Arizona’s Commission on Privatization and Efficiency Releases Initial Report

Arizona’s Commission on Privatization and Efficiency (COPE), which includes Reason Foundation’s Len Gilroy as a commissioner, released their initial report on Tuesday, outlining an initial set of privatization tools and strategies that could save Arizona taxpayers millions in the coming years. Governor Jan Brewer established COPE in January 2010 under Executive Order 2010-10.

Arizona has made budget cuts of more than $2 billion over the past two fiscal years, though ongoing, severe fiscal pressures are likely to make additional future reductions necessary. With budgetary concerns in mind, “COPE focused on the recommendations that the state can work towards implementation immediately.”

Hence, this initial report serves as a starting point for Arizona’s policymakers to join the ranks of innovative leaders around the country that have leveraged privatization and public-private partnerships (PPPs) to save money and improve services.

The focus on practical application makes the report worth reading in its entirety. That said, some highlights include:

Designing a state privatization process: The most important work included in this report does not relate to privatization opportunities within specific departments, but rather the lasting value derived from creating a stable and reliable privatization process that will be ongoing through the years. Having a sound privatization process in place will ensure that any pursuit of future privatization efforts will be done sensibly and sustainably. Specifically, COPE discussed institutionalized application of best practices, project selection and contracting, and creating a process for unsolicited privatization proposals. Reason has long advocated for this type of policy approach, as discussed most recently here, here and here.

Public-private partnerships for state parks: Like New Jersey’s Privatization Task Force earlier this year, COPE recommends the expanded use of “whole park concessions”-essentially PPPs for the operation and management of entire parks under strict state controls-throughout the state parks system to ensure that parks remain open and properly maintained, as well as to take significant costs off the state’s books. Though relatively new policy territory for states, the U.S. Forest Service-which manages the largest parks & recreation system on the planet-has used this approach for decades. Reason Foundation has reported extensively on state parks privatization over the past year – read more here, here, here and here.

Developing broad asset management: The Arizona Department of Administration (ADOA) conducts an annual inventory of real property. COPE calls for this to be expanded to include raw land and any assets whose title was transferred to ADOA. Further, ADOA should conduct a review of office space utilization.

The goal of this inventory is to then seek if public assets could be sold, leased or exchanged for other lower cost alternatives. This would lead to common sense solutions, such as pursuing divestiture for multiple agency buildings and consolidating to one larger and less costly facility. Reason Foundation’s Anthony Randazzo explored this approach here.

Expanding performance-based building maintenance: PPPs in asset maintenance are one of the most widely proven methods of privatization available. Arizona already benefits from contracted maintenance, but the state is using an outdated, piecemeal approach that fails to realize the full benefits that are within reach.

In a broader sense, privatization of road maintenance sets an indisputable precedent of the value that can be added by the private sector. Long-term performance-based maintenance contracts for roads have worked throughout the U.S. and around the world, and as the COPE report notes, states like Georgia have adapted the model for state buildings. COPE calls for contracts longer than three years in a “total asset management” model that will allow the private sector to operate in a more efficient way to maximize proper asset maintenance. For more on this subject, see Reason’s recent policy brief here.

Public-private partnerships for rest areas: COPE supports changes in federal law to allow for PPPs in rest areas. Currently, only states with rest areas in operation before the 1956 Interstate Highway Act are eligible to privatize them. Most of Arizona rest areas are at least 40 years old-with several having been closed in the last year amid the state’s fiscal crisis. If allowed the opportunity to enter into PPPs for rest area development, Arizona could finally harness private sector capital and revitalize a valuable division of the state’s infrastructure. Rest area privatization is a hot topic for many state DOTs, as Reason has written about recently here and here.

The report details a range of additional recommendations, such as:

  • Consolidation of email systems
  • Cell phone contract management
  • Improved personal computer power management
  • Interdepartmental exchange of surplus equipment
  • Privatized education data collection
  • Consolidated credentialing
  • Electronic signatures for online tax filing

One final noteworthy aspect of the COPE initial report is the inclusion of a partial list of state agency services that have already been privatized.

Arizona is not the only state pursuing comprehensive cost-savings through streamlining and privatization at the state-level. Last year, Louisiana’s Commission on Streamlining Government released a set of over 230 reform recommendations estimated to save the state at least $1 billion per year. Also, the privatization task force established by New Jersey Gov. Chris Christie released a report earlier this year, and the Commission on Government Reform and Restructuring established this spring by Virginia Gov. Bob McDonnell is currently examining a plethora of potential privatization and government reform opportunities.

This initial report is just the beginning. COPE chairman and state Gaming Director Mark Brnovich told the Arizona Daily Star that “History has shown that the private sector is able to come up with innovative and, very often, cost-effective solutions to problems.” Arizona lawmakers and taxpayers alike should stay tuned for the expected release of COPE’s final report this winter.