Privatization and Political Accountability
Fordham Urban Law Journal
Privatization and Political Accountability
Jack M. Beermann 0
0 Boston University School of Law
Copyright c 2000 by the authors. Fordham Urban Law Journal is produced by The Berkeley Electronic Press (bepress). http://ir.lawnet.fordham.edu/ulj
Jack M. Beerman
This article draws some general connections between privatization and political
accountability. Although the main focus of the article is to examine different types of privatization,
specifically exploring the ramifications for political accountability of each type, I also engage in some
speculation as to whether there are situations in which privatization might raise constitutional
concerns related to the degree to which the particular privatization reduces political
accountability for the actions or decisions of the newly privatized entity. Court-created constitutional limits
on privatization concerning political accountability have antecedents in recent Tenth Amendment
jurisprudence and not-so-recent nondelegation cases. “Privatization” denotes a broad spectrum
of the relationship between government and the private sector. On one end, accountability is not
likely to be a serious concern, however in other circumstances, such as deregulation of personal
relationships and business matters, reducing political accountability is the point of deregulation, and
the increase in personal and economic freedom is worth the reduction of political accountability.
This article is an attempt to draw some general connections
between privatization and political accountability. Political
accountability is to be understood as the amenability of a government policy
or activity to monitoring through the political process. Although
the main focus of the article is to examine different types of
privatization, specifically exploring the ramifications for political
accountability of each type, I also engage in some speculation as to
whether there are there situations in which privatization might
raise constitutional concerns related to the degree to which the
particular privatization reduces political accountability for the
actions or decisions of the newly privatized entity. Although some
states have constitutional constraints along these lines,1 current
federal constitutional law does not address directly the
constitutionality of privatization along political accountability lines.
However, if a majority of the Supreme Court becomes convinced that a
particular government practice presents serious problems,
constitutional limits can be erected in relatively short order.
Court-created constitutional limits on privatization concerning
political accountability have antecedents in recent Tenth
Amendment jurisprudence2 and not-so-recent nondelegation cases. In
some nondelegation cases, it was important that policymaking was
delegated to a private group.' Political accountability has, in recent
years, become very important in Supreme Court Tenth
Amendment cases. Specifically, the Court has invalidated what it views as
federal "commandeering" of state and local government agencies
and officials on the normative ground that such commandeering
obscures lines of political accountability.5
* Professor of Law and Richard L. Godfrey Faculty Research Scholar, Boston
University School of Law. Thanks to Ron Cass, Ward Farnsworth, and Kate Silbaugh
for help with the ideas put forward in this article.
1. Infra notes 39, 54 and accompanying text.
2. Infra Part I.B.1.
3. Infra notes 9, 14-18 and accompanying text.
5. Infra Part I.B.1.
There are so many varieties of "privatization" that privatization
is difficult to define and analyze comprehensively. Most generally,
privatization denotes the moving of something that had been in the
public sphere into the private sphere. However, movement from
public to private is not absolutely necessary, because something
may be called privatized even if it always has been private, merely
because it is publicly administered in another jurisdiction.
Privatization analysis also captures entities such as government
corporations that straddle the public/private divide and were created to
address a particular policy problem in ways that are not clearly
public or private. Further, although marketization and
deregulation may be more accurate appellations, privatizationmay be used
to describe an entity or activity that was always privately owned
but has moved from a heavily regulated status to a less regulated
one.' The privatization label is accurate because decisions that
were once made in a regulatory agency now are made privately in
response to market forces.
Privatization thus denotes a broad spectrum of adjustments to
the interaction between government and various private actors.
One concern about privatization is that it can lead to less political
accountability. In order to evaluate privatization through a
political accountability lens, two questions need to be answered. First,
has privatization actually reduced political accountability? Second,
if political accountability has been reduced, is it a cause for concern
in the particular context?
Viewed through the lens of political accountability, it quickly
becomes clear that all privatizations are not created equal. Some
forms of privatization may tend to reduce political accountability,
some forms may be neutral, and some, surprisingly, actually may
increase political accountability. The main purpose of this article is
to look for these differences among different types of privatization.
Part I introduces the concept of political accountability, with an
eye toward speculation on whether a constitutional law of
accountability in privatization might develop. Part II describes different
categories of privatization and examines each type of privatization
for its effects on political accountability, with some appropriate
excursions into accountability-based or influenced constitutional
doc6. The change in utility regulation is such an example. Most electric utilities and
telephone companies in the United States were always private, but in recent years
have moved to a more market-oriented system of operation. Jack M. Beermann, The
Reach of Administrative Law in the United States, in THE PROVINCE OF
ADMINISTRATIVE LAW 171 (Michael Taggart ed., 1997).
trines. Part III briefly discusses the application of the Freedom of
Information Act and related statues and the Administrative
Procedure Act to the activities of entities involved in privatization. The
article concludes with a plea for a non-ideological attitude toward
privatization, based on the variations among privatizations in
political accountability and other terms.
ACCOUNTABILITY AND CONSTITUTIONAL CONCERNS
I am concerned here with the amenability of a government
policy or activity to monitoring through the political process. There
are several different ways in which a government policy or activity
can be more or less subject to political monitoring. Political
accountability should be understood to include the democratic
character of decision-making, the clarity of responsibility for an action
or policy within the political system, and the ability of the body
politic to obtain accurate information about a governmental policy
The democratic character of decision-making involves the degree
to which the body politic can influence a decision, policy, or
activity through political activity. The clarity of responsibility for an
action or policy involves the degree to which the body politic can
discern who in the political system is responsible for a decision,
policy, or activity, so that efforts to exert political influence can be
directed to the proper authorities. The ability of the body politic to
obtain accurate information depends on the degree to which
information on the activities is available. All these, and perhaps others
not mentioned here, are distinct but related criteria for judging
Assume for present purposes that at least some forms of
privatization reduce the political accountability of a government activity
or practice. For example, if Congress were to privatize fully the
United States Postal Service,7 it is likely that it would be more
difficult for the political system to influence the organization of the
Postal Service, as well as postal rates and services. Although
privatized, the Postal Service might remain highly regulated. If the
Postal Service retained its monopoly over certain aspects of mail
delivery, it is likely that Congress and the executive branch would
subject the Postal Service to both formal and informal scrutiny,
such as rate regulation and political pressure over other aspects of
7. By "privatize fully," I mean charter the Postal Service as a private corporation,
offer shares to the public, and allow the private corporation to choose its officers and
directors under corporate law without government involvement.
the Postal Service's organization.
Nevertheless, it is likely that
there would be less political influence over Postal Service decisions
and activities because the decision-making process might be less
democratic. It also might be unclear whether the private entity or
the government regulators were responsible for any particular
action. Similarly, it might be more difficult for the public to obtain
information about the operations of the privatized entity.
At present, privatizations face few, if any, federal constitutional
For example, there is no doctrine of federal
constitutional law that prevents
municipalities from selling
owned electric utilities, mass transit systems, or professional sports
facilities to private entities. Along the same lines, federal
constitutional law has little, if anything, to say about a decision to contract
with private entities for provision of public services, such as police
and fire protection, operation of jails and prisons, street cleaning,
garbage collection, inspectional services, and maintenance of
public parks and buildings. There is no general federal
anti-privatization doctrine requiring that particular government activities, state
I do not mean to say that federal constitutional law has
absolutely nothing to say about privatization. For example, if Congress
were to decide to privatize the Postal Service and the privatized
Postal Service were given the power to make governmental
statutory standards or governmental
oversight, a delegation doctrine attack could be mounted.9 If the
8. See Ronald A. Cass, Privatization:Politics, Law and Theory, 71 MARQUETTE
L. REV. 449, 455-56, 480 (1988) ("While privatization presents many legal issues, it
does not confront serious legal constraints other than process requirements."). Dean
Cass analyzes three constitutional constraints on or impediments to privatization,
none of which have proven, thus far, to be serious impediments to privatization.
These are: (1) applying the nondelegation doctrine, which limits Congress's ability to
delegate legislative power to the executive branch and to private organizations, (2)
holding government liable for the conduct of the private entity, and (3) holding the
private entity liable (under public law norms) without affording the private entity
immunities or privileges enjoyed by government. The second possible legal response
discourages privatization, because it removes a potential incentive to privatize, i.e.,
that government is no longer responsible for the activity. The third possible legal
response tends to make it more expensive to privatize an activity than to keep it inside
government because it makes it easier to hold the private entity liable than it would
be to hold government or government officials liable for the same conduct. Id. at
497512; Clayton P. Gillette & Paul B. Stephan III, ConstitutionalLimitations on
Privatization, 46 AM. J. COMP. L. 481, 481-82 (Supp. 1998) (discussing "paucity" of
constitutional limitations on privatization).
9. See Carter v. Carter Coal Co., 298 U.S. 238, 311 (1936) (noting that delegation
problems were exacerbated because delegation was to private parties rather than
govresulting entity were quasi-public, or some sort of government
corporation with partial government control, the method of
appointing directors and other officers might be subject to scrutiny
under the Appointments Clause.10
The Appointments Clause
The best candidate for a federal constitutional constraint on
privatization of federal government activities may be the
Appointments Clause. The Appointments Clause specifies the method for
appointing "Officers of the United States."'1 Principal officers
must be appointed by the President "with the advice and consent
of the Senate."' 12 Inferior officers may be appointed in the same
way, but Congress may also legislate appointment by the President
alone (without senatorial advice and consent) or appointment by a
court of law or head of a department of the federal government.13
A person is an "Officer of the United States" for Appointments
Clause purposes if that person "exercis[es] significant authority
pursuant to the laws of the United States."14 If Congress legislated
the privatization of a federal agency-for example, if it decided to
delegate the administration of federal environmental law to a
privately-owned "Environmental Protection Agency, Inc.,"-the
appointment of officials within the corporation would be subject to
Appointments Clause attack, insofar as corporate officials
exercised authority to enforce federal law, including rulemaking and
other enforcement activities. 5
A recent decision of the D.C. Circuit suggests that not all
employees of the federal government must be appointed pursuant to
the Appointments Clause.' 6 That court held that Administrative
Law Judges who make recommendations to higher officials are
ernment officials); Schechter Poultry Corp. v. United States, 295 U.S. 495, 501 (1935);
A. Michael Froomkin, Reinventing the Government Corporation,1995 U. ILL. L. REV.
543, 574-77 (discussing delegations to private entities).
