MISSISSIPPI LEGISLATURE
1998 Regular Session
To: Appropriations
By: Representative Montgomery
House Bill 1526
AN ACT TO CREATE THE MISSISSIPPI COMMISSION ON PRIVATIZATION; TO PROVIDE FOR THE MEMBERSHIP AND DUTIES OF SUCH COMMISSION; TO ESTABLISH A SEQUENCE OF ACTIONS THAT THE COMMISSION MUST FOLLOW IN ORDER TO STUDY THE POTENTIAL FOR PRIVATIZING AN ACTIVITY; TO ESTABLISH A PROCEDURE FOR RECOMMENDING PRIVATIZATION UNDER CERTAIN CONDITIONS; TO REQUIRE CERTAIN ACTIONS BY THE COMMISSION AFTER THE CONDUCT OF COST BENEFIT ANALYSES OF AGENCIES BEING CONSIDERED FOR PRIVATIZATION; TO PROVIDE A PROCEDURE TO CONTRACT FOR SERVICES NECESSARY AS A RESULT OF PRIVATIZATION; TO CREATE THE TAXPAYER'S DIVIDEND FROM GOOD GOVERNMENT FUND INTO WHICH A CERTAIN AMOUNT OF THE SAVINGS DERIVED AS A RESULT OF PRIVATIZATION SHALL BE DEPOSITED; TO PROVIDE THAT MONEY IN SUCH FUND SHALL BE DISTRIBUTED IN THE FORM OF DIVIDENDS TO THE OWNERS OF CERTAIN MOTOR VEHICLES; TO REQUIRE THE LEGISLATURE TO APPROPRIATE THE AMOUNTS IT DETERMINES WILL BE SAVED AS A RESULT OF PRIVATIZATION IN A CERTAIN MANNER; TO BRING FORWARD SECTION 43-1-3, MISSISSIPPI CODE OF 1972, WHICH RELATES TO THE PRIVATIZATION OF THE DEPARTMENT OF HUMAN SERVICES; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. For purposes of this act, the following words and phrases shall have the meanings ascribed in this section unless the context clearly indicates otherwise:
(a) "Commission" means the Mississippi Commission on Privatization created under Section 2 of this act.
(b) "State entity" means any board, commission, authority, department, agency or institution which employs state- or nonstate service personnel as defined by Section 25-9-107.
(c) "Privatization" means a method of providing a portion or all of a formerly government-provided and government-produced program and/or its services through the private sector using one or more or a combination of the three (3) following categories of activity:
(i) Divestment;
(ii) Delegation; or
(iii) Deregulation.
(d) "Divestment" means that the state, through a competitive process, turns over the ownership, control, financial responsibility and delivery of a public service to the private sector. Such may be given effect through sale of the assets necessary to produce the service to a provider of services or through liquidation of assets wherein the purchaser of assets will not provide the service.
(e) "Delegation" means that the state assigns the provision of all or part of a function or service through a make or buy analysis, to the private sector, while retaining the responsibility of overseeing its production and/or delivery to its citizens and/or governmental entities.
(f) "Deregulation" means the passive process by which the government is gradually displaced by the private sector through elimination of regulation.
(g) "Attributable fully allocated cost" means the operating and capital cost of a public service including direct, indirect and allocated cost minus the cost of any function not to be competitively contracted.
(h) "Make or buy analysis" means a periodic analysis in which the costs of internal production of a good or service are compared to the costs of production by outside vendors. The process requires the comparison of the true costs of public and private production methods that result in comparable public goods or services.
SECTION 2. (1) There is created the Mississippi Commission on Privatization to consist of the Governor, Lieutenant Governor, and the State Auditor of Public Accounts. The Governor shall be chairman of the commission, the Lieutenant Governor shall be vice chairman and the State Auditor shall be secretary.
(2) The Lieutenant Governor shall designate two (2) Senators and the Speaker of the House of Representatives shall designate two (2) Representatives to attend any meeting of the commission. The appointing authorities may designate alternate members from their respective houses to serve when a regular designee is unable to attend such meetings of the commission. Such legislative designees shall have no jurisdiction or vote on any matter within the jurisdiction of the commission. For attending meetings of the commission, such legislators shall receive per diem and expenses, which shall be paid from the contingent expense funds of their respective houses in the same amounts as provided for committee meetings when the Legislature is not in session; however, no per diem and expenses for attending meetings of the commission will be paid while the Legislature is in session. No per diem and expenses will be paid except for attending meetings of the commission with prior approval of the proper committee in their respective houses.
