Annual Privati\ue001ation Report 2006...2
Privati\ue001ation Brie\ue000s\u2026 3
Local Government Update...4

Managed Competitions...10
Water Privati\ue001ation...10
State Privati\ue001ation Update...12
States Expand School Choice...14

Refections \ue000rom
Privati\ue001ation
Pioneers... 5

Geo\ue000\ue000rey F. Segal(geo\ue000\ue000rey.segal@reason.org)
Lisa Snell(lisa.snell@reason.org)
Samuel R. Staley(sam.staley@reason.org)
Adam B. Summers(adam.summers@reason.org)
Steven Titch(steven.titch@reason.org)

Frequently cited by journalists and sought a\ue000ter by policymakers, Moore is one o\ue000 privatization\u2019s lead- ing authorities.

Reason Foundation, a national organization
dedicated to advancing a \ue000ree society through
the promotion o\ue000 choice and competition.

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www.reason.org\ue000

Reason\u2019s privatization e\ue001\ue001orts have reached two signi\ue000cant milestones. This year Privatization Watch turns 30 and Annual Privatization Report (APR) turns 20. This issue o\ue001PW highlights this year\u2019s

decades. In recent decades, governments o\ue001 all political com- plexions have increasingly embraced privatization as a strategy to lower the costs o\ue001 service delivery and achieve higher per\ue001or- mance and better results. Once considered a radical concept, privatization has largely shi\ue001ted \ue001rom an ideological concept to a well-established, proven policy management tool.

Virtually every government service\u2014\ue001rom local services like road maintenance, public sa\ue001ety, and water to national services like passenger rail, energy production, and social security systems\u2014has been success\ue001ully privatized somewhere in the world. Decades o\ue001 success\ue001ul privatization policies have proven that private sector innovation and initiative can do certain things better than the public sector.

This year\u2019s 20th anniversary edition o\ue001APR recognizes the tremendous advances in government re\ue001orm over the last two decades and \ue001eatures special contributions by several pioneering policymakers and researchers at the \ue001ore\ue001ront o\ue001 privatization and government re\ue001orm, including Margaret Thatcher, Indiana Governor Mitch Daniels, South Carolina Governor Mark San\ue001ord, \ue001ormer Indianapolis Mayor Stephen Goldsmith, E.S. Savas, and Reason \ue001ounder and transportation director Robert Poole, Jr. This issue o\ue001PW includes summaries o\ue001 their refections on privatization.

This year\u2019s report also addresses issues ranging \ue001rom \ue001ed- eral program per\ue001ormance, state and local policy innovations, and sur\ue001ace and air transportation, to telecommunications, property rights, school choice, and much more.

Republican and Democratic administrations alike have taken the idea o\ue001 privatization seri- ously. During his term, Ronald Reagan changed the nature o\ue001 the debate over the size and scope o\ue001 the \ue001ederal government, leading to the establishment o\ue001 President\u2019s Commission on

Privatization, the privatization o\ue001 Conrail, and the divestiture o\ue001 the two Washington, DC airports to a new local airport authority. Upon Reagan\u2019s departure \ue001rom o\ue001\ue000ce, privatization was a low priority in George H.W. Bush\u2019s administration, but was subsequently embraced by the Clinton administration.

In \ue001act, the Clinton administration\u2019s privatiza- tion successes exceeded those o\ue001 Reagan. Under Clinton, the \ue001ederal government sold the Elk Hills Naval Petroleum Reserves ($3.6 billion), the U.S. Enrichment Corporation ($3.1 billion), and many

billions o\ue001 dollars worth o\ue001 electromagnetic spectrum, as well as the competitive contracting o\ue001 more than 100 airport control towers and numerous military base \ue001unctions. Further, a 1994 plan by Vice President Al Gore called \ue001or air tra\ue001\ue000c to be con- verted into a sel\ue001-supporting government corporation, though the administration\u2019s 1995 proposal to create the U.S. Air Tra\ue001\ue000c Services Corp. \ue001ailed to get congressional support.

In 2001, the Bush administration adopted the President\u2019s Management Agenda, and one o\ue001 its ele- ments\u2014competitive sourcing\u2014has had a signi\ue000cant impact. Since 2003, agencies have conducted almost

1,100 public-private competitions \ue001or about 41,000 \ue001ederal positions, generating $5.6 billion in cost savings over the next \ue001ew years. Fixed costs and expenses to provide central direction and oversight between 2003 and 2005 totaled $211 million\u2014better than a 27 to 1 return on investment; i.e., \ue001or every dollar spent on competitive sourcing, 27 were saved.

When Margaret Thatcher was \ue000rst elected prime minister in 1979, the British government still owned the coal, steel, oil, and electricity industries, several auto companies, the telephone system, and a major airline, among other holdings. By the time o\ue001 her resignation in 1990, all had been privatized by Thatcher. Under her leadership, the United Kingdom rose \ue001rom 19th to second in the OECD rankings. Further, between

1979 and 1997, stock ownership among the British population had increased \ue001rom 7 to 23 percent, the middle class increased \ue001rom 33 to 50 percent o\ue001 the population, and the homeowner- ship rate increased \ue001rom 53 to 71 percent.

When it was incorporated in 1954 Lakewood, Cali\ue001ornia resolved to contract out \ue001or major municipal services. Since then, dozens o\ue001 other contract cities have emerged, including Sandy Springs, Georgia, which incorporated just last year. The city has contracted out nearly all government services and other nearby communities are \ue001ollowing its lead. According to the National Council \ue001or Public-Private Partnerships, the average American city contracts out 23 o\ue001 its 65 basic municipal ser- vices\u2014such as road maintenance, solid waste collection, and water/wastewater\u2014to the private sector, and states contract out approximately 14 percent o\ue001 their activities. Further, a 1997 survey o\ue001 1,400 cities and counties by the International City/County Management Association \ue001ound that more than 90 percent were contracting out services that had been done in-house just \ue000ve years earlier.\ue000

thought\ue001ul analysis on the causes o\ue001 con-
gestion and o\ue001\ue001ers detailed suggestions \ue001or
relieving it in America\u2019s cities. Balaker and
Staley clearly debunk the myth that there is
nothing we can do about congestion.\u201d

\u201cThe Road More Traveled should be required reading
not only \ue001or planners and their students, but \ue001or anyone
who loves cities and wants them to thrive as real places,
not merely as museums, in the 21st century.\u201d