A new report from the Kentucky Chamber of Commerce examines how greater engagement of the private sector in state government through partnerships can help the state meet essential needs while saving tax dollars and improving efficiency.
The report, Private Solutions to Public Problems: Partnerships to Build a Better Government, was released Tuesday (July 23, 2013) as part of the Chamber’s annual Business Summit. It points the way toward addressing the persistent challenges that are created when the demand for money to fund state government programs exceeds available resources.
“The pressure on public resources is compounded by an economy that is still recovering from the recession as well as by unsustainable spending in several areas of state government,” noted Chamber CEO Dave Adkisson. Earlier “Leaky Bucket” reports from the Chamber detailed budget trends that found state spending on corrections, Medicaid and public employee benefits to be growing faster than the overall state budget and the state economy.
“This erodes funding for education – the area where we must make strong investments to build a successful future for individual Kentuckians and the state as a whole,” Adkisson added.
The approach advocated by the Chamber’s new report is known as a public-private partnership, or P3. A classic P3 usually involves a private entity working with a government agency to provide financing, construction and operation of an infrastructure project such as a highway or building. The Chamber’s report expands that definition to include the general trend of states contracting with the private sector to provide a wide range of government services to the public.
The Chamber’s research found that governments can achieve several important goals by partnering with the private sector: saving money, gaining expertise, improving quality and risk management and taking advantage of private-sector innovation. Possible arrangements for P3s range from the design and construction of a project to providing specific services to long-term leases and program operations.
Kentucky already has some experience in this area, the report noted, using private vendors to provide such services as billing for Medicaid and operating psychiatric hospitals. Two universities have contracted with a private company to design, build and manage new dormitories, and P3s are in place to promote economic development in the state’s two largest metropolitan areas.
An existing state law is intended to provide accountability when the state contracts for private services in general, but Kentucky does not have a strategic approach to contracting for services. It also does not have – unlike 33 other states – any form of a P3 enabling law for highway and bridge projects.
The Chamber report recommends that Kentucky:
- Enact legislation to enable the creation of public-private partnerships for a wide range of infrastructure projects at all levels of government
- Consider the creation of a state P3 office or unit to foster the development of public-private partnerships
- Enact legislation to create the Kentucky Competitive Government Council to identify opportunities within state government for the use of private partners, promote transparency and monitor the implementation of partnerships
“We believe Kentucky can take an important step by enacting these recommendations to create a system for partnerships that will make the best use of tax dollars to deliver the services Kentuckians need and deserve,” Adkisson said.
Click to download the report.