What's the Real Cost of Privatization?

Privatization is a buzz word in Pennsylvania these days, even if no specific plans were put forth in Governor Corbett's budget proposal last week.

At the Pennsylvania Budget Summit on Monday, I heard from Shar Habibi of In the Public Interest on the broad issue of privatization. She shared some of the experiences of other state and local governments across the U.S. that have tried to sell off public assets or farm out services to private companies, usually for a quick infusion of cash. The D.C-based group's latest report goes through the basics of privatization deals and some of the issues that policymakers should consider before signing on the dotted line.

Getting a decent value for public assets seems to be a tricky deal for taxpayers. Many assets are difficult to put a price on. What are the waterfalls at Ricketts Glen worth? What are the real costs to families, as well as the state, if public universities go private? What happens to rates if parking garages or roads are sold? Like many things, the devil is in the details. We need to have a grasp of what the costs and fallout are up front to make informed decisions.

Looks like this issue will be around for a bit. While the proposal to privatize the state liquor stores was left out of the Governor’s proposed 2011-12 budget, he will be appointing a commission to study privatization — not only of the liquor stores but of other assets and services, too.

In his budget address, Governor Corbett stated, "This isn't about the money. It's about the principle. Government should no more run the liquor stores than it should run the pharmacies and gas stations.”

John Meyerson, who represents many of the workers at the state stores through the United Food and Commercial Workers, pointed out that this shift from financial to philosophical grounds for selling off the liquor stores was probably necessary. To get to the magic $1.7 billion to $2 billion sales price for the liquor store system, licenses would likely have to be priced at more than $2 million a pop. Other states to go down this road haven't come close to that amount.


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