Privatizing "Yellow Pages" Government

Executive Summary

Pennsylvania state and local policymakers are facing mounting debt, strained budgets, and underfunded public pension systems. These unprecedented challenges call for new and innovative policy solutions. By applying the "Yellow Pages test," governments of all sizes have been able to do more with fewer resources. The "Yellow Pages test," says that if a service can be found in the Yellow Pages of a phone book, government should consider buying it rather than using taxpayer dollars to hire and manage public employees.  

The commonwealth is involved in an array of yellow page services. While many Pennsylvanians are aware of efforts to privatize Pennsylvania's state-run liquor stores and to lease the Pennsylvania Turnpike, this report examines some of the lesser-known government-run businesses. For example, municipalities throughout Pennsylvania own a total of 49 golf courses; numerous local governments operate fitness centers; the Dauphin County Authority owns the Hyatt Regency at the Pittsburgh airport; the Department of Conservation and Natural Resources owns a luxury hotel at Bald Eagle State Park; and about thirty counties in Pennsylvania operate nursing homes.

The reason privatization works is simple: it introduces competition into an otherwise monopolistic system of public service delivery. Too often, poor performers in government are rewarded with budget increases following failure. Competition done right drives down costs and incentivizes good performance.

Diverse leaders throughout the country have embraced versions of the Yellow Pages test with great success. Florida's former Republican Governor Jeb Bush achieved more than $550 million in direct savings and avoided more than $1 billion in future taxpayer costs. Former Indianapolis Republican Mayor Stephen Goldsmith identified $400 million in savings and opened up more than five dozen city services to competitive bidding. And Chicago's Democratic Mayor Richard Daley has privatized more than 40 services and, since 2005, has generated more than $3 billion in privatization deals for the Chicago Skyway toll road, four downtown parking garages, and the city's downtown parking meter system.

All forms of privatization are simply policy tools—they can be effective when used well and ineffective when used incorrectly. In well-structured privatization initiatives the government and taxpayers gain accountability they rarely have with public agencies.  Privatization is a tool that can lead not only to cost savings, but improve service quality, enhance risk management, and result in greater innovation.

Getting government out of unnecessary services is not limited to auctioning off services and assets; privatization can also involve governments partnering with for-profit firms to deliver services or with non-profit organizations or volunteers.

This report surveys the scope of Yellow Pages Government in Pennsylvania, looks at examples of state and local privatization throughout the country, and outlines best practices to equip lawmakers to successfully transition government out of unnecessary services by implementing a variety of models.

Editors Note: This paper refers to Pennsylvania as having the most golf courses per capita.  While many travel information resources make this claim, recent data refutes it.