Update: Upcoming Outsourcing Issues. August 18, 2014


1) National/Pennsylvania: Len Boselovic of the Pittsburgh Post Gazette completes a four part series on the pros and cons of “public private partnerships,” and concludes that “states using public-private partnerships, or P3s, are discovering that what sounds like a straightforward, efficient process can be fraught with hazards.” In the final article, he writes “the early wave of P3s illustrates how hard it can be to protect the public interest. (…) Many industry leaders, government officials and their consultants believe P3s will only be used for a small portion of America’s massive infrastructure needs.”


2) National: Efforts to fight pervasive Medicare fraud are being stymied by poor contractor oversight. “An array of outside contractors used by the government is poorly managed, rife with conflicts of interest and vulnerable to political winds… Authority and responsibilities among the contractors are often unclear and in competition with one another. Private companies—like insurers and technology companies—have responsibility for enforcement, often with little government oversight.”


3) National: The American Postal Workers Union is asking teachers and parents to avoid shopping at Staples for back-to-school supplies as the company continues its efforts to privatize the U.S. Postal Service. Last week, National Association of Letter Carriers President Fredric V. Rolando noted better operating results by USPS, but emphasized that “the red ink at USPS is attributable to non-mail factors—chiefly the 2006 congressional mandate that the Postal Service pre-fund future retiree health benefits, something no other public or private entity is required to do.”


4) National: The Department of Transportation will be insourcing some of its IT contractor workforce. DOT CIO Richard McKinney said “that contractors cost significantly more money. Part of that cost was passed on to component agencies, raising the cost of shared services. ‘We did an exhaustive analysis and the long and short of it is we were spending a lot more. Just let me say the number was eye-popping.’”


5) NationalThe advent of cloud computing is driving states, including Wyoming, to outsource IT capacities. “Wyoming now runs two data centers. It plans to close one in the next six months and shift the bulk of its remaining IT infrastructure operations to a colocation facility by 2016. It will continue to operate a small data center to support its networking equipment and a mainframe. State governments are clearly moving to cloud-based services, but there’s no single approach. For example, IBM just announced plans to build a private cloud for the California state government.”


6) National: The National Labor Relations Board has found that American Water Works, a company leading the effort to privatize public water systems, illegally made unilateral changes in employees’ health and disability benefits. The board ordered American Water to make whole any employees affected by its actions.


7) National: School privatization advocate Michelle Rhee steps down as CEO of StudentsFirst, leaving “a trail of disappointment and disillusionment.” One “activist” said “they were policy purists in a way that made them seem oblivious to political reality.” Rhee is moving on to a board position with a fertilizer company.


8) National: “Public private partnerships” are increasingly being used to support free Wi-Fi in public parks.


9) NationalDavid Kirp takes aim at the simplistic solutions for improving schools that are offered by “school reform” advocates. “Teaching is not a business,” he writes. “While these reformers talk a lot about markets and competition, the essence of a good education—bringing together talented teachers, engaged students and a challenging curriculum—goes undiscussed. Business does have something to teach educators, but it’s neither the saving power of competition nor flashy ideas like disruptive innovation.”


10) National: NBC News’ Nona Willis Aronowitz reports on the impact of Corinthian Schools’ bankruptcy on it students, and the legal fallout from its failure. Corinthian “continues to be investigated by the U.S. Consumer Financial Protection Bureau and 16 state and federal attorneys, and it’s been hit with lawsuits from California and Massachusetts attorneys general. And last week, the company received a grand jury subpoena from the U.S. attorney’s office in Los Angeles—the first indication of a federal criminal inquiry.”


11) Colorado: After funding falls short for a proposed $100 million new stadium on the campus of Colorado State, CSU president Tony Frank says other options are bring considered, including “a ‘scaled’ or ‘phased’ version of a new stadium that could allow for future expansion, and seeking a public-private partnership on bonds. ‘In a public-private partnership, we’re not issuing the bonds,’ he said. ‘The private partner issues the bonds, and we lease the facility back over a period of time.’”


12) Colorado: The release of “relatively flat” TCAP standardized test scores sets off an ideological debate over school reform in the state board of education. “Democrat Angelika Schroeder of Boulder suggested the board should perhaps take a closer look at the performance of choice schools, and Democrat Jane Goff of Arvada commented, ‘I can’t say that I have seen eye-popping examples of innovation’ at non-traditional schools. Schroeder is a former college accounting professor, and Goff is retired Jeffco teacher and administrator.”


13) Florida: Three charter schools threatened with contract termination meet with school officials. “District officials don’t believe local boards are making decisions for the school. Instead, they say, Fort Lauderdale-based management company Charter Schools USA is calling the shots. Superintendent MaryEllen Elia says this violates the schools’ contracts with the district.”


