Just before proposing the largest budget in the history of the state — and a new service excise tax of almost $1.5 billion to pay for it — Michigan Gov. Jennifer Granholm wrote the following in a public letter to state employees:
"It is a bitter irony that many of the critics who say we aren’t doing enough are the same ones to suggest we can continue to make cuts. They are wrong. If we are to maintain our standing as one of the best-run states in the nation, then a funded, effective, and committed team of public servants is absolutely essential."
The implicit assumption in this statement is that vital services will vanish if the overwhelmingly unionized government workforce were made smaller. The governor’s remarks are part of a campaign to convince the public that state government has been "cut to the bone." In fact, it’s barely been scratched, and many opportunities to realize huge savings have been ignored. Among these is the option to pay someone besides government employees to do the work.
For example, the corrections budget accounts for about 30 percent of state government workers. Privatized prisons save money in other states, but they have never housed more than 1 percent of Michigan’s inmates. The Rio Grande Foundation in New Mexico examined that state’s prisons in 2001 and found that private guards were watching more than 45 percent of the inmates. New Mexico’s annual cost per prisoner was 32 percent lower than the national median and $9,600 per prisoner less than states with no prison privatization.
Numerous other studies have demonstrated that prison privatization nets savings of between 5 percent and 15 percent. Nearly $1.3 billion has been appropriated for Michigan’s prison facility operations in 2007. Cutting that figure by just 5 percent through competitive contracting would save more than $63 million annually (before a single felon is released under a plan proposed by the governor). Furthermore, private prisons would pay tax dollars, like all other business, rather than spend them.
Outsourcing can yield significant savings even when a service is shifted to a less costly level of government, rather than to the private sector. When the city of Mount Clemens closed its 118-year-old police department and hired the Macomb County Sheriff’s Office to do the work, the city realized annual savings of 38 percent, or about $1.4 million.
Likewise, the yearly cost of policing the state’s highways could be reduced by more than $60 million by switching state police patrol duties to local sheriff’s deputies. Motorists would scarcely notice that the color of the highway patrol’s uniforms had changed; only the state employee union would. The state police troopers union recently denounced this idea as "foolish" and predicted that it would be "extremely unpopular" with voters.
Public school districts should contract out costly noninstructional services, including transportation, food service and custodial work. The decision by the Jackson Public Schools to switch to a private custodial company is expected to save the district $193 per pupil each year. Mackinac Center research shows savings from custodial outsourcing ranging between $100 and $200 per pupil for other schools that have taken this step, but only 63 of 552 school districts now report doing so.
Cutting annual noninstructional costs by just $150 per-pupil at all public schools would save $255 million per year. Why wouldn’t one of the "best-run states in the nation" encourage — indeed, demand — this reform? Part of the answer is suggested by Gov. Granholm’s response when Michigan’s largest public school employee union asked for her opinion on privatizing services:
"I have urged other units of government to think twice before they jump on the privatization bandwagon — the public sector can outperform the private sector with the right supports and management."
But no one is suggesting that government employees shouldn’t be allowed to show they can "outperform" private contractors in a competitive contracting process. If government workers submit the lowest price and provide quality service, they will win the contract — and taxpayers will win the best possible deal.
Given this, and given the successful record of privatization in Michigan and elsewhere, it’s hard to agree with the governor’s claims. State policy should not set up government workers as a privileged class — especially when so many residents are struggling to keep their own jobs in a private-sector economy that foots the bill for government spending.
Kenneth M. Braun is a policy analyst specializing in fiscal and budgetary issues for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.