Massachusetts Governor Takes Privatization Tack

WHEN Massachusetts Gov. William Weld (R) first took office in 1991, he called for the creation of a leaner, more efficient ``entreprenurial government.''

Faced with a bloated state bureaucracy and budget deficit, he vowed to make use of the private sector to encourage competition, improve government performance, and reduce costs.

State officials say they believe Governor Weld's restructuring efforts over the past 3-1/2 years have paid off. Privatization of state mental hospitals, building of skating rinks, improving prison health care, and upgrading highway maintenance, among other things, have saved taxpayers more than $300 million, Weld officials say.

``Privatization is not about public vs. private,'' says Steven Wilson, director of strategic planning in the Weld administration. ``It is about monopoly vs. competition. It is about ... saying: Who is willing to take this on and do it for less?''

To be sure, privatizing government services at the local, state, or federal level is nothing new, but more states are looking into a systematic approach to the idea, says John O'Leary, policy analyst for the Reason Foundation, a market-oriented think tank based in Los Angeles.

A 1993 Council of State Governments (CSG) survey found that state-level privatization has increased over the past five years and will continue to do so throughout the 1990s.

One reason states are privatizing is cost savings, according to the survey, as well as a need for greater flexibility, speedy implementation, and better quality in delivery of services.

``I think fiscal pressure puts a demand on government at any level to do things better,'' Mr. O'Leary says. Government privatization takes a variety of forms such as asset sales, vouchers, contracting out for goods and services, and public-private partnerships, to name a few. According to the CSG, mental health, social services, transportation, and corrections are state agencies most likely to be privatized.

In Massachusetts, state officials point to impressive savings. Before privatization, the Bay State had the highest prison health-care costs in the nation at $4,300 an inmate, while none of its prisons met national health care standards. After privatization, health-care costs were reduced to $2,600 per inmate, and all of the 20 state prisons now meet national health-care accreditation standards.

Another success story is hospital consolidation. Since 1991, nine Bay State mental health, mental retardation, and public health hospitals have been closed. Patients were relocated to private, community-based residences, with many preferring this type of home environment over an institutional setting. Savings that resulted include $60 million in operating costs, and $140 million in capital expenditures.

Michigan is moving in the same direction. Through the use of the state analytical model called PERM (Privatize, Eliminate, Retain, or Modify), state officials have recommended contracting out prison inmate health care, highway maintenance, and fruit and vegetable inspections. Meanwhile, the state has privatized its state liquor distribution system and is in the process of doing the same thing to its state Accident Fund, a worker's compensation insurance company.

In Texas, the state's Council on Competitive Government determines whether private firms or different public agencies can deliver state services more cheaply.

In the future, the Council will look at the possibility of privatizing state mail operations, or computer maintenance services.

Privatization is not without problems, including the possibility of unfair labor practices and political awarding of contracts. Public employee unions have fought Weld's efforts.

State Sen. Marc Pacheco (D) said that Weld's initiatives lacked clear labor standards, administrative guidelines, and management oversight.

Meanwhile, the governor has put new proposals in his 1995 budget that would relax some of the privatization restrictions.