Update: Upcoming Outsourcing Issues. September 22, 2014


1) National: As tens of thousands of people gather across the globe to protest official inaction on climate change, privatization is contributing to the problem. Donald Cohen and Stephanie Farmer have detailed how poorly structured “public private partnership” (P3) deals threaten long-term environmental sustainability. Others have noted that a non-compete clause in a Denver P3 “will impose mandatory traffic congestion—for the next 99 years,” and that “non-compete clauses derail smart transportation policies.”


2) National: Jeff Inglis and Phineas Baxandall co-author a new PIRG report on “highway boondoggles.” They find that despite stagnation in driving levels, “state and federal governments continue to pour vast sums of money into the construction of new highways and expansion of old ones—at the expense of urgent needs such as road and bridge repairs, improvements in public transportation and other transportation priorities.” Inglis and Baxandall also warn about the “potential pitfalls of privatization,” and caution against potential harm to the public interest of “public private partnerships.” PPPs are increasingly relying on public subsidies that shift the risk of lower-than-projected traffic volumes onto the public; involve loss of control over transportation policy; and lead to “poor decisions based on less visible costs.” [Highway Boondoggles: Wasted Money and America’s Transportation Future]


3) National: The Annenberg Institute for School Reform publishes a report on the inadequate patchwork of state laws, regulations and oversight practices governing the operation of charter schools, and makes detailed recommendations to improve performance and tighten up public control and oversight. In the coming months, In the Public Interest and others will be working on a campaign to make these recommendations a reality. [Public Accountability for Charter Schools]


4) National/TexasThe New York Times notes “growing resistance to the proliferation of toll projects.” Speaking at the International Bridge, Tunnel and Turnpike Association’s annual conference, USPIRG’s Phineas Baxandall says “toll roads don’t just add new choices or benefits. Like any other transportation project, they also foreclose choices and impose potential harms. This shouldn’t be discounted just because a transponder is involved.”


5) National: Student Transportation Inc. announces its fourth quarter and FY14 financial results, and says it is launching a new division to promote school bus privatization to 10,000 public school systems. Its CEO says “conversions, or privatizations, picked up in FY14. (…) We recently launched a separate division to market our logistics and management services to the 10,000 school districts who still own and operate their own fleets as well as the private contractors and other schools like charter schools.”


6) NationalNew figures released by the Bureau of Justice Statistics show that state prison populations are rising despite a decline in the number of federal prisoners. Last week, as the top official at the DEA struggled to explain her position on sentencing reform to a congressional committee, Sen. Charles Grassley (R-IA) attacked the proposed Smarter Sentencing Act.


7) NationalWriting in Prison Legal News, Beth Schwartzapfel examines labor rights of prisoners. “The direct link between corporate profit and prison labor—and, by extension, the potential for profit-driven exploitation—has made it a target for criticism. Proponents of prisoners’ and workers’ rights point to a push by the American Legislative Exchange Council, or ALEC, to ‘improve and expand federal prison industries’ in several states.”


8) National: Food & Water Watch sues the agriculture department over its privatization of chicken inspection. “In its suit, FWW alleges the new inspection system violates the 1957 Poultry Products Inspection Act. This act gave, and still gives, the USDA the authority to protect the health and welfare of U.S. consumers by ensuring the wholesomeness and safety of raw chicken products.” [FWW brief]


9) NationalUSIS loses its federal background check business. POGO’s Neil Gordon writes, “USIS still has contracts with other federal agencies—a situation that has become a matter of concern in both the House and Senate. The OPM is still making up its mind on whether to impose a government-wide contracting ban on USIS. Given the impact on USIS’s bottom line, however, the loss of its OPM contracts arguably has as much impact as a suspension or debarment.”


10) NationalCommon core math standards “add up to big money for education companies,” according to the Hechinger Report. “Teachers must master the standards and become savvy shoppers. Otherwise, they might find themselves stuck with a whole lot of useless gadgets and a bad case of buyer’s remorse.”


11) National: CNN Money looks at “Why Wall Street loves for-profit education.


12) National: ITT Educational, the for-profit education company, “faces scrutiny on multiple fronts” and has received a Wells Notice from the Securities and Exchange Commission. The Wall Street Journal reports that “ITT has also received warnings that the New York Stock Exchange may delist its shares due to its continued failure to file its annual report from last year. On Friday, the company said it received a listing extension from the NYSE that expires Nov. 15.” [Sub required]


13) National: The National Archives and Records Administration has revised its regulations on FOIA requests, and will publish the final rule today.


