Truth be told Governor Arnold Schwarzenegger has always been in favor of public-private partnerships and privatization — California’s laws are fairly restrictive in what the Governor can do. Even when voters overwhelmingly support a measure to change the constitution and give the Governor more power state unions sue to fight and stop the activity. California’s infrastructure needs are tremendous — and the Governor wants to tap the private sector to help build and finance it. In a recent town meeting in Monterey he explicity gave his support saying, “We’ll miss out if we don’t take private money and build public projects.” Specifically, California is alreadly looking at wind-power farms, ports and freeways. The governor’s plan calls for a split of future profits and upfront concession payment to the state. His first proposed partnership is the lease of the state’s lottery that brings in $1.1-billion in annual revenue. The proceeds would be used to pay down debt and finance new construction. The plans face a tough uphill battle. Senate President Pro Tem Don Perata (D-Oakland) said that leasing “looks like a bake sale” and continues to believe that financing infrastructure is “part of state government.” Perhaps what Perata doesn’t understand is that the state maintains ownership and regulatory authority — public-private partnerships are but another tool in the toolbox and bring a new pot of capital to be invested. Perata also doesn’t offer up an alternative — the investment is needed, the state can’t afford more bonds and higher taxes. Without public-private partnerships California’s infrastructure will only get worse (and its bad already).
Geoffrey Segal is the director of privatization and government reform at Reason Foundation, a nonprofit think tank advancing free minds and free markets. He is also editor of Reason's Privatization Watch.