Growth & Justice Blog

Reverse privatization improves emergency, fire services

GRAND JUNCTION, COLORADO — As a part-time Colorado resident (but income-tax-paying Minnesotan), I keep an eye on developments in governance and tax policy out here. After all, this is the birthplace of the Taxpayers Bill of Rights (TABOR), and Colorado's experience offers some lessons to Minnesota legislators who might get overly excited about managing state revenues and budgets by referendum.

Last week I ran across a story that might give pause to those who are enamored by the prospect of privatizing public services.

In Grand Junction, starting two years ago, the city fire department has done a sort of reverse privatization — taking over ambulance services once run by a private company and assuming the role as sole ambulance provider for roughly 1,200 square miles of the Grand Valley.

Critics blasted the city’s takeover of emergency medical services because it was estimated to cost taxpayers $1.55 million over five years. They also panned the ouster of American Medical Response and the company’s 28 employees who served the community for a decade.

By all accounts, AMR had done a good job. I talked with police and county sheriff officers who praised the reliability of service and competence of the company's workers. Area hospitals were concerned, too. 

But two years later, criticism in this conservative community of about 120,000 has melted away. Ambulances get victims to the hospital faster. Fire stations are better staffed (with 35 people per day versus 21). Crews going to fight fires respond faster, and captains on the scene are able to better coordinate efforts and oversee safety.

And the department is operating in the black.

Assuming responsibility for taking medical patients to the hospital and between medical facilities has generated more money for the Fire Department than first anticipated. Operations Chief Jim Bright said he expects the department to end the year with a $250,000 fund balance.

 

One former AMR worker who now works for the department said even though AMR provided high-quality emergency medical services during its tenure: “I saw the side of things where it was always down to the very bottom dollar.”

The dollars still matter, but now they're all going back into the community and the people being served.

— Charlie Quimby

Dakota County: Taking the long view pays

When local governments are under pressure to do more with less, it's tempting to focus on service cuts or fight over taxes, rather than tackle the long-term job of self-assessment and continuous improvement. Dakota County is one local government making sure it's looking at the big picture.

Last week, according to an article in ThisWeek, Dakota County commissioners reviewed the county's report card from the Minnesota Council for Quality. The evaluation will be used by the county to improve its operations.

Taking a strategic and systematic approach to improvement is a mark of good leadership. Dakota County should be congratulated for showing its commitment to delivering value to its constituents.

According to the county, its net price of government — measured as property tax levy as a percent of personal income — has decreased over the past decade [Download ReportCard.pdf]. Over the last four years, it has had the lowest county property tax rate in the state, supported in large part by growth of the county's tax base.

But part of that performance must also be due to good management practices.

In 2006, Dakota County became the first county in Minnesota to participate in the Minnesota Quality Award process established in 1991 and based on the Malcolm Baldrige Performance Excellence assessment. Early state winners were manufacturers and service companies, but in recent years emphasis shifted to helping organizations progress, and now schools and health care centers make up most of the participants.

The Malcolm Baldrige National Quality Improvement Act was passed in 1987 as a response to foreign competition and to inspire American businesses to adopt practices to improve productivity. Applying business practices in the public sector sometimes gets a bad rap, especially when "privatization" initiatives reinforce the customer model of government

in which the relationship between government and citizens is characterized as arms-length transactions rather than shared governance. This relationship undermines the legitimacy of public goods, makes long-term investments more challenging, and raises expectations that any new revenues will have immediate, direct benefit to the individual.

But the Baldrige program reflects good government principles, such as planning with a long-term view, understanding expectations, defining outcomes, measuring effectiveness, adopting best practices and being accountable for results.

Whether or not they follow the Baldrige approach, local governments can certainly benefit by following Dakota County's lead.

— Charlie Quimby

One place high fliers get a nearly free ride

Aviation isn't the first area we think of when we talk about transportation infrastructure in the state, but it's on my radar now.

On MPR's Midmorning today, one of the guests threw out an interesting number. Private aviation accounts for 15 percent of the costs to control our airspace, but provides only 3 percent of the funding. That's because the revenue formula is driven by commercial passenger ticket taxes.

I was driving as I listened, so don't quote me on the details. But the principle is pretty clear. A private jet carrying four people through airspace must consume nearly as much air traffic control attention as a commercial airliner, but the users of the private craft don't pay in proportion to that use.

Remember this example next time someone tells you it's unfair to ask high earners to pay higher taxes because they consume less government service.

— Charlie Quimby

Can philanthropy replace public funding of services?

The New York Times has a story about GiveWell — a nonprofit started by two young former hedge fund analysts — which studies charities and ranks them on their effectiveness. Unlike other philanthropic rating services that rely on tax forms filed by nonprofits, GiveWell applies more sophisticated financial analysis  to gauge outcomes achieved with the money.

Most would agree that developing better measures of performance for nonprofits would be a good thing, because it would increase accountability to donors and could help the organizations improve.

