Update: Upcoming Outsourcing Issues. May 5, 2014


1) National/Louisiana: The federal government has rejected a financing plandeveloped by the Jindal administration to privatize the state’s public hospitals. “The decision was a significant blow to the Jindal administration and could create massive upheaval in the state’s budget. The budget was balanced this year assuming that hundreds of millions of dollars of federal funding would flow into the hospitals.” Louisiana has 60 days to appeal the decision.


2) National: The Obama administration has sent a proposal to Congress that would lift the ban on tolling interstate highways. The ban has stood, with some exceptions, since the interstate system was originally developed during the Eisenhower administration. The road privatization industry and its think tanks have long pushed for such a move. “The administration said lifting the toll ban would help address a shortfall in funding to pay for highway repairs. The tolls, along with other changes, could provide an additional $87 billion for aging roadways, tunnels and bridges, the administration said.” The tolling industry applauded the move, “but the Alliance for Toll-Free Interstates, which includes American Trucking Associations, UPS, FedEx, McDonald’s and Dunkin’ Donuts, said it was disappointed.” Tollroads News will conduct a series of Q and As on the issue over the next few weeks. The Washington Post has a useful map, “Miles of toll roads by state.” The proposal also expands the federal TIFIA loan and Private Activity Bond programs.


3) National: MeriTalk, which describes itself as a “public private partnership” focused on improving federal IT, releases a report saying greater competition could lead to cost savings. The study was funded by Brocade, a network provider for data centers. [OMB reports on digital government strategy and IT investment]


4) National: As the American Legislative Exchange Council holds its spring task force meetings in Kansas City, national and local public interest groups protest its “dangerous agenda that rewards greedy CEOs and hurts middle class workers and our public schools.” Four groups released a joint report detailing ALEC’s influence in Missouri and Kansas, including its push for school privatization bills. ALEC model legislation on school privatization is also reportedly moving in North Carolina.


5) National: Pearson wins a major contract to administer Common Core tests from a state consortium. “Gauging the total cost of the contract is not as simple as it is for a state charged with negotiating with a vendor, in which the state and vendor agree ‘we’ll do it for X million,’ said [contract negotiator James Mason]. By contrast, figuring out the costs for multiple states in PARCC will depend on what they choose from an ‘a la carte’ menu of testing options, he said.”


6) National: ConnectEDU, the Boston-based ed-tech startup, has filed for bankruptcy. “Just in September, ConnectEDU had received a $500,000 grant from the Bill & Melinda Gates Foundation to develop an online teaching and learning platform to improve students’ literacy skills in the Common Core Standards.”


7) National: Rough Type blog says the online private education corporation Coursera is using “sharecropping” tactics to pay its translators. The company “has pulled in $85 million in venture funding over the last two years, attracting big-name investors like Kleiner Perkins and the World Bank’s VC arm, LearnCapital. Those millions aren’t enough, apparently, to pay translators to help the company extend its online courses, or MOOCs, into foreign markets.”


8) Arizona: Controversial Maricopa County sheriff Joe Arpaio again offers to take ICE detainees into his jails. “The Office of Internal Audit at Pinal County concluded in its January 2013 report that the national average for ICE per diem rates was $75.72. And other rates in the state were even higher, such as $79.06 at Corrections Corporation of America-Florence and CCA-Arizona. Smith is skeptical of Arpaio’s ability to house the detainees at $70 per day without a significant cost to Maricopa County taxpayers.”


9) California: University of California President Janet Napolitano says the university is turning toward private sources for funding, including by “creating more partnerships with private industry, such as through technology transfer, a process in which UC scholars partner with private enterprises to patent products from their research and generate commercial profits. She added that while doing so, it is important not to privatize the University and to avoid conflicts of interest.”


10) Florida: Sarasota County may privatize paratransit services to the elderly, veterans and disabled people. Commissioners have also asked staff to do a study that goes beyond paratransit services.  One commenter says “those buses also aid Disabled Veterans trying to get to Bay Pines VA Healthcare and Hospital in Pinellas County. What will happen to them?”


11) Georgia: Gov. Deal vetoes private probation bill. “In a report issued last week, the Georgia Department of Audits recently found a high frequency of case management problems, including failure to impose general supervision standards, failure to respond to probationers who missed reporting dates, and cases in which people were required to continue paying probation fees after their probation terms expired.” The state’s troubled private probation system has received coverage recently in the Guardian, The Economist and NPR.


