There are 40 bankrupt cities and municipalities in the US today, and undoubtedly a number of others that are considering bankruptcy. When we final have a budget for 2013, we can be sure that budget reductions will put greater economic pressures on municipalities that are already teetering on the edge.
The two most obvious areas of outsourcing in local government are the police and sanitation services. Every municipality is different, but these two services together are usually responsible for 15% to 30% of a municipality's budget. There are a lot of opportunities in these departments to make huge changes, that could do a lot to balance their budgets and get them out of bankruptcy.
Outsourcing could be a huge benefit in these areas, especially in the many municipalities where these services not only cost too much, but also provide very poor services. For government services, if it is Broke... ain't it time to fix it?