Update: Upcoming Outsourcing Issues. August 31, 2015

1) National/Louisiana: On the tenth anniversary of the Katrina disaster, a three month investigation by In These Times finds that “New Orleans’ all-charter school system has proven a failure.” In These Times “received an advance copy of research conducted for the Network for Public Education (NPE) by University of Arizona researchers Francesca López and Amy Olson. (…) The researchers found that the gap between charter and public school performance in Louisiana was the largest of any state in the country. And Louisiana’s overall scores were the fourth-lowest in the nation. ‘You can say until you’re blue in the face that this should be a national model, but this is one of the worst-performing districts in one of the worst-performing states,’ says NPE board member Julian Vasquez Heilig, an education professor at California State Sacramento.” But “test scores, high or low, are only a piece of the story.” Diane Ravitch has also posted about the impact of privatization on education in New Orleans.

2) National: The Project on Government Oversight submits comments backing a proposed rule and guidance improving government contractor oversight. The executive order would require “contractors and subcontractors to disclose violations of laws regarding wages, workplace health and safety, collective bargaining, family and medical leave, and civil rights. Contracting officials must take this information into consideration when determining whether companies have sufficient integrity and business ethics to receive federal funds. The EO also prohibits contractors from requiring employees to submit to arbitration in disputes involving discrimination and sexual assault and harassment, and requires contractors to give their employees the information they need to verify the accuracy of their paychecks.”

3) National: Economist Dean Baker calls for an “idiot proof retirement system.” He warns that basing a system on individuals who may panic and sell during a stock market downturn is irrational. “Existing systems of private accounts, like those in Britain and Chile, have administrative costs that are 20 or 30 times as high as those of our Social Security system. Such inefficiency might actually help to explain the ongoing interest in privatization. The costs of administering a privatized system are income to financial firms. (…) If the administrative costs for managing these accounts were equal to 1 percent of the value of the accounts, which is roughly the case in countries with privatized Social Security systems, it would imply fees of $140 billion a year. That’s real money.”

4) National: As the federal government makes more funding available to incarcerated students to pursue their education, PublicCEO points to past problems with private companies trying to vacuum up the funds. “This means it is critical to ensure that the institutions receiving Pell Grants for inmate education have sufficient and appropriate training, staff, and capacity to offer high-quality college classes and student support services.”

5) National: The New York Times highlights the role of the special inspector general on Afghanistan in exposing waste, fraud and abuse by private contractors. “The reports by the special inspector general underscore the inherently chaotic nature of development that relies on private contractors and local agencies. Records disappear, agencies do not measure progress accurately and outright corruption drains government funds, especially in war zones.” But POGO’s Iulia Gheorghiu warns that “a coming expansion in the role of Department of Defense Inspector General (DOD IG) stands to undermine the impressive work of SIGAR.”

6) National: Republican presidential primary candidate Marco Rubio comes out against the privatization of social security. “I think the time has passed for that…. I don’t think privatization is the right approach.”

7) National: The Congressional Research Service issues a report on “The Intelligence Community and Its Use of Contractors: Congressional Oversight Issues.” Issues include whether or not contractors are performing inherently governmental work, and whether or not the intelligence community is equipped to monitor contract employees.

8) National: The New York Times visits the annual meeting of the American Correctional Association and finds little evidence that sentencing reduction is on the immediate horizon. In the Public Interest reported recently that “considering corrections companies’ track records of providing low-quality services that harm prisoners, communities, and taxpayers, the influence they exert through professional corrections associations” is cause for concern.

9) Alabama: The Anniston Star endorses a careful and deliberate system to vet charter schools. “Alabama’s first charter schools won’t open until 2017, state officials said this week, and that sounds about right to us. (…) Quite frankly, our concerns about charter schools don’t involve calendars and start dates. They involve implementation, oversight and performance.”

10) Arizona/National: Gov. Doug Ducey (R) cancels the state’s contract with Management and Training Corp. (MTC) after reports by the American Friends Service Committee-Arizona and the corrections department reveal critical problems at MTC’s Kingman prison before riots over the Fourth of July weekend. “Caroline Isaacs, program director for the American Friends Service Committee, said she found it difficult to believe state monitors could have missed so many problems in Kingman. ‘Clearly, the longstanding issues noted in the report could not all have been “withheld” from ADC monitors. And if it is so easy for them to be deceived, how can we have any confidence in ADC’s management of any for-profit prison contract?’ Isaacs said.” Nevertheless, Ducey says he is looking for another private operator for Kingman, and will go forward with a proposal to add 2,000 beds to the state prison system.

Mother Jones reported in February that “according to campaign filings, Ducey received $10,500 in campaign contributions from political action committees
and lobbyists associated with the private prison industry. The Republican Governors Association, which received hundreds of thousands from the private prisons industry, was also heavily involved in Ducey’s contest against Democrat Fred DuVal: Campaign filings show that it funded the RGA Arizona PAC with $500,000 in startup cash. GEO Group also gave $50,000 to the Koch brothers’ onetime dark-money impresario, Arizonan Sean Noble, for a PAC that spent nearly a half-million dollars supporting Ducey. (Ducey’s office did not respond to requests for comment).