10. Froomkin, supranote 9, at 574-77; see also infra Part II.E (discussing
11. U.S. CONST. art. II, § 2, cl. 2.
13. See id.
14. Buckley v. Valeo, 424 U.S. 1, 125-26 (1976) (per curiam).
15. There are numerous government corporations that perform functions that
might otherwise be performed by government agencies. Insofar as the appointment of
officers and directors of these corporations departs from the Appointments Clause
model, they may be subject to constitutional challenge. See Froomkin, supra note 9, at
16. See Landry v. FDIC, 204 F.3d 1125, 1130-34 (D.C. Cir. 2000).
"employees" and not "officers" who must be appointed pursuant
to the Appointments Clause.'" Apparently the D.C. Circuit
believes that an official does not "exercise significant authority
pursuant to the laws of the United States" unless that official has some
power to make decisions with legal effect.1"
In the case of a corporation formed to administer federal law, it
would appear that the Appointments Clause presents a serious bar
to allowing federal law to be administered by privately hired
corporate directors, officers, or other employees. Even under the
D.C. Circuit's relaxed view of the applicability of the
Appointments Clause, a corporate employee not appointed pursuant to the
Appointments Clause could not take action that would have an
actual effect on a member of the public.'9 Rather, insofar as their
actions were aimed at having some effect in enforcing federal law,
corporate employees might be able only to make recommendations
that would be carried out by properly appointed Officers of the
United States. This would significantly reduce the utility of the
privatization of the agency function.
The Appointments Clause is directly related to political
accountability concerns. Even under the D.C. Circuit's view, federal
officials with power to enforce federal law must be appointed
politically. Principal Officers must be acceptable both to the
President and a majority of the Senate. Many inferior officers also will
be appointed politically, by the President or a department head.2°
17. Id. at 1125.
18. Id. The status of the D.C. Circuit's rule in Landry is somewhat doubtful
because there is no Supreme Court authority to the effect that there are federal
"employees" whose appointment is not subject to the Appointments Clause. Interestingly,
the Supreme Court case that provides the D.C. Circuit some support is actually a
privatization case in which the Supreme Court approved contracting out to persons
providing support services for federal agencies without complying with the
Appointments Clause. See United States v. Germaine, 99 U.S. 508, 512 (1878) (holding that a
surgeon was not an "Officer of the United States," because he was employed only on
an as needed, fee for services, basis). Other Supreme Court cases cited by the D.C.
Circuit provide only general definitions of "Officers of the United States." E.g.,
Buckley v. Valeo, 424 U.S. 1, 126 n.162 (1976), cited in Landry, 204 F.3d at 1133. Another
case relied on heavily by the D.C. Circuit in Landry, United States v. Mouat, 124 U.S.
303, 306-07 (1888), cited in Landry, 204 F.3d at 1133, actually provides support for the
contrary view, that all federal employees are subject to the Appointments Clause. In
Mouat, the Court held that a navy "paymaster" could not collect business travel
expenses, because he was not appointed properly pursuant to the Appointments Clause.
United States v. Mouat, 124 U.S. 303, 306-07 (1888).
19. See Landry v. FDIC, 204 F.3d 1125 (D.C. Cir. 2000).
20. Historically, the courts of law have not appointed many inferior executive
officers. A notable exception is the independent counsel, under the now-expired Ethics
in Government Act, Pub. L. No. 95-521, 92 Stat. 1824 (1978) (codified in scattered
Appointment through the political process is a device to keep
officials exercising federal authority somewhat politically accountable.
Removal power may be even more important to political
accountability than appointment power. After all, federal judges are
appointed by the President with the advice and consent of the
Senate, but they are shielded from political influence by their
protection from removal except by impeachment. The Supreme Court
has rejected attempts by Congress to assign executive functions to
officials removable by Congress on the ground that executive
officials should be accountable to the President, not to Congress.2'
The possibility of removal of such officials by an executive branch
officer accountable to the President might be sufficient to preserve
the separation of powers,22 but any attempt to shield completely
officers of the United States from removal initiated by political
officials within the executive branch would probably violate
accountability-preserving separation of powers principles.
Direct Constitutional Limits on Privatization
Thus, privatization of activities amounting to private execution
of federal law might present serious constitutional problems arising
from the appointment and removal of the directors, officers, and
employees of the private entities that would enforce federal law in
the privatized regime. What is missing, however, is a more direct
analysis of the constitutionality of privatization. There may be
certain functions that should not be privatized based on some
principle that particular governmental functions must be performed only
by government itself. Concerns about maintaining political
accountability may counsel against privatization. For example,
imagine a private regulatory agency-would we tolerate administrative
rulemaking by a privately-owned "Environmental Protection
Agency, Inc.," charged with administering the environmental laws?
Regardless of how accountable EPA, Inc., might be to Congress
and whether notice and comment and judicial review applied in
exactly the same way as they do to the actual Environmental
Protection Agency ("EPA"), the lack of direct political accountability
through the President might make such a reform unwise or
unacsections of 2 U.S.C., 5 U.S.C., and 28 U.S.C.), provisions that were at issue in
Morrison v. Olson, 487 U.S. 654 (1988).
21. See Bowsher v. Synar, 478 U.S. 714 (1986).
22. See Morrison v. Olson, 487 U.S. 654 (1988) (holding that Congress may restrict
removal of independent counsel to removal for cause by the attorney general, and
that the President need not have removal power).
ceptable. Although the example may seem far fetched, it actually
is not all that different from the provision of the Food and Drug
Administration Modernization Act of 1997 that privatized some
aspects of the medical device approval process and proposals to
extend private review functions into the drug approval process.2 3
The above analysis is applicable to federal privatization, and
really would not touch state and local efforts to privatize. It is thus at
least interesting, if not potentially fruitful, to speculate about the
possibility of a more direct analysis of privatization generally. This
is where the creative potential in constitutional law comes in.
Although under current law there is no direct constitutional analysis
of privatization, concerns about political accountability of
privatized government provide for the possible evolution of a doctrine
evaluating whether a privatized government function lacks
1. Tenth Amendment Limits on Privatization
It is useful to remember that current Tenth Amendment
jurisprudence arose quite recently out of the ashes of the Court's failed
attempt to construct a general Tenth Amendment standard for
evaluating whether federal regulation of state and local
government activity went too far. Under National League of Cities v.
Usery,24 the Court created and applied a three-factor test to
scrutinize federal regulation of state government for compliance with
Tenth Amendment limits on federal power. Under that test, as
applied in later cases, "federal regulations are subject to Tenth
Amendment attack only if they regulat[e] the States as States,
address matters that are indisputably attributes of state sovereignty,
and impair the States' ability to structure integral operations in
areas of traditional functions. "25 The Court was divided over
whether commandeering violated this test, with the majority
holding that commandeering did not necessarily impermissibly displace
state sovereignty. 26 Political accountability was not relevant to the
Court's Tenth Amendment jurisprudence under National League
Post-NationalLeague of Cities Tenth Amendment jurisprudence
has been built largely on a normative base concerned with issues of
political accountability. The political accountability basis for Tenth
Amendment limitations on Congress's power to regulate states
goes back only to a dissent by Justice O'Connor in a 1982 case,
FERC v. Mississippi, in which the Court upheld federal regulations
that placed certain, largely procedural, obligations on state utility
regulatory agencies.27 In that dissent, Justice O'Connor, joined by
Chief Justice Burger and Justice Rehnquist, argued strongly against
allowing the federal government to compel state agencies and
officials to carry out federal regulation.28 She argued forcefully that it
should be unconstitutional for the federal government to regulate
via a state agency.29 One of her primary normative arguments
against what has come to be called "commandeering" is that
"Congressional compulsion of state agencies, unlike pre-emption, blurs
the lines of political accountability and leaves citizens feeling that
their representatives are no longer responsive to local needs."3 In
other words, the problem with federal law that requires states to
regulate individuals in line with federal standards is that "lines of
political accountability" become blurred, and it becomes uncertain
who should be held politically responsible for the regulation.
After Justice O'Connor's dissent, two interesting developments
occurred. First, the Court overruled NationalLeague of Cities,
implying that the Tenth Amendment placed no legally enforceable
restrictions on Congress' power to regulate states as states.31
Second, the Court has twice struck down federal legislation on a new
Tenth Amendment theory, erecting what looks like a per se rule
against federal commandeering of state agencies.32 Under this
rule, although federal law may regulate states in their own
activities, and may regulate private parties to the extent federal power
over an area exists, it may not force state agencies and state
officials to regulate private parties. The primary normative basis for
this anti-commandeering rule has been the problems that
commandeering causes with regard to political accountability. 33
A PotentialAccountability-Based Doctrine
This has been a rather long story to make a rather narrow point:
it is within current judicial practice on the Supreme Court of the
United States that concerns over political accountability could give
rise to a federal constitutional doctrine analyzing privatization for
fidelity to structural constitutional principles. 34 Although some
doctrines of constitutional law appear to spring from nowhere,35 an
accountability-based norm for evaluating privatization at least
would appear to evolve from pre-existing Tenth Amendment
Without the benefit of even a suggestion by a member or
members of the Court, it is difficult to imagine what an
accountabilitybased limitation on privatization might look like. With regard to
federal law, perhaps using the Court's definition of "Officer of the
United States" as a starting point,36 the Court could attempt to
define "execution of federal law," and then create a rule barring such
execution except by an agency of the federal government.
Advocates of a rule disallowing private exercise of governmental power
face the difficult task of satisfactorily distinguishing governmental
from private power, for there are many situations in which private
entities carry out the terms of federal law under which they are
regulated or subsidized.
33. See New York v. United States, 505 U.S. 144, 168 (1992) ("[W]here the Federal
Government compels States to regulate, the accountability of both state and federal
officials is diminished.").
34. The politics of privatization make the emergence of such a doctrine unlikely
now or in the near future for the simple reason that the conservative members of the
Court are likely to favor privatization. President George W. Bush is likely to appoint
Justices who share this view. The Justice's legal doctrines are designed to effectuate
their normative political views, and law has very little to do with Supreme Court
decisionmaking, at least in cases implicating strongly held political views.
35. For example, I daresay that before Bush v. Gore, 531 U.S. 98 (2000), very few
observers of federal constitutional law would have found in that law a norm
subjecting variations in ballot counting procedures to strict scrutiny and holding that
differing standards for counting ballots would be held to violate equal protection without
regard to whether they were the product of intentional discrimination and without
regard to the government interest underlying the differing standards. I believe a
similar story could be told about Roe v. Wade, 410 U.S. 113 (1973), or at least its primary
antecedent, Griswold v. Connecticut, 381 U.S. 479 (1965).
