Privatization Lessons for U.S. Extension from New Zealand and Tasmania

When public agencies come under budget stress, user fees are often suggested as a means of cost recovery. The question of whether any of the agency's activities could be made self- supporting or spun off to the private sector is often asked. In considering such funding alternatives, U.S. Extension can look to other countries where experiments in privatization have been taking place for several years.

During the last six months of 1991, I did a study of the privatization of advisory services in New Zealand and Tasmania. The study, which involved interviews with Extension professionals, administrators, and clients, provided insights into what might occur if U.S. Extension adopts similar approaches.

In Australia and New Zealand, Extension is largely an advisory service, primarily involves agriculture, and is attached to Ministries of Agriculture, which also have responsibility for research and regulation. Defining Extension as advisory services emphasizes the private benefits of Extension activities and, when government budgets are stressed, can easily lead to the conclusion that Extension's private sector clients should pay for its services. With this focus on the role of technology transfer, educational, human development, and community benefits are easily overlooked. In these countries, Extension's almost exclusive association with agriculture reinforces the notion that its allegiance lies with private interests within agriculture rather than with the public.

These factors have led to attempts to divide advisory services into public and private benefit categories with the implication that private benefit activities should recover costs through user fees. Attempts also have been made to divide the Extension function itself between public and private providers. Private Extension, in this concept, involves any professional in the private sector who delivers advisory services to agriculture, and is seen as an alternative to public Extension.

The Australian state of Tasmania has the longest experience with fee-for-service Extension activity in the world, having introduced fee-based advisory services in 1982. The Labour government in New Zealand went several steps further in 1985 when it required the advisory services of the Ministry of Agriculture and Fisheries (MAF) to become completely commercial by 1990 as the first step to privatization. The final step was planned for July 1, 1992, when MAF Management Consultancy Services was to become a State Owned Enterprise (SOE) with the government as the initial sole shareholder.

Interviews with departmental staff and farm organization leaders revealed that fee-based Extension has been an unhappy experience in Tasmania. Implementation of the cost recovery policy fell on top of a major restructuring that required field staff to assume roles of greater technical specialization. Field staff reported they were still trying to gain confidence in their new roles when they were required to charge farmers for their contacts.

Thompson found that the new policy hadn't caused the department staff to be monopolized by one size class of farmer, as some had feared it would. Nor had it attracted new clientele. However, 90% of client farmers had reduced the frequency of contact with the advisory services. They also had changed the manner of contact from predominantly face-to-face to telephone.1

One of the important functions of Extension is to facilitate the transfer of information between farmers. Departmental field staff reported their perception that less personal contact between themselves and farmers had greatly reduced the effectiveness of the service. In their view, assigning charges to their personal interactions with farmers had restricted staff access to an essential source of information and impeded the free flow of information within the agricultural knowledge system. Departmental staff believed they were losing touch with farmer thought and innovation.

Interviews with farm organization leaders revealed a concern that linked fee-based Extension with increased regulation of agriculture and forestry in Tasmania. When Extension is both publicly and privately funded, its ability to serve the public interest on issues such as sustain-ability is questioned. As the department concentrated on developing a more commercial relationship with its agricultural clientele, farm leaders believe it became less an agent of the public and was less able to challenge the rural community on important public issues. They believe the fee-based policy has weakened Extension as a force for positive change in rural Tasmania. With a weakened public sector pursuing its interests through voluntary approaches, the Tasmanian electorate has resorted to greater regulation of its agricultural industries.

The fee-based service policy in Tasmania also failed to generate significant cost recovery. After 10 years of the policy, fees don't total five percent of annual departmental revenues.

Commercialization

The introduction of commercialized advisory services in New Zealand left few recognizable parts of the earlier service. Interviews with the regional consultancy managers revealed that since 1985, when the transition began, professional staff and clientele numbers had fallen by more than 50%, with reductions reaching 80% in one region. Commercialization required a shift in organizational culture that proved difficult, particularly for older staff. While the managers report contact with fewer farmers, that contact has greater depth than before.

In addition to individual farm and business clients, the service is marketing its capabilities as a national system to commodity groups and agricultural input and processing industries. Technology transfer contracts are being pursued with the three newly formed Crown Research Institutes (CRIs) having responsibility for agricultural research. Government is also being cultivated as an important client. The organization is pursuing government contracts to provide strategic information about agriculture to government and supply public benefit information to agriculture. The organization's reduced client base and commercial nature would appear to limit its credibility for these roles.