Although GiveWell itself doesn't make this point, its attempt to rate the efficiency of nonprofits raises the question of how we evaluate government efficiency — and whether there's any equivalence between the two.

The public sector, too, should be open to effectiveness measures — especially when the information can be used to improve the value of public services.

Under Gov. Arne Carlson, Minnesota used to do a very good job of this. That effort was cut from the budget after 2002, and since, we've heard mostly about lowering costs, not improving outcomes. (The Times story noted that funder bias against paying for administrative costs discourages nonprofits from collecting and evaluating the performance data GiveWell seeks.)

One anti-government talking point claims that charity is a good alternative to government spending. But what data supports that contention? Are smaller nonprofit service models scalable to a size that can serve all citizens across the state? And if they are, will citizens voluntarily fund them to a sufficient level?

Even in generous Minnesota, it doesn't seem that charitable giving can provide for substantially more public sector services.

In 2005, individuals, foundations and corporate giving programs gave a total of $5.1 billion in charitable contributions, according to the recent Giving in Minnesota Report. Using the report's data on institutional giving and applying the national average to individual giving, Minnesota contributes just slightly over half of the $5.1 billion to non-religious programs.

So let's say there's a $2.6 billion total capacity of voluntary private giving to fund existing education, health and human services, arts, environment, public affairs and other programs. That's equal to about 15 percent of the state budget.

What are the chances that any sort of tax cut would double present philanthropy? Even if we did muster another $2.6 billion in giving, it would equal only about half the state's annual health and human services spending.

The nonprofit sector simply doesn't have the capacity now to serve all Minnesotans, and a system of voluntary funding would come nowhere near equaling the government's capacity.

Growth & Justice is developing a project to help better understand when government is being effective and how we can make it more accountable to us donor-taxpayers. We'll keep you posted.

— Charlie Quimby

Five voices of nonpartisan reason

Every time I've been moved to post here in the past week, a good op/ed has appeared to momentarily cool my jets. In case you've missed a few, may I recommend:

• Jay Kiedrowski, former state finance commissioner under Gov. Perpich says: Let's stop the state's fiscal roller coaster.

Reducing variability should not be a partisan issue. It is a good-government issue. Wouldn't it be better for public officials all across the state to focus on service and innovation rather than on how they will survive the latest cuts or how they can justify more money?

• Charlie Weaver, executive director of the Minnesota Business Partnership, in Funding isn't everything — nor is it the only thing, speaks in favor of looking more strategically at school funding and considering investing in cost-effective reforms. He also compliments Growth & Justice for highlighting research about effective practices.
• Chaska Superintendant David Jennings fires back at Michael Wigley of the Taxpayers League of Minnesota.

It is actually the word "public" that bothers him more than the word "schools." It seems he simply does not believe in any public expenditure of taxpayer dollars. He instead believes we will all be better off when our futures are left in the hands of corporate America and the enlightened few who share his views and his economic stature.

• John S. Adams contributes one of the best explanations I've seen about why a focus on current spending represents shortsighted financial stewardship. As much as I've written on the topic, I'm embarrassed to admit I never drew such a clear and convincing parallel between business finance and state budgets. If you only have time to read one link, click this one.
• Economist Edward Lotterman provides a clear run down of why forgiving some subprime mortgage interest hikes might be the best of some not very appetizing policies choices.

And we're pleased to note that two of those voices echoing Growth & Justice positions belong to former Republican legislators.

It's not that all privatization is bad, but pass on the robots

[via Lincoln Institute of Land Policies] An article in the LA Times (registration required) describes the latest beachhead in the privatization of government services: Fulton County Georgia.

Newly established cities have been carved out of the large county that encompasses Atlanta and unincorporated areas north and south. The affluent, white, northern tier began a secession movement, to retain tax money that had been flowing into the city.

It's not where they're spending the money, but how that's of interest here:

Instead of establishing bureaucracies, the new cities have chosen to outsource nearly all government services to private corporations, making this the nation's most ambitious experiment in privatizing city administration.

For decades now, the county has been racially and economically split, with the north predominantly white and affluent, and the south predominantly black and poor. Although the first three new cities were formed in the north, charges of elitism and racism have faded to some extent as communities in the southern part of the county have sought cityhood too.

The dramatic and rapid shift toward an all-city county has sent shock waves through county government.

With potentially no unincorporated areas, county commissioners are, among other things, considering replacing the Sheriff's Department with a privately contracted jailer. And they are looking at replacing the seven county commissioners with a five-member panel.

Fulton County would continue to collect taxes and provide countywide services such as courts, health centers and senior services.

            [...]

Yet the movement's aim does not appear to be lowering taxes or unraveling bureaucracy. Despite their differences, the new cities all seem to share a desire for greater regulation, particularly when it comes to zoning.