(3) The Governor, Lieutenant Governor and State Auditor of Public Accounts jointly shall appoint to the commission one (1) nonvoting associate member from the private sector and one (1) nonvoting associate member from the public sector to serve one-year terms.
(4) The Office of State Audit shall provide staff support to the commission.
SECTION 3. (1) The commission shall have the following duties and responsibilities:
(a) To advocate, develop and accelerate a privatization program for state entities which ensures private sector competition for provision and/or production of state government services. Such authority shall extend to issuing requests for information and proposals from both public and private sector entities.
(b) To develop an overall state privatization policy including necessary goals and objectives for privatizing the programs and services of state government.
(c) To establish all analytical, approving, planning and reporting processes required to carry out the functions of the commission, and to promulgate all rules essential to carry out the commission's mission, including deadlines for state entity reports, timetables for commission action, standards and criteria governing reports made to the commission, standards for requests for proposals, and rules of order.
(d) To determine, in conjunction with other state entities, the pool of potential program or service candidates for privatization; however, the commission shall not issue any privatization recommendation regarding any program which:
(i) Directly and significantly consists of planning and proposing public policy, making public policy or consists in whole or in part of activities which regulate the business, occupation or profession of any person, firm, partnership, corporation or association that is doing business in Mississippi or is domiciled in this state;
(ii) Directly and significantly affects the investigation or prosecution of criminal acts, the operations of the courts of law, the preservation of peace and order, or the prevention of epidemics; or
(iii) Makes judgments or recommendations relative to the fiscal policy of the state or judgments pertaining to the making of rules and regulations by which entitlements are granted.
(e) To require information to insure that all state entities whose programs are included in the pool of candidates for privatization assist the commission in performing the managerial, operational or administrative analysis relative to:
(i) Determining the privatization potential of a program or activity;
(ii) Performing cost/benefit analysis;
(iii) Performing make or buy analyses; and
(iv) Certifying the profits and savings from privatization projects.
(2) The commission, with the assistance of state entities, shall devise evaluation criteria to be used in conducting reviews of any program or activity that is the subject of a privatization recommendation.
(3) To the extent practicable and to the extent resources are available, the commission shall make available its services for a fair compensation to any local government entity. The Legislature encourages local government entities to utilize the services of the commission.
SECTION 4. In carrying out the duties described in Section 3 of this act, the commission shall follow the sequence of activities described in this act. The commission shall prepare, through the use of state entity input, a pool of program or activity candidates for privatization before performing any other analytical function. Such pool shall include not less than ten (10) state entity projects. Subsequent to developing a pool of candidates, the commission shall conduct cost/benefit studies of all candidates in the pool. Recommendations of privatization may be issued only subsequent to the preparation and commission review of cost/benefit studies. Each year the commission shall complete cost/benefit studies with respect to expenditures comprising not less than Two Hundred Million Dollars ($200,000,000.00) of all government expenditures.
SECTION 5. (1) In conducting a cost/benefit analysis of candidates from the pool, the commission shall consider the use of delegation, divestment or deregulation as means of privatizing programs or activities. In developing a plan for conducting cost/benefit analysis, the commission shall consider the following:
(a) The potential annual revenue generating or recurring savings from privatization;
(b) Potential market for the programs or activities;
(c) Potential one-time revenues and/or savings from elimination of a program or activity;
(d) Relative strengths and weaknesses of governmental customer service mechanisms and private sector customer service mechanisms;
(e) The impact of reduced services on the citizens of the state;
(f) The private sector's capacity to engage in voluntary self-regulation; and
(g) Barriers to privatization created by laws, market structure, user expectations, and imperfections in the dissemination and assimilation of information.
(2) The commission shall set appropriate deadlines for reporting of costs and benefits, as well as any other matter germane to privatization. The commission also shall determine the criteria for judging successful privatization and shall publish such criteria for evaluation purposes.
(3) Upon privatizing a program or service, the commission shall review annually such privatization project and certify the savings and profits generated by such project.