11) California: As debate intensifies over whether Los Angeles should put in a bid to host the 2024 Summer Olympics, city analysts raise concerns that the $1 billion estimate for the cost of a “public private partnership” to build an Olympic Village for athletes is too low. “But there’s another reason to be cautious of the bid book’s vision. Piggyback Yard is considered one of the critical pieces of the Los Angeles River revitalization. The site is a rare, large swath of riverfront property that offers an unparalleled opportunity to restore the river ecology and create a public space that could be L.A.’s Central Park.” The City Council has to vote to authorize the mayor to sign the document, and the U.S. Olympic Committee is expected to decide on whether to accept the L.A. bid by September 15.

12) California: Private investment in Marin City’s public housing program is being considered by a “working group.”

13) California: Sacramento is converting $299 million of short term debt into bonds to finance its share of an arena for the Sacramento Kings. “Stadium bonds have drawn fire from critics who say the major sports facilities they fund tend to be overwhelmingly for private use that becomes essentially government-subsidized. A new stadium for Major League Baseball’s Atlanta Braves faced a similar legal challenge last year, and those bonds finally came to market this week after surviving legal wrangling all the way to the Georgia Supreme Court.” [Sub required]

14) California: The Orange County Register runs an interesting story on the per capita number of public workers, and class issues, in south Orange County. “Aliso Viejo is the most circumspect, with just one employee for every 2,498 residents, while Laguna Beach is the most sumptuous, with one worker for every 92.5 residents. Everyone else falls somewhere in between. This wild divergence illustrates the difference between old and new, between ‘full-service’ grande dames (with their own police, fire, marine-safety, library, recreation, etc.) and newfangled ‘contract’ cities (which hire third parties to do such work and thus have dramatically fewer staffers on the books).”

15) Colorado: The city of Denver has shortened the time it takes to approve major contracts, and eliminated a requirement to publish proposed contracts in the newspaper. “But not everyone is hailing the change. ‘I felt like city council needs to have enough time to look at all the things that come before us,’ said Councilwoman Deborah Ortega, who voted against changing the way contracts are approved. ‘By removing one of those readings, it means they’re going to move through the process much faster and council will have less time to review them and ask questions.’”

16) District of Columbia/National: The DC Public Service Commission rejects Exelon’s takeover of Potomac Electric Power Company (PEPCO), setting off a heated debate over power regulation and public vs. private interests. Local organizers played a key role in scuttling the proposed deal. “Exelon wants to eat Pepco because it needs more ratepayers to pay for its nuclear plants,” writes David Roberts in Vox. The move has created “a foot in the door for public power, perhaps.” [Debate on the issue on WAMU’s Kojo Nnamdi Show]

17) Florida: GCA Services, the custodial contracting company owned by the Blackstone private equity firm—$333 billion in assets under management—sends $0 paychecks to some of its Volusia County Schools janitors.

18) Illinois: Barrington High School janitors strike over low pay from RJB Properties, demand restoration of last year’s wage rates. “‘When I was at the strike today one of the workers said she was making more money when she was hired on 13 years ago,’ [SEIU spokesperson Izabela] Miltko said, referring to $8.50 an hour as ‘poverty wages.’” RJB Properties, which cut the janitors’ pay from $9.77 to $8.50 and hour, settled a suit for discrimination against Latino employees brought by the EEOC in 2013.

19) Illinois: Chicago’s treasurer office hires the former head of the Illinois State Toll Highway Authority, Kristi Lafleur, as deputy treasurer. “Lafleur will oversee the Treasurer’s office day-to-day operations and serve as Treasurer Summers’ senior advisor in implementing key initiatives such as a neighborhood and infrastructure investment plan and a pension fee savings initiative.”

20) Indiana/National: The privatization of land and a facility on the Indiana dunes draws criticism from conservationists and concern about the gaudy commercialization of a public good. “Opponents say the favorable terms of the contract, as well as the apparent advantage [Chuck Williams, a regional chairman of the state Republican Party], had over his competitors, are indicative of murky proceedings that can surround privatization deals.”

21) Iowa: A Des Moines Register investigation shows that “some of Iowa’s top elected officials—most notably Gov. Terry Branstad—have accepted tens of thousands of dollars in campaign contributions from some of the companies that vied for lucrative contracts to manage Iowa’s annual $4.2 billion Medicaid program.”

22) Kentucky: Schoolteacher files class action suit against the worst-funded state teacher plan in the U.S. over mismanagement, private equity fees. He argues, among other things, that “many of these alternativ
e investment entities have not documented in their contracts that they adhere to investment ethics and disclosure rules as required by statute.”

