Legislation Would Ensure that Cost Savings Are Not Achieved Through Increased Charges on Taxpayers, Reduced Services, or Lowered Workforce Standards
TRENTON – A bill sponsored by Senate Majority Leader Loretta Weinberg and Senator Shirley K. Turner which would set basic standards for the privatization of public services contracts, including a requirement that privatization would yield cost savings to the taxpayers which are not based on increased charges, reduced services or lowered workforce standards, was approved by the Senate Labor Committee today by a vote of 3-2.
“Recently, there has been a major push to privatize public services, under the context that privatization can save taxpayers money,” said Senator Weinberg, D-Bergen. “However, when such privatization is done at the expense of the quality of services, or when cost savings are achieved by paying employees a substandard wage or charging the public additional fees, then we really have no place engaging in such privatization contracts. This is about ensuring the continuity of services, and protecting public employees and tax and ratepayers of New Jersey from hidden charges and wage and benefits reductions resulting from privatization contracts.”
“Our State’s public workforce provides a level of service to New Jersey’s taxpaying public at a cost that I think would be hard to match from the private sector,” said Senator Turner, D-Mercer and Hunterdon. “While there may be instances when privatization makes sense, the employees and the public must be protected and the integrity of services must be preserved. If savings cannot be achieved while adhering to these basic standards, then privatization isn’t in the best interest to New Jersey.”
The bill, a Senate Committee substitute for S-968 and S-1494, would establish procedures and standards whenever a public entity seeks to enter into a contract for the privatization of public services. Under the bill, a contract for the privatization of services could not be entered into without a cost analysis demonstrating actual savings for the public agency and for taxpayers. The bill would also require sustained oversight of savings and public disclosure regarding contracts to provide taxpayers with a level of transparency and to ensure that savings are not achieved by increased charges on the public, reduced services or decreased workforce standards.
Specifically, the bill would prohibit the State and any other public entity in New Jersey from entering into a contract of $250,000 or more to purchase private entity services unless:
• the public entity solicits competitive, sealed bids for the contracts based on a comprehensive statement of requirements;
• the contract requires that the public not be charged fares, fees or other chargers greater than those currently charged, and that the quantity and quality of the services provided must be equal to those provided under the public entity;
• the private contractor is qualified to perform the work, and contractor employees have qualifications and wage and benefits rates at least equal to public employees currently performing the services. Contractors under this bill would be required to submit payroll records to the public entity, and failure to pay the prevailing wage would be subject to penalties and remedies under the “New Jersey Prevailing Wage Act;”
• the public entity permits the union of the affected public workers to review current cost estimates and propose cost savings measures which are compliant with the standards under this bill.
The contractor would also have to comply with antidiscrimination standards and would be required to have no adjudicated record of substantial or repeated noncompliance with federal or State law pertaining to the operation of a business. After receiving bids, the public entity would be required to issue a comprehensive written analysis of the total contract cost and certify that the proposed contract is in compliance with the provisions of the bill and that the total estimated contract costs is less that the cost of services performed by public employees, with a statement of the amount of the savings.
The Office of the State Comptroller would be required to review the public entity’s certification of cost savings and would prohibit the entity from entering into the privatization contract if the Comptroller determines that the bid does not provide cost savings or that the entity failed to comply any requirement under the bill. The State Auditor would be required to conduct post-audits of contracts subject to the bill, evaluating whether the projected cost savings were obtained without raising charges, cutting services, or cutting workforce standards, and the contractor and the public entity would be subject to penalties and sanctions if the privatization contract is deemed to be noncompliant with the standards in the bill.
This bill would not apply to contracts for legal, management consulting, planning, engineering, design services or any contract solely for public works subject to the State “Prevailing Wage Act.” It would also not apply to any privatization contract first entered into before the effective date of the bill.
“The standards we’re talking about under this bill – actual cost savings, a livable wage for employees, no hidden charges for taxpayers, and no drop in the quality of services – these are very basic expectations that we should measure all privatization efforts against,” said Senator Turner. “Unfortunately, there are some people in public service that have the mentality that the private sector is always better, when there are instances in which that simply might not be the case. Through this bill, we can make sure that we’re getting a good deal for the taxpaying public of New Jersey without undermining the services that people depend on or paying committed public employees less than they’re worth.”
“Whenever government moves to privatize services, we have to make sure that we’re treating public employees with fairness, and that we’re ensuring that services will continue at a level that the taxpayers have come to expect, and without increased costs or new fees to pay for those services,” said Senator Weinberg. “Privatizing services is not an open invitation for private contractors to cut corners, provide substandard services, cut employee salaries or benefits or reduce the level of services provided to the public. This is about fairness to public employees and the taxpaying public as a whole, and would make sure that privatization doesn’t occur for the sake of privatization alone.”
The bill now heads to the full Senate for consideration.