Update: Upcoming Outsourcing Issues. June 8, 2015

1) National: Scott Maxwell, writing in the Orlando Sentinel, warns that proponents of TSA privatization will use recently reported serious lapses in security performance to push their agenda. “Some politicians—especially those tight with private security companies—will suggest this is proof that TSA agents need to be replaced with private-sector screeners. The chatter has already begun. It’s still floating around Orlando International Airport. (…) I’ve looked at claims that private screeners always do things better and cheaper. And those claims simply don’t hold up.”

2) National: Campaign for America’s Future fellow Dave Johnson warns that the Trans-Pacific Partnership treaty may force privatization of the U.S. Postal Service, and demands that the text be made available to the public.

3) National: Dave Dayen reviews the bankruptcy saga of Corinthian Colleges, the devastating effects its practices and business model had on students and faculty, and the irresponsibility of the federal government in sending billions of dollars to the institution and now refusing to forgive student loans. “Now, a growing contingent of former students calling themselves the Corinthian 100 have refused to pay their debts, arguing that they were duped by a predatory lending scheme. Despite support for the debt strike from Democratic lawmakers and advocates, the Education Department has resisted demands for blanket loan relief.”

4) National/New York: Fairness & Accuracy in Reporting reports that New York Times columnist Thomas Friedman uses Baltimore to plug his billionaire wife’s charter school operation. “Put another way: Friedman used the most influential media space in the world to run a totally pointless commercial for his wife’s charter school. And it’s OK, because he disclosed the commercial. Sort of—he doesn’t mention that the SEED Foundation lists him and his wife jointly as a million-dollar-plus contributor.”

5) California: Costa Mesa settles out of court with the Orange County Employees Association over terms for outsourcing. “The settlement allows Costa Mesa to privatize parks and maintenance services in 2017, but prevents the city from outsourcing other services for four years, which Righeimer called a ‘cooling-off period.’ The city also agreed to reimburse the union for $375,000 in legal fees and boost employees’ pay by 4%, effective July 1, 2015.”

6) Florida: The Florida Development Finance Corporation, a conduit bond issuer, again postpones a meeting to approve the bond resolution for Private Activity Bonds for All Aboard Florida, a private rail line. [Sub required]

7) Florida: Volusia County schools will fire Aramark for poor performance at the end of this month. This district will negotiate with GCA services to take over. In 2011, GCA entered into a consent decree with the federal government to remedy repeated labor law violations, including threats and intimidation against employees.

8) Illinois: Despite repeated promises from Mayor Emanuel to clean up multiple problems with Aramark for janitorial services for Chicago’s public schools, it “is still a mess.” Ben Joravsky reports in The Chicago Reader that “in February the teachers filed a union grievance stipulating that they ‘are performing the daily duties of a custodian,’ including ‘sweeping, mopping, vacuuming, cleaning bathrooms and disinfecting play areas.’” But the hearing officer—a board employee—ruled against the teachers.

9) Indiana/Illinois: Indiana suspends all work and contracts on the controversial Illiana Expressway “public private partnership.” Illinois governor Bruce Rauner has removed the project from the state budget. “A spokesman for the Indiana Department of Transportation said the state ‘remains ready to proceed with the project when Illinois is ready.’” [Sub required]

10) Indiana: The Journal Gazette takes a skeptical view of the bankruptcy and resale of the Indiana Toll Road’s operating company. Tolls have skyrocketed, and the dealmakers in the resale, with a remaining 66-year concession, made out handsomely. “So, overall, has the deal stood the test of time? Drivers who use a lot of the new roadway it funded around the state might say yes. Others might say no. In any case, the saga of the Indiana Toll Road has already become a cautionary tale in the annals of government privatization. How will the saga end? Our grandchildren will have to see.”