12) Georgia: The state board of education is seeking a “public private partnership” for dorms at Dalton State College. “According to the AP, college officials will have more say on the dorms before leases—which could run from 30 to 65 years—are signed by private companies. Members of the regents told the AP they plan to ‘maintain some control over rent and daily operations’ even after leases are signed, but it wasn’t clear what that would look like.” It’s unclear whether the PPP would make dorms cheaper or more expensive for students.


13) Indiana: After some confusion over who would pay consultants who worked on the privatization of Gary Airport, the Gary Redevelopment Commission agrees to pick up the $817,500 tab. In other news, “Gary/Chicago International Airport’s deputy director and two other employees are being laid off just weeks after city officials promised the new public-private partnership there would create more jobs for Gary residents.”


14) Michigan: A federal judge is reviewing Detroit’s exit bankruptcy document. If he does not approve the document, a deal to privatize the city’s water and sewer system would be jeopardized. [Sub required]. Another federal judge has held talks to try to create a regional water authority, but this has run into multiple problems, though some have called it a “viable solution.”


15) Michigan: Detroit’s privatized trash collection begins today. 150 jobs are being lost. “Rizzo will be paid up to $49.1 million to provide services to about 90,000 households. Advanced Services will service about 125,000 households and be paid up to $73.5 million. The contract also provides the option of five, one-year renewals.”


16) New Jersey: As lawmakers blast a plan to privatize the jobs of toll collectors, the Turnpike Authority delays a vote on the measure until October. “The deadline for vendors to submit proposals to collect tolls has been extended from May 7 to Aug. 8, and state Transportation Commissioner Jim Simpson, who chairs the Turnpike Authority, is reserving comment until after proposals are received from companies.”


17) New York: Public education advocates and unions run an online ad campaign toprotest a pro-charter school conference in Lake Placid running from today to Wednesday. The conference will feature Gov. Cuomo as “honorary chairman.” A picket will be held outside the meeting today “aimed at those hedge-fund operators and billionaires who make outlandish campaign contributions and try to impose their version of reform on all students.”


18) New York: Save Our Seaport warns that a recently-appointed working group is determined to privatize the South Street Seaport “for the benefit of the developer, Howard Hughes Corporation.” SOS says “in our view, it is becoming obvious that the Seaport Working Group is being steered through a flawed process designed to resemble participatory consensus building.”


19) New York: Three contractors have been convicted in the New York City CityTime scandal. “The corrupt contractors lined their pockets with millions of dollars as they accepted kickbacks, funneled huge sums into shell companies, deposited stolen money into overseas accounts, inflated bills and maintained a bloated payroll with excessively paid and even fired employees.”


20) New York: Albany Nursing Home outsourcing is caught up in controversy over whether public employees can be leased to a private corporations, and over subsidies (“mission payments”). The county’s proposal is under review by the state comptroller’s office and the state health department.


21) North Carolina: The DOT has named David Tyeryar as its new chief financial officer. Tyeryar established Virginia’s office of Public Private Partnerships.


22) Ohio: Drivers wonder whether President Obama’s proposal to let interstate highways be tolled could lead to privatization of I-75 or I-675. “‘I think it’s a good idea that way if the money is used to maintain the road like they do the Ohio Turnpike then I’m for it. The reason I’m kinda against it is because I’m worried the governor would then try to privatize it,’ says Ohio native Paul Henry.”


23) Pennsylvania: The Philadelphia Inquirer cites State Treasurer Rob McCord’s strong stand against privatization of the state lottery as a key reason for endorsing him for governor.


24) Pennsylvania: Parents and the school advisory committee come down on different sides over whether the Steel School should remain under district control or be turned over to a charter operator. “Jerry Jordan, head of the Philadelphia Federation of Teachers, congratulated the parents ‘for overwhelmingly uniting behind the idea that our neighborhood schools deserve to be supported, not written off and given away to the highest bidder.’”


25) Tennessee: Trousdale signs a contract with Corrections Corporation of America to take control of its 2,500 bed correction facility. “In this contract, CCA agrees to take on responsibility and liability for the operation of the prison. This includes liability for food, medical care, and all programs designed to rehabilitate inmates.”


26) Texas: San Angelo may be considering suing Republic Services for overcharging on its trash contract. Will discuss the issue at its council meeting tomorrow. Last monthSan Angelo Live reported that through an open records request “we found that Republic Services may have billed the San Angelo ISD over $50,000 annually in suspect fees.” Last Tuesday the Teamsters protested the company at Waste Expo 2014 in Atlanta “as they called on Republic to protect the health and safety of its workers and communities.”


