FISCAL PRESSURES AND THE PRIVATIZATION OF LOCAL-SERVICES

The privatization movement appears to have lost some momentum in the U nited States over the 1990s. Although local governments continue to lo ok for ways to deliver services more efficiently by using private cont ractors, the pace at which they are issuing contracts has slowed. In p art, the trends may reflect political realities. Public employees natu rally are concerned about losing their jobs, and they constitute a siz able share of the electorate. The limited role of outside contractors may also reflect economic pragmatism, especially in the face of greate r scrutiny of past efforts to privatize services. Another influence ma y be the improving fiscal position of local governments. To the extent privatization has been a response to fiscal pressures, the growing fi scal comfort of local governments would lessen the degree to which the y seek out low-cost providers. The author reviews trends in outside co ntracting by cities and towns between 1987 and 1992 and uses regressio n analysis to sort out the various influences. The results confirm tha t fiscal pressures, as evidenced by heavy debt burdens, did spur priva tization in the early 1990s. She then examines localities' decisions t o drop services altogether, and finds that contracting out and reducin g services appear to have been alternatives over this period. Cities a nd towns tended to choose one or the other course of action, not both.