howardnlby Howard Stephenson
After years of operating in the red, Salt Lake County decided in the early 1980s to get out of the business and contract ambulance services with a private provider, Gold Cross. Now, twenty years later, several County officials and employees want to give in-house ambulance service another shot even though Gold Cross has provided adequate service while saving taxpayers money.

The County’s business plan for take-over of ambulance services projects an annual net profit of $580,410 if the County assumes the responsibility of emergency transport from Gold Cross. However, your Taxpayers Association has scrutinized the County’s business plan and has found that the County has made several very optimistic and unrealistic assumptions. The County’s business plan potentially overestimates the number of transport requests, the dollar amount of the average transport fee, as well as the collection rate while underestimating the write-off rate.

Private Contractors Pay Taxes

Gold Cross pays state income taxes and property taxes that benefit public education and also pays sales taxes that benefit higher education. Salt Lake County, on the other hand, is tax-exempt, and these lost tax revenues for public and higher education are not accounted for in the County’s business plan.

In 1996, Salt Lake City considered getting into the ambulance business, but a private consultant firmly concluded that the City should continue to contract with Gold Cross.

Protecting taxpayers against government encroachments on the private sector is a never ending battle. Private sector entities have a built-in incentive to control costs whereas government can cover out of control costs by simply raising taxes. The County’s plan exposes taxpayers to unneeded financial risks.

The New Trend

Utah is not the only place where local governments are considering getting into ambulance services. Public employee unions across the country are putting pressure on municipal and county officials to cancel contracts with private ambulance providers in order to provide jobs for government employees. The public sector has been Big Labor’s most successful recruiting area for several years.

State and local governments in Utah in recent years have been pushing for government control of other types of services including fitness centers, golf courses, medical pharmacies, and even development of residential subdivisions. Whenever government gets into the business of business the tax base is diminished, forcing the remaining taxpayers to pick up the tab. In a state which is already made up of 70% federal, non-taxable land, the conversion of more taxable property to un-taxed property only magnifies Utah’s challenge of adequately funding essential services including public education.

Contracting-out Can Save Precious Tax Dollars

The Utah Taxpayers Association has for years advocated just the opposite action of that now being considered by Salt Lake County: contracting out services which can be provided more effectively through the private sector.

Despite an opportunity for significant cost savings, public officials often face strong opposition to contracting efforts, especially from public employees and their unions. In fact, in an effort to prevent expansion of private sector contracting, public-employee unions in many states have pushed for legal protection for their jobs in the state legislatures or in the courts.
Some States Prohibit Contracting

The Reason Foundation reports that in Hawaii, for example, the state supreme court held that the state constitution protects civil service positions from elimination unless state legislation specifically exempts a position from protection. The court ruled that civil service protection extends to all services that customarily and historically have been provided by civil servants. The public-employee union has interpreted the ruling to mean that all service contracting must cease.

In California the courts have long held that the state constitution prevents the state government from contracting out any job that can be performed by civil servants, according to the Reason Foundation. To legally contract out a service, the government must show that the contract will save money, cannot be performed by civil servants, or is an entirely new service. A recent state supreme court ruling held that the California Department of Transportation violated those guidelines by issuing contracts for entire projects, when parts of each project could have been performed by civil servants.

Colorado’s state constitution provides similar protection for state employees, stipulating that no function performed by a state employee can be contracted out to the private sector.

Fortunately, in Utah there are laws limiting the size of construction projects that can be done by city or county crews. While some local entities push those limits by breaking up large projects into smaller segments, there is legislation being prepared for the upcoming session of the legislature which would more clearly define those limits.

Contracting Creates Flexibility and Innovation

As the Reason Foundation points out, contracting out is not just about saving money. It is also a way to create flexibility, innovation, and greater speed in the implementation of projects. While public employees deserve fair treatment, government is intended to serve citizens and taxpayers–not public employees.

As Robert Mallet, the City Administrator of the District of Columbia, put it, “Privatization must be a vital component of any government re-invention and fiscal reform strategy, and it must be a readily accessible instrument to use when appropriate. To remove it, or render it ineffectual, would be both foolhardy and irresponsible.”