36. See supranotes 14-18 and accompanying text (discussing Buckley v. Valeo, 424
U.S. 1 (1975), and limits on exercise of government power by private persons and
Accountability considerations might be of some help in
distinguishing permissible from impermissible privatization. An
accountable agency might satisfy concerns over privatization in the
following manner. Consider, for example, partial privatization of
environmental enforcement. Congress could adopt legislation
allowing a private entity to monitor pollution and certify to the EPA
that all regulatory requirements have been met. The legislation
could allow the EPA to establish standards and actually choose the
private entities qualified to perform the monitoring and make the
necessary certifications. If the EPA provided clear instructions to
the private enforcers, and remained fully accountable for successes
and failures of the privatized regulatory scheme, and if complete
information were available regarding the activities of the private
company, accountability might not prove an impediment to
Since federal authority is exercised by entities of many different
forms, a direct analysis of federal privatization also would require a
definition of "agency of the federal government." In addition to
traditional departments and agencies within departments, there are
agencies outside of departments, independent agencies, wholly
owned government corporations, corporations partly-owned by the
federal government, and privately owned but federally chartered
corporations. Even if a rule confining the exercise of certain
powers to the government were created, a formal, pragmatic, or
functional test would be necessary to determine whether a particular
entity was governmental and could exercise government power.
It is much less likely that federal constitutional limits on state
privatization would be recognized, because state law would govern
questions regarding the proper organization of state government
and federal separation of powers norms would be irrelevant. The
substance of the Guarantee Clause a7 might include limits on state
privatization, but that clause has not been judicially enforced with
any vigor.3" If a state privatized government activities to shield
them from scrutiny by the public, would that violate the Guarantee
Clause, or some other federal principle, like one-person one-vote?
State constitutions themselves contain limits such as accountability
37. U.S. CONST. art. IV, § 4.
38. See Luther v. Borden, 48 U.S. (7 How.) 1 (1849) (holding that Guarantee
Clause issues surrounding which of two competing state governments was legitimate
provisions and separation of powers norms, and these might
provide some limits on privatization of state government activities. 9
The likelihood that accountability concerns would motivate
courts, particularly the Supreme Court of the United States, to
limit privatization depends, at least in part, on how serious of a
perception there is that privatization reduces political
accountability where political accountability is desirable. Although I do not
predict that such a doctrine will arise, and I do not attempt to
outline the specifics of such an accountability-based anti-privatization
constitutional doctrine, it is worthwhile to consider whether
privatization has the potential for causing accountability problems as
serious or more serious than those that the Court states motivate its
Tenth Amendment jurisprudence. The current Court does not
appear to be ideologically disposed against privatization. Quite the
contrary appears to be true, and thus the proponents of
anti-privatization constitutional law have an uphill battle if they attempt to
convince what appears to be a conservative Court that
privatization is an evil the Court should resist.4 °
39. See Julie H. Vallarelli, Note, State ConstitutionalRestraintson the Privatization
of Education, 72 B.U. L. REV. 381, 393 (1992) (discussing limitations on privatization
that may inhere in state "accountability" clauses). Vallarelli cites the Massachusetts
constitution which provides: "All power residing originally in the people, and being
derived from them, the several magistrates and officers of government, vested with
authority, whether legislative, executive, or judicial, are their substitutes and agents,
and are at all times accountable to them." MASS. CONST. pt. 1, art. V. The federal
Accountability Clause does not appear to address privatization; it is a prohibition on
spending federal money without congressional authorization, and it requires that
expenditures be accounted for: "No Money shall be drawn from the Treasury, but in
Consequence of Appropriations made by Law; and a regular Statement and Account
of the Receipts and Expenditures of all public Money shall be published from time to
time." U.S. CONST. art I, § 9, cl. 7. For some state constitutional challenges to
privatization, see Hicks v. Commonwealth, 535 S.E.2d 678 (Va. Ct. App. 2000) (upholding a
decision to privatize streets around housing project and enforce trespass laws on
private streets against constitutional challenge); FM PropertiesOperating Co. v. City of
Austin, 22 S.W.3d 868 (Tex. 2000) (finding the privatization of a water project an
unconstitutional delegation of legislative power to private entity); Tex. Boll Weevil
EradicationFound., Inc. v. Lewellen, 952 S.W.2d 454 (Tex. 1997) (declaring a statute
allowing a private entity to receive public funds to eradicate pests an unconstitutional
delegation of legislative authority to private entity). Some state constitutions also
have "civil service clauses" which can limit privatization, insofar as non-civil service
employees perform government functions. See CAL. CONsT. art. VII, § 1; State Comp.
Ins. Fund v. Riley, 69 P.2d 985 (Cal. 1937) (state civil service clause implicitly
prohibits contracting out for services traditionally performed by the state); see also Prof'l
Eng'rs v. Dep't of Transp., 936 P.2d 473 (Cal. 1997).
40. The best hope for a declaration of unconstitutionality with regard to a
structural matter normally exists when the Court is convinced that a particular
constitutional procedure, such as the Appointments Clause, has been violated. See Buckley v.
Valeo, 424 U.S. 1 (1975); INS v. Chadha, 462 U.S. 919 (1983).
Privatization could cause problems of political accountability
similar to those caused when the federal government commandeers
state officials to carry out federal policy. As elaborated below, if a
private entity were entrusted with carrying out a government
activity, it might be difficult for the public to know whom in the political
system to blame when things go wrong. The accountability effects
would vary greatly among the contexts in which privatization has
occurred. Thus, the next section of this article looks at a wide array
of privatizations and explores the accountability issues that inhere
In his comprehensive review of the policy issues underlying the
privatization movement, 41 Ronald Cass divided privatizations into
four categories: (1) divestiture, which means the sale of
government assets including state-owned enterprises; (2) contracting out,
which means contracting with private parties for performance of
both internal and external functions such as cleaning and
maintaining government buildings and providing government services to
members of the public; (3) deregulation and vouchers, which mean
reducing or eliminating regulation of private entities so that
decisions are made privately rather than politically or giving benefits
recipients the choice to go into the market for goods and services
rather than being confined to those provided directly by
government; and (4) tax reduction and employing user fees, which is
privatization in that it either returns money to private entities or at
least targets payments to government so that private parties do not
have to pay for government services they do not want. With some
refinement, these are useful categories for analyzing privatization
in accountability terms. In addition to these categories, I consider
special issues that arise regarding government corporations and
similar public/private partnerships, and I also focus attention on
the application of procedural structures such as the Administrative
Procedure Act ("APA") 42 and the Freedom of Information Act
("FOIA")4 3 to private entities involved in privatization.
41. Cass, supra note 8, at 449.
42. 5 U.S.C. §§ 551-559 (1994).
43. Id. § 552.
Divestiture includes two distinct activities, selling government
assets such as land, buildings, or equipment that the government
decides are no longer useful assets, and selling government owned
enterprises, such as state owned transportation, housing, or
utilities, where the intent is for the private owner to continue to
operate the enterprise in government's stead. As long as asset sales are
conducted pursuant to normal government procedures,
accountability is less of an issue in asset sales than in the sale of enterprises.
Of course, once an asset becomes private, its use is likely to be
subject to less government supervision than when it was under
public ownership, so an accountability issue does exist. For
example, if the government sells a tract of undeveloped land,
government regulation of that land's use is likely to be less than if
government retained ownership. There may be controversy over
government's decision to divest itself of an asset, but the sale of a
raw asset does not significantly affect political accountability over
an activity that has moved from the public into the private sector.
Sale of an ongoing government enterprise presents a greater
possibility that reduced political accountability will be a significant
result of the sale. For example, when the federal government sold
Conrail, the railroad became less subject to political control than
when it was owned by the federal government.44 If a local
government sells its bus service or its electric utility to a private company
(or converts the existing entity to a private corporation by publicly
offering shares), political control is likely to be less than under
continued government ownership and operation.45
The difference in political accountability has to do with the
degree to which ongoing discretionary operational decision-making is
made under direct government control. For example, in a publicly
owned bus service, political accountability for the level of service
44. CONSOL. RAIL CORP., A BRIEF HISTORY OF CONRAIL (1999) (describing the
history of Conrail, including its formation by the federal government and ultimate
45. Municipally owned utilities are common in the United States. My guess is that
most water and sewer services, where they exist, are provided through municipal or
state sewer and water agencies. Municipal power companies are also still quite
common, with recent newspaper articles identifying, for example, forty municipal electric
companies in Massachusetts that serve customers in fifty-eight municipalities and
provide "about 13 percent of the state's power needs," at prices substantially lower than
those charged by privately owned utilities even under deregulation. Bruce Mohl,
Power Rates Up, But Officials Insist Deregulation Working, BOSTON GLOBE, Jan. 26,
2001 at C1, 10; Peter J. Howe, It Pays to Be Local: Municipal Electric Customers
Dodging Rate Increases of Big Utilities, BOSTON GLOBE, Jan. 26, 2001 at C1, 10.
provided and the prices charged is direct. Voters can reward or
punish legislators and elected executive officials for the
performance of the service. A privatized system might be subject to a wide
range of regulation, but privatization is almost certain to lessen the
degree to which those running the bus company are subject to
political accountability for their decisions. The regulators, of course,
remain politically accountable and politicians might be blamed (or
praised) for the privatization decision itself.
The ability of the body politic to influence the operation of the
privatized enterprise is likely to be reduced after the sale.
However, strict government regulation can maintain a high degree of
political accountability. This has been especially true in developed
countries in which many utilities and large enterprises were
stateowned and only recently have been privatized. 6 These countries
may have more recently begun to marketize the operation of these
enterprises, which would further reduce political accountability,
but private ownership does not necessarily eliminate significant
political accountability for the operation of privatized enterprises. 7
The ability of the public to identify who is responsible for
problems in the operation of the privatized entity also may be
lowered after privatization, although that is not necessarily the case.
The issue of public employee labor unions is discussed infra.48
With regard to a private, but highly regulated, enterprise,
government and the private owners may blame each other when
postprivatization problems arise. Further, as often has been the case
with regulated industries, what the public understands as
regulation may be experienced and understood by the regulators and
regulated as subsidization.49
Privatized enterprises also might be able to avoid procedural and
openness restrictions that apply to government-owned enterprises.
