NASHVILLE - While Republican Gov. Bill Haslam favors privatizing state government services in areas where he thinks it makes sense, he isn't ready to go on a government outsourcing crusade.

"I think our mission is to be able to provide that service at as low of a price as we can, and most of the time that'll mean doing it ourselves," Haslam said. "But if it can be done at a higher quality and a lower cost by someone else, we should do that."

The governor told the Chattanooga Times Free Press in an interview last week that revenues are still below normal from the Great Recession and that state governments, including Tennessee's, must keep looking at what they do and how they do it.

Haslam, who took office in January, early on ordered his department chiefs to review state operations "top to bottom" in hopes of effecting reforms.

"Right now, I don't anticipate a huge move toward privatizing a lot of things," he said. "Could we end up doing more than we're doing now during my time as governor? Sure, just as a process of evaluating what we do."

Haslam's first budget, which he signed last week, includes at least two outsourcing provisions.

The Department of Children's Services is pulling the plug on the last seven group homes it operates for delinquent teens and outsourcing the program to the private sector.

The move, originally proposed by the Bredesen administration, will abolish 99 state jobs and save about $2.76 million a year.

The Education Department is converting 33 part-time positions in the Tennessee Early Intervention System to contract services. The program provides voluntary educational assistance to families with disabled infants or toddlers. Savings are unclear.

That's not all. Haslam also signed two education bills pushed by Republican allies in the General Assembly. One allows for-profit companies to operate computerized "virtual schools" for public school students.

The other lets local school systems use private firms to supply substitute teachers.

In the legislative session that ended last month, Sen. Andy Berke, D-Chattanooga, fought the bill allowing for-profit companies to run computerized schools.

Berke said everyone should be concerned about waste and fraud in government.

"But that also means being vigilant when for-profit companies knock on our door and want to use taxpayer dollars to put profits in their investors' pockets," Berke said.

He noted the "virtual-schools" bill was promoted by several for-profit companies including K-12 Inc. One of that firm's founders is disgraced Wall Street "junk bond king" Michael Milken, who went to prison for financial reporting improprieties.

"When you have a convicted felon who after he got out of prison was again sanctioned by the [Securities and Exchange Commission] and we start turning over BEP [education] taxpayer dollars to him, our state should be concerned," Berke said.

Proponents in the General Assembly quashed efforts to bar a company from doing business with the state if a convicted felon owns more than 5 percent of the firm.

But others argue the state should be doing more to privatize services.

"I would like to see him [Haslam] be a little more aggressive at identifying additional opportunities for that," said Justin Owen with the Tennessee Center for Policy Research, which advocates for limiting government.

Owen noted the governor has talked a great deal about "reforming the way government works."

He said Haslam should be targeting areas for potential privatization that would save taxpayer money, ease government burdens and provide "more customer friendly-oriented approaches."

Jim Burnett, executive vice president and chief development officer for Nashville-based SMS Holdings, which has wide expertise in public and private-sector outsourcing, said the state could "benefit and gain efficiencies from outsourcing."

"The time is right," Burnett said. "Given the economic climate, more states and local governments are having to look at other options - very viable options."

The executive director of the Tennessee State Employees Association, Robert O'Connell, doesn't think privatization is wholly a great idea.

"Especially when we're talking about services that involve caring for human beings," he said. "Because companies, the corporations, we know why they're put on Earth - and that's to make a dollar."

O'Connell warned that "every decision" made by a for-profit company "is going to be preceded with a question: Will this make a dollar for our stockholders? I'm glad they're around. They're great at building cars and making shoes, whatever.

"But," O'Connell said, "they need to stay out of the business of running big governments. They're just not good at it."

Prison privatization

One area where Haslam could look at is turning more of the state's prisons over to private companies.

He said the state can compare costs between its own prisons, private prisons and county facilities that house state prisoners for pay.

"That's one thing we can measure," the governor said. "We don't have any active study going on right now to privatize all our prisons. We do have the data there to look and see who's doing the best."

Nashville-based Corrections Corporation of America and its executives, many of them former state or federal Republican officials, gave Haslam's campaign some $32,375 last year, according to the National Institute on Money and Politics. That made the company Haslam's No. 5 campaign contributor.

A week before he presented his first budget, Haslam spoke with top CCA officials, and his budget included $31 million to keep CCA's Hardeman County Correctional Facility at Whiteville going.

Former Gov. Phil Bredesen had sought to cut it, saying it wasn't needed.

But Haslam earlier this year said a review showed the Hardeman prison was needed and affordable.

"We went back and weren't certain that we would adequately be able to take care of the prison population that we needed to and do it at a cost that would make sense," he said.

Two previous Republican governors, Lamar Alexander and Don Sundquist, also worked to privatize state prisons in the 1980s and '90s. Sundqist's former finance commissioner, John Ferguson, later became CCA's chief operating officer and still serves as chairman.