Policy Brief

Privatizing “Yellow Pages” Government in Pennsylvania

Private sector solutions for the Keystone State

Pennsylvania state and local policymakers are facing mounting debt, strained budgets, and underfunded public pension systems. These unprecedented challenges call for new and innovative policy solutions. By applying the “Yellow Pages test,” governments of all sizes have been able to do more with fewer resources. The “Yellow Pages test,” says that if a service can be found in the Yellow Pages of a phone book, government should consider buying it rather than using taxpayer dollars to hire and manage public employees.

The commonwealth is involved in an array of yellow page services. While many Pennsylvanians are aware of efforts to privatize Pennsylvania’s state-run liquor stores and to lease the Pennsylvania Turnpike, this report examines some of the lesser-known government-run businesses. For example, municipalities throughout Pennsylvania own a total of 49 golf courses; numerous local governments operate fitness centers; the Dauphin County Authority owns the Hyatt Regency at the Pittsburgh airport; the Department of Conservation and Natural Resources owns a luxury hotel at Bald Eagle State Park; and about thirty counties in Pennsylvania operate nursing homes.

The reason privatization works is simple: it introduces competition into an otherwise monopolistic system of public service delivery. Too often, poor performers in government are rewarded with budget increases following failure. Competition done right drives down costs and incentivizes good performance.

Diverse leaders throughout the country have embraced versions of the Yellow Pages test with great success. Florida’s former Republican Governor Jeb Bush achieved more than $550 million in direct savings and avoided more than $1 billion in future taxpayer costs. Former Indianapolis Republican Mayor Stephen Goldsmith identified $400 million in savings and opened up more than five dozen city services to competitive bidding. And Chicago’s Democratic Mayor Richard Daley has privatized more than 40 services and, since 2005, has generated more than $3 billion in privatization deals for the Chicago Skyway toll road, four downtown parking garages, and the city’s downtown parking meter system.

All forms of privatization are simply policy tools-they can be effective when used well and ineffective when used incorrectly. In well-structured privatization initiatives the government and taxpayers gain accountability they rarely have with public agencies. Privatization is a tool that can lead not only to cost savings, but improve service quality, enhance risk management, and result in greater innovation.

Getting government out of unnecessary services is not limited to auctioning off services and assets; privatization can also involve governments partnering with for-profit firms to deliver services or with non-profit organizations or volunteers.

This new report by the Commonwealth Foundation and Reason Foundation surveys the scope of Yellow Pages Government in Pennsylvania, looks at examples of state and local privatization throughout the country, and outlines best practices to equip lawmakers to successfully transition government out of unnecessary services by implementing a variety of models.

Attachments

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.

The project aims to promote solvent, sustainable retirement systems that provide retirement security for government workers while reducing taxpayer and pension system exposure to financial risk and reducing long-term costs for employers/taxpayers and employees. The project team provides education, reform policy options, and actuarial analysis for policymakers and stakeholders to help them design reform proposals that are practical and viable.

In 2016 and 2017, Reason's Pension Integrity Project helped design, negotiate and draft pension reforms for the state of Arizona's Public Safety Personnel Retirement System and Corrections Officer Retirement Plan, which both passed with overwhelming bipartisan support in the state legislature and were signed into law by Gov. Doug Ducey.

Gilroy is also the Director of Government Reform at Reason Foundation, researching privatization, public-private partnerships, infrastructure and urban policy issues.

Gilroy has a diversified background in policy research and implementation, with particular emphases on competition, government efficiency, transparency, accountability, and government performance. Gilroy has worked closely with legislators and elected officials in Texas, Arizona, Louisiana, New Jersey, Utah, Virginia, California and several other states and local governments in efforts to design and implement market-based policy approaches, improve government performance, enhance accountability in government programs, and reduce government spending.

In 2010 and 2011, Gilroy served as a gubernatorial appointee to the Arizona Commission on Privatization and Efficiency, and in 2010 he served as an advisor to the New Jersey Privatization Task Force, created by Gov. Chris Christie.

Gilroy is the editor of the widely-read Annual Privatization Report, which examines trends and chronicles the experiences of local, state, and federal governments in bringing competition to public services. Gilroy also edits Reason's Innovators in Action interview series, which profiles public sector innovators in their own words, including former U.S. Transportation Secretary Mary Peters, former Florida Gov. Jeb Bush, former Indiana Gov. Mitch Daniels, former New York City Mayor Rudy Guiliani and more.

Gilroy's articles have been featured in such leading publications as The Wall Street Journal, Los Angeles Times, New York Post, The Weekly Standard, Washington Times, Houston Chronicle, Atlanta Journal-Constitution, Arizona Republic, San Francisco Examiner, San Diego Union-Tribune, Philadelphia Inquirer, Sacramento Bee and The Salt Lake Tribune. He has also appeared on CNN, Fox News Channel, Fox Business, CNBC, National Public Radio and other media outlets.

Prior to joining Reason, Gilroy was a senior planner at a Louisiana-based urban planning consulting firm. He also worked as a research assistant at the Virginia Center for Coal and Energy Research at Virginia Tech. Gilroy earned a B.A. and M.A. in Urban and Regional Planning from Virginia Tech.

Harris Kenny is a state and local government policy analyst at Reason Foundation, a non-profit think tank advancing free minds and free markets.

Harris has worked alongside policymakers in Colorado, Texas, Florida, North Carolina, Arizona, Oregon and elsewhere to implement public policy solutions. Harris is currently serving as a member of the Local Authority Working Group of Colorado Governor John Hickenlooper's Amendment 64 Task Force, which is providing guidance on implementing recreational marijuana legalization. He conducts research on public finance, public-private partnerships, privatization, public safety, criminal justice and regulatory policy issues.

Harris has appeared on various television and radio outlets, such as National Public Radio, HuffPost Live, Al Jazeera, Voice of Russia and Colorado Public Television. His writing has been published in The Wall Street Journal, The Denver Post, The Sacramento Bee, The Orange County Register, Real Clear Markets, reason.com, and other print and online outlets. He also serves as co-editor of Reason Foundation's Annual Privatization Report (reason.org/apr) and Innovators in Action (reason.org/innovators) publications.

Prior to joining Reason Foundation, Harris worked at the Los Angeles Economic Development Corporation. He earned a BA in Economics from Pepperdine University, where he worked as a research assistant to Dr. Luisa Blanco at Pepperdine University's School of Public Policy.


twitter-bird-blue-on-white_small Follow Harris Kenny on Twitter @harriskenny

Katrina Currie is a policy analyst at the Commonwealth Foundation.

Elizabeth Stelle is a policy analyst at the Commonwealth Foundation.