Privatization continues to be a controversial management issue in state governments. In the past five years, 1997-2002, the extent of privatization activities in the states has largely remained the same as in the previous five years or slightly increased. The main reasons for privatization are a lack of personnel or expertise and cost savings. In most cases, privatized services account for less than 5 percent of agency services, while reported costs savings range from none to less than 5 percent. But many state agency directors surveyed seem to have no clear ideas as to how much has been actually saved from privatization. Nevertheless, privatization is likely to continue in the states in the next few years as in the past decade.