A very long time ago, I spent the last year of my service in the Army Reserve in a mobile unit that was responsible for making dry ice, which supposedly would be needed to keep blood plasma cold during combat operations. It was a scene straight from “Catch-22,” since the Army never needed our truck or our ice-making skills. They got all the ice they needed in Vietnam from Coca-Cola.

I’m assuming that that unit was disbanded long ago because, during the past few decades, much of our military infrastructure has been privatized. A recent Pentagon survey concluded that there are about 100,000 contractors in Iraq, a figure that is creeping up on the number of troops stationed in the country. And it’s 10 times the number of contractors used during the first Gulf War 15 years ago, when we had more than three times as many troops committed.

What we’re seeing in the military has become pervasive throughout the federal government, which is one of the reasons the number of federal employees is about where it was when John F. Kennedy was president. (The other is that so much of the work administering federal programs has been passed on to state governments.)

Now, though, the privatization trend is moving down the political food chain to the states and localities. The trend follows two plot lines: First, a number of states and cities are privatizing all kinds of functions traditionally handled by public employees, with mixed results. Second, an increasing number of governments, looking for revenue in an anti-tax environment, are planning to sell off (or enter into very long-term leases for) key revenue-producing assets such as highways, parking garages and, in the latest wrinkle, their state lotteries.

Gov. Mitch Daniels of Indiana, former director of the Office of Management and Budget, is taking advantage of both trends. He recently signed a contract with IBM and a consortium of subcontractors to privatize the back-shop operation of Indiana’s welfare system for a decade at a price of $1.16 billion. Daniels says that not only will the state save $500 million over the life of the contract but that recipients will be better served and the state should benefit from a lower error rate.

Indiana has the benefit of learning from the mistakes another state has made in trying to achieve the same goal. Texas just backtracked drastically on an ambitious plan to hand over most of the responsibility for running social-services programs in the state after a consortium of contractors began making embarrassing mistakes like taking away subsidized health insurance from 27,000 children. Now the contract has been reduced by more than half and public employees are back making decisions about who qualifies for various programs from Medicaid to food stamps.

Daniels has been hands-on in overseeing the privatization of his state’s welfare system, moving slowly to avoid Texas-style disasters. State employees will continue to determine eligibility, and all other public workers will be offered jobs with the IBM Group, as it is called.

He is a politician willing to take risks. He started a trend last year in selling the 157-mile Indiana Toll Road to a Spanish-Australian consortium for $3.8 billion, money which will be used to make fast improvements to the state’s crumbling infrastructure. Although his popularity suffered in polls, Daniels is betting that all that maintenance work will turn voters around.

It’s not just a red-state trend, either. In Pennsylvania, Gov. Edward G. Rendell, facing an enormous backlog of deferred maintenance, wants to take bids on the Pennsylvania Turnpike, one of the nation’s busiest. “There is only one option that is not on the table, and that is doing nothing,” Rendell said in announcing his intentions. Across the border in New Jersey, Gov. Jon Corzine, who headed the investment bank Goldman Sachs before running for the U.S. Senate, has hired the Swiss bank UBS to decide which assets to sell. The first targets are the Jersey Turnpike, the Garden State Parkway, the Atlantic City Expressway and the state lottery.

Earlier this month, Texas Gov. Rick Perry announced plans to do the same — sell the state lottery to help cover the costs of providing health insurance for up to a half million low-income adults.

In Virginia, the privatization trend is tilting more toward the partnership model, where the state is seeking the expertise and the financial resources of technology companies, in effect to serve as its partner rather than as just a contractor. If the company has a good plan and is willing to invest risk capital, it can take a share of revenue.

The list of revenue-producing infrastructure going on the block is growing fast, as is the number of governments willing to have private companies assume management of basic operations.

If you’re skeptical, take note of this: Last fall, it was revealed that New York City is considering hiring private organizations to take over the management of large parts of its school system. Such a move, according to The New York Times, “would further Chancellor Joel I. Klein’s earlier efforts to tear apart the traditional bureaucracy of the nation’s largest school system, giving principals greater autonomy and increasing the role of the private sector.”

That seems to be the way it’s going.

Peter Harkness is the editor and publisher of Governing magazine, published by Congressional Quarterly Inc.