Thursday, October 15, 2009

Hope for Florida’s Budget: Curb Executive Compensation at Privatized Companies

From Representative Elaine J. Schwartz, Florida House District 99:

I have kept a promise that I made in April during a debate on the floor of the Florida House of Representatives' chamber. It was a promise to examine and review the compensation packages enjoyed by the executives of those companies that are awarded state contracts which provide services formerly held by state employees.

The promise was made in response to a bill that passed both the House and Senate, but was vetoed, thankfully, by Governor Charlie Crist. It mandated a decrease of 4 to 5 percent in salaries of most state employees.

There are considerably fewer state employees now than there were in 1998, when then-Governor Jeb Bush administration threatened to nearly put government out of business, and substitute it with private companies. In every aspect of state government, private companies headed by “privateers” with cushy perks have attempted to replace the lessening numbers of public servants.

Determining how much of our hard-earned taxpayer dollars are secreted away in the form of executive compensation for these private companies is a question that my district staff, interns and I have attempted to learn this summer.

It is especially urgent that streams of income be found immediately. In 2010, Florida is likely to face another tight state budget.

During the 2009 legislative session, the Republican leadership failed to design and implement new and fair revenue streams. Instead, they cut benefits to those who need services the most and tried to decrease state employee salaries. My fear for the coming session is that privatization will continue to suck the lifeblood out of our taxpayers. Privatization failed to save money or streamline government.

Some people believe that critical state services are best performed solely by private entities. Their rallying cry is that private companies are more efficient than government. To refute this point, one need only compare Medicare’s approximate 3 percent overhead with the 30-plus-percent overhead incurred by private insurance companies, as some researchers have indicated.

Let no one be mistaken or deceived when the ideas start flying next session. The true focus of privatization is not efficiency, it is profit. Unfortunately, favored private companies continue raking in huge sums of taxpayer money, especially when compared to the salaries of the state employees who previously performed these services.

My staff and I, with the help of Florida Chief Financial Officer Alex Sink’s office, and the staff of numerous committees, councils and state agencies, have looked at executive salaries, perks, and compensation packages. Our findings went far beyond our worst expectations.

In many cases, it is impossible to determine how much the executives are earning proportionate to the value of their contract with the state. But our research brought to light one thing: these firms, especially their executives, are held accountable for very little and their work is insufficiently monitored. These contracts must be transparent and easily accessible.

I propose a mandatory revision of state contracts. All firms seeking to provide services to the state should have to disclose their executives’ compensation packages, and the information must be open to public review.

Meanwhile, I commend State Senators Al Lawson, D-Tallahassee, and Dave Aronberg, D-Greenacres, for their proposals to limit automatic increases in privatized contracts.

I am hopeful that these and other reforms will bring crucially needed new oversight to state spending and improve the public’s confidence in our state government, while halting the drain on my precious resources – taxpayer dollars.

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