Privatizing state services: The House caves in

In a prudent move, particularly in fiscally tight times, the House Ways and Means Committee’s budget proposed giving state officials more power to pursue savings by hiring private companies to provide state services. That would have saved an estimated $10 million in public funds. But under the threat of a floor battle instigated by legislative allies of public-employee unions, the House leadership largely backed down. It was a clear case of lawmakers putting the unjustified demands of those who work for state government ahead of the interests of taxpayers.

Currently, the anti-privatization statute known as the Pacheco Law makes it difficult for agencies to seek savings; it requires that any proposed privatization contract for more than $500,000 first be reviewed for savings by the state auditor, under assumptions that tilt the outcome sharply in favor of the status quo. The law has basically shut down all privatization efforts in state government.

In its budget proposal, the Ways and Means Committee called for raising the threshold for the auditor’s review to contracts over $2 million, projecting savings to taxpayers of up to $10 million from that reform. But organized labor objected strenuously. Faced with a floor amendment that would have kept the current threshold in place, House leadership agreed to scale back to $750,000, a level that would eliminate most of the savings.


Unions object to privatization because they fear it would reduce public-sector jobs. But the purpose of state government isn’t to be a jobs program, particularly one that turns a blind eye to opportunities for savings. Further, contracting out doesn’t necessarily mean public-sector pink slips. Public employees whose functions are transferred to the private sector can be assigned to different roles. The reduction in positions could come when employees retire or otherwise leave state employment.

House Ways and Means Chairman Brian Dempsey declares he’s not giving up on bigger Pacheco Law reforms. “We are going to continue to look at this, talk with folks, talk with the administration, and try to move forward,” he says. All Beacon Hill policy makers, from Governor Patrick on down, should recognize the importance of getting maximum bang for the public buck — particularly at a time when they are asking people to pay more in taxes.