Regulation might require the enterprise to submit financial
information for government review, but in most situations FOIA
principles and procedural protections such as those contained in the
APA are unlikely to apply to privatized enterprises. ° The market
may provide an adequate substitute if the privatized entity is
forced to compete in an open market, but political accountability
per se is likely to be reduced.
The second form of privatization Cass analyzes is called
"contracting out." Here, too, the general category includes different
types of privatization that raise radically different accountability
issues. Contracting out describes an incredibly wide range of
possible privatization. On the most mundane level, government
procurement of office supplies and other necessary goods and
services unrelated to discretionary government decision-making or
coercive government action can be seen as a form of privatization,
especially if government decides to purchase something on the
market that it, at one time, produced itself. I call the goods and
services involved here "support goods and services" because they
support government's ability to perform its functions but do not
involve dealings with the public in the governing sense.
No business produces all the goods it uses, and the same reasons
that lead firms to contract out should lead government to contract
out.51 Government may, for example, shut down a heating plant
used to heat government buildings and purchase heat from private
sources. The United States Government Printing Office produces
and sells government publications, and it is easy to imagine
privatization of some, most, or all of the printing and sales.
In my view, contracting out of support goods and services does
not raise serious accountability issues since the source and quality
of such goods and services are not normally something the public
cares much about. Of course, corruption in the procurement
process may be an issue, and obviously procurement fraud does not
exist without procurement, but government officials remain
accountable for overspending on goods and services, and the savings
from competition to sell to the government is likely to dwarf any
increased potential for fraud that procurement entails.
Procurement of support goods and services does raise one
central area of controversy in privatization-labor issues.
Privatiza50. See infra Part Ill.
51. See Ronald H. Coase, The Nature of the Firm, 4 ECONOMICA 386 (1937)
(describing how increasing monitoring costs as firms grow larger lead firms to
contract out, thereby gaining market discipline in the place of hierarchical discipline
within the firm).
tion of support goods and services often is advocated as a money
saving proposition, and from the perspective of government
workers, the money is saved at their expense. Often, the most vocal
opponents of privatization proposals of many types including
support goods and services are the government workers who either
would lose their jobs, face transfer to different units, or who may
end up working for the private company hired to provide the good
Although government workers may lack legal standing to
challenge privatization, 53 they are often a potent political force in
opposing privatization.54 There is at least a perception that some of
the gains from privatization come from the ability of private
business to operate free from the necessity of dealing with government
workers who have strong civil service protections regarding job
security and work rules.
Government workers can make some traditional labor
arguments against privatization. Government workers have very strong
protection of job security in the form of civil service statutes and
rules. 55 Further, government workers enjoy constitutional
protections that are not shared by workers in the private sector, both in
terms of due process protections of job security and
anti-discrimination norms that apply only to state action. Government workers
also may be protected by statutory anti-discrimination norms and
by executive orders that do not apply in the private sector.56 There
52. See, e.g., Judith Havemann, Welfare Reform Incorporated:Social Policy Going
Private; States Turning Agencies Over to Business, WASH. POST, Mar. 7, 1997, at Al;
Editorial, CharterAmendment is Ill Advised, OMAHA WORLD-HERALD, Nov. 3, 2000,
at 22 ("Moreover, this amendment would be a regrettable precedent. It is a brainchild
of organized labor, which hates the privatization of public jobs."); Brian C. Mooney,
DeNucci May Bar$305m Bus Deal, BOSTON GLOBE, May 16, 1997, at B3
("Privatization, a watchword of Governor William F. Weld's administration and a political battle
cry for organized labor, faces a crucial test today.").
53. See Air Courier Conference of Am. v. Am. Postal Workers Union, 498 U.S.
517, 530 (1991) (postal workers union lacks standing to challenge Postal Service's
decision to give up its monopoly over international remailing services).
54. As noted supra note 39, civil service protection for government workers is
mandated in some state constitutions. This mandate can become a protection against
privatization, prohibiting private, non-civil service employees from performing work
traditionally performed by government employees. See CAL. CONST. art. VII, § 1;
State Comp. Ins. Fund v. Riley, 69 P.2d 985 (Cal. 1937); Prof'l Eng'rs v. Dep't of
Transp., 936 P.2d 473 (Cal. 1997).
55. See generallyDevelopments in the Law: Public Employment, 97 HARV. L. REV.
1611, 1619-76 (1984) (describing civil service system).
56. Exec. Order No. 13,087, 3 C.F.R. 191 (1998) (prohibiting discrimination in the
federal government on the basis of sexual orientation); Exec. Order No. 13,152, 3
C.F.R. 264 (2000) (prohibiting discrimination in the federal government on the basis
also may be a feeling that, in addition to special rules like civil
service protections, the legal rights of workers in many areas such as
anti-discrimination and wage and hour protections are respected
and enforced more in the public sector than in the private sector.
From one perspective, privatization that shakes an agency loose
from labor related restriction can increase accountability, in sort of
a perverse way. There are some circumstances in which
government bureaucrats can place the blame for their failure to fulfill
their missions or operate efficiently on labor restrictions, arguing
that government workers have such great job security that it is
impossible to get them to work hard, or that work rules are enforced
so strictly in the government setting that it is impossible to
accomplish anything innovative.57 Whether these or similar stories are
true is beside the point. They are certainly believable, and they
allow agencies to dodge accountability for their failings.
An agency that has privatized a function can no longer shift
blame to government workers and strictly enforced work rules.
Accountability is thus enhanced. When the private entity chosen
to perform the function fails to perform adequately, blame can be
placed squarely with the agency that chose the private company or
the agency that is supposed to monitor the performance of the
private entity. One major qualification is that an agency can attempt
to avoid blame by pointing to procurement rules that forced it to
choose an inferior supplier because that supplier had the best bid
within the restrictive rules.
Another form of contracting out straddles the territory between
contracting out for support goods and services and privatizations
that affect the public. For example, road building and maintenance
are public-oriented government activities but normally do not
involve any policymaking or discretionary decision-making that
would raise serious accountability concerns. I expect that the
federal, state, or local transportation department hiring the private
firm would remain fully accountable for the performance of the
private firm, although the same labor issues raised above arise
here. Further, as in procurement, the cost of bringing all road
of parental status). This situation has been equalized somewhat by executive orders
that apply to government contractors. Exec. Order No. 10,925, 3 C.F.R. 448 (1961)
(discussing how government contractors also have been held to higher standards than
others with regard to employment discrimination and affirmative action).
57. See Developments in the Law: Public Employment, supra note 55, at 1631
(describing civil service system as "a barrier to the dismissal of incompetent
employees and an impediment to government efficiency").
With all regulatory programs that increase cooperation between
interested parties and government, especially those focused only
on the relationship between government and the regulated parties,
there is a danger of agency capture. Too much cooperation
between government and regulated parties could lead to unhealthy
relationships in which both regulated parties and government
officials gain at the expense of the public interest. Programs that
increase the complexity of monitoring for regulatory compliance
present the same danger, although government officials also could
use uncertainty as an excuse for even stricter regulation if that
would result in gains to those officials. Thus, although the positive
potential in the reforms outlined above is clear, concerns for
political accountability should lead, at least, to caution.
Vouchers present interesting political accountability issues. The
most widely discussed voucher issue over the past several years is
education, in which a strong movement advocates giving parents of
school-aged children vouchers they can use toward tuition at either
public or private schools. 90 The idea would be to create more of a
market in elementary and secondary education, because vouchers
would enable more people to afford private education.
There is a perception that at least some public school systems,
not facing much in the way of market competition, spend
inordinate amounts of money on administration and neglect education. 9'
Further, public schools may be hampered by powerful teachers
unions that bargain for seniority systems and work rules that reduce
flexibility in ways that harm education.92 Of course, teachers may
tell a different story, blaming the failings of public schools on
overcrowded classrooms, inadequate support, and social problems in
the communities they serve. These two sets of factors, combined
with tax reduction movements that have left schools with what they
claim is inadequate funding to keep pace with the changing
educational needs of public school students, have made public schools a
prime target for privatization advocates. Tuition vouchers are a
method for accomplishing that privatization. Voucher advocates
argue that were public schools forced to compete for students, they
either would have to perform to the standard of private
competitors, or they would wither away. There always has been some
competition with private schools for students, but the public schools
cost much less and are the only affordable choice for some
Tuition vouchers in primary and secondary education in all
likelihood would lead to greater privatization, because at the margin
more people could afford and would choose private schools. The
arguments over these vouchers are similar to arguments
concerning privatization in other contexts. For example, in addition to
interests representing poorer parents who are concerned that the
public schools will lose support in a voucher system, the biggest
interest group that has opposed vouchers is teachers who fear the
consequences vouchers will have on their jobs and working
conditions.94 Interests concerned about supporting religious education
with public funds also have opposed tuition vouchers because
many private schools are religious and would not be subject to the
prohibition on religious education that exists for public schools. 95
Private schools, like other private entities, may not pay as much as
public schools and may not provide the highly rule-bound,
structured work environment that public schools provide. Even with
similar laws in place, there is a perception that labor laws and
contracts are not enforced with the same zeal in the private sector as
they are in the public sector. 96
Tuition vouchers are viewed as a method for improving the
public schools because, for lack of competition or some other reason or
combination of reasons, the traditional lines of government
accountability have not succeeded in a significant number of public
schools in maintaining high quality programs. In many
tions, management of the schools is overseen by an independently
elected school board, which acts like a board of directors and hires
a superintendent, who acts like a chief executive officer.
Private schools receiving government funded tuition vouchers
would be more difficult to control through the political system than
public schools. However, it is likely that governments giving
vouchers would impose substantive and reporting requirements on
private schools accepting vouchers. School board, and thus
political, control over school curricula and other program details would
be reduced, as of course would political control over other
structural and labor matters. The body politic would have to decide
whether political accountability is worth losing in favor of
increased market accountability that might lead to better quality and,
ultimately, more responsiveness to the popular will.