14) California: Long Beach officials commence the months-long process to decide whether a new or refurbished civic center will be developed as a “public private partnership.” The project would be a similar PPP to the Long Beach Courthouse. “The courthouse opened last year with great fanfare, but a report released in November 2012 by the Legislative Analyst’s Office found that the then-under-construction facility in downtown Long Beach may cost the public $160 million more than if it had been built as a public project.” Under the proposal, Long Beach would pay rent for the building for 40 years. Proposals by two potential bidders will be discussed October 14. [Documents]


15) CaliforniaCaLPERS, the $300 billion public pensions investment system, divests from hedge funds. “The move followed years of complaints by pension funds about high fees and a rate of return that has often lagged the stock market.” Brad Alford of Alpha Capital Management says “high fees, little transparency, limited liquidity, light regulation plus hard-to-measure risk from leverage and derivatives are not a good investment solution.” Forbes asks, “Is private equity next?


16) California: The Palo Alto city council will discuss a proposal to outsource street sweeping today. “The proposal has attracted opposition from Service Employees International Union Local 521. The city and union met half a dozen times to discuss different proposals, according to the report.”


17) California/NationalPostal workers protest the closure of a mail processing facility in Industry. Omar Gonzalez, regional coordinator for the American Postal Workers Union, says “we believe the postal service is on a collision course to privatize.”


18) ConnecticutThe Hartford Courant reports that “The Jumoke Academy charter school organization, now facing a state probe into allegations of nepotism, directed more than a million dollars in construction work to the husband of one of its executives.” The Courant was able to surface the information through a FOIA request. [Sub required]


19) Georgia: The state department of transportation has pulled the plug on a proposal to privatize janitorial and landscaping services at highway rest stops after finding that it would cost more than keeping the services in the public sector. Two bidders said they would do the work for $37.7 million and $36.5 million. “However, according to a presentation delivered to members of the board’s Public-Private Partnership (P3) Committee, the DOT can do the same work for $27.8 million by hiring custodians and landscapers itself.”


20) IllinoisEast Moline aldermen vote to privatize garbage services. “The city has been negotiating with Republic Services and the American Federation of State, County and Municipal Employees simultaneously, and, during Monday night’s committee of the whole meeting, voted to go with the Republic offer.”


21) Illinois: After reports emerge of filthy Chicago schools following the privatization of custodial services to Aramark, Mayor Emanuel warns the company to shape up or clean out their desks. Among Aramark’s innovations: taking away janitors’ mops.


22) IndianaThe Indiana Toll Road “public private partnership” is expected to declare bankruptcy today, despite a 176% increase in trucking tolls. “The bankruptcy will be a pre-packaged Chapter 11 bankruptcy, meaning ITR has already struck agreements with its lenders and creditors to either sell the lease or refinance ITR’s existing debt.” ITR Concession Co., the operator of the troubled privately-operated road, will submit a restructuring plan in court. A Republican State Senator has made light of the potential bankruptcy of the Cintra/Macquarie operator. State Sen. Luke Kenley, chairman of the Senate Appropriations Committee, said that if the state reclaims the road, “that would be a good deal for us. Then we could put it up for auction again.”


23) LouisianaFederal authorities call for the renegotiation of the state’s contracts privatizing LSU hospitals. “Because most of the money the state will use to pay its private partners for the services provided in the hospitals comes from the federal government, federal authorities have to agree with the financing plans. Officials with the federal Centers for Medicare and Medicaid Services, called CMS, said the arrangement amounted to Louisiana trying to get extra federal dollars to repay the private managers for those front-loaded lease payments. That structure constituted a ‘hold harmless arrangement,’ which is not allowed under federal rules.” LSU is in a contract dispute with the entity to which it privatized its Shreveport and Monroe hospitals management.


24) Michigan: The Morning Sun calls for Aramark’s food service contract with state prisons to be terminated. “If this is the way the company is performing within the last eight months, what’s going to happen in the next months? Isn’t it time for Gov. Snyder to cancel that contract?”


25) MissouriState education chief Chris Nicastro to retire at the end of the year. A joint statement by teachers unions in St. Louis and Kansas City said “we have been disappointed in Commissioner Nicastro’s dealings with for-profit groups that want to privatize our public education system.” Plans to replace Nicastro have not been announced yet.


26) Montana: The private equity firm Carlyle announces it will sell Missoula’s water system to Canada-based Algonquin Power, despite what city officials say was a promise to sell the system back to the city when it was privatized in 2011. The city is attempting to regain the asset through eminent domain. “We began the legal process to buy our water utility because we knew this announcement was coming, and we wanted to be prepared,” Missoula Mayor John Engen said. “Carlyle can make announcements all day long, but ownership of Missoula’s water company is not a unilateral decision made by anonymous investors, but a decision of a Missoula judge.”