14) Florida: Pinellas County commission candidates debate public vs. private in EMS services. Dave Eggers says “I have often thought that public safety is the last place to privatize government services, and yet we have done so with EMS. It may be time to look at the viability of bringing transport back to the local fire stations.”


15) Florida: Standard & Poor’s downgrades bonds that Boynton Beach issued to support the Charter School of Boynton Beach. “The downgrade and negative outlook reflect our view that given the revocation of the charter and closure of the school, there is a virtual certainty of default within the next 24 months.” [Sub required]


16) GeorgiaParents give First Student an F as school starts in Savannah. “One said First Student dropped her kids off in the wrong neighborhood. Another parent said an overcrowded bus left five students at the bus stop. One parent even said her son had to sit on the floor of the bus. ‘That is completely a huge concern. One for safety, and two, First Student didn’t even know that the students couldn’t get on the bus for overcrowding,’” said another parent. The Savannah Morning News says “it’s not as if First Student is a novice at this. Also, the school system has budgeted $17 million for transportation this year and just bought 36 new buses. So it’s not as if the district isn’t holding up its end of the bargain.”


17) Illinois: Two Oak Lawn trustees are demanding an investigation of the town’s recently-privatized 911 center. “The two trustees said they have heard numerous complaints from residents regarding the work of the dispatchers since Oak Lawn contracted with Norcomm to run its 911 emergency call center.” The mayor is resisting an inquiry.


18) Illinois: The private company providing custodial services to Thornton, Thornridge and Thornwood high schools fails to provide a performance bond. “So from day one, [FYI & Associates] was in default of the contract?“ asks “irate” school board member Edward Crayton. Yes, said District 205 Business Manager Robert Charnot. The information was helpfully provided at a public meeting by Dennis Thomas, of custodial services competitor GCA Services Group.


19) Illinois: The Department of Transportation issues a Request for Information for the development of the proposed South Suburban Airport in Peotone, and schedules an industry forum next month with private developers, airlines, and potential airport tenants. The project will likely be a DBFOM “public private partnership” The move comes nearly a year after the latest failed attempt to privatize Midway Airport.  [IDOT RFI]


20) Indiana: The Indianapolis Public Schools have begun formulating a policy on how they will deal with charter schools. “Accountability for potential partner schools is a key question. The district already has four schools that were taken over by the state and handed off to be run independent of IPS by outside by charter school organizations, and there has been considerable debate before the Indiana State Board of Education about whether that approach is working. The takeover schools have seen modest test score gains over two years and relations with IPS, at times, have been strained.” The next school board committee meeting isSeptember 10.


21) Louisiana: Educator and blogger Jason France takes aim at the failures of New Orleans’ privatized schools model. “Reformers claiming victory from the failure of their original plan now tell this was their plan all along. This is what they were hoping to achieve, a completely privatized education Mecca that all Reformers in the US and around the world can turn to 5 times a day and wave dollar bills at in homage—to the sanctity of what they built there.”


22) MarylandProtestors warn that Baltimore’s water system may be up for privatization. They cite “a public notice from the city’s Office of Boards and Commissions that requests consulting on the efficiency of Baltimore’s water filtration and wastewater treatment plants.” Glenn Middleton, president of AFSCME Local 44, says “we’re here because there is an efficiency study that Veolia is trying to bargain with the city so they can get the contract. And we know what they want to do. They want to outsource.” A Baltimore Sun editorial says “the promise that a private operator would do a better job of investing in long-term system maintenance is belied by the facts that borrowing costs for governments are generally cheaper than for private enterprises.”


23) Massachusetts: As the state hires Raytheon to provide it with a highway tolling system,journalist Tim Shorrock asks “Hey Massachusetts, do you really want one of NSA’s biggest contractors running your toll collection/tracking system?”


24) Michigan: The state has paid Aramark Correctional Services $21,897,880 so far this year. Aramark’s food service contract with the state is for $145 million. ITPI’s Donald Cohen points out that “last month, maggots were discovered in two Michigan prisons where Aramark also runs the food service programs. The Philadelphia, PA-based corporation hasn’t taken responsibility, and officials in both [Michigan and Ohio] are sticking by the vendor, responding with small fines instead of canceling the contracts.”


25) Michigan: Food & Water Watch asks the Obama administration to declare the water crisis in Detroit a public health emergency. “Tawana Petty, an activist with the People’s Water Board Coalition,” said “we also ask that Detroit’s leaders enforce the People’s Water Affordability plan and abandon all plans to privatize Detroit’s water.” A mass rally to protest the water shut-offs and “hostile takeover of Detroit’s assets” is planned for August 29.