SECTION 6. (1) Following the preparation of cost/benefit analysis, the commission shall review such cost/benefit analysis to determine the accuracy of the analysis provided. In performing this function, the commission may contract with consultants and other experts for assistance. The commission may refer questions or proposals to the state entities or the experts referred to in this act regarding the analysis of the program or activity or the delivery of services.
(2) In the event that the commission finds that the cost/benefit analysis prepared by the state entity or expert fails to address the criteria or regulations promulgated by the commission with respect to cost/benefit analysis, the commission shall direct the state entity or expert to resubmit a revised cost/benefit analysis.
SECTION 7. Following the cost/benefit analysis, the commission shall:
(a) In the case of divestment or deregulation deemed to be in the public interest, transmit its recommendation to the state entity, the Governor and the Legislature and shall make its recommendation available to the public.
(b) In the case of delegation anticipated to produce any one-time or annual savings of either the previous year's expenditures for a program or activity, or the proposed aggregate charge for rendering the same program or activity, require the state entity to perform a "make or buy" analysis at the earliest feasible date.
SECTION 8. (1) In addition to make or buy analyses required by the commission, the commission shall perform or require the state entity or expert to perform a make or buy analysis covering any service for which the commission has received a qualifying petition of interest from a private company consistent with the process provided for in this section. No more than one (1) make or buy analysis shall be required for a particular good or service within a one-year period.
(2) Private companies interested in providing services for state entities through delegation may file petitions of interest with the commission.
(3) Petitions of interest shall include the following:
(a) A description of the service that the private company would like to provide for the state entity;
(b) A statement that the private company believes that it can provide the same service, under contract to the state entity, for a lower cost than the present cost with at least comparable quality, efficiency and effectiveness;
(c) A description of the company's financial capacity to provide the service;
(d) A description of the company's technical ability to produce the service, especially evidenced by identical, similar or relevant goods or services provided by the company, whether under public sponsorship or not; and
(e) Any additional information the commission deems necessary to make an appropriate decision.
(4) Within ninety (90) days, the commission shall determine whether there is sufficient reason to believe that the private company has the financial and technical ability necessary to provide the service.
(5) The commission shall take one (1) of the following actions with respect to the petition of interest:
(a) Certification of the petition if the commission finds that the company has sufficient financial and technical ability to provide the service. If the commission certifies the petition, the commission shall undertake a make or buy analysis with respect to the public good or service specified in the petition at the earliest feasible opportunity.
(b) Denial of the petition if the commission finds that the company has insufficient financial and/or technical ability to provide the service. The commission shall state its justification for such a finding.
(c) If the commission has already scheduled a make or buy analysis for substantially the same service specified in the petition of interest, it shall notify the petitioner that such an analysis has been scheduled without making a finding on the petition.
SECTION 9. (1) The make or buy analysis shall be performed through the issuance and evaluation of requests for information and proposals from private companies.
(2) The make or buy analysis shall be conducted as follows:
(a) The commission shall seek the widest reasonable distribution of each request for proposals, and at a minimum, shall send each request for proposals to each organization on the interested proposer's list and to each additional organization that requests the specific request for proposal.
(b) The commission shall begin advertising each request for proposals within ten (10) days of issuance. Requests for proposals shall be advertised in each daily newspaper published in the state once a week for three (3) consecutive weeks.
(c) Submission of proposals shall be required no sooner than forty-five (45) days after the request for proposal advertisement date.
(d) A request for proposals shall clearly specify the goods or services to be procured and include a draft contract.
(e) Any state entity may submit its own proposal in response to the request for proposal, subject to the terms and conditions later specified.
(3) The commission shall employ a two-step review process, involving the concurrent submittal of two (2) packages, as follows:
(a) The first step shall be an evaluation of a package of the financial qualifications and technical proposals from the responders. The commission shall determine whether each such submittal represents a responsive and responsible proposal.
(b) The second step shall be an evaluation of the cost proposals packages of the responsive and responsible proposers.
(4) With respect to each request for proposals, the state entity shall award the contract to the private provider or state entity whose responsible and responsive proposal offers the lowest cost; however, no contract shall be awarded unless the Senate and the House of Representatives of the State of Mississippi adopt a concurrent resolution expressing their approval of the contract.