Vouchers have been used widely in other government benefits
contexts, sometimes with a privatization connection and sometimes
without. There are at least three prominent voucher programs in
the welfare area: Food Stamps, WIC coupons, and Section 8
housing vouchers. 97 Recipients of Food Stamps and WIC coupons must
use them to purchase food. 98 Section 8 vouchers require benefits
recipients to use the vouchers for housing. 99 Although there is no
great tradition in this country of direct government provision of
food to benefits recipients, there has been and still is plenty of
public housing in this country. Thus, the Section 8 voucher program
can be viewed as a privatized system of public housing, in which
government pays the rent, but private, regulated, landlords provide
Contrary to the freedom-enhancing intent of tuition voucher
programs, welfare vouchers are an attempt to retain political
accountability over the welfare recipient's use of benefits. Vouchers,
as opposed to pure cash grants, are designed to increase
accountability and decrease private decision-making. The welfare recipient
must use a portion of the benefits exclusively for food or housing.
It is usually a crime to use such vouchers for other purposes or to
trade them for cash. 100 Food Stamps and WIC coupons come with
tight controls over the kinds of foods that can be purchased.
Gov97. 7 U.S.C. §§ 2011-2032 (1994) (establishing Food Stamps program); 42 U.S.C.
§ 1786 (1994) (creating WIC (women, infants, and children) program); 42 U.S.C.
§ 1437f(o) (authorizing Section 8 housing program).
98. 7 U.S.C. § 2016; 42 U.S.C. § 1786.
99. 42 U.S.C. § 1437f(o).
100. See 7 U.S.C. § 2024(b) (1994).
ernment agencies control even minor details, such as whether a
WIC coupon can be used to purchase flavored milk or only
unflavored milk.1" 1 In situations in which direct government
provision of a good or service is not a realistic or likely alternative, a
voucher increases political accountability by giving government
control over choices made by private individuals.
Although political accountability may help explain welfare
vouchers for food, the political realities may not appear all that
positive. For one, the paternalistic impulse that leads to
restrictions on the use of welfare creates the image of a "Big Brother"
government making sure that people spend their welfare in the
grocery store and not the liquor store. Further, the politics of
welfare are quite interesting. Public choice scholars sometimes have
difficulty explaining why welfare programs for poor people are
enacted, since the poor do not appear to be obvious candidates for
having the ability to organize and the power to influence
government. They may be numerous enough to carry voting power in
some jurisdictions, but they often are not as likely to vote as their
wealthier counterparts. However, the existence of organized
interests in the food production industries may explain the existence of
the Food Stamp and WIC voucher programs. The Food Stamp
program, for example, is administered by the Department of
Agriculture, not Health and Human Services-the agency one would
think would have primary jurisdiction over welfare programs. 102
Although any welfare program for the poor is likely to increase
spending on food, vouchers that are restricted to food purchases
ensure that a certain amount of government money goes toward
food rather than other possible uses that welfare recipients might
Housing vouchers function more like tuition vouchers because
they rely on a private alternative even though a government
institution providing the same service may exist. One reason for the
existence of housing vouchers is that the supply of publicly owned
low income housing is inadequate. Public housing, in some places,
has suffered from problems that plague government attempts to
provide goods or services without real competition or sufficient
accountability for managers-mismanagement, inflated costs, and
101. See Chocolate Mfrs. Ass'n v. Block, 755 F.2d 1098 (4th Cir. 1985) (addressing
procedural validity of rulemaking process that resulted in removal of flavored milk
from the list of permissible foods for the WIC program).
102. See 7 U.S.C. § 2012(l) (1994) (defining "secretary" as used in statute to be the
Secretary of Agriculture).
corruption. 10 3 Housing vouchers allow housing benefit recipients
to live in privately owned housing where landlords may be in
competition for tenants. However, this competition may be more
theoretical than real, because the need for housing benefits may be due
to an inordinately tight or expensive private housing market; The
problems of quality and supply that exist for voucher tenants may
be similar to problems suffered in the purely private market,
especially by tenants at the lower end of the economic spectrum. Public
housing may suffer from poor management common to
government-run institutions where market discipline is lacking and
accountability to the public is not nearly as strong as private
accountability to shareholders. If political accountability is not
sufficient to ensure high quality public housing at a reasonable cost,
then perhaps market competition, in the form of vouchers, could
D. Tax Reductions and User Fees
Cass's final category of privatization is tax reductions and user
fees, both allowing private parties more choice about the use of
money than if taxes were not reduced or if user fees were not
imposed. Tax reductions are the bluntest form of privatization since
they involve decreasing the share of the economy captured by the
government without regard to the particular programs that would
be cut or the particular uses to which the money would be put.
User fees privatize decision-making in that they permit private
parties to decide how much of a government good or service to use
(and thus how much should be provided) based on whether the
good or service is worth the cost imposed by the user fee.
1. Tax Reductions
There may be nothing original to be said about tax reductions
and political accountability. Obviously, the ability of the political
system to influence the use of money is reduced if taxes are
reduced. The whole point of a tax reduction is to take consumption
decisions away from government and put them in private hands. A
person enjoying a tax reduction is unlikely to complain that she has
lost the ability to politically control the use of her money since she
has been given complete direct control.
103. See generally Don Terry, Former Housing Chief Blames Woes on Feds, SAN
DIEGO UNIoN-TRIB., Aug. 6, 1995, at H15; Serge F. Kovaleski, D.C. May Write Off
More Rents; HousingAgency's Losses Would Grow by $5.8 Million, WASH. POST, May
15, 1994, at Al.
This does not mean, of course, that no one opposes tax
decreases. A heavy consumer of government services, such as a
parent of school aged children or a daily user of public mass transit,
may fear that a tax decrease will lead to lowered government
services and thus would prefer to pay higher taxes to support those
programs. The poor may approve of increased taxes on the rich.
Putting ideological preferences aside, one would expect opposition
to tax decreases when it is someone else's taxes that are being
decreased or when the gain from the tax decrease is perceived as less
than the loss from reduced services.
One political accountability matter that can be raised by the
overall level of taxation is the problem of overspending. There
have been periods of deficit spending by government in which, in
effect, the current generation finances consumption through
borrowing that appears likely to be paid off only by future
generations. A tax reduction could be a rational decision by current
taxpayers to reduce their share at the expense of future taxpayers.
However, it may be that the borrowing is for long-term capital
projects that will benefit future generations, and borrowing also
could strengthen the economy in ways that will benefit future
generations albeit less tangibly than would capital projects.
Nonetheless, it is not an original observation to point out that the inability
of future generations to influence today's political decisions can
skew decision-making against the interests of future generations.
There are factors that ameliorate this problem. The size of the
deficit became, in recent times, a political issue to current
taxpayers, perhaps because it got so big that government interest
payments hampered flexibility in government spending, and higher
market interest rates caused by government borrowing were
hurting current taxpayers. 0 4 Perhaps current taxpayers recognized
that consumption at the expense of future generations was morally
questionable. While President Clinton expressed concern over
eliminating the deficit too quickly, he was happy to take credit
when a strong economy led to surpluses in federal funds rather
than deficits.1"5 It remains to be seen whether deficits will return
when the economy sours or whether political concern over deficits
104. See, e.g., Eamonn Fingleton, Unsustainable,11 AM. PROSPECT 1821 (2000).
105. See Richard Rahn, Who Gave Us the Surplus, WASH. TIMES, Oct. 24, 2000, at
A14 (discussing President Clinton taking credit for the surplus); Weekly Compilation
of Presidential Documents 1139, 95 WL 15155290, July 3, 1995 (Speech by President
Clinton cautioning against too rapid reduction of deficit).
hinders borrowing for long-term capital projects the cost of which
ought to be shared by future generations.
User fees are a fascinating subject for study, because they can
raise fundamental issues about the role of government. User fees
are ubiquitous, and most are accepted without much thought. We
pay for our driver's licenses, our passports, licenses for our pets,
postage stamps, fares for government-owned mass transit, copies of
birth, marriage, and death certificates, and numerous other
government goods and services. Some fees are very controversial, and it
is interesting to contemplate the appropriate circumstances for
imposing user fees, as opposed to providing government services
User fees tend to privatize the decision of whether government
should provide a particular good or service because the good or
service will not be provided unless it is worth it to the consumer to
pay the user fee. °6 This is often preferable to general taxation and
use of government funds to provide goods and services without
user fees, especially where the beneficiaries of the goods or
services are users who can afford a fee and who might choose
alternatives if they were forced to pay.
User fees are thought to introduce a measure of efficiency into
the operation of government, because, assuming some measure of
accuracy in pricing, they ensure that government goods and
services are not overconsumed simply because they are available for
free or at too low a price. Although efficient pricing is a laudable
goal, some user fees appear to be imposed simply because
government can do so and the group upon whom the fee is imposed
cannot use the political process to resist them. For example,
defendants in criminal cases are often assessed court costs as part
of the disposition of their cases. The Immigration and
Naturalization Service imposes user fees for entering the United States and
for other services it provides, °7 and user fees in the form of higher
telephone rates are imposed by some states on calls by prisoners.10 8
106. This description of user fees as privatizing choice is drawn from Cass, supra
note 8, at 461.
107. See 8 C.F.R § 103.7 (2000). For a schedule of fees in table form, see
Immigration and Naturalization Serv., Forms and Fees, at
http://www.ins.gov/-graphics/formsfee/forms/index.htm (last modified Mar 14, 2001).
108. Collect calls made from prisons are charged at a higher rate than other collect
calls, with the telephone company and the government sharing the extra revenue. See
Jeremy Kohler, Boycott Highlights High Fees PaidBy Inmates' Familiesfor Long
DisThe groups on whom these fees are assessed may have difficulty
organizing against them within the political process. 0 9 It is unclear
whether these fees are motivated by a desire to rationalize
consumption or are simply revenue raising measures where there
appears to be an easy source of revenue.
Consider further examples of user fees. Public schools do not
charge tuition for residents of the school district, although they
may accept tuition-paying students from outside the district, and
they often charge user fees for extracurricular activities such as
sports teams, drama groups, and the like. Municipally-owned
recreational facilities, such as golf courses, swimming pools, and
beaches charge user fees, though other recreational facilities, such
as parks, do not. Some targeted taxes, such as the excise tax on
gasoline, are more accurately thought of as user fees since they are
earmarked for highway funding. Highway tolls are also user fees.
Although it may be very efficient to target the users of a particular
road for the costs of building and maintaining the road, the
transaction costs of imposing tolls may not be worth the gains in
User fees potentially are subject to abuse. User fees may be
implemented in order to impose cross-subsidization; rates are
sometimes set in regulated industries in which uniform rates often result
in subsidies to customers whose service is relatively expensive to
tance Calls: Missouri Will End Payments to State in Next Contract, ST. Louis POST
DISPATCH, Aug. 11, 2000, at Al; Cathy Woodruff, Vote Set for Jail Phone Contract,
TIMES UNION (Albany, NY), Sept. 6, 2000, at B1 (describing $1.30 surcharge on
county jail inmates' collect calls which funds a forty-nine percent commission on calls
that goes to county; county claims that the surcharge and commission do not affect
the rates charged).