27) International: The British government has been forced to reveal more details about the number of shares allocated to “priority investors” in the privatization of the Royal Mail. “During questioning by MPs on the business select committee this week, [Vince] Cable offered “absolutely no apology” for the pricing of the shares at 330p, despite their immediate 38% rise in value.”


28) Think Tanks: The Heritage Foundation releases a report saying that surface transportation policy decisions should be devolved to the states. “If the citizens of Tennessee want to build new roads through private–public partnerships, the state should be able to arrange for such projects without the threat of violating federal law.”


Legislative Issues:


1) National: House and Senate negotiators have been working over the weekend on getting a conference report on the Water Resources Development Act ready for members signatures. WRDA “is likely to include a series of pilot projects to test the feasibility of a P3 approach to the inland waterways system.” The bill may get Senate floor time this week.


2) National: Sen. Patty Murray (D-WA) holds a hearing on social impact bonds. Kyle McKay, an analyst with the Texas Legislative Budget Board, tells the Senate Budget Committee “I guess the thing I would add is that you need to be really careful that the investors are bringing a discipline that’s valuable to the government. Because if the investors are telling the government what it should already know to implement programs that have already been proven, then you’re going to privatize the savings of that program to the investors.” [Transcript, SEC Wire, May 1; sub required] The idea of social impact bonds gained little support. Senator Angus King (I-ME) said “I have a radical idea. Instead of trying to contract out with social impact bonds, why doesn’t the government just get it right?” Social impact bonds are, in essence, “a gigantic admission that the government can’t do stuff.” [Sub required]


3) National: House “public private partnerships” panel hears from state DOT representatives from Pennsylvania, Maryland, Florida and Virginia.


4) National: Maryland state treasurer Nancy Kopp says municipal bond tax exemption is vital for state and local investment in infrastructure. “The state has undertaken several infrastructure public-private partnerships. According to Kopp, Maryland P3s include Port of Baltimore dredging, renovation of interstate highway travel plazas and the construction of the light-rail transit Purple Line, which will provide east-west access between Montgomery and Prince Georges counties outside Washington, D.C.” [Sub required]


5) Alaska: Lawmakers pass a bill to fund the Knik Arm Bridge as a public project. The project had once been a leading candidate for a “public private partnership,” but that option was closed off late last year when the governor argued that hundreds of millions of dollars could be saved by developing it publically.


6) Colorado: State senate approves new rules on “public private partnerships.” “Sen. Matt Jones, D-Louisville, said the public deserves to know what’s happening with their highways. ‘The controversy that arose around the U.S. 36 private-public partnership opened a lot of eyes to the need for more transparency,’ Jones said in a news release. ‘This bill makes sure everyone has a chance to review details and weigh in while these expensive, long-term deals are developed.’” [SB 197]


7) Georgia: The Child Welfare Reform Council, formed by Gov. Deal to head off privatization of the state’s child welfare system, holds its first meeting. The council is to make recommendations by next year’s legislative session.


8) Hawaii: Bill to partially privatize the state’s hospitals dies in the legislature. A similar measure failed last year.


9) Louisiana: A bill to ban red light cameras on interstate highways has passed the legislature and awaits Gov. Jindal’s signature. A lawmaker “says a private company has approached municipalities to introduce speed cameras on interstate highways.”


10) Michigan: Toll roads and “public private partnerships” may be coming to Michigan if legislation passes. James Walker of the National Motorists Association “said public-private partnerships contemplated in the new legislation raise the same concerns about the potential for unlegislated tolls as such arrangements proposed for a new Detroit River bridge in 2009-10. Those worries are heightened by a transportation funding scheme the Obama administration announced this week that would relax restrictions blocking tolls on interstate routes.” [HB 4925]. Last week user groups accused lawmakers of trying to sneak through legislation expanding toll roads.


11) New Jersey: Democratic lawmakers push for responsible outsourcing legislation, which the Press of Atlantic City backs in an editorial. The paper says Gov. Christie would likely veto the bill if it passes, but “even supporters of privatization should agree that any proposed deal be publicly scrutinized ahead of time, and over the course of the contract, to ensure that any projected cost-savings are real—and don’t come as a result of reduced services or increased costs to taxpayers.” The bill would require that a cost analysis would have to be made of any outsourcing proposal and then reviewed by the Office of the State Comptroller. [S. 770]

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