(5) Any service operated under competitive proposals on the effective date of this act or thereafter shall be subject to a new competitive proposal at least every five (5) years. Renewal options that extend a contract beyond five (5) years shall be prohibited.
(6) In no case shall a service operated under competitive proposal be returned to operation not subject to competitive proposal.
(7) A state entity shall not establish or impose any requirement relating to salaries, wages, benefits or labor union representation, staffing levels, work rules or other conditions of employment of private contractor employees. All contractors shall comply with applicable federal and state labor laws.
(8) Each state entity shall make capital facilities and equipment available for operation under competitive proposals by private contractors to the maximum extent feasible, subject to supervision of the state entity. Capital facilities and equipment should be denied use by private contractors only if such facilities and equipment would be denied to use similarly by the state entity itself if it were awarded the contract.
(9) All contract prices shall be competitively determined through a request for proposal. No change in contract payment amount to a private contractor or state entity shall be made except as specified in the contract. Payment changes in a contract shall be limited to indices, escalators, deflators, changes in service level and other expressly stated or calculable amounts consistent with the request for proposal and the proposal of the private contractor or state entity awarded the contract.
(10) A state entity may execute interim standby competitive contracts with one or more private contractors to provide any service on an interim basis in the event that the state entity is required to do so by the public welfare. Any service operated under a standby contract shall be subject to competitive proposal within six (6) months of standby contract service award.
(11) No state entity shall make or be bound by any contract, agreement or assurance that restricts its ability to comply with this act in any respect.
SECTION 10. Any state entity may compete to provide the public service subjected to a make or buy analysis by submitting its own proposal, subject to the following conditions:
(a) That it submit a sealed proposal before the advertised deadline for such proposals, that the proposal not be altered after that deadline and that the proposal be publicly opened and made public at such deadline.
(b) That any labor provision assumed in the proposal shall have been finally executed and binding on the state entity with respect to the public good or service subjected to a make or buy analysis.
(c) That it take reasonable steps to ensure an objective and fair evaluation process, including prohibition of proposal evaluation participation by personnel or departments that were involved in preparing the state entity's proposal.
(d) That its proposal price be not less than its attributable fully allocated cost for the service, that its proposal price not be based on part-time labor provisions or other less costly labor provisions to a greater percentage than such provisions are employed in comparable positions within the state entity, and that its proposal price be consistent with currently adopted budgets and financial plans.
(e) That it shall not make or be bound by a contract, agreement or assurance that creates or extends any form of obligation for continued employment or employee compensation, except for pension, beyond the contract expiration date under the provisions of the request for proposal for employees assigned to the service.
(f) That it shall be bound by the same terms, conditions and performance and other standards that would have applied to a private provider awarded the contract under the request for proposal.
(g) That its costs shall not, at any point during the contract period, rise by an amount greater than that specified for the corresponding period in the state entity's proposal. If the state entity's cost performance is not in compliance with this provision, the state entity shall issue a new request for proposal for the service within ninety (90) days.
SECTION 11. (1) The state entity privatizing a service shall prepare a statement estimating the cost savings and profits from privatization and submit such estimate to the commission for review.
(2) The commission shall review all cost savings and profit statements submitted by a state entity. If the commission believes that the savings and profits estimates contained in the statement are incorrect, the commission shall arrange for one or more independent audits of the cost before and after the make or buy analysis.
(3) The commission shall certify to the Legislature and public actual cost savings and profits from privatization and shall identify which portions of the savings and profits that are recurring, and which are one-time, with the total amount of recurring and one-time saving equaling the amount certified.
SECTION 12. (1) Before October 1 of each year, the commission shall issue a report to the Legislature and the Governor which shall:
(a) Describe each program or activity in the pool of candidates for privatization;
(b) Summarize the cost/benefit analysis prepared on each candidate;
(c) Provide a detailed summary of all privatization recommendations issued by the commission;
(d) Evaluate any privatization activity that was recommended by the commission which became effective the first day of the previous fiscal year;
(e) Prepare a review of the effectiveness and efficiency of any privatization recommended by the commission which has become effective since the commission came into existence;
(f) Compare the savings that the commission had projected to the savings that were certified, detailing the implications of both the projected and actual savings with respect to taxpayer dividends; and
(g) Certify the savings and profits achieved through new make or buy analyses in the year ending the previous June 30 and the total recurring savings from previous years and recommend that such certified amount be appropriated as provided in Section 15 of this act. Based upon the total savings and profits certified, the commission shall estimate and provide the amount of each dividend as specified by the Taxpayer Dividend From Good Government Fund under Section 13 of this act. This information shall be conveyed to the public and the media.