109. An organization, Citizens United for the Rehabilitation of Errants, organized
a month-long national boycott of prison phones with surcharges, and the boycott
apparently helped convince at least the Missouri legislature to end the practice. Kohler,
supra note 108. The organization continues to campaign against surcharges on inmate
telephone calls. See Citizens United for Rehabilitation of Errants, Prisoners'
Telephone Charges, at http://www.curenational.org/Position/curepo9.html.
110. Stopping for tolls causes pollution, wastes time and fuel, and can be
dangerous. For example, Connecticut removed the tolls from the Connecticut turnpike after
a widely publicized fatal accident in which "a tractor-trailer slammed into a line of
cars, killing seven people." Pat R. Gilbert, Drivers May Pay a Price to Lose Tolls:
More Traffic, Crashes and Trucks are Feared, REC. (Bergen County, N.J.), Apr. 26,
1992, at Al. Further, when only some roads are toll roads, choices get distorted and
people choose less desirable roads to avoid tolls, thus causing overcrowding on
nontoll roads and under-utilization (from a purely traffic perspective) of toll roads. When
tolls are removed, traffic increases, prompting fear of congestion and accidents, which
appears to contradict the accident-reducing motivation for removing tolls in some
provide. The best example of this may be postal rates. It has long
been argued by competitors of the United States Postal Service
that first class postal rates are set at a level that far exceeds the
average cost of delivering first class mail.11 The surplus from first
class postage is used, it is argued, to subsidize other services
provided by the Postal Service such as parcel post and express mail 1 2
and even non-postal products and services.1 1 3 Unlike first class
mail, over which the Postal Service has a monopoly, the Postal
Service competes with private companies in other areas, and the
companies complain that this renders the competition in areas where
the Postal Service has surrendered its monopoly unfair.'1 4 There is
also a suggestion that the Postal Service uses some of the first class
surplus to subsidize what many call junk mail, i.e., mail consisting
of catalogs and sales offers. It may be socially desirable to
subsidize such mailings, for the positive effects on commerce and
communication. However, it is not at all clear that it makes sense to do
this at the expense of first class mailers, as opposed to taxpayers
generally. Although the high price of first class mail gives
incen111. See Joseph W. Belluck, Note, Increasing Citizen Participationin U.S. Postal
Service Policy Making: A Model Act to Create a Post Office Consumer Action Group,
42 BuFF. L. REV. 253, 254-55 (1994) (arguing that the average consumer pays inflated
first class rates and receives poor service because commercial mailers and postal
unions exert undue influence in the rate setting process). The Postal Rate Commission is
required by statute to set postal rates for each class of mail to recover the costs of
handling that class of mail. See 39 U.S.C. § 3622 (1994). There is often controversy
over the allocation of these costs. Nat'l Ass'n of Greeting Card Publishers v. U.S.
Postal Serv., 462 U.S. 810, 833-34 (1983).
112. Mark Murray, No Stamp of Approval for Postal Reform, NAT'L J., Jan. 30,
1999, at 277 ("But many Postal Service competitors, such as Federal Express and
UPS, have . . . complained for years that the Postal Service uses its billion-dollar
monopoly of first-class mail to subsidize express mail, parcel post, and other services
that compete with the services that private firms offer.").
113. Timothy Roche et al., Who's Got Mail?, TIME, Oct. 16, 2000, at 86 ("For years
the Postal Service has been accused of using profits from its monopolistic first-class
deliveries to subsidize loss-leading services such as prepaid phone cards that compete
with private companies.").
114. The claim of subsidy is controversial because determining the proper market
rate for first class mail is not a simple task. The Postal Service may enjoy a
competitive advantage merely because the equipment and labor necessary to handle first class
mail may, to an extent, reduce the marginal cost of providing other services. Forcing
the Postal Service to include some of that equipment in its cost calculations for other
services might result in unfairly increasing prices for other services and decreasing
prices for first class mail, which might in turn unfairly disadvantage firms competing
around the edges of the first class monopoly, such as messengers and other delivery
services, fax machine manufacturers, and email equipment and service providers.
Thus, the claim of subsidy, although intuitively attractive, may be more complex than
it appears at first glance.
tives to find alternatives, such as faxing and email, the monopoly
frustrates substitution at least to some extent.
I do not mean to suggest that third party effects should not be
considered when user fees are imposed or set. Although some
payers of user fees easily may be able to spread the costs to third
parties enjoying benefits, there may be social benefits that can be
more easily spread through a tax system than a system of user fees.
For example, it may be that all local residents and businesses
benefit from the existence of roads and mass transit, even if they do not
use the roads or transit system themselves. Although it makes
sense for users to pay part of the costs (through tolls, gasoline
taxes, and fares) it may not make sense to attempt to collect all, or
even nearly all, the costs through user fees if the users cannot
spread the costs of the fees to other beneficiaries. Insofar as
society benefits generally, it makes sense to finance an activity through
more general taxes. For example, an argument against imposition
of user fees on primary and secondary education is that there are
significant third party benefits when the work force is educated,
and it would be difficult for workers to recoup their educational
costs from their employers, who would then recover the costs from
It is unclear how user fees affect political accountability.
Because government activities are, almost by definition, subject to
accountability through the political process, whether those activities
include user fees should not normally have large effects on political
accountability. In some situations, financing government activities
through user fees on consumers of government goods or services
rather than through general revenues may help remedy a common
problem of political accountability. The general public usually has
little incentive to pay attention to what a large government like the
United States government is doing with general revenues because
the taxes paid by any particular person are unlikely to be affected
even if unrest by taxpayers completely eliminated a government
good or service. Beneficiaries, on the other hand, may have a
strong incentive to lobby for a benefit, and if the beneficiaries are a
small and cohesive group, they may succeed without regard to
whether the benefit is politically acceptable generally or socially
desirable.' 15 Even though some oversight, for example by a
legislative committee, is theoretically possible, without anyone with an
115. See generally MANCUR OLSON, THE LOGIC OF COLLECTIVE ACTION (1965)
(describing characteristics of groups that are likely to be able to organize and procure
benefits through the political process).
incentive to complain, under many circumstances it is unlikely that
the political process effectively will check government provision of
benefits. 16 With user fees financing all or some of the provision of
the government good or service, this element of political distortion
is less of a problem.
User fees also can provide accountability by applying a measure
of market discipline to government. If a governmental unit is
required to finance its activities through user fees, and if there is
competition or substitutes, the fees will be constrained by the price
at which alternatives are available. The performance of the
governmental unit can be judged by its ability to attract business and
finance its activities with the fees imposed.
The imposition of user fees also may increase users' incentives to
monitor government's performance. It may be that when a service
is paid for the user feels a greater entitlement to competent,
effective government than when a service appears free of charge. Since
most people must realize that even "free" services are paid for
through taxes, this should not be a great effect, but when user fees
mimic payment for a good or service in the market, the effect may
The last form of privatization I discuss involves entities that are
difficult to classify as either public or private. There are numerous
government corporations performing various functions in which
the lines of accountability are very unclear and the status of the
entity as governmental or private is highly uncertain. Michael
Froomkin has written an extensive article on this subject,117 and I
do not mean to repeat his analysis here, but I hope to shed some
light on the issue from a privatization and political accountability
perspective. If agencies are a headless fourth branch of
government, then perhaps federal government corporations are a fifth.
I suspect that most people have heard of at least a few federal
government corporations, such as Amtrak, Fannie Mae, Ginnie
Mae, Freddie Mac, the Resolution Trust Corporation, the
Corporation for Public Broadcasting, the Legal Services Corporation, and
one that has been in the news recently due to President Bush's
focus on faith-based organizations, the Corporation for National
116. This is the public choice dilemma.
117. See Froomkin, supra note 9 (analyzing federal government corporations and
their character as both public and private entities).
and Community Service.1 18 These are corporations owned wholly
or in part by the federal government.
For some reason or set of reasons, the federal government has
found it desirable to conduct some of its business in the corporate
form." 9 Perhaps the corporate form is more convenient when the
government participates in financial or other markets. Perhaps the
corporate form allows federal expenditures to not appear on the
federal budget, or shields funds of the government corporation
from potential use by other government agencies. However, the
government's use of the corporate form raises questions. Are
there limits to the choice of the corporate form? To return to an
earlier example, 2 ' is there any reason why, assuming the
Appointments Clause and other concerns were met, the federal
government could not create EPA, Inc., a government corporation, to
administer federal environmental law?
When the federal government sells goods or services on the
market, the corporate form may be desirable, especially if there is a
possibility that the corporate entity might someday be privatized.
Amtrak, the common name for the National Railroad Passenger
Corporation, was established by federal legislation as a for-profit
corporation under the District of Columbia's corporate law.121
Congress explicitly provided that Amtrak is not an agency or
establishment of the federal government. However, by statute the
President appoints six members of Amtrak's board of directors, and
because of ongoing government subsidies, the secretary of
transportation appoints two board members.1 22 The final board
member is appointed by the other eight.123 If Amtrak were to become
profitable and no longer need government subsidies, perhaps the
federal government would sell its stock in Amtrak. The corporate
118. Although the corporation's official name is the Corporation for National and
Community Service, it commonly uses a shortened version, the Corporation for
National Service. E.g., Corporationfor National Service, at http://www.cns.gov.
119. See Froomkin, supra note 9, at 557-59 (discussing reasons that government
forms government corporations).
120. See supra note 23 and accompanying text.
121. Beermann, supra note 6, at 177.
123. Id. Appointments Clause issues with regard to the appointment of Amtrak's
board members are similar to those raised above, supra Part I.A. If Amtrak is not a
government entity, it is unclear what constitutional provision authorizes appointment
by the President or the Secretary of Transportation. On the other hand, if the board
members are officers of the United States, then there is no authority for appointment
of the final director by the other eight, because Amtrak is unlikely to be considered a
department of government and the directors are thus not likely to be considered
heads of a department.
form would ease Amtrak's transformation into" a purely private
Government corporations also are used commonly in financial
matters, such as facilitating home mortgage financing. Although
several federal government corporations are involved in this
market, I focus here on the Federal Home Loan Mortgage
Corporation, commonly known as Freddie Mac. 124 Freddie Mac purchases
home mortgages, pools them, and securitizes them, selling shares in
the pools on the open market. 125 This helps finance home
mortgages, since mortgagees can sell the mortgages and use the funds
from the sales to write more mortgage loans.
