Privatizing Government Services
December 8, 2017
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  • Do business-run public services save taxpayers money?

    Current Situation

    Infrastructure Needs

    President Trump’s 2018 budget in May proposed spending $200 billion for infrastructure over 10 years. Critics noted that it also included $255 billion in cuts of existing infrastructure programs, amounting to an overall reduction in federal infrastructure spending. But administration officials said some of the money being trimmed was for administration and oversight and not for infrastructure.58

    The budget did not spell out how federal money would be leveraged with private investment to reach $1 trillion in spending. However, several of Trump’s principal advisers, including Pence and Transportation Secretary Elaine Chao, favor relying on private investment.59

    Other analysts say any final plan must include privatization. “If they want to get to a trillion dollars, it’s going to be really hard for them to do without private finance,” says Cohen, of In the Public Interest, because “the other choice is public finance or, even better, public funding, … and this Congress isn’t going to do it.”

    Savas believes private capital could provide a much needed boost. “America has great infrastructure needs … and here’s an opportunity to tap the private sector,” he says. “As long as it’s managed well, the basic idea is good.”

    While the administration’s infrastructure plan remains on hold, state and local governments continue to privatize highway, bridge and water and sewer projects. In Arizona, Republican Gov. Doug Ducey is asking the U.S. Department of Transportation to allow the state to privatize rest stops along interstate highways, bringing in private businesses such as restaurants or gas stations that would pay to upgrade the facilities. The idea is opposed by the National Association of Truck Stop Owners, which says it would hurt existing businesses operating at rest stops.60

    Los Angeles International Airport is seeking a private partner to build, operate and maintain an “automated people-moving system” to transport travelers to car rental facilities as part of a $14 billion upgrade in airport facilities.61


    Air Traffic Control

    Trump supports privatizing air traffic control, transferring it from the Federal Aviation Administration (FAA), which oversees aircraft traffic across the country, into a separate nonprofit corporation.82

    The administration’s plan is modeled closely on legislation introduced by Rep. Bill Shuster, R-Pa., chairman of the House Transportation and Infrastructure Committee. Shuster’s plan aims to modernize the aging air traffic control system, with the costs borne by carriers through user fees established by a 13-member governing board. The idea is supported both by the major U.S. airlines and the air traffic controllers’ union.83

    Puentes, of the Eno Transportation Center, says the proposal would allow airlines and airports to make needed long-term investments to upgrade the system, something Congress, because of its annual spending and budget battles, hasn’t done. “Congress can’t authorize money in the way it needs to for long-term investment,” Puentes says.

    Air traffic controllers staff the control tower at Portland International Jetport in Maine on Oct. 26, 2017 (Getty Images/The Portland Press Herald/Derek Davis)

    Air traffic controllers staff the control tower at Portland International Jetport in Maine on Oct. 26, 2017. President Trump supports transferring air traffic control from the Federal Aviation Administration to a nonprofit corporation. Major U.S. airlines and the air traffic controllers’ union support the idea. (Getty Images/The Portland Press Herald/Derek Davis)

    By creating a private, nonprofit corporation to manage the system, something several European nations have already done, “you can spin it off from the FAA and set up an entity that can start to deliver this modern system we’ve been talking about for a long time,” Puentes says.

    However, opponents of the proposal, especially those involved in providing air service to small, rural communities, see it as a power grab by the major airlines. “This is an attempt to really get more control over the system and be able to direct the infrastructure investment and resources toward the hubs that they [the major airlines] care about,” says Selena Shilad, executive director of the Alliance for Aviation Across America, a coalition representing small airports, businesses and other groups. 

    Modernizing the system can be done without privatization if the government adequately funded the FAA, Shilad says. Maintain an equitable system that treats all parts of America fairly is essential, she says. 

    “The FAA makes sure we maintain public transportation both big and small,” Shilad says. “If you transition that to a governance board that’s overseen by private interests, a 13-person board dominated and heavily influenced by the airlines and larger private interests, then we’re concerned about how smaller airports would fare.” 

    Others, such as retired U.S. Airways pilot Sully Sullenberger, famous for landing a disabled passenger jet in the Hudson River in 2009, argued in an op-ed that privatizing air traffic control operations would threaten passenger safety and access to aviation.84

    Air traffic privatization also faces powerful resistance from lawmakers wary of giving up federal control of the system, fearing it could leave the major airlines with too much power over commercial aviation. Prospects for the legislation passing are considered uncertain.85

    In July, for instance, a Senate Appropriations subcommittee rejected President Trump’s proposal, citing concerns that the nonprofit corporation would not have congressional oversight.86