Controller Assails Wilson on Privatization : Government: Connell urges independent audit of agencies before deciding which functions should be turned over to firms. Governor’s aide defends plan to have appointees make those decisions.

State Controller Kathleen Connell warned Tuesday against Gov. Pete Wilson’s proposal to shift vast functions of state government to private businesses without an independent investigation of costs and needs.

“I don’t know how you come up with a grand scheme of privatizing if you don’t lay the basis with a performance audit,” said Connell, a self-described Democratic fiscal conservative.

She also criticized Wilson for opposing a bill that would have authorized the state controller and the governor to jointly evaluate the performance of executive branch departments and programs. These audits would scrutinize costs, effectiveness, economics, and efficiency and service to the taxpayers.

The bill cleared the Senate overwhelmingly but was stalled in the Assembly last summer after opposition from Wilson, who was then running for President. Connell said the governor apparently “didn’t want an audit going on while he was running for another office.”

In an effort to reduce the size of state government, Wilson has ordered his officials to examine which programs could be spun off and operated more cheaply by the private sector.

Officials were told to report to him by March so that a formal proposal could be sent to the Democratic-controlled Legislature, which has been hostile to privatization plans in the past. The program probably would generate opposition from public employee groups.

In an interview Tuesday with The Times’ Sacramento Bureau, Connell, an investment banker who was elected as the state’s chief fiscal officer last year with the support of public employee organizations, said the case for privatization has yet to be made.

The method Wilson is using--having his officials decide which programs should be kept and which should be jettisoned--gives her no confidence that the right choices will be made, Connell said.

Government bureaucrats, she said, might slough off programs “they no longer want to operate” and keep those that “they enjoy operating.”

On the other hand, Connell said, performance audits conducted by objective evaluators would examine government efficiency, scrutinize the costs of delivering services and study whether a department was doing its job.

But Wilson’s spokesman, Paul Kranhold, defended the governor’s use of his trusted top-level appointees to identify which services fill a vital, “core” function and which do not. He said those that come up short “should be farmed out to private business or another branch of government at a cost savings.”

“It’s not the role of some private auditor or Kathleen Connell’s office to identify which services are core and which are not,” Kranhold said. “We have not prejudged any service that government delivers.”

Connell said she has investigated privatizing some aspects of her department but discarded the idea when she learned that doing so might illegally compromise the confidentiality of certain records in her custody.

Kranhold said Wilson opposed the performance audits bill this summer because it was unnecessary. He said the state Finance Department is experimenting with a performance-type audit of the Department of Corrections, and that Connell should wait to see the results of that before seeking to expand performance auditing.