Giving Privatization a Thoughtful Look : Bankruptcy Fuels Debate on Shrinking Government

Privatization as an alternative to costly or bloated government has been getting extensive discussion around the country. In Orange County, the added problems of bankruptcy have fueled the debate.

If privatization seems like a cut-and-dried alternative, Orange County is proving to be a laboratory for many variations on the basic idea of simply selling off public assets. Not all the experiments or studies are directly related to the financial crisis, but the county is learning something valuable in this period. Three sets of unrelated privatization ideas in the county this summer illustrate this point.

The Reason Foundation has just released a study on Orange County airports urging the county to seek a single firm to enter into two separate agreements. The first would be a long-term contract to manage John Wayne Airport, and the second would be a purchase or lease agreement for the same firm to develop a commercial airport at El Toro.

There remain many important concerns about privatizing airports in Orange County. These have to do with really big questions, such as whether El Toro should even be an airport down the road, and others that are more structural, such as how privatizing John Wayne Airport would be possible in view of such things as federal requirements on revenue.

But the study is informative and useful for its detailed research. It explores a full range of possibilities--contract management, long-term leasing and outright sale--all within the umbrella of the larger concept of privatization. If nothing ever comes of this proposal, it stands as a good resource and as an inspiration to think creatively about options for providing services to the public.

In another study, the Social Services Agency has just concluded a critical analysis of a private proposal to take over home care to the elderly and disabled. National Homecare Systems had promised to save the county between $3 million and $5 million over three years, and said it would also pay home care providers more than the minimum wage and do a better job.

The county ultimately concluded that the program would be unlikely to produce savings and would actually aggravate the county cash flow problems. It also decided that there were other problems involving loss of Medicaid funding, risk of litigation and need for waivers.

Accordingly, they all but ruled out the plan, which pleased advocates for the elderly, disabled and blind. The company, meanwhile, said it will try again. This may be a case where leaving privatization undone is best. But the county has benefited at least from considering options.

Meanwhile, in a completely different area of privatization, the city of Seal Beach says that its first year with the only privately run jail in Orange County has been a success. The city reports it saved more than $30,000 in county booking fees and operations costs and earned an additional $85,000. The jail suggests that some operations can be privatized in a cost-effective way. There are critics, but for low-risk, minimum-security prisoners, it is certainly one alternative to the persistent problem of jail overcrowding. Whether all jail operations can or should be turned over remains highly controversial.

The important point is that there are variations of privatization that can be used in different spot situations. For example, the Reason proposal represents the evolution of some earlier thinking about what to do with airports in view of the bankruptcy. The field of privatization turns out to be a vast one, with lots of options worth considering.