Government 'efficiency' for LIPA? Inefficiency is more like it 

The list of activities the government can do more efficiently than the private sector is a short one. The reason for this is elemental: The owners of a firm benefit if managers can keep costs down and operate efficiently, and they typically strive mightily to do so — and owners reward managers if they accomplish that. However, bureaucrats tasked with running an operation have no such motive, nor do they have many carrots or sticks to motivate workers to do so; that’s because government entities can’t really give bonuses or fire anyone except in extenuating circumstances, and usually not even then.

But apparently New York State has concluded that it is an exception, and the State Legislature has set in motion a plan to have the government take over the electric system on Long Island, something commonly referred to as municipalization.

The ostensible reason for this is the notion that if the government ran it, there would be no shareholders clamoring for dividends, so prices could be reduced and customers would be better off.

However, while the legislature may see this as a way to earn political points, there’s a very good chance it could come to regret this after the election.

It was scarcely a decade ago that Superstorm Sandy hit New York, and LIPA’s municipal ownership proved to be a hindrance in the recovery. The government-run entity had failed to take even elemental steps to prepare for a natural disaster, and rebuilding damaged power lines dragged on interminably.

The government needed to blame someone besides the elected officials tasked with overseeing LIPA, and said the failure was due to the structure of its municipal ownership. The state privatized it and private management rebuilt it, which cost the ratepayers some money. Now that this task is completed, the government is stepping in to reclaim it.

While the state may be currently running a surplus with money at hand to accomplish this at present, that's not likely to last. Its current fiscal surplus is due almost entirely to the federal government’s pandemic response shoveling billions to the states and that sugar-rush high stimulating economic growth and the stock market in 2021, both of which kicked off billions of dollars of (wholly short-term) tax revenue for the state. The recently proposed budget for fiscal year 2024 has a $12 billion structural deficit.

Taking a chunk of that windfall to fully municipalize LIPA rather than construct new school buildings, improve teacher training, or add more police protection is difficult to explain to most voters without dissembling, especially when the bill comes due in a year or two and the state is forced to raise taxes or cut spending. 

The Democrats who run much of New York and have outsized power in Albany may want the government to own the factors of production, but in the 70 years or so that such a thing was tried on this planet it proved to be unworkable regardless of the country or era. That ineluctable fact is why the Cold War ended with us on top and the Soviet Union disbanding. 

No one being honest would declare that a municipal-run LIPA would protect taxpayers, save money for ratepayers, or improve service. Bringing the efficiency of the Post Office to a major utility is a recipe for long-term disaster.