Atlanta Looks at Outsourcing to Cut Growing Employee Costs

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Back in December, I wrote about Georgia's plan to privatize its IT services and to consolidate 11 state agencies that together spent some $617 million a year on technology. Mentioned in that blog was a prediction from Insight that more local and state government agencies would turn to outsourcing to cut costs and supplement staffs.


The research firm is looking pretty prescient. According to bizjournals, Atlanta's City Council is considering outsourcing some services, in an effort to slice payroll, benefits and pension costs, which account for 70 percent of the city's general fund. Says the chairman of the council's Finance Committee:

Privatization will have to be looked at because of the increasingly high cost of maintaining employees during and after employment.

The council will have to tread carefully, as a previous foray into privatization with the city's water and sewer services was not successful. Also, there is almost always political fallout when government jobs are cut.


Still, the practice is pretty common across Georgia. The state's Department of Community Affairs found that more than 85 percent of cities outsourced voter registration operations and more than three-quarters outsourced animal control services. Hinersville's city manager says it saved $125,000 in the first year alone after outsourcing operations of a sewage treatment plant. He says city employees lacked the needed skills.


Memphis, Tenn., is happy with its outsourcing efforts, largely because temporary employees can be brought on for special projects with little fuss and expense, says an official from that city.


One caveat: Outsourcing social services isn't a good idea, because it's hard for private companies to turn a profit without cutting corners. After complaints from patients and doctors, Georgia's General Assembly recently passed legislation imposing restrictions on three private companies that took over operations of the state's Medicaid program two years ago.