New York State officials need to do more to encourage private firms to compete with entrenched public-sector monopolies. Some ideas on how to accomplish this are presented in this month’s Syracuse Post Standard “Rethinking Albany” column by E.J. McMahon, director of the Empire Center for Public Policy.

McMahon notes that introducing competition into the provision of public services has produced efficiency gains ranging from 5 to 50 percent in other states and localities. In New York, savings at the low end of that scale would translate into hundreds of millions of dollars a year in reduced spending on areas such as highway maintenance, bus transit subsidies, mental health facilities, motor vehicles record-keeping, human resources management, prisons, and welfare and Medicaid administration.

Despite this potential, 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 more details on how the issue can be handled effectively by state government, see Private Competition for Public Services: Unfinished Agenda in New York.

Under Pataki, the state has privatized the operation and management of some high-profile physical assets, such as Stewart Airport and the World Trade Center (now, sadly, back under public sector dominance). But when it comes to services, the administration has been content to increase its use of private firms to perform some small-scale activities. McMahon’s column says Pataki’s “go slow, under-the-radar approach” may have emboldened opponents of competitive contracting.

For example, the Assembly has already passed one of the top priorities of the New York State Public Employees Federation (PEF) — a bill (A.1259) listing myriad conditions, exceptions and requirements for all types of outsourcing. Pushed as under the guise of “accountability” as a “cost-benefit analysis” measure, it would for all practical purposes make future outsourcing virtually impossible.

Moreover, both houses have passed another bill (S.1920) that would set stringent new terms and conditions for the use of private consultants. These include the requirement that all state contractors and subcontractors submit an “annual employment report” listing the number of people employed under the contact, their hours worked and their compensation. This kind of red tape is tailor-made to discourage outside firms from competing for state business.

About the Author

Tim Hoefer

Tim Hoefer is president & CEO of the Empire Center for Public Policy.

Read more by Tim Hoefer

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