Freddie Mac was established by federal statute to advance the
federal government's interests in a stabile secondary market for
home mortgages and to further the availability of mortgage
financing, including for low and moderate income housing. 126 In addition
to establishing Freddie Mac as a corporation, Congress statutorily
prescribed Freddie Mac's powers, granted Freddie Mac immunity
from state and local taxation (except for real property taxes), and
provided that for purposes of federal court jurisdiction, Freddie
Mac should be considered a federal agency and all cases to which
Freddie Mac is a party are deemed to arise under federal law. 2 7
Freddie Mac functions largely like a private corporation. It has
issued stock to the public, and Freddie Mac stock is traded on the
New York Stock Exchange under the symbol FRE. It has,
however, a continuing connection to the federal government. Its board
of directors has eighteen members, five of which are appointed by
the President, apparently without the advice and consent of the
Senate. 2 8 Further, the statute creating Freddie Mac grants the
President the power to remove the directors he appoints "for good
Arguably, the President should not have the sole power to
appoint or remove Freddie Mac directors unless they are inferior
officers of the United States. 3 ° They cannot be principal officers
124. See 12 U.S.C. §§ 1451-59 (1994).
126. Id. § 1451 note (Short Title and Statement of Purpose).
127. Id. § 1452(f).
128. Id. § 1452(a).
129. Id. § 1452(a)(2)(B).
130. As Professor Michael Froomkin points out, the Supreme Court has long
approved presidential appointment of directors to private corporations in which the
government has an interest. Froomkin, supra note 9, at 574 n.156 (discussing the Court's
longstanding approval of presidential appointments of directors of the Bank of the
because then senatorial confirmation would be required. 31 If the
directors are not officers, it is difficult to imagine what power the
President would have to appoint them. Removal is even trickier. I
find it very suspicious for the President to have the power to
remove a director of a private company. It is not a question of the
President stepping on the toes of another branch of government,
which is often an issue in separation of powers questions, but
rather a question of ultra vires, i.e., whether the President has the
power to appoint and remove directors of federally chartered
Perhaps strong evidence that the President has such power lies in
historical evidence, dating to entities like the Bank of the United
States and even back to the colonial period in which the King of
England appointed colonial officials who governed the colonies by
heading up what may be best characterized as government
corporations. 132 Because questions like what powers are included as
proper Presidential powers are difficult to answer conceptually,
historical practice is often a good guide on what powers were
granted in the Constitution. If historically the President and even
the King of England have made appointments to government
corporations, or privately owned corporations chartered to perform
government functions, then perhaps the executive power granted
in the Constitution should be understood to continue the tradition.
Interestingly, the courts have not been sympathetic to arguments
that Freddie Mac is a government agency, at least when the issue is
whether Freddie Mac is subject to constraints on government
action. The Ninth Circuit has held that Freddie Mac is not a
government entity for the purposes of applying the Due Process Clause to
Freddie Mac's dealings with sellers and servicers of mortgage
loans. 3 3 The court relied primarily on the fact that the President
could appoint only a minority of Freddie Mac's directors, which
was insufficient to give the federal government control over
Freddie Mac.'34 The court distinguished Freddie Mac from Amtrak,'35
131. See U.S. CONST. art. II, § 2, cl. 2.
132. The first Congress created at least one government corporation, the Bank of
the United States. See McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819)
(discussing constitutionality of Bank of the United States). It may be, although I am not
certain, that entities like the Massachusetts Bay Colony are even earlier examples of
government corporations, private companies exercising powers, some of which may
have been governmental in nature, granted by the sovereign.
133. See Am. Bankers Mortgage Corp. v. Fed. Home Loan Mortgage Corp., 75 F.3d
1401, 1409 (9th Cir. 1996).
134. Id. at 1407.
135. Id. at 1407-08.
which the Supreme Court held to be a state actor for First
Amendment purposes because all but one of Amtrak's board members are
appointed by federal government officials.136 The Seventh Circuit
denied a claim against Freddie Mac under the Federal Tort Claims
Act 37 on the ground that Freddie Mac is not an agency of the
federal government, 38 although it did hold that Freddie Mac was
protected from estoppel under doctrines that hold government
agencies not subject to estoppel by the representations of their
The structure and ownership of federal government corporations
varies widely. On one extreme, the Corporation for National and
Community Service, from an accountability standpoint, appears to
be indistinguishable from a government agency except that it is in
the corporate form. 140 The structure and powers of the corporation
are prescribed by legislation, and the directors and CEO of the
corporation are appointed by the President with the advice and
consent of the Senate. 141 The corporation's directors and CEO must
be legally considered "Officers of the United States" or the
Senate's role in confirming appointments would be subject to
constitutional challenge because the only basis for senatorial action
without bicameralism and presentment is the Senate's
constitutional role in confirming the appointments of such officers. 42
Unilateral action by the Senate with effects outside the Senate itself is
unconstitutional unless specifically authorized by the
The legal and constitutional status of other federal government
corporations is not so clear. For example, the Federal Reserve
System has a great deal of power over monetary policy in the United
States. The system is a mixture of what look like government
agencies (the members of the Board of Governors of the Federal
Reserve System are appointed by the President with the advice and
consent of the Senate) and private entities (the directors of the
Federal Reserve Banks are chosen by member banks, which also
136. See Lebron v. Nat'l R.R. Passenger Corp., 513 U.S. 374, 400 (1995).
137. 28 U.S.C. §§ 2671-2680 (1994).
138. See Mendrala v. Crown Mortgage Co., 955 F.2d 1132, 1140-41 (7th Cir. 1992).
139. Id. at 1139.
140. See 42 U.S.C. § 12651 (1994) (establishing the Corporation for National and
Community Service). Interestingly, the term "Executive Agency" is defined in the
United States Code to include "an Executive Department, a Government
corporation, and an independent establishment." 5 U.S.C. § 105 (1994).
141. 42 U.S.C.S. § 12651c, 12651e (2001).
142. See U.S. CONST. art. II, § 2, cl. 2.
143. See INS v. Chadha, 462 U.S. 919, 955 (1983).
own shares in the Federal Reserve Banks). 1 4 Membership on the
Federal Open Market Committee, an important committee in
setting monetary policy, is selected in part by the Boards of the
Federal Reserve Banks, which in effect means that private entities are
choosing members of what looks like a government body. 145 This
arrangement raises grave doubts under the Appointments
Clause 146 and perhaps also under nondelegation doctrine
principles. If the members of the committee are officers of the United
States, they can be selected only in compliance with the
Appointments Clause which would not allow appointment by private
entities such as banks. If they are not officers of the United States,
then the appointment of some members by the President with
senatorial confirmation, even indirectly by virtue of their service on
the Board of Governors, is subject to constitutional attack as, at a
minimum, beyond the Senate's confirmation power.
Nondelegation principles also call into question allowing an entity that is at
least partly privately controlled to decide important matters of
federal government policy.
Regardless of the legal issues raised by these sorts of
arrangements, the appearance and reality of political accountability are
placed in doubt when government power is wielded by entities that
are either outside government or only loosely connected to
government.1 47 The Federal Reserve System may be the best example of
this, because in recent years the Chairman of the Federal Reserve
System, Alan Greenspan, has appeared to function independently
of the rest of government, steering the economy away from the
depths of recession and the shoals of inflation. The Chairman is
appointed pursuant to the Appointments Clause, so perhaps his
perceived lack of accountability is a function of the independence
of his agency and his insulation from Presidential removal, but the
structure of the Federal Reserve System, with its public/private
144. 12 U.S.C. § 304 (1994).
145. Five of the twelve members of the committee are selected by the Federal
Reserve Banks. The other committee members are the Members of the Board of
Governors of the Federal Reserve System, who are appointed by the president and
confirmed by the Senate. 12 U.S.C. § 263(a) (1994).
146. See Melcher v. Fed. Open Mkt. Comm., 836 F.2d 561, 562 (D.C. Cir. 1987)
(holding that equitable discretion counsels against hearing United States Senator's
challenge to appointment by Federal Reserve Banks of members of the Federal Open
147. See, e.g., Melcher v. Fed. Open Mkt. Comm., 644 F. Supp. 510, 521 (D.D.C.
1986) (stating that selection of members of Federal Reserve Board's Federal Open
Market Committee by private individuals did not violate Appointments Clause), affd
in part and vacated in part on othergrounds, 836 F.2d 561 (D.C. Cir. 1987).
partnership appears to have at least something to do with the
Chairman's unique status in the political system.
Whatever their virtues, government corporations appear to
create significant questions of accountability. Their connection to
government can be mysterious, and their loyalties mixed if both
government and shareholders participate in their governance by
choosing directors and officers. A public unhappy, for example,
with Freddie Mac or Fannie Mae is likely to have no idea whom to
hold responsible. It may not even be obvious who is making which
decisions. The inability to assign political responsibility for the
actions of government corporations is often likely to be much greater
than that caused by commandeering of state and local government
by the federal government. Yet we have no developed vocabulary
for discussing whether a particular function is appropriate for the
corporate form or whether it should be performed, if at all, by an
actual government agency.
III. FOIA AND THE APA
Freedom of Information Act ("FOIA")' 4 8 and related statuotfesth14e9
The last set of issues I look at involve the applicability
and the Administrative Procedure Act ("APA") 150 to the activities
of entities involved in privatization. Recall that the three criteria
for political accountability put forward at the outset of this article
are: (1) the body politic's ability to influence a governmental
decision, (2) the body politic's ability to know which entity in the
political system is responsible for an action or policy, and (3) the ability
of the body politic to obtain information about a decision or action.
Application of FOIA and the APA to an activity enhances
accountability along all three measures. The APA and FOIA require
agencies to publish certain of their decisions in the FederalRegister
and give the public the right to gain access to many agency
records.5 In accountability terms, FOIA most directly allows the
body politic to gain information about the operation of
government by requiring agencies to open many records to public
inspec148. 5 U.S.C. § 552 (1994).
149. Related statutes include the Government in the Sunshine Act. Id. § 552b. In
order to avoid needless complication, the discussion in the text is confined to FOIA.
