Mayors fear no
privatization action
this year

The bill would make it legal
for the counties to continue to
receive services from private
and nonprofit businesses

By Craig Gima
Star-Bulletin

Alarmed by the lack of action on a privatization bill, the four county mayors, nonprofit organizations and businesses planned to march on the state Capitol today.

"There is a real chance that they (the Legislature) will let it (privatization) die this session, and that will have disastrous impacts on all of our operations," Honolulu Mayor Jeremy Harris said in a conference call to the Star-Bulletin with the other mayors.

The privatization bill would protect the counties and the state from court challenges to contracts with businesses and nonprofit organizations that provide government services.

The services provided by private and nonprofit companies range from landfill operations and picking up trash in parks to the transportation of the handicapped and children.

"If we can provide the service cheaper and more efficiently through the private sector, we need the ability to do that," Harris said.

"For the Legislature to go another year without resolving this issue is very irresponsible, and the city is going to be subject to lawsuits."

The mayors planned to meet with Senate Human Resources Committee Co-Chairman Brian Kanno (D, Makakilo) and other senators on a conference committee.

The bill is still in committee because the House and Senate could not reach agreement on the measure before a midnight internal deadline Friday.

Because the session is being extended, the conference committee could have another chance to work out the differences between the two bills, but no new talks have been scheduled.

A key difference between the latest House version of the bill and the Senate bill is a House proposal to exempt privatization from collective-bargaining laws.

Maui Corporation Counsel J.P. Schmidt said unless contracts are exempted, unions can block private contracts by refusing to negotiate with the counties.

The House and Senate generally agree on provisions to establish a committee to come up with a "managed competition" process to determine if private entities or government can provide services better.

But the two sides disagree about whether existing contracts should be subject to review and cancellation by the managed competition process.

The Senate bill is supported by government labor unions.

The four mayors released a joint statement supporting the House version.

"The state Senate leadership must do what's right for the people of Hawaii and not just what's best for (United Public Workers Director) Gary Rodrigues," the mayors said.

Kanno said the Senate bill is a compromise reached after talking with all parties involved in privatization.

"We hope to adjourn with a privatization bill," Kanno said. "I'm not sure it's the bill the mayors specifically want."

Both bills address the state Supreme Court's decision. The court ruled that services traditionally provided by civil service workers could not be privatized.

"They (the Supreme Court) said in their opinion the Legislature needs to take some definitive action if we want to continue to privatize these services," said Maui Mayor Linda Lingle.

"Our financial outlook is far from favorable here on Kauai," said Mayor Maryanne Kusaka. "It's just desperately in need of alternate ways to provide these cost-effective services for our people."

Kusaka said a $25,000-a-year contract to pick up garbage at police substations and parks is being challenged by the United Public Workers.

She said the county does not have the equipment to do the job.

"In order to provide that same service it's going to cost this county $37,000 more than the $25,000," she said.

State courts have also established a procedure for contracts to be reviewed.

But the mayors say the process is cumbersome and expensive because the decisions can be appealed and challenged in court.

Big Island Mayor Stephen Yamashiro said the unions have challenged most of the contracts submitted for review.

"It will end up in litigation for everything," he said.

---

Privatization accountability
is a must, auditor Higa says

By Harold Morse
Star-Bulletin

Interest in privatizing government functions is surging, said state Auditor Marion Higa.

But she warned that privatization must be managed to guarantee accountability to taxpayers for costs and results.

"Privatization will not absolve the state of responsibility," she said in her 1997 annual report.

Higa noted in the report that privatization is nothing new.

"Now, however, Hawaii's policy makers are considering privatization of more functions in new ways -- for example, handing over the operation of prisons to a private company," Higa wrote.

In other areas, Higa said the Department of Business, Economic Development and Tourism improved its contract planning in defining the need for services and results desired.

"However, the department remains weak in managing its contracts, which results in poor accountability over the contractors and weak controls over contract payments," the report said.

Other examples of poor accountability included no evidence of monitoring 75 percent of contracts reviewed in welfare-to-work programs -- and management shortcomings in a contract with a private health organization involving child and adolescent mental health, resulting in money being spent for services that weren't rendered.

An example of faulty monitoring came up in state libraries. "The Board of Education did not adequately review a major outstanding contract of the public library system," the report said. "Adequate review might have prevented some of the problems that subsequently arose."