One city has only five people on its staff, and contracts for basic services including tax collections, planning and zoning, and parks and recreation. Another farms out administration, public works and community development.

It remains to be seen how these smaller and fragmented duchies will fare as part of one of the nation's largest metroplexes. And whether private contractors can deliver more for the taxpayer dollar, not just now, but over the long term.

— Charlie Quimby

Transportation market mechanisms merit a closer look

Any hard-line, no-new-taxes, market-solutions-only types had to be disappointed if they went to this week's American Experiment Luncheon Forum: "Safeguarding and Rebuilding America's Physical Infrastructure: The Indispensable Role of Markets."

And why not?

Robert Poole, director of transportation studies for the libertarian Reason Foundation, came to town in the wake of the I-35W bridge collapse to talk with officials and the public about the nation’s transportation infrastructure needs and the potential role of toll roads in meeting those needs. But at the luncheon, sponsored by the conservative Center of the American Experiment, Poole’s comments resonated with listeners from all over the political spectrum. 

A stark funding challenge

Poole highlighted the dramatic drop in inflation-adjusted fuel-tax revenues per vehicle mile traveled on the nation’s roadways. He pointed out the $9-billion gap between the annual expenditures the U.S. Department of Transportation says are needed to maintain the current highway system and the current spending by federal, state and local governments. Beyond that, we're $62 billion short of what's required to address all possible bridge and highway projects with a positive benefit-to-cost ratio.

[Photo: Underside of Hwy. 61 Bridge, Hastings]

He also noted the lack of adequate investment in maintenance for our roads and bridges; the problems that flow from a political process that often distorts transportation spending priorities; and the durability issues that emerge from public-sector contracting rules that favor low-cost bids. 

Poole did advocate for privately financed toll roads as his preferred option for transportation projects. But he also readily acknowledged the need to “shore up the mainstream funding system,” and said he would support indexing fuel taxes to inflation as part of the answer to our transportation challenges.
Much of what Poole discussed would line up well with the concerns and comments of Robert Puentes, the transportation expert from the mainstream liberal Brookings Institution.

Policy wonks from the right and the left are often allies now, too, in supporting a growing range of strategies for incorporating market measures into our transportation system. Smart growth advocates favor congestion pricing and tolls that make explicit the costs of sprawling development. Conservatives support the same approaches as ways to encourage efficiency, reduce demand, and put the cost burden on users rather than society at large. And, as Robert Poole said Sept. 5, most everyone recognizes the legitimate public interest in highways and transportation. Certainly, regions benefit from the positive spillover effects of transportation infrastructure on the economy. 

The trick these days is to side-step unbending ideology when exploring reasonable approaches to the transportation challenge.

Market strategies have pitfalls, too

From a market solutions perspective, it’s important to recognize differences exist among strategies that rely on market mechanisms.

Developer fees for new transportation infrastructure differ from tolls and congestion pricing by public-sector transportation agencies, which in turn differ from privatization of roads and tolls. Privatizing roads and bridges can lead to the same process problems that exist now for public-sector transportation initiatives. That has been evident in states where horse-trading for votes on tollway privatization led to at least as much — and probably more — funding for low-priority road improvements and expansions. Privatization, it should be noted, is a major element of the U.S. Department of Transportation’s plan for addressing congestion.

From a progressive perspective, it’s important to emphasize that the public sector has an important and positive role to play in economic development and growth through its investment in infrastructure, transportation and other areas.   

In answering a question about whether the Minnesota Transporation Department itself ought to be abolished and privatized, Poole deftly defended the idea that overall public control of transportation is crucial. The private sector, on its own, will not provide adequately transportation infrastructure based on price-and-profit indicators because the benefits of the transportation system spill over broadly and cannot be fully captured by private-sector buyers and sellers.

And what’s more, transportation strategies appropriate for some locations won’t work for others. By way of example, a tollway may make sense for the busy I-90 into Chicago, particularly in an age when technology can assess the fees without stopping the drivers, but it’s likely to be unworkable for, say, Minnesota Highway 11 into Warroad.

It’s also crucially important that the burden for additional costs for transportation not fall disproportionately on lower- and middle-income Americans and Minnesotans. Both state and national tax structures have redistributed the burden from the wealthy to everyone else, and that must not continue.

Robert Poole spelled out many of the needs and the policy problems we face when it comes to roads and bridges. Good food for thought as we consider next steps. 

Tolls and fees are not popular with drivers, and drivers vote. Gas tax increases aren’t popular either, in part because the public instinctively recognizes the regressive impact of a "user fee" that is levied by the gallon used instead of ability to pay. 

In light of growing needs for investment in transportation infrastructure here in Minnesota, we’d all do well to consider the appropriate roles of the public sector, the private sector, pricing strategies, gas taxes, and transit as we consider how best to tackle our growing transportation problems.

What makes sense from a progressive perspective? And, more important perhaps, what will work?

— Dane Smith