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Christie Vetoes Bill That Would Check His Power to Privatize

Colleen O'Dea | July 10, 2013

Legislation would have required all privatization efforts to demonstrate they save money, protect current quality of services.

The Christie administration made privatizing dozens of state programs and services a priority shortly after taking office, announcing it was a way to save millions of dollars during economically tough times. But recently, Gov. Chris Christie vetoed a bill whose purpose was to ensure that government privatization actually saved money.

Christie vetoed the bill, A-998, along with seven other bills a few weeks ago, as he signed the $32.9 billion state budget, saying they would "deplete the state's fiscal resources, restructure government in a significant manner, and significantly alter the policies and spending priorities" of the budget. He said the bills as a group would "potentially add hundreds of millions of dollars to state and local budgets, frustrating New Jersey's already over-burdened taxpayers and undermining the state budget."

Democrats, though, said the opposite. Christie’s veto is evidence he would rather advance his conservative ideology than ensure that privatization results in real savings, said Assemblywoman Valerie Vainieri Huttle (D-Bergen), chief sponsor of the bill.

“With this inexplicable veto, Gov. Christie further threatens to overburden taxpayers and undermine the state budget with unchecked privatization schemes,” she said.

The bill would have required that a contract for the privatization of public services not be entered into without cost analyses demonstrating actual savings for the public agency and taxpayers, without increased fees or other charges to the public, reduced quantity or quality of services, or lowered workforce standards, including reduced staff qualifications and pay.

The bill would have constricted the governor’s power to choose when to privatize, which he has now, as evidenced by the lottery bill. In many ways the issue is simple: Christie wants to privatize -- maybe for ideology, maybe for savings, maybe for both. The Democrats want to stop him -- maybe because they think it's the right thing to do, maybe because they want to protect the jobs of public workers. All the bill requires is that the governor demonstrate that any privatization will save money. That checks his ability to do what he wants, which is likely why he vetoed it.

Introduced at the beginning of the legislative session in January 2012, the bill moved from committee shortly after Christie vetoed a separate measure that would have required legislative approval for his move to privatize sales and marketing functions for the $2.8 billion New Jersey Lottery. The state treasurer last April agreed to award a contract to the sole bidder and about 60 state workers’ jobs are expected to be cut as a result.

Treasury Department spokesman Bill Quinn said the state signed the contract on June 21, but Northstar New Jersey Lottery Group will not fully take over the work until October 1. The group has begun interviewing for more than 100 jobs, and state workers may apply.

Democrats contended that the move was done quietly in part so the administration could receive an upfront $120 million payment to help balance the state budget. Under the complex terms of the contract, Northstar could earn $1 billion over the 15-year life of the contract, but it faces penalties for not meeting growth targets for lottery sales.

This is just the latest of the administration’s privatization efforts. The transfer of the former New Jersey Network to other public broadcasting companies and the leasing of two of the state’s racetracks were accomplished in 2011. Shortly after taking office, a committee appointed by the governor recommended privatizing about 40 government services in order to save $210 million.

Democrats now worry that Christie plans to privatize the state’s motor vehicle inspections program. New Jersey has had a contract with Parsons Corp. since 1998 to operate a hybrid system of centralized auto inspections. The chief administrator of the New Jersey Motor Vehicle Commission said a new three-year contract saves the state money without shifting the responsibility for inspections to private garages.

“We already know he's considering privatizing state motor vehicle inspections,” Vainieri Huttle said. “With this veto, taxpayers must not only worry about the inconvenience of such schemes, but they also must worry about being frustrated by wasteful costs."

Her bill would have required most privatization contracts of $250,000 or more -- not including professional and construction work -- to be bid competitively and not cost the public more. The agency would have had to have certified the privatized cost, the public cost, and the total savings. The state comptroller would have to have reviewed those estimates, with the state auditor checking to see if the savings targets had been met without higher fees to the public or diminished services.

“Decisions to use private contractors to provide public services must be based on factors that promote the public interest,” said Vainieri Huttle. “Requiring a thorough review and analysis of potential cost impacts before entering into any such privatization contract just made smart fiscal sense, but it appears the governor put his right-wing ideology above protecting the taxpayers.”

It also would have included a lot of provisions meant to help public employees. Contractors would have had to have provided at least a comparable level of service and could not pay their employees less than the public workers currently doing the job. The affected union would have had the right to review the agency’s current cost estimate and propose cost-savings measures. Qualified displaced workers would have had to have been offered jobs, and training and assistance would have had to be provided for those who lost their jobs.

That prompted Christie spokesman Michael Drewniak to charge that the bill was really about trying to protect the public employee unions.

“They are reflexive in their opposition to opportunities to do better with state government, as the administration did with the sales and marketing functions of the Lottery,” Drewniak said. “It was plainly obvious that their opposition was driven exclusively by a blind allegiance to their public employee union benefactors. That's what that bill was all about.”

The checks by the comptroller and auditor specified in the bill would seem to have fulfilled the strong recommendation by the governor’s privatization task force that the state set up a “permanent, centralized entity” to monitor privatized services, something the Christie administration has not done.

New Jersey had high-profile privatization problems with the initial enhanced motor vehicle inspection system and installation of the E-ZPass system on the toll roads. In both cases, the State Commission of Investigation blamed the failures on a “lack of due diligence, flawed contract documents, manipulation of the bid evaluation process, and failure to heed reasonable warnings.”

Administration officials have not taken some of the task force’s other suggestions for one reason or another -- outsourcing toll collections on the New Jersey Turnpike and Garden State Parkway was halted, for instance, when toll collectors agreed to a pay cut. The Department of Transportation rejected a suggestion to outsource the emergency service patrol after determining it could save money and still keep the work in house. Other efforts, including the Lottery partial privatization, did not come from the task force but from other studies.

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