07/11/2026
No to privatization!
While the privatization of state agencies is often marketed as a strategy for fiscal efficiency and innovation, historical evidence and economic analysis frequently reveal a different reality. Far from being a "panacea" for budgetary woes, the transition of public services to for-profit entities often results in increased costs, diminished accountability, and a quantifiable decline in service quality.
A primary argument against privatization is the fundamental shift in mission, state agencies exist to serve the public good, whereas private firms are legally obligated to prioritize shareholder profit. By privatizing a public service, it can hide previously accessible information and records from public scrutiny, undermining the very notion of open and transparent government records.
When a service is privatized, the public loses direct oversight. Contractual "trade secrets" often replace open-record laws, making it difficult for taxpayers to see how their money is being spent or to hold providers accountable for failures.
The promise of lower costs is frequently undermined by "low-balling", a tactic where private firms submit artificially low bids to win a contract, only to increase prices once the state has dismantled its own internal capacity to perform the task.
The Government Finance Officers Association estimates that the indirect costs of drafting, monitoring, and enforcing private contracts can add up to 25% to the total contract price.
Once a state sells an asset or signs a long-term exclusive contract, competition vanishes. The private entity becomes a monopoly provider, removing the very market pressure that was supposed to ensure efficiency.
The transition from public to private management has led to documented failures across various sectors and states:
A. Indiana’s Toll Road Failure
In 2006, Indiana entered a 75-year lease of the Indiana Toll Road to a private consortium for $3.8 billion. While the state received an immediate cash infusion, the private operator eventually filed for bankruptcy in 2014. According to reports from In the Public Interest, a similar public-private partnership for an Indiana highway cost the state $137.3 million more than if traditional public financing had been used.
B. New Jersey’s DMV Reversal
New Jersey attempted to privatize its Division of Motor Vehicles (DMV) in the late 1980s. The result was a catastrophic failure characterized by massive technology glitches, multi-hour wait times, and administrative chaos. The experiment was so poorly received that the state was forced to bring the agency back under public control to restore basic functional standards.
C. Iowa’s Medicaid Mismanagement
After Iowa privatized the management of its Medicaid program in 2017, costs did not stabilize as promised. Instead, the average cost of insuring participants climbed nearly three times faster than it had under public management. Furthermore, the shift led to frequent disputes over denied claims and reduced access to care for the state’s most vulnerable citizens.
D. Economic Development Scandals
In Florida, the privatized agency Enterprise Florida faced intense scrutiny over "misuse of taxpayer funds, conflicts of interest, and exaggerated job-creation claims" (Good Jobs First). Similar privatized development boards in Wisconsin and Ohio have been criticized for lack of transparency and failing to meet the very economic benchmarks they were created to achieve.
The privatization of state agencies often trades long-term stability and public trust for short-term fiscal optics. When the profit motive is introduced into essential services, such as healthcare, infrastructure, or social services, the incentive to "cut corners" to satisfy margins often outweighs the commitment to quality delivery.
In a bid to strengthen care, an Oklahoma agency plans to shift to a privatized model for many of its behavioral and mental health services in some areas of the state.
