University of Michigan Survey Finds High Use, Satisfaction with Local Government Privatization

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University of Michigan Survey Finds High Use, Satisfaction with Local Government Privatization

65% of Michigan municipalities privatize services, and 73% of them are satisfied with it

With the heated rhetoric that often surrounds the privatization of government services, a perspective often lost is that of those officials that actually implement it. A new University of Michigan survey of local officials in Michigan adds some interesting new insights from practitioners, finding that most jurisdictions privatize something, and by and large, they’re happy with it.

The survey, released by the University of Michigan’s Gerald R. Ford School of Public Policy last month, found that 65% of Michigan’s local governments-and 84% of jurisdictions with over 30,000 residents-outsource one or more services. Further, 73% of officials from jurisdictions that privatize services reported being satisfied with the results, a finding that notably cut across party lines. Only 15% of jurisdictions that currently privatize services reported ever bringing a previously contracted service back in-house, suggesting that privatization tends to stick once implemented.

Digging further into user satisfaction, the survey found that 78% of officials in jurisdictions that privatize report satisfaction with their contractor(s) responsiveness, with similarly high levels reported for quality of service delivery (77%) and timeliness of service delivery (77%). And nearly two-thirds (64%) of officials reported being satisfied with the cost savings from privatization.

The survey found that the most common services outsourced are attorney/legal services (83%), engineering (51%), solid waste and recycling (45%), property assessment (43%), and inspections (42%).

For officials in municipalities that currently outsource services, the most common factors reported as encouraging privatization were cost savings (58%), a lack of in-house expertise (52%), and a desire to improve service quality (40%). By contrast, for those that do not currently use privatization, the most common factors officials report as discouraging them from doing so were high costs from private service delivery (18%), a lack of available private providers (17%), and sufficient in-house expertise (13%).

The survey results also pointed to a major area of potential improvement, as only 25% of officials reported having any techniques for formal evaluation of privatization efforts in their jurisdictions. And in those jurisdictions, 92% reported using analyses of service delivery costs, but only 68% evaluate contractors’ compliance with service delivery standards.

Overall, 69% of respondents felt like their jurisdictions were doing the right amount of privatization (again, with few partisan differences), which may help explain why only 10% of jurisdictions planned to pursue additional privatization initiatives in the coming year, a figure slightly lower than the 12-15% seen in the most recent annual surveys. This isn’t really an unexpected result, given that interest in privatization tends to rise and fall with the national economy and government fiscal conditions.

Surveys like this are very useful for providing some much-needed perspective on what tends to be an issue driven by passionate rhetoric on all sides, which obscures the nuance of real-world experience. Privatization is neither a panacea nor a scourge-it’s a proven public service delivery tool used in many places by officials of all political persuasions.

Leonard Gilroy is director of government reform at Reason Foundation and is the editor of the Privatization & Government Reform Newsletter, available here. This article was featured in the December 2014 edition of the newsletter.

Leonard Gilroy is Senior Managing Director of the Pension Integrity Project at Reason Foundation, a nonprofit think tank advancing free minds and free markets. The Pension Integrity Project assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.