Yesterday, I had my first chance to speak before one of North Carolina’s House committees, this one on public private partnerships or “P3s.” Click below to hear my testimony (eight minutes, mp3), and here is the written version, which each legislator received a copy of—not that I read it word for word.
My role was to support and complement the main presentation from Leonard Gilroy of the Reason Foundation. Like him, I noted that P3s are nonpartisan ventures. Rather, they are opportunities to utilize competition to bring more accurate and cost-effective provision of state commodities, and I sought to encourage North Carolina’s legislators to push in that direction.
The state’s precarious fiscal condition provides plenty of incentive for cost-effective alternatives. The State Budget Solutions Project has noted North Carolina’s total debt at nearly $100 billion or $30,000 per private sector employee. Yet, contrary to public perception and despite limited tax revenues, North Carolina’s state-level government spending has continued to increase. Even after we discount for inflation, in total it increased by 4 percent between fiscal years 2009 and 2011.
Before doing that, though, legislators do well to step back and frame the issue. I posed two questions worthy of address when considering a P3. First, does this property or activity have a legitimate role in state activity? If not, simply sell those assets off rather than prolong the waste. Second, if the activity does have a legitimate role, how far can we go in terms of delegation to private, competing vendors?
There are plenty of wasteful albatrosses available to point to. In fact, North Carolina has approximately 15,000 properties, but a comprehensive list does not exist. So the time has come to clean house.
One such example I highlighted was the state’s system of aquariums—not exactly a legitimate role of government. These have a value of about $70 million, including $40 million worth of buildings, and they already cover half of their expenses through gate takings. There is little doubt they would flourish under private ownership, as so many aquariums have all around the world. So if the will to sell these off is not there, I’m not sure what will exists in the legislature for any privatization.
On the other hand, prisons and jails would seem to be core government activities, and the state has already utilized the private sector there. Legislators could easily expand those ventures and allow sheriffs to do the same with jails.
Between that spectrum, though—from the aquariums to the prisons—there is a whole array of options for different forms of P3. And I encourage people to consider the policies of the counties, since they have already proved P3s to be both effective and politically plausible. The John Locke Foundation survey of the counties is an ideal starting point for these ideas.