(2) The Legislative Budget Office shall cooperate with the commission in the completion of any report or reporting activity required by this section.
(3) The commission shall submit to the Legislature, in conjunction with the report required under subsection (1) of this section, an analysis of any legal impediments to future privatization. Such report also shall include proposed remedies, including, where appropriate, change to rules and regulations, draft legislation or constitutional amendments.
(4) All reports required under this section shall be provided quarterly to the Joint Legislative Committee on Performance Evaluation and Expenditure Review for its review.
SECTION 13. (1) There is created a special fund in the State Treasury to be known as the "Taxpayer's Dividend From Good Government Fund," into which shall be deposited such amounts that are derived from savings and profits realized as a result of privatization of state government activities, as appropriated to such fund by the Legislature. Money in such fund at the end of any fiscal year shall not lapse into the General Fund. Interest earned on amounts deposited into such fund shall remain in such fund.
(2) Money in the Taxpayer's Dividend From Good Government Fund shall be distributed biennially beginning July 1, 1999, with the first distribution to be as close to July 1, 1999, as practicable. The Department of Finance and Administration shall make such distributions as provided in this subsection to natural persons who are owners of private carriers of property with a gross vehicle weight of six thousand (6,000) pounds or less, motorcycles and motor vehicles who paid the annual highway privilege tax levied pursuant to Section 27-19-5 or 27-19-11 in the year before the year in which such distribution is made. Each eligible owner of an eligible vehicle shall be entitled to one (1) dividend from such fund for each vehicle such person owns. Each dividend shall be in an amount equal to the balance in the Taxpayer's Dividend From Good Government Fund as of the previous June 30 divided by the number of eligible vehicles.
(3) The State Tax Commission shall provide to the Department of Finance and Administration all taxpayer information necessary to effectuate the distribution of dividends.
(4) The terms "motor vehicle," "owner," "motorcycle" and "private carrier of property" shall have the meaning ascribed to such terms in Section 27-19-3.
SECTION 14. Each fiscal year the Legislature shall appropriate the amount it determines to have been saved as a result of privatization of state government activities in the immediately previous fiscal year, both through privatization instituted in such fiscal year and recurring savings from privatization in previous years, based upon the amounts certified by the commission in the report required by Section 12 of this act, as follows:
One hundred percent (100%) to the Taxpayer's Dividend From Good Government Fund created pursuant to Section 13 of this act.
SECTION 15. Section 43-1-3, Mississippi Code of 1972, is brought forward as follows:
43-1-3. Notwithstanding the authority granted under subsection (4)(d) of Section 43-1-2, the Department of Human Services or the Executive Director of Human Services shall not be authorized to delegate, privatize or otherwise enter into a contract with a private entity for the operation of any office, bureau or division of the department, as defined in Section 7-17-11, without specific authority to do so by general act of the Legislature. However, nothing in this section shall be construed to invalidate (i) any contract of the department that is in place and operational before January 1, 1994; or (ii) the continued renewal of any such contract with the same entity upon the expiration of the contract; or (iii) the execution of a contract with another legal entity as a replacement of any such contract that is expiring, provided that the replacement contract is substantially the same as the expiring contract. Notwithstanding any other provision of this section, the department shall be authorized to continue the operation of its child support collection program with a private entity on a pilot program basis in Hinds and Warren Counties in Mississippi, and the department and the private entity shall specifically be prohibited from expanding such pilot program to any counties other than Hinds and Warren Counties without specific authority to do so by amendment to this section by general act of the Legislature. Before December 15, 1994, the department shall provide a detailed report to the Joint Oversight Committee established by Section 43-1-2 and to the Legislature that describes the results of the pilot program for the privatization of the department's child support collection program as of December 1, 1994, including an evaluation of whether there has been substantial compliance with the performance standards specified in the contract for the private entity in conducting the pilot program.
This section shall stand repealed on July 1, 2001.
SECTION 16. This act shall take effect and be in force from and after its passage.