11) Kansas: Wichita issues a Request for Proposals for a water and sewer renewal “public private partnership.” Participants in a pre-proposal phone call included “North American investment banker BMO Capital Markets, US-based public-private partnership specialists Corvias Solutions, Spanish urban waste services firm FCC Citizen Services, global tax audit and advisory firm KPMG, Canadian investment bank RBC Capital Markets, and Madison Avenue business and technology consultants West Monroe Partners.” Others on the call “included EPCOR and EPCOR Water, Schneider Electric, Suez Environment North America, United Water, and Veolia North America.” [Sub required]

12) Massachusetts: As the debate on MBTA transit reforms gains steam, Senate president Marc Pacheco, author of the state’s rigorous Pacheco Law guarding against flawed and overpriced privatization of public services, fires back to refute clams that the law blocks outsourcing. “Since 1993, the Taxpayer Protection Act has served as a measurement tool for contracting out state services. The law does not ‘make it difficult’ for any agency to contract out work to private companies; in reality, 80 percent of proposals that undergo the ‘Pacheco Law’ process are privatized. The law merely requires an open cost analysis of public and private bids to guarantee taxpayer savings of at least a penny in order for state services to be contracted out. Clearly, this debate is more about ideological disparity than evidence-based decision making.”

13) Massachusetts: The Boston Globe reports on the high price of transparency. “What doe
s it take to get e-mail records from the general manager of the country’s fifth-largest transit system? About $1,000, three months, and a bit of persistence. The MBTA on Monday released 500 e-mails from Beverly A. Scott’s files when she was the T’s top official. The next day, the Globe published a story based on the e-mails, including details on Scott’s consternation with Keolis Commuter Services, the T’s commuter rail operator, and some questionable decisions about subway service. What it did not detail is how much and how long it took me to get the e-mails.”

14) Mississippi: Students doubled or tripled the amount of time they spent on test taking or preparation over the last school year. But “after spending a year or more preparing for this year’s tests, educators will have to once again prepare for new tests administered by a new company. The one-year contract the Education Department had with Pearson, Inc., to deliver the College and Career Readiness assessments expired and the department opted to sign a new contract with Questar Assessment Inc., which Walt Drane, the department’s interim assessment director, said ‘is not going to mirror the PARCC assessment at all.’”

15) Missouri: State officials will turn to the private sector for financing and other ideas to improve a section of I-70. “On Wednesday, the state’s highway commission opened a virtual suggestion box, emphasizing that it’s especially eager for ideas that include a way to pay for a better roadway. ‘We don’t have a plan. We don’t have the money. We are looking for ideas,’ said Stephen Miller, the chairman of the Missouri Highways and Transportation Commission. ‘We’re broke.’”

16) New York: DNAinfo reports that New York City will not renew its contracts with Corizon to provide health care at Rikers Island. “The city’s public Health and Hospitals Corporation will take over providing health care for inmates, according to a source, though officials are now working to see how quickly the agency can take over after Corizon’s deal with the city is set to expire on Dec. 31, 2015.” The Intercept recently reported on abuses at the Rikers Island women’s jail.

17) New York: After a long battle by activists, researchers and the media—especially Juan Gonzalez of The Daily News and Democracy Now!—over bloated IT outsourcing and a lack of oversight, New York City is to insource IT services. “The agreement is a big success for union chief Henry Garrido, who assumed leadership of District Council 37 when Lillian Roberts, its longtime head, retired in December. ‘I’ve always said city workers can compete if they’re given the right opportunity,’ Garrido said. ‘We applaud the mayor for stopping the huge waste of taxpayer dollars.’”

18) North Carolina: The state board of education approves 12 charter schools to open in the fall of 2016, but turns two down. “Two more schools managed by Newpoint Education Partners will also get another review from the charter advisory board.  Allegations of grade tampering have arisen involving two of its schools in Florida.” Newpoint fired a number of teachers in Escambia, and they and the district are demanding they be compensated.

19) Ohio: MuckRock reports that “‘Special Incidents’ [are] disturbingly commonplace at Lake Erie private prison.” The prison is now owned and operated by Corrections Corporation of America. MuckRock has published some incident reports from the facility. On Friday, RT published an interview with a former corrections officer at Lake Erie.