Ritchie reported that the plan for MAF Management Consultancy Services to become a State Owned Enterprise on July 1, 1992 has been postponed due to the inability of the SOE Board to attract sufficient staff with the required qualifications and regional representation. Present plans call for the privatization of local practices (district offices) with franchises back to MAF. In return for the franchise fee, MAF would supply national generic marketing, marketing to large corporations, quality assurance, and administrative systems.2

The New Zealand experience is an excellent case study as it involved movement from public funding to commercialization in a five-year period. The capacity to conduct public benefit Extension programs no longer exists except as the government may contract with private entities. Again the question of whether a commercial organization can serve the public interest arises. Koller cites public benefits to Extension that can't be commercialized.3 This suggests private Extension (private sector delivery of advisory services) can't completely replace public Extension.

It's worth remembering that the privatization of advisory services in Tasmania and New Zealand wasn't voluntary; it was directed by external political forces. Such decisions hinge not only on fiscal considerations, but also on majority public (and public official) perceptions of the relative public versus private value of the service. When the majority view is that the service is primarily of private value, or that it can best be provided by private markets, then that will largely determine the outcome.

The Tasmanian and New Zealand experiences are most applicable to that part of U.S. Extension relating to agriculture. The U.S. definition of Extension as public education within the land grant university system reduces somewhat the application of this experience. Nonetheless, the privatization efforts in Tasmania and New Zealand suggest several lessons.

Publicly funded Extension must reaffirm that it's about the public business. While this seems obvious, the point has become confused. Public Extension disseminates objective, scientific information and encourages its application by individual families, farms, businesses, and communities. The purpose isn't private profit maximization. Rather, the public supports this work to capture the larger benefits it brings to society. That innovative farmers, and others, may reap a windfall is part of the process, but not its justification. Efforts to divide the benefits of Extension programs into private and public categories, then, aren't helpful in pursuing the interests of either the public or agriculture.

Public Extension doesn't compete with the private sector. The public won't continue paying Extension to do work that can be done by the private sector. Extension must be competitive in acquiring the resources necessary to fulfill its unique mission and in hiring and rewarding staff. But in its educational role, Extension can only cooperate. Wolek argues that when Extension finds itself competing with the private sector in programming, it's probably doing the wrong thing.4 In fact, one of Extension's important public roles is to support the development of a dynamic, innovative, and competitive private sector; for the public benefits that a well-functioning private sector yields. At the same time, the public educator's role is necessary precisely because private goals and actions aren't adequate to serve all the public's needs.

Charges for interacting with Extension agents are incompatible with the public educator role. These charges restrict the free flow of information within the agricultural knowledge system and have the same effect as restricting access to research results. At the same time, Wolek defends Extension's use of nonprofit user fees,5 including charges to recover the costs of delivering information to individuals through publications, plant and animal diagnostic services, computer programs, conferences, workshops, and other means.

Private Extension isn't an alternative to public Extension in matters related to the public interest. To paraphrase Breimyer,

No private entity is charged with the responsibility to pursue the public interest, and none should be rebuked for failing to pursue it. Only public institutions have that responsibility.6

Extension is a public investment in the ability of agriculture to voluntarily incorporate public goals. This isn't to suggest that Extension can completely replace regulation and control. However, public education offers an alternate way for society to pursue its interests with agriculture-be they greater productivity and competitiveness, reduced environmental impacts, increased rural employment, sustainability issues, or others. When Extension functions properly, agents of the public-who possess agricultural expertise-challenge and work with the industry to bring about change responsive to public interests, yet sensitive to the needs of agriculture.

Lacking a credible public education capability to address its goals, the public can only resort to greater regulation and control. As the experiences of New Zealand and Tasmania demonstrate, surely public Extension, by being less intrusive and restricting, is more efficient in addressing public/private interest issues.

1. R. P. Thompson, "Fees for Farmer Advisory Services," Journal of Australian Institute of Agricultural Science, LII (No. 2, 1986), 73-78.

2. Personal communication, I. J. Ritchie, acting national business manager, MAF Management Consultancy Services, July 13, 1992.

3. Personal communication, B. Koller, national business manager, MAF Management Consultancy Services, July 16, 1992.

4. F. W. Wolek, Cooperative Innovation: Key to a New Agriculture (Villanova, Pennsylvania: Villanova University, Center for Agricultural Commerce, 1989), pp. 15-17.

5. Ibid., pp. 54-55.

6. H. F. Breimyer, Economic and Marketing Information for Missouri Agriculture (Columbia, Missouri: Department of Agricultural Economics, September 1987).