LANSING —In his nearly eight years in office, Governor John Engler has turned dozens of state functions over to the private sector, saving taxpayers millions of dollars. But the administration's overall track record in privatizing is mixed, according to a series of stories by reporter Chris Andrews in the Lansing State Journal: Some notable successes have been marred by a few snafus.
One of the administration's most successful efforts, notes Andrews, was the sale of the state's workers' compensation insurer, the Accident Fund, to Blue Cross/Blue Shield of Michigan in 1995. Critics predicted that if the state got out of the insurance business, premiums would rise and small businesses would be unable to buy affordable workers' compensation insurance. But, says Andrews, ". . . premiums industrywide plunged about 32 percent between 1995 and 1997 and businesses have more options than ever. The state received $255 million from the sale, Blue Cross reported net income of $57 million in 1997, and once-stressed-out workers seem happy with the change."
The administration's latest privatization move came in July of this year, when the state administrative board unanimously approved the sale of the state's vaccine lab to BioPort, Inc. for $25 million. An Associated Press report noted that Governor Engler "expressed his happiness that the aging, money-losing lab would soon go into private hands where it is expected to prosper."
Controversy continues to plague the 1997 partial privatization of Michigan's liquor distribution. State officials are examining the feasibility of placing the financial end of the operation back under public control by having the state's 13,000 bars and stores pay for their liquor electronically through an existing system run by the Michigan Lottery.
Nonetheless, Jacquelyn A. Stewart, chairwoman of the Michigan Liquor Control Commission, maintains that the privatization has been successful and cites these facts as evidence: The state no longer needs to own and staff three large warehouses and 63 leased facilities; free delivery saved licensees in the City of Detroit $1.4 million alone; licensees are permitted more purchasing choices than ever before; and the state netted $91.1 million from the 1997 privatization.
The state's switch to managed health care through private providers in the prison system was troubled when the contract holder, United Correctional Managed Care, failed to meet all its obligations to vendors. The state switched to Correctional Medical Services, which Ken McGinnis, director of the department of corrections, says has "performed very well and is making full payments to vendors."
Contracting for road maintenance around Lansing and the state's early experience in privatizing campground reservations continue to raise questions about whether a single, centralized agency to oversee privatization is needed, but the administration, while acknowledging temporary shortcomings, maintains that department directors are capable of performing all necessary oversight.
Finally, a U.S. District Court Judge in May set back the administration's program to use private sector workers to carry out employment services with federal and state funds through the Michigan Jobs Commission. Judge Robert Holmes sided with the U. S. Department of Labor in ruling that private sector workers cannot be used. The administration plans to appeal.
