In lawmakers’ quest to cut the state budget, new reports show that privatizing some services would actually cost the state money. The Senate Health and Social Services Committee reviewed feasibility studies Monday for potential privatization of the Alaska Psychiatric Institute (API) and state juvenile justice facilities. 

The studies were a requirement under Senate Bill 74, which implemented reforms to the state’s Medicaid system after it was passed by lawmakers last year.

SB 74 also called for a feasibility study on privatizing the state-run pharmacy that serves pioneer homes across Alaska, but Valerie Davidson, commissioner of the Department of Health and Social Services (DHSS), told lawmakers the department couldn’t find anyone qualified to run those numbers.

“The department made two attempts to procure the study through an open, competitive solicitation process,” Davidson wrote in a letter to lawmakers. “Responses to both solicitations were deemed nonresponsive.”

Rep. Ivy Spohnholz, who chairs the House Health and Social Services Committee, said she’s not surprised by the lack of interest from the private sector. She doesn’t see her committee pushing the issue further. 

“Pharmacies make money when there’s a volume, when they have the opportunity for a volume, and there’s just not the volume in a pioneer home,” Spohnholz said in an interview Monday afternoon. 

Feasibility studies for API and juvenile justice facilities found, in both cases, that the state would have to spend money to privatize and that the private sector lacks the skills and experience to take on those services.

“The department agrees that privatization of these facilities is not viable given the specialized skills necessary, risk, costs, and lack of contractors interested in the operation of the short-term juvenile detention facilities,” Davidson wrote to lawmakers.

Senate President Pete Kelly, who sponsored SB 74, called the results of the studies unfortunate.

“Privatization has been something people of Alaska have asked for time and time again and it’s been difficult to achieve because you do have that feasibility study always in the way,” Kelly said in a press conference Monday morning.

The report on API suggested limited outsourcing of communications and administrative positions.

Last year, the Legislature approved $535,000 to pay for all three reports. Spohnholz said it was worth it for the state to realize that it would have lost money in the process of privatization.

“The privatization studies are there so we can avoid making mistakes, and it’s really important that we don’t make any mistakes with particularly Alaska psychiatric Institute and with the Division of Juvenile Justice,” Spohnholz said. “We don’t want to be making any mistakes with those people and those services.”

KTVA 11’s Liz Raines can be reached via email or on Facebook and Twitter.

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