Capitol Comments

Yesterday, the University of Kentucky announced it is moving forward on a dormitory privatization agreement with Education Realty Trust (EdR).  In an email (and blog post) to students, faculty, and staff, President Eli Capilouto called the deal “an important first step…in the ambitious transformation of our infrastructure.”  In a recent piece in the Lexington Herald-Leader, a spokesman for the Association of College and University Housing Officers claimed privatization is “a topic we hear discussed a lot,” but “people have really taken notice” of the UK deal given its size. 

Capilouto indicated EdR owns and operates thousands of residence halls at colleges and universities in 23 states, including residential facilities at nearby University of Louisville.  Recurring budget cuts have prompted state universities across the country to pursue alternative infrastructure financing arrangements like those offered by EdR. 

By now, there is no need to recount how badly the Great Recession battered public finances, other than to reiterate that governments’ fiscal challenges remain unprecedented - especially at the state and local level.  The economy’s steep, prolonged downturn and slow recovery have hit tax revenues hard and put historic pressure on safety net programs. 

As noted in CSG's new fiscal and economic policy brief, challenges will likely persist through 2012, as Recovery Act funds dry up, healthcare costs grow, and other structural factors weigh on state and local budgets.  For policy makers weary of cutting spending or raising taxes to close budget gaps, asset privatization – the long-term sale or transfer of public assets to private parties – offers an attractive alternative.  Here is a run-down on some recent experiences with this practice at the state and local level. 

A USA Today piece describes how public employees in 21 states are buying credit toward early retirement or enhanced benefits.  

The Marketplace Fairness Act (S. 1832) would allow states to require sales and use tax be collected on remote sales, provided: (i) the state belongs to the Streamlined Sales and Use Tax Agreement (SSUTA), or (ii) the state meets a series of tax simplification requirements prescribed in the legislation.

Here are three questions to keep in mind when thinking about program effectiveness.  Though inspired by growing interest in state-funded school vouchers, these questions are equally applicable to job training, workforce development, healthcare initiatives, and other programs meant to assist target populations.