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The Post-Standard


Competitive Sourcing Can Save Millions

June 21, 2005

By E. J. McMahon

Many state and local governments throughout the country - led by both Democrats and Republicans - have found that opening more public services to private competition can produce significant cost savings and quality improvements.

Since George Pataki took office as governor 10 years ago, New York state has increased its use of private firms to perform some relatively small-scale activities. But competitive contracting has not yet taken root as the preferred approach to providing public services in New York. As a result, many larger savings opportunities remain to be pursued.

For example, New York spends more than $3 billion in state funds on highway maintenance, bus transit subsidies, mental health facilities, motor vehicles record-keeping, human resources management, prisons, and welfare and Medicaid administration. In just these areas, efficiency gains at the low end of the5 percent to 50 percent range usually attributed to competitive sourcing could translate into annual savings of hundreds of millions of dollars.

Given our high taxes and ever-growing fiscal pressures on government, state officials should do more to encourage private providers to challenge New York’s entrenched public-sector monopolies.

The governor can spur the process in two ways:

Establish a new oversight agency, the Empire Competition Council, to establish competitive contracting as the standard way of doing business for every level of government in New York. Modeled on successful agencies in other states, it would include representatives from both the executive and legislative branches of state government, the state comptroller’s office and local governments.

Create a permanent Sunset Review Commission to recommend ways the government can cut costs, reduce waste and improve efficiency and service levels. Specifically, the commission would review 20 percent of state programs each year, assess the importance of each agency function and recommend the elimination or consolidation of unneeded or outdated programs.

To date, Gov. Pataki’s go-slow, under-the-radar approach seems to have emboldened public sector monopolists to seek a rollback of even the modest gains that have already occurred.

The state Assembly recently passed a "contracting" bill that may qualify as this year’s No. 1 example of deceptive advertising in the state Capitol (which is really saying something). The list of conditions, exceptions and requirements in the legislation is designed to make any outsourcing of public services virtually impossible in practice. No wonder it has been pushed by public employee unions.

It’s not enough to just say "no" to such retrograde proposals. To preserve and build on the gains from existing outsourcing arrangements, the governor needs to spearhead a new effort to create a permanent, institutional framework for competitive contracting. This way, the benefits of competition can be tapped not only to help solve the state’s latest budget problems, but to pay dividends for future generations of taxpayers throughout New York.



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