150. Id. §§ 551-559.
151. Agencies must publish rules that affect the public in the Federal Register. Id.
§ 552(a)(1)(D). A rule not properly published may not be used against a person
lacking actual notice of the rule. Id. § 552. Agencies are also required to "make available
for public inspection and copying" final opinions and orders in adjudications. Id.
tion. FOIA furthers additional accountability interests because the
information made public under FOIA can be used to facilitate
efforts to influence government decision-making and to identify
which government entity is responsible for a particular action or
The APA increases the body politic's ability to influence
government action in rulemaking by providing for an open, somewhat
political, rulemaking process. By specifying procedures for both
formal and informal adjudication, 52 the APA also increases the
ability of adjudicatory subjects to influence the outcome of their
cases. Further, by subjecting rulemaking and adjudication to
judicial review under various statutory standards of review,153 the APA
provides private parties a means of restraining agencies from acting
without good reason or beyond their statutory authority. Finally,
by requiring agencies to give notice of both adjudicatory and
legislative action,'54 the APA provides the public with information
about agency action, including which agency proposes to take what
action. Armed with this information, influencing agency action
Privatization threatens to undermine the accountability provided
by the APA and FOIA in several ways, some obvious and some not
so obvious. Most obviously, insofar as a private entity is not
subject to the APA or FOIA, the accountability advantages of those
statutes are lost. For example, the records of a company
administering a social welfare program might not be available to the public
under FOIA because they would not be considered records of an
agency, 55 and the directors of the private company would be able
to meet in private, without regard to Sunshine Act requirements.
Private companies developing rules of thumb for dealing with
claims or other matters affecting the public might not have to
publish those rules under the APA, and the lack of public access to
their records and meetings might make it difficult for the public to
even know of such rules' existence.
There are ways to maintain accountability in privatized
situations. Agencies could require publication and openness, and courts
might hold benefits denials invalid if, for instance, they are made
152. See id. §§ 552(a)(1)(B), 554, 555(e), 556-557.
153. Id. §§ 704, 706.
154. Id. §§ 552(a)(2)(A)-(B), 553.
155. See Forsham v. Harris, 445 U.S. 169, 171 (1980) (holding that data produced by
private researchers in government funded study are not "agency records" subject to
by a private contractor without publication by the agency of either
the agency's rules or the contractor's rules. Perhaps courts should
deem any rules (such as rules of thumb) developed by a private
contractor to be rules of the agency and apply the APA's
publication requirement.' 56 Agencies also should provide clear
instructions to private providers of government benefits, and should not
allow the private companies to make discretionary decisions that, if
made by an agency, would be subject to the APA and FOIA's
accountability enhancing procedures. Thus, it is possible to maintain
accountability in a privatized situation, but the process of
accountability is at a minimum made more difficult by the privatization.
However, privatization also may threaten accountability in ways
that are not so obvious. Although an agency is obviously
accountable for the decision to engage a private company to provide goods
or services, agency rules and records surrounding what are
essentially procurement decisions may be less open to public scrutiny
and influence under FOIA and the APA than other agency policy
decisions. Rules relating to agency management and contracts are
not subject to the APA's rulemaking requirements. 157 Government
contractors and agencies might be able to shield data submitted by
contractors to agencies from FOIA disclosure as "confidential,"
"commercial or financial information.1 158
The applicability of FOLA and the APA to government
corporations and similar entities is worthy of separate attention. Congress
sometimes specifies whether a particular government corporation
should be considered an agency for the purposes of FOIA and the
APA.1 59 The statutory default rule is that a government
corporation is subject to FOIA, even though it might not be subject to the
APA.'60 Thus, even though entities like Freddie Mac discussed
supra may not be subject to constitutional constraints or the
re156. The APA's publication requirement is the primary mechanism that applies to
benefits-related rules since the APA's rulemaking provisions do not apply to rules
regarding government benefits. See 5 U.S.C. § 553(a)(2).
157. Rules relating to "agency management ... or to public property ... or
contracts" are not subject to the APA's rulemaking requirements. Id. § 553(a)(2).
158. Id. § 552(b)(4).
159. See Beermann, supra note 6, at 173, 176.
160. FOIA has a broader definition of "agency" than the APA. The APA defines
agency as "each authority of the Government of the United States" with enumerated
exceptions including Congress, the United States courts and territorial governments. 5
U.S.C. § 551(1) (1994). FOIA defines "agency" as "any executive department,
military department, Government corporation, Government controlled corporation, or
other establishment in the executive branch of the Government (including the
Executive Office of the President), or any independent regulatory agency." Id. § 552(f).
quunidreermFenOtIsAo1f61the APA, they are subject to disclosure of records
In sum, for a variety or reasons, privatization might render the
APA and FOIA less effective in providing avenues for holding
agencies accountable. Congress or the relevant agency should take
care when contracting for the provision of goods and services to
ensure that private contractors operate under clear instructions
and do not exercise governmental discretion or coercive power
without an adequate substitute for the accountability protections
that apply to government. Perhaps Congress, and state
legislatures, should consider subjecting the records of government
contractors to FOIA-like disclosure obligations, at least when the
contractor is providing benefits directly to members of the public.
"Privatization" denotes a broad spectrum of the relationship
between government and the private sector. In some circumstances,
such as government contracting out for support goods and services,
accountability is not likely to be a serious concern, because
government remains fully accountable for its procurement decisions
regarding goods and services and because procurement decisions do
not directly affect members of the public. In other circumstances,
such as deregulation of personal relationships and business
matters, reducing political accountability is the point of deregulation,
and the increase in personal and economic freedom is worth the
reduction of political accountability.
In recent years, attention has focused largely on contracting out
by government of the provision of goods and services to the public,
most notably with regard to social welfare and social insurance
programs. One serious concern that has been raised with regard to
this type of privatization is that private companies providing goods
and services to the public are less politically accountable than the
government agencies they replace. In general, if a private
company is given detailed, comprehensive instructions by a
government agency, and that agency remains accountable for the
successes or failures of the private provider, the degree of political
accountability lost may be worth the gains in market accountability
161. See Rocap v. Indiek, 539 F.2d 174, 181 (D.C. Cir. 1976) (concluding that
Freddie Mac is subject to FOIA as a government controlled corporation); Energy
Research Found. v. Def. Nuclear Facilities Safety Bd., 917 F.2d 581, 585 (D.C. Cir. 1990)
(finding that Defense Nuclear Facilities Safety Board is subject to FOIA and Sunshine
that competition over government contracts brings. If, however,
the private provider is not given detailed comprehensive
instructions, but rather exercises discretion and coercive power over
members of the public, accountability concerns may be well
founded. Some reform, such as applying freedom of information
principles or procedural requirements akin to those in the
Administrative Procedure Act, could go a long way toward alleviating
accountability concerns. It is important to look separately at each
type of privatization, and even each instance of privatization,
without lumping all privatizations together as positive or undesirable
along ideological lines.
23. See Nick Littlefield & Nicole R. Hadas , A Survey of Developments in Food and Drug Law from July 1998 to November 1999 , 55 FOOD & DRUG L.J. 35 , 41 ( 2000 ) (describing use of private reviewers for low risk medical devices under Title II of the Food and Drug Administration Modernization Act of 1997 , 21 U.S.C. § 301 ( 1994 & Supp . V 1999) ) .
24. 426 U.S. 833 ( 1976 ).
25. FERC v. Mississippi , 456 U.S. 742 , 763 - 64 n. 28 ( 1982 ) (internal quotations and citations omitted) (alteration in original).
26. FERC v. Mississippi , 456 U.S. 742 , 761 - 62 & n.25 (characterizing Justice O'Connor's anticommandeering analysis as "demonstrably incorrect" ).
27. Id . at 775-97 (O'Connor , J., concurring in part and dissenting in part).
28. Id .
29. Id .
30. Id . at 787 (citation omitted).
31. See Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528 ( 1985 ).
32. See Printz v. United States , 521 U.S. 898 ( 1997 ); New York v. United States , 505 U.S. 144 ( 1992 ). Regulation of states' own activities is still allowed, although the line between commandeering and regulating a state's own activities is not particularly clear . See Reno v. Condon , 528 U.S. 141 ( 2000 ) (upholding statute that prohibited states from selling driver's license information pertaining to individual license holders despite argument that statute regulated the state's treatment of third parties). 2 .
46. See generally Mark Aronson, A Public Lawyer's Responses to Privatisationand Outsourcing, in THE PROVINCE OF ADMINISTRATIVE LAW 40 (Michael Taggart ed ., 1997 ).
47. Id .
48. See infra notes 53 , 111 and accompanying text.
49. See MILTON FRIEDMAN , CAPITALISM AND FREEDOM 140 ( 1982 ) (describing how pressure for regulation "invariably" comes from regulated parties, not the public); see also Jonathan Macey, Promoting Public RegardingLegislation through Statutory Interpretation:An Interest Group Model , 86 COLUM. L. REV. 223 ( 1986 ).
90. David Boaz, CATO Inst., Let the Children Go, Mar. 22 , 1999 (defining voucher plans ), http://www.cato.org/dailys/03-22-99.html.
91. See , e.g., Meredith May & Janine DeFao, Oakland Team on Education Wraps Up Proposals , S.F. CHRON ., Oct. 8 , 1999 , at A21 (discussing school reform proposals in Oakland) .
92. See , e.g., Brian McGrory , Kerry Set to ProposeEnding Tenure System , BOSTON GLOBE, June 16, 1998 , at Al ( discussing proposal to end teacher tenure system in public schools that is part of school system's contract with teachers unions).
93. See , e.g., Edward Wyatt , 4 Companies Emerge in Bid to Privatize Worst Schools, N.Y. TIMES , Oct. 19 , 2000 , at B8 (discussing for-profit companies taking over public schools).
94. See generally , Press Statement, Statement of UFT President Randi Weingarten, United Federation of Teachers (Aug. 28 , 2000 ) (arguing that vouchers are a poor solution to the problems facing public schools ), http://www.uft.org/ news.cfm?doc id= 1200 .
95. See David Webber, Editorial, Public Fundingfor Religious Schooling is a Part of America'sPast,ST . Louis POST -DISPATCH, Oct . 24 , 2000 , at D9 ( "A frequent argument of opponents is that establishing tuition vouchers amounts to aiding religion and is , therefore, unconstitutional.").
96. See supra notes 55-57 and accompanying text. 2.