Government for Lease

The fine folks at the Allegheny Institute today dove into the numbers surrounding Pittsburgh Mayor Luke Ravenstahl’s push to lease the city’s parking garages and spaces.  The proceeds will go to boost the Steel City’s flagging pension fund, which is in jeopardy of state takeover if the deal doesn’t happen.

Our aim today is not to quibble with the report or its findings, mostly because we do not employ a team of economists here at the Triadvocate.  However, after having perused the report, it got us thinking about the push for privatization.

Cities like Pittsburgh are leading the way when it comes to leasing and selling public assets.  That wave will no doubt hit Third Class cities across the Commonwealth in the coming decade, and the reasons are fairly simple.  First, all cities are in the same fiscal boat, more or less, struggling to balance their books with declining commuter tax revenue, and no ability to effectively collect money from non-profits.  Most are also staring at badly-underfunded pension plans as well.  Mayors are looking at this “no way out” scenario, and contemplating privatization and long-term leases of assets.  In fact, Pittsburgh may not be first to the dance when it comes to leasing its garages, as Harrisburg has been contemplating the same plan for years and could act soon, lest the city itself plunge into bankruptcy. 

Will this wave of privatization splash down on the shores of state government as well?  It already has to some degree.

Both Tom Corbett and Dan Onorato have come out in general support of privatization efforts.  Corbett has publicly thrown his support behind a plan to privatize the State Store system, and Onorato has for years invited folks to come into Allegheny County to discuss privatizing everything from the construction of the Mon-Fayette Expressway to the parking concession at Pittsburgh International Airport. 

The House GOP earlier this year unveiled a comprehensive transportation infrastructure funding plan, which includes the aggressive use of public/private partnerships, all of which followed Governor Rendell’s call to lease the Pennsylvania Turnpike.

As is the case with many of our posts of late, the driving force behind this phenomenon will be the state budget deficit.  With lawmakers increasingly averse to tax increases, there will be a seat at the table for anyone who can produce new revenue without harmful budget cuts.  This will be right in the wheelhouse of companies who would be more than happy to take some assets off of the hands of the state for a nice sum of up-front money.

Think about state parks, for instance.  Private operators across the country are beginning to win concessions at those facilities.  We have little doubt you will see the same push in Pennsylvania.  How about driver’s license processing?  We also fully expect the next governor to do a thorough inventory of state office buildings outside of Harrisburg and see which ones might fetch a nice price on the open market.

When you stop to think about it, the out-sourcing of governmental services is really nothing new.  Most municipalities and some state government agencies routinely use independent parties to pursue back taxes, fines, penalties and other debts owed to them.  Privatizing prisons and half-way houses started back in the 1980s and is still going strong.  Even mental health, mental retardation and drug and alcohol services are routinely performed for government by independent contractors.

It all comes down to a debate on what the core functions of state government really are, and how far policy makers are willing to go in the face of a $5 billion deficit, a $3.5 billion transportation funding hole, and a $3 billion Unemployment Compensation loan coming due in 2011.

We are willing to bet they go pretty far.