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To Solve Budget Woes, California Should Expand Privatization Idea

The opinions expressed by columnists are their own and do not necessarily represent the views of

California Governor Arnold Schwarzenegger delivered his final State of the State Address this week amid the harshest economic downturn since the Great Depression. With less than one year to go before he is termed out of office, Schwarzenegger and the state that elected him face monumental challenges.


The address was lean on any innovative ideas that could pull the Golden State out of its fiscal nosedive. But the Governor unveiled two banner proposals, the first his plan for a constitutional amendment to mandate greater spending on universities than prisons, the second his plan to privatize prisons.

According to the Governor, 30 years ago 10 percent of the state’s general fund was allocated to higher education, 3 percent to prisons. Now, prisons receive almost 11 percent of the budget, and higher education 7.5 percent.

“Spending 45 percent more on prisons than universities is no way to proceed into the future,” explained Schwarzenegger. “What does it say about a state that focuses more on prison uniforms than caps and gowns? It simply is not healthy.” Schwarzenegger boldly vowed, “…never again do we spend a greater percentage of our money on prisons than on higher education.”

State Senator George Runner disputes these numbers, reporting that in the most recent budget, the state spent 7.3 percent of the general fund on prisons and 9.7 percent on higher education. The Governor’s staff then admitted that excluded from the numbers in his speech was state spending on community colleges. Most community college students and teachers would consider themselves part of higher education in California.


But even going with the Governor’s numbers, in order to invert the current ratio of greater spending on prisons than higher education, the state must either increase spending on education—an impossibility considering a $20 billion budget shortfall—or decrease spending on prisons. The Governor proposed privatizing prisons to cut costs and thereby meet his goal to spend more on education than incarceration.

Schwarzenegger reasoned, “California spends $50,000 per prisoner. By comparison to the ten largest states, they spend $32,000 only. They spend less and yet you do not see federal judges taking over their prison health care system. Why do we have to spend so much more than they do?”

California’s prison system has been a chronic headache for Schwarzenegger and the legislature, making headlines as the federal judiciary took over the prisons and ordered the state to rectify prison overcrowding. Last year a federal judge ruled the state must release almost a quarter of the state’s prisoners.

By privatizing the prison system, Schwarzenegger believes the state will save billions of dollars. He encouraged the legislature to “find more cost-effective ways to run our prison system and allow private prisons to compete with public prisons. Competition and choice are always good.”


Such talk of competition and choice is exactly what will help pull California’s government out of its budget plight. But privatizing prisons is only half of the equation. If competition leads to lower costs in the prison system, why not privatize a whole slew of other similarly poorly-run government programs?

Like most areas in the public sector where government encroaches, the death of competition leads to poor quality at high costs. The state’s education system could certainly use some privatization and competition to spur long-overdue reform. Many parents pay double for their children’s education: they pay exorbitant taxes on a failing school system and pay for tuition to a private school that will actually provide a quality education. If competition will save prisons money, school choice will save taxpayers money.

The Governor’s restrictive constitutional amendment plan (requiring an emergency declaration or two-thirds vote in the legislature to suspend) will leave the state no choice in prioritizing public safety, which should be the first obligation of government.

From a proper-role-of-government perspective, the problem with Schwarzenegger’s proposal is that he intends to privatize the one area of society for which government is responsible: the execution of justice. Running the prison system can certainly be contracted out and save the state money. But since the chief responsibility of government is public safety—not education—the Governor is incorrect in altering the constitution to mandate greater spending on higher education. Yes, any society should place a high priority on ensuring its children are equipped to be successful. But the state should encourage families to provide the best education for their children by creating the least burdensome tax and regulation system.


But setting aside the misguided belief that government should provide education over public safety, Schwarzenegger’s plan to inject privatization and competition into mismanaged government programs is an idea long past due. Too bad Governor Schwarzenegger waited until his last year in office to embrace the free market principles he once trumpeted.

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