

Over the last half century, governments of all political complexions have increasingly embraced privatization—shifting some or all aspects of government service delivery to private sector provision—as a strategy to lower the costs of government and achieve higher performance and better outcomes for tax dollars spent.

Recent decades have seen privatization shift from a concept viewed as radical and ideologically based to a well-established, proven policy management tool. Indeed, local policymakers in many jurisdictions in the U.S. and around the world have used privatization to better the lives of citizens by offering them higher quality services at lower costs, delivering greater choice and more efficient, effective government.

In the 21st century, government's role is evolving from service provider to that of a broker of services, as the public sector is increasingly relying far more on networks of public, private and non-profit organizations to deliver services. Virtually every local government service—from road maintenance, fleet operations and public works to education, recreation and public health services—has been successfully privatized at some point in time somewhere around the world.

This trend is not confined to any particular region, or to governments dominated by either major political party. In fact, privatization is a bipartisan trend, embraced by pragmatic local policymakers from both sides of the aisle. The reason for the widespread appeal of privatization is straightforward: it works. Decades of successful privatization policies have proven that private sector innovation and initiative can do certain things better than the public sector. Privatization can also boost the local economy and tax base, as private companies under government contract pay taxes into government coffers and offer employment to communities.

As they continue to explore ways to navigate current budget challenges and better prepare themselves for unforeseen future fiscal headwinds, Fresno policymakers should ask fundamental questions about how their city government operates and whether there is a better way. This Reason Foundation policy brief provides an overview of common goals and types of privatization, how local governments use privatization, recent highlights from local government privatization efforts across the country, myths and facts, and more.

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