Administration and Finance

• Audit and budgeting services
• Custodial services and building maintenance
• Event and facilities management
• Human resources
• Inspection and Licensing
• Investment advice
• Lotteries
• Outsourcing and acquisition policy
• Pension fund management
• Printing and mailing
• Purchasing
• Tax collection

Lured by promises of increased efficiency, cost savings, and increased administrative flexibility, many local and state governments and the federal government are privatizing administrative and financial services. Privatization in the Administration and Finance sector varies from simple office functions like printing and purchasing to sensitive policy areas like human resources and investment consulting. It also includes services like inspection and licensing that have public safety implications. Several states have considered selling off their state lotteries to finance holes in the state budget, although none have done so as of the end of 2009. Perhaps because they are relatively out of sight, many administrative and financial functions were among the first candidates for privatization. On the federal level, this type of privatization is best illustrated by the example of the Internal Revenue Service contracting out tax collection to private companies. Large state agencies have also attempted to outsource their entire human resources departments, with sometimes very frustrating results. And governments on all levels use private consultants to help justify difficult policy decisions, including further privatization. Problems such as cost overruns, service quality degradation, and outright corruption have been consistently documented with privatization in this sector. Especially administrative functions involving big money and high-level decision-making -- such as operating lotteries, managing pension funds, the sale and leaseback of government buildings, and the growing use of private sector consultancies -- have generated conflict-of-interest abuses and a variety of other problems when privatized.

Recent reports of interest:

A Bad Deal: An Analysis of the Pending California State Office Building Sale/Leaseback Program
Beacon Economics, 2010

For additional reports, please see the research section on the side bar or visit our research library.

Bush's Iowa Trip a Bust

Publication Date: 
3/31/2005

Proposed Privatization of Social Security

History: 

Pursuing one of the top goals of his presidency, George W. Bush set out in 2005 to privatize Social Security, the retirement savings program that ended widespread poverty of the elderly. Bush proposed that voluntary personal retirement accounts be used to replace all or part of the traditional Social Security program. With Congressional allies, the Bush Administration crafted legislation (H.R. 3304 - Growing Real Ownership for Workers Act of 2005) to authorize the transfer of money from the Social Security trust fund to pay for private accounts, known as GROW accounts.  Several other bills also were introduced that would privatize Social Security by establishing individual accounts within the Social Security system either on a voluntary or mandatory basis (S.857/H.R.1776, S.1302, S.2427, H.R.440).

Researchers who analyzed the proposals concluded that privatizing Social Security would do little to improve the program's long-term financial solvency and would significantly reduce workers' overall future retirement benefits. 

Advocacy and citizen groups successfully rallied against the privatization effort, using a variety of campaign tactics, including organized rallies, town hall meetings, and the production and distribution of educational materials.  This coordinated campaign was able to systematically apply pressure to the political forces behind this large national privatization proposal. 

Ultimately, H.R. 3304 never made it out of committee for a House vote, and the Bush Administration never made significant progress on privatizing Social Security.   

 

Key Issues: 

In the intense debate about Social Security privatization, many economists, advocacy groups and citizens worried about how privatization would affect individual retirement accounts and the program's overall financial solvency.  Many argued that privatization would actually reduce workers' overall retirement benefits, since many new factors such as market fluctuations would have enormous effects on the amount of money in each person's account upon retirement.  Economists revealed that Social Security privatization would adversely affect women and minorities, as they would take the steepest losses due to those groups' historical earning patterns.

Economists and advocates also argued that the mechanism used to finance the private individual retirements accounts would actually deplete the Social Security fund even faster than if nothing was done.  The government would have had to start borrowing from the private sector almost immediately to be able to meet commitments to retirees and near-retirees. 

 

Advocacy: 

Several groups who had a big impact of defeating the Social Security privatization initiative are listed below.

Americans United for Change targeted 23 keys states, using aggressive public relations tactics such as rallies, press events, and town halls meetings with members of Congress. 

The Center for Economic and Policy Research (CEPR) made clear how unrealistic the Bush Administration assumptions were with a "challenge" to economists to find any way the numbers could work.

The Century Foundation created the Social Security Network, which brought together Social Security experts from think tanks and universities around the country to compile research outlining the privatization risks. 

 

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