27) New Jersey: New Brunswick city council votes to privatize the management and operations of the public water system to NJ American Water. Council President Rebecca Escobar abstained because “she was not aware that a vote would be held.”


28) New York: As a battle over the possible privatization of the Valley View nursing home continues, county officials have proposed creating a new Local Development Corporation to sell the county-owned facility. A hearing on the proposal will be held by the county legislature onSeptember 29. A full vote will be held October 2.


29) OhioThe state supreme court will begin hearing arguments in the White Hat Management case tomorrow. The case will decide whether the company or the public controls the physical assets of schools. Denis Smith, a retired consultant in the Ohio Department of Education’s charter school office, asks why unions and public education associations have not intervened in the case or filed amicus briefs.


30) PennsylvaniaAn ad blitz promoting privatized education is about to hit PhiladelphiaPolitico reports. “The campaign is organized by Choice Media, a nonprofit news service that focuses heavily on school choice. Executive director Bob Bowdon won’t name his funders; he told Morning Education that he wants to keep the focus on parents and students, not the money behind the (decidedly pricey) campaign.”


31) PennsylvaniaThe state education department is resisting an expanded state audit that would include “a review of its oversight of special advisers and consultants.”


32) International: As Scotland votes not to secede from the United Kingdom, the flashpoint campaign issue of creeping privatization of the National Health Service remains. “When you hear statistics about what goes wrong in the NHS, ask yourself where the figures on private medicine’s mistakes and failures go. Behind the wall of commercial confidentiality, that’s where. But it’s mostly privatization by stealth: a nudge towards queue-jumping here, a suggestion that we should pay to see a GP there.”


33) International: Brookfield Infrastructure says “we like Europe” because it has been amenable to the privatization of roads, airports and water. “We don’t have the same political clash or obstacles to invest in this type of assets that we find in other regions in the world.”


34) New BookPrivate Island, James Meeks’ look at privatization in Britain over the past 30 years. “Meek explores the human stories behind the incremental privatization of the nation over the last three decades. He shows how, as our national assets are sold, ordinary citizens are handed over to private tax-gatherers, and the greatest burden of taxes shifts to the poorest. In the end, it is not only public enterprises that have become private property, but we ourselves.” [Excerpt]


35) Report: Infiniti Research predicts the government outsourcing market will grow by 6.9% by 2018.



Legislative Issues:


1) National: Writing in the Madison Capital Times, Ian Smith and Buzz Davis warn against privatization of the Veterans Administration. “Private care will cost taxpayers up to 30 percent more than VA health care, which is proven to be of better quality, with shorter appointment wait times than in the private sector. (…) This law is supposed to terminate the privatization effort by Sept. 30, 2016. By that time the government will have wasted over $25 billion on sending vets to private care, and the special interests will demand that the law be extended. Citizens need to contact the president and members of Congress to urge them to fix and staff the VA—don’t privatize it!”


2) National: The House Transportation committee’s special panel on “public private partnerships” issues its final report and recommendations. The report says that “one consistent theme throughout the panel’s work was that P3s are not a source of funding and should not be thought of as the solution to overall infrastructure funding challenges.” (p. 9) The panel also recommended that a Transportation Procurement Office that would draft model P3 contracts be created in the USDOT. The week before last, the FHWA released a model contract guide for toll concessions. The owner-operator trucking association has voiced caution about P3s.


3) NationalLabor groups offer muted support for the House transportation committee’s Amtrak construction refunding bill, which slashed the budget by 40%. “Most importantly, the Shuster-Rahall bill rejects wrongheaded reform proposals to privatize Amtrak, break up the operation, and outsource good middle class jobs.”


4) National: Legislation is introduced in the House to promote “public private partnerships” in the federal rail sector. HR 5449 calls on a proposed Gulf Coast Rail Service Working Group to “identify Federal and non-Federal funding sources required to restore such service, including options for entering into public-private partnerships to restore such service.”


5) National: Nossaman, the pro-privatization law firm, develops model legislation to require private investment in federal, state and local public buildings. [Model Social Infrastructure PPP Bill]


6) MichiganLawmakers call for a moratorium on charter school growth. “Michigan has more for-profit charter schools than any other state in the nation,” said Rep. Sarah Roberts. “State law does not effectively prevent insider dealing and conflict of interest for those who operate charter schools, and yet they spend $1 billion of our taxpayer dollars every year.”

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