New Report Finds SB499, AB522 Could Increase Costs, Waste Money
Madison, WI – As the Wisconsin state senate and assembly today consider bills removing the requirement for cost benefit analyses for all WISDOT projects over $25,000, a new WISPIRG report finds that numerous government ventures in privatizing or outsourcing public work have ended up being a bad deal for taxpayers and costing more in the long run. As recently as 2009, a Legislative Audit Bureau report found that the Department of Transportation had spent $1.2 million on contracting work that would have been performed more cheaply in-house.
“Removing cost-benefit analyses for outsourcing WISDOT projects takes away protections for Wisconsin taxpayers,” said Bruce Speight. “It’s important to know whether privatizing public functions would save money or create higher costs. The cost-benefit protections make sure that governments don’t enter into bad deals.”
The new WISPIRG report, Outsourcing Outrages: Why Wisconsin Must Continue to Require Cost-Benefit Analysis When Considering Privatization Proposals, reviews a number of cases where state and city governments have privatized public functions and suffered big losses. Findings include:
• In Wisconsin a 2001 legislative audit revealed that taxpayers had been overpaying for private computer consultants, with some equivalent contractors receiving twice the hourly compensation as paid in-house.
• The City of Chicago hastily privatized its parking system, leaving city Aldermen with little opportunity to even read the 75-year agreement before the vote. The city received $1.2 billion in upfront cash, which was promised to fund long-term endowments to aid the city – but which were instead spent down in a few short years. Meanwhile, parking rates skyrocketed, increasing four-fold in some areas and were required during many hours when parking was previously free of charge. City residents became outraged as tickets were issued on many meters that failed to work or with inaccurate signage. The city is also sometimes forced to pay “compensation” to the private meter operator when streets are closed for repairs, parades or festivals. An Inspector General report subsequently ascertained that Chicago received almost a billion dollars less than it should have in the deal.
“An ounce of prevention is worth a pound of cure,” concluded Speight. “Requiring a cost benefit analysis is sound public policy when you consider how many contracts have resulted in bad deals for taxpayers. State Senators and Representatives should stand up for the best interest of taxpayers and reject SB499 and AB522. We applaud Senators Lasee, Erpenbach and Coggs for opposing this bill in committee; we urge them to do the same today on the Senate floor.
WISPIRG is a statewide membership-based, non-profit, non-partisan public interest organization that stands up to powerful interests. www.wispirg.org.