US states hit by a deepening economic downturn are thinking of selling public properties to raise money and crawl out of financial holes.
States like Minnesota, New York, Massachusetts and Illinois are considering selling or leasing toll roads, parks, lotteries and other assets to raise money in a bid to ease or avert side-effects of a melting down economy, the Associated Press reported.
Minnesota Gov. Tim Pawlenty says he has proposed to privatize some public assets in the state to set the budget for January. The Republican is looking for cash to help close a $5.27 billion deficit without raising taxes.
Leonard Gilroy, a privatization expert with the market-oriented Reason Foundation in Los Angeles, believes that private investors like to pour their money in such projects because of their safe and risk-free nature amid a falling economy.
“Infrastructure is more attractive today than ever,” Gilroy said. “It’s tangible. It’s a road. It’s water. It’s an airport. It’s something that is – you know, you hear the term recession-proof.”
But Mark Price, a labor economist with the Keystone Research Center in Harrisburg, Pa., maintains that privatization could harm taxpayers in the long run as there would be a rush toward using state-owned assets to avoid higher tolls that by itself could wear these assets down faster and raise public costs over time.
“You’re privatizing some profits in this process and socializing some losses,” he said.
Selling or leasing public assets can produce an immediate infusion of cash for the state, while foisting the tough decisions, such as raising tolls, onto private operators instead of the politicians.
“The downsides are often after they leave office,” said Phineas Baxandall, a researcher with the consumer-oriented U.S. Public Interest Research Group in Boston.