Recently Maj. Gen. Rita Aragon, Oklahoma’s Secretary of Veterans Affairs, suggested that school gyms, playgrounds, and athletic fields should be opened to the public after hours. She argued that these “shared-use agreements” for public facilities would reduce obesity, especially in poor communities that may not have access to private gyms, parks, or safe sidewalks.
Aragon’s idea would be an effective and efficient use of public dollars based on a simple premise: the state identifies a public good and directly provides it. Contrast that with an obesity-fighting idea from a few years ago, when Sen. Mike Mazzei proposed a tax credit to reimburse 20 percent of the cost of health club memberships. This would have been more expensive than simply opening up schools and limited to those who could afford 80 percent of a health club membership. In addition, a substantial part of the credit would be wasted on those who would have joined a health club without it.
Sen. Mazzei’s tax credit was not made law, but it is emblematic of a common problem in public policy. Because we have stigmatized direct government action in many areas, we look for workarounds that are less efficient than if the state just went ahead and provided the service. This creates gaps in both efficiency and accountability.
Another example is how the state has encouraged rehabilitation of historic buildings. Lawmakers decided this was in the public interest, so they created a tax credit. However, because the credits were transferable, recipients sold many of them at 80 or 90 cents on the dollar. The buyers likely had no relationship to the rehabilitation project, so a significant percentage of the money was immediately wasted.
A more straightforward way to accomplish this goal would be to provide grants for the restoration. The state could collect proposals for projects and award funds based on merit and need. That type of program is more likely to be attacked by critics of public spending, but if lawmakers believe a program is worthwhile they should not be afraid to stand by it. Tax expenditures may be safer politics, but at a large cost.
Tax credits are not the only inefficient back door used for public goals. Privatization can create a similar problem. In some situations, a private company will have specialized skills that the state needs to contract for, and certainly some activities are more appropriate to the private sector. However, we can’t always assume privatization is more efficient.
A prime example is support services in public schools. In an attempt to respond to complaints about under-funded schools without actually putting more money into schools, one lawmaker suggested privatizing food, medical, janitorial, and transportation services, as if that would free up money for the classroom.
Yet if we think it through, it’s not clear how privatization would help. We haven’t introduced more competition, as there’s still only one buyer — the school district. Privatization would in fact add more bureaucracy, since instead of simply hiring janitors, the schools will be hiring janitorial companies with their own layers of management (not to mention a profit margin taken off the top). One study that reviewed hundreds of federal contracts found that public employees were less expensive than contractors in 33 of the 35 occupational classifications.
Contracting with private companies or monkeying with the tax code are complicated workarounds compared to directly providing a service. The most efficient way to achieve public goals is usually to keep it simple.