26) Missouri/Think Tanks: The Donors Capital Fund-backed Show-Me Institute interviews the Mayor of Ferguson, Missouri, James Knowles, on the troubled city’s use of privatization. [Report on the Show-Me Institute]


27) Nevada: The state Transportation Board is to decide today whether to develop Project Neon as a “public private partnership” or a design-build project. Project Neon is a widening and improvement scheme for Interstate 15. Gov. Sandoval favors the P3 option, saying it will save money and accelerate construction; but P3 “has generated concerns from state lawmakers, ranging from how the new financing would work to what kinds of guarantees there are that Nevada will get some of the construction jobs.”


28) New Jersey: State Senator Loretta Weinberg criticizes the appointment of Jerrold Binneyas acting Bergen county administrator. “‘The deal orchestrated by Jerrold Binney that privatized Bergen Regional Medical Center resulted in negligent care and patient deaths,’ Weinberger said in a release.” Ann Twomey, president of the Health Professionals and Allied Employees Union, called the deal “the most costly, ill-conceived and damaging privatization scheme in New Jersey history.”


29) North Carolina: State audit finds that the N.C. Division of Medical Assistance and its contractor, Computer Sciences Corporation, failed to adequately run the provider application process for the state Medicaid program. “The contractor’s enrollment review procedures do not provide reasonable assurance that only qualified providers are approved to participate. (…) The contract lacks adequate performance measures to hold the contractor accountable for processing applications accurately and reliably.” The audit comes at a time when Gov. McCrory and the legislature are divided over privatizing the Medicaid program.


30) Oregon: As the tug of war continues over an intergovernmental agreement to oversee a new Multnomah County courthouse, the source of the project’s financing is still up in the air. Assistant county attorney Ken Elliott says “the county has spent $521,000 of the $3.3 million it has set aside for the project. It’s still unknown where the remainder of the county’s share will come from, but a public-private partnership is being considered.”


31) Pennsylvania: Mercer County commissioners approve a new three year contract with corrections officers at the county jail. The agreement blocks any attempt to privatize the jailduring the term of the contract.


32) Texas: North Texas citizens are being invited to give their input on managed toll lanes at two public workshops scheduled for August 25 and 26. The workshops are being organized by the North Central Texas Council of Governments.


33) TexasIssuer of jail bonds (Fannin County Public Facility Corp.) settles with the IRS over tax law violations. “The IRS has had concerns about the tax-exempt status of a number of jail bond issues, suggesting they should be taxable private-activity bonds. Jail bonds fall into this category when they are managed under contract by private companies and/or house too many federal inmates, which are considered to be private parties under federal tax law.” [Sub required]


34) Virginia: The deadline to comment on revisions to Virginia’s “public private partnerships” manual is this Wednesday. Comments can be made at the Office of Transportation Public-Private Partnerships (OTP3) website.


35) Revolving Door NewsCorrections Corporation of America appoints Mark A. Emkes to its board of directors. Emkes served as Chief Budget Officer and Commissioner of Finance and Administration in Tennessee Governor Bill Haslam’s Cabinet.



Legislative Issues:


1) California: Critics are concerned about a bill pending in the state Senate that would “make it easier for private interests to take greater control of the 52 state-owned fairs in California.” The Orange County Fair Preservation Society, “which helped in the lawsuit that blocked the state’s planned sale of the fair in the wake of the recession, is urging a gubernatorial veto. It argues that it could eventually lead to groups like the 4H club and the Future Farmers of America being kicked off the fairgrounds because they don’t generate income.” [AB 2490]


2) Colorado: As right wing think tanks push for privatization of pensions, Dinah McKay calls on lawmakers to pass legislation to protect defined benefit pensions “similar to those recently passed in Tennessee. On May 28, Republican Gov. Bill Haslam signed into law a bill called Public Employee Defined Benefit Financial Security Act of 2014 that requires all local government entities that operate pension plans in Tennessee to pay the payments recommended by their actuaries each year in order to protect the financial stability of local governments and to protect worker’ pensions.” [Tennessee SB 2079]


3) Michigan: State lawmakers kick the can down the road on a plan to fix the state’s crumbling roads. Raising the gas tax is now “off the table.”


4) Ohio: As the prospect for getting rules passed to regulate charter schools fades into the future, the Aurora Advocate’s Marc Kovac writes “the tide might be turning against charter schools, given recent news accounts of FBI investigations, alleged illicit activities involving children and other issues with one chain. Another Cincinnati charter closed abruptly earlier this month, reportedly over financial and other problems. Average people don’t like to hear about that kind of thing and must wonder why the state has allowed such charters to stay in business.” Kovac says “it’s only a matter of time before lawmakers are pushed to act.”

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