20) Pennsylvania: PennDOT announces that the Rapid Bridge Replacement project will begin this month.  By packaging all 558 bridges into one design-build-finance-maintain “public private partnership,” the state claims to be saving over $200 million. [Sub required]

21) Pennsylvania: The Philadelphia school system is trying to outsource the jobs of substitute teachers to a private, for profit company—Cherry Hill-based Source 4 Teachers. “In addition to privatizing substitute services, the district is also exploring outsourcing school health services, including nearly 200 nurse positions. That measure will be considered later.” The Philadelphia Federation of Teachers is fighting the move and may go to court. The PFT and the district have not held contract talks for months.

22) Pennsylvania: As overtime costs for state workers surges, a debate on outsourcing vs. past cutbacks is rekindled. Nathan Benefield of the State Policy Network-funded Commonwealth Foundation calls for more privatization. But “the increasing amount spent on overtime is the downside of not having enough employees, said David Fillman, executive director of Council 13 of the American Federation of State County and Municipal Employees. ‘There’s a price to pay on this,’ he said. ‘Do we continue to do the overtime piece or do we backfill these positions?’”

23) South Dakota: Sioux Falls is considering a “public private partnership” for a downtown redevelopment site. “The city plans to make an announcement this month. The request for proposals called for a parking ramp to be done by the end of 2017.”

24) Tennessee: Hamilton County may privatize all of its local jails to Corrections Corporation of America, and may hire Public Financial Management as an advisor. “It will not be cheap to hire this consultant, it will be six figures,” Hamilton County Mayor Jim Coppinger said.

25) Texas: The Willacy County Detention Center defaults on $78.5 million of bonds. “The Federal Bureau of Prisons cancelled its contract with operator Management Training Corp. after inmates took over the 2,800-bed facility and caused enough damage to make the center uninhabitable.” [Sub required]

26) Virginia: Although a public procurement option for the I-66 improvement project seems likely, the possibility of a P3 is not completely dead. VDOT and the OPPP will engag
e in talks with private developers for the rest of this month, and if they recommend a P3 then the Department of Rail and Public Transportation and Transportation Public-Private Partnership Advisory Committee would have to approve, the latter after holding public meetings, possibly next month. Transportation secretary Aubrey Layne “said the state will continue to prepare for the possibility of going ahead with public financing, as an alternative to the private partnership method.”

27) Virginia/National: The state’s experience with the troubled US 460 project continues to spur a broad critical reassessment of “public private partnerships,” of when they should and should not be used, and what taxpayer protections and rigorous oversight needs to be in place when they are. “The state is obviously taking a hard look at this P3 model,” Jonathan Gifford of George Mason University said. “That’s what states are supposed to do. This is not designed to be a giveaway to private concessionaires. The only time you want to go forward with these is when they are going to add value to what the state would be able to do on its own.” In Esquire, Charles P. Pierce argues “public private partnerships” are “vehicles for the financial services industry.”

28) Virginia: The Daily Press’ Travis Fain gripes about the state’s privatized road service signs setup. “Virginia’s logo sign program was privatized back in 1995, and its cousin programs—such as ‘tourist-oriented directional signing’—in 2004. Virginia Logos LLC has the contract, and it’s part of Interstate Logos LLC, which handles sign programs in 23 states.” Drivers can go for “miles and miles” before finding the gas, food and lodging outlets on the signs. “VDOT can’t say definitively whether privatization has saved money.”

29) Revolving Door News: Tom Pelnik joins EY Infrastructure Advisory as a managing director. Pelnik “joins EY from Grupo ACS’ North American Infrastructure Development arm, where he served as senior vice president of business development. Before that he served as the founding director of the Virginia Department of Transportation’s (VDOT) Innovative Project Delivery Division, ‘helping to pioneer the use of PPPs and design-build in the US transportation market,’ according to the statement.” [Sub required]

30) Think Tanks: June Sekera, a research fellow at the Global Development and Environment Institute at Tufts University, releases a working paper on the nexus between mainstream economics and what James Galbraith has called “the collapse of the public governing capacity.” She writes, “over the last several decades, market advocates have imposed upon government a pseudo-market with outcomes ranging from the unfortunate to the disastrous. So-called ‘New Public Management’—a child of neoclassical economics—has colonized and weakened every level of public administration.”

