S-1350/A-5430, which establishes procedures and standards regarding public services privatization contracts, has been released from committees.
Legislation that would limit local government’s ability to privatize public services is advancing. The League joins the New Jersey Association of Counties and New Jersey School Board Association in opposing the legislation.
As amended, A-5430/S-1350 any contract of $500,000 or more by which a non-governmental person or entity provides services previously provided by government employees to meet certain requirements. Among the requirements: every bid and contract for privatization requires that the public not be subject to any fees or charges greater than those currently charged; the services provided are equal to or exceed the quantity and quality; and prior to the solicitation of bids the employees and their union(s) be permitted to review the public agency’s estimates and submit an alternative cost estimate based on the review as well as submit an alternative proposal.
After solicitation of bidders, if a government entity determines that one or more bids comply with the requirements, the government entity must publicly designate the bidders it proposes to award the contract to and issue a comprehensive written analysis of the total contract costs, including transition costs, unemployment and retirement benefits of public employees, and the costs of monitoring and administering the contract. If the designated bidder is out of state, the total contract cost must be increased by the amount of income tax revenue that will be lost to the state by eliminating the public employees’ positions.
A copy of the proposed privatization contract and written certification must be provided to the Office of the State Comptroller for review. The State Comptroller can prohibit a public entity from entering a privatization contract if they determine that the bid does not provide cost savings or that the public entity has failed to comply with the provisions of this bill.
Contracts for legal, management consulting, planning, engineering, or design services; public work contracts subject to Prevailing Wage Act; or for services provided by persons with disabilities employed by rehabilitation facilities are not subject to the provisions of this bill.
As local units struggle with raising inflation while subject to 2% levy cap, without the full effects of the management reforms and with the continued diversion of energy tax receipts, officials are forced to re-examine their budgets and delivery of their services. ITo deliver the services that residents expect and want, local officials have been making structural changes not only to their budgets but to their services. S-1350/A-5430 would create such a burden on both the municipality and potential contractors that there would be limited privatization of services.
Making the decision to move from an in-house operation to a private contractor is never made lightly. Municipalities will often conduct a thorough analysis of the benefits and pitfalls of such a change. When developing their analyses, municipalities will involve the affected departments and will examine alternatives to delivering the services.
This bill adds many layers of review and oversight, rendering the process burdensome and lengthy. If the municipality passes all the hurdles to bid, we are concerned that there will be limited bidders willing to compete for projects, potentially resulting in a loss of savings. Municipalities must continue to have the flexibility to meet the current fiscal demands, and not have their hands tied further by legislation.
The legislation now awaits consideration by the Senate and Assembly’s respective budget committees. Please reach out to your Assembly representatives and Senator urging them to vote no on this legislation.
Contact: Lori Buckelew, Deputy Executive Director & Director of Government Affairs, lbuckelew@njlm.org, 609-695-3481, x112.