Democrats Struggling to Push Ahead With Privatization Bill

Joe Tyrrell | October 4, 2012 | More Issues
Substitute legislation still hung up, pushback from across the aisle, business community

State Senate Democrats are attempting to put together legislation that would ensure that privatizing public services translates into actual savings for taxpayers. But they’re getting some pushback from across the aisle, with Republicans complaining there are too many strings attached, as well as from the business community.

It was expected that the bill would go before the Senate today, but it’s not on the agenda.

Among other things, the legislation would require public agencies get a fiscal analysis before they contract for more than $250,000 with a private vendor to take over services.

Subsequent performance would be subject to a state audit, which could lead to penalties or even loss of the contract for failing to produce promised savings. The bill also would require that private vendors pay “comparable wages” to public employees and give hiring priority to those laid off because of the privatization.

A hearing on the measure before the Senate Labor Committee earlier this week quickly broke along partisan and ideological lines. The committee advanced a substitute version combining bills from Sens. Loretta Weinberg (D-Bergen) and Shirley Turner (D-Mercer).

The changes exempted some public works services and those performed by disabled workers in rehabilitation centers.

Almost no one mentioned the amendments. Instead, consumer and labor groups generally praised the effort, though some called for sterner measures. Some speakers anticipated future battles, and scandals, if Gov. Chris Christie proceeds with plans to let a private vendor run the New Jersey Lottery. But business groups said the measure would cost taxpayers instead of protecting them.

The arguments did not appear to change any minds. Sens. Fred Hadden (D-Gloucester), Richard Codey (D-Essex), and Sandra Cunningham (D-Hudson) all supported the measure. Sens. Dawn Marie Addiego (R-Burlington) and Anthony Bucco (R-Morris) opposed it.

The legislation “undercuts the underlying promise of privatization,” said David Brogan, first vice president of the New Jersey Business and Industry Association. The provisions for comparable salaries and hiring laid-off workers would discourage potential bidders and prevent savings, he said.

“We’re trying to promote transparency in contracting and accountability to the taxpayers of New Jersey,” said Eric Richard, legislative affairs director for the New Jersey AFL-CIO. Even a report from the governor’s privatization task force recommended a “rigorous cost-benefit analysis” before such contracts, he said.

“This bill would skew the process, making it impossible for private contractors to meet the requirements at a lower cost,” said Diane Walsh of the Commerce and Industry Association of New Jersey.

“The process for privatization in New Jersey is simply broken,” said Seth Hahn, political director of CWA-New Jersey. Contracts often “take a lot of money off the top and send it to a management firm that is not in New Jersey.”

“We recognize that in some cases, privatization may save money,” said Fran Ehret, president of the local representing Turnpike employees. But she said that is frequently “all on the backs of the workers,” not a help to the economy, unemployment, or social costs. Her members already have accepted a $4.00/hour pay cut, she said.

“Ultimately, the goal here in any privatization is to offer the best services at the lowest price,” said Michael Egenton, senior vice president of the New Jersey Chamber of Commerce. “We can’t hinder privatization to go forward by creating impediments and burdens and additional hurdles.”

John Donaddio, executive director of the New Jersey Association of Counties, said his members already analyze the potential impacts of privatization, and the bill would interfere with their ability to negotiate terms.

But state Sen. Fred Madden (D-Gloucester), the committee chairman, replied that “the genesis of the bill is that if you are privatizing services, you need to be able to substantiate that you are saving money” for the taxpayers.

The two men found more agreement on the subject of shared services, which Donaddio said has also helped cut costs along with using private vendors.

Several speakers mentioned the pending Lottery privatization, pointing out that the governor is not promoting it on the basis of potential savings, but increasing revenues.

“Our members could perform the duties that this private company will go out and do, however they’ve been shackled” by departmental regulations, said Bob Purcell, a representative of the CWA local representing some state workers.

He and other speakers identified GTEC, the company that provides lottery machines, as the frontrunner for the new contract. While it has U.S. headquarters in Rhode Island, it is a subsidiary of the Lottomatica Group of Italy.

“It seems to be ironic that last year a bill went into place to require state workers who live in Pennsylvania and New York to move into New Jersey to keep their jobs . . . but the profits from that contract will go to a foreign country.”

Like other labor speakers, Purcell said the legislation should be strengthened to prevent those kinds of situations.

In prepared statements, Weinberg and Turner said the legislation is not intended to prevent privatization, but to provide documentation for taxpayers that any claims of savings are realized.