31) Think Tanks: The Economic Policy Institute releases a report showing that the privatization of the Tennessee Valley Authority would “increase electricity rates by requiring any new owner to pay to buy TVA, plus pay the higher private borrowing rates required by shareholders and bondholders in the private market.” [Report]

Legislative Issues:

1) National: The White House threatens to veto the National Defense Authorization Act. One of the president’s concerns is a plan to privatize military commissaries. Two Senators have objected to the privatization plan and have introduced an amendment to the bill. “The armed services committee wants DoD to test that privatization plan in at least five commissaries chosen from the commissary agency’s largest U.S. markets. The new amendment doesn’t rule out privatization, but instead require DoD to study the idea, and submit a report to Congress by Feb. 1.” The amendment may be considered this week.

2) National: Rep. Richard Neal and Sen. Edward Markey introduce companion bills to make the Build America Bonds program permanent with a lower subsidy (HR 2676 and S 1515). “The legislation was introduced one day before Fitch Ratings released a paper concluding that financing options that compliment traditional tax-exempt bonds would be beneficial because they would broaden the U.S. infrastructure-investment base.” [Sub required]

3) Iowa: As the session adjourns, lawmakers agree on a health budget that will fund one of two mental health facilities due to be shut down, and search for a private operator for the other one (Clarinda).

4) Kentucky: The state legislature may be asked to vote on an ambitious plan “to extend the Mountain Parkway east for 140 miles to connect with Interstate 64/Interstate 77 near Beckley, W.Va. The proposal would cost between $8 billion and $10 billion.” If it came to fruition, the tolled “public private partnership” project would be one of the largest in the country.

5) Louisiana: The Senate has passed House-initiated legislation to provide more rigorous oversight of future government contracts. “HB137 would require that agreements with the private sector—valued at more than $5 million—that would take over tasks being done by government would first have to go through the competitive bidding process; require the legislative auditor to analyze the costs, including the so-called ‘legacy’ expenses, such as insurance and pensions of state employees; and require legislative oversight of the contract. The bill also would require the records related to the privatization contract be available under the state’s public records law.” The bill now goes back to the House for reconciliation, and then on to Gov. Jindal’s desk. It is unclear if he will sign it.

6) Louisiana: Senators receive an updated briefing on the funding shortfalls for the troubled LSU hospital privatization deal. “The shortfall, combined with federal matching money, tops $177 million for next year. Hospital operators said that without the extra funding, they’d have to shrink specialty care and other programs. Gregory Feirn, CEO of LCMC Health, which runs the state-owned hospital in New Orleans, said his board would have ‘to rethink the deal’ and decide whether to stay in the partnership with the state.”

7) Minnesota: The Minneapolis Star Tribune denounces a move to privatize county auditing and take it out of the hands of the state’s public auditor. “Private auditors may be qualified to review county bookkeeping, but few such firms can provide the compliance review that the state auditor performs to assure that county practices comply with state law. That oversight, plus the expertise of a staff that has received national awards, would be lost if the privatization provision stands. So would be the independence that’s designed into an office that’s accountable to Minnesota voters rather than to those who hire them. The privatization provision is also troubling because it reaches into what may be unconstitutional territory.”

8) Texas: The Austin American-Statesman reviews this session’s education reform legislation. Bold plans floundered. “The Senate, for example, did not get its $100 million “tax credit scholarship” plan that would’ve helped public school students switch to private or religious schools at taxpayer expense—a top priority for Lt. Gov. Dan Patrick, but not so much for the Texas House.”

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