23) Kentucky: The Kentucky Economic Development Finance Authority will price $230 million of bonds this week to finance a statewide high speed internet system as a “public private partnership.” The deal, “driven in part by the BBB-level ratings, will potentially offer better yields to buyers that have participated in similar P3 transactions, said Ryan Barrow, executive director of Kentucky’s Office of Financial Management.”

24) Maryland: Baltimore City may get public municipal broadband. “The conduit system is a valuable piece of city infrastructure, Hardebeck said Wednesday. ‘It is literally a gold mine at our feet,’ he said. ‘I can’t get into what the real value is. I will say that what we looked at, and what the task force looked at, is viewing these assets not as something to flip and monetize and privatize.’” Baltimore Gas & Electric, a subsidiary of Exelon (see above), is trying to buy the conduit for itself, which the Baltimore Business Journal says might be “a bad deal for Baltimore.”

25) Maryland/District of Columbia: Montgomery County and the Metro have filed a $166 million lawsuit against three companies, including Parsons Brinckerhoff, “that designed, built and inspected the Silver Spring Transit Center, contending that their ‘collective failure’ led to five years of delays and $50 million in cost overruns to correct substandard work.” Parsons Brinckerhoff produced early ridership estimates for the Purple Line light rail “public private partnership,” for which Montgomery County recently agreed to increase its funding.

26) Massachusetts: Debate escalates over Gov. Baker’s plan to privatize some MBTA bus routes. The Association for Public Transportation says it “believes the MBTA’s plans to privatize bus routes has the hallmarks of a covert plan to end service on those lines. The idea that a private company can run any routes at a profit is nonsense on its face as there is no transit system in the world that runs at a profit. The so called privatization works only if a subsidy is provided by the T. Where can money be saved? Only by reducing drivers’ pay, which is an open attack on its union contract.”

27) New Mexico: A lawsuit over resident abuse and neglect at a private nursing home raises questions about privatization. “The civil suit comes as prosecutors, researchers and advocates across the country are questioning whether for-profit nursing home chains’ focus on the bottom line comes at the expense of the care residents receive.”

28) New York/New Jersey: The P3 industry hopes that “the reconstruction of LaGuardia Airport in New York could open the door for more public-private partnerships including ancillary projects.” Roddy Devlin, a project finance and P3 attorney at Squire Patton Boggs, says “a P3 structure is a possibility for the LaGuardia air train.” The projects would be taxpayer subsidized to guarantee a return to private investors.

29) Ohio: The Parma Heights city council votes today on an ordinance amending the city charter on the status of the fire department. “Council has never met to discuss the privatization of the fire department, but current staffing levels proposed in the amendment cost our residents nearly $300,000 in overtime last year,” Council President Marie Gallo said.

30) Ohio: The Mahoning County Board of Elections blocks a ballot initiative on a Home Rule Charter for Youngstown. The move drew a lawsuit by the Community Environmental Legal Defense Fund (CELDF). “CELDF has assisted nearly 200 communities to ban shale gas drilling and fracking, factory farming, water privatization, and other threats, and eliminate corporate ‘rights’ when they violate community and nature’s rights.”

31) Oregon: A liquor privatization ballot measure may be in the cards for 2016. “We’re in the process of doing our homework and seeing if it makes sense to do it,” said Joe Gilliam, president of the Northwest Grocery Association. Last week the Oregon Liquor Control Commission voted to accept proposals for 17 more stores in the Portland area, including in existing businesses.

32) Pennsylvania: The Commonwealth Court, an intermediate state appellate court in Pennsylvania, rules that the School Reform Commission lacks the power to impose enrollment caps on charter schools. “The ruling throws another wrinkle into the School District of Philadelphia’s ongoing effort to remain solvent. The District has maintained that unrestrained charter growth depletes its own limited funding and doesn’t allow it to plan for its own schools.”

The financially troubled Philadelphia School District has a tense relationship with the city council, some of whose members feel it hasn’t been transparent enough. Council President Darrell L. Clarke “has not been shy about voicing his frustrations with the district. He was against the district’s move to privatize substitute teaching services, and is wary of its exploration of possibly outsourcing school nurses. He has called for a formal fiscal oversight role for Council.”

33) Puerto Rico: The Working Group for the Fiscal and Economic Recovery of Puerto Rico is expected to complete its fiscal and economic adjustment plan today, and the power authority is expected to compete its debt restructuring plan on Wednesday. The Fiscal and Economic Adjustment Plan will advocate “promoting alliances with the private sector to provide some of the services that are today provided by the public sector,” according to Governor García Padilla.

34) Tennessee: Nashville’s Newschannel 5 uncovers an internal document showing that Gov. Haslam (R) plans to rush through significant public asset sales in less than a year. “What had been known was that responses to the administration’s RFI were due on August 21st. But the confidential timetable shows officials planned to immediately begin creati
on of a Request For Qualifications (RFQ). That’s how the state would pick the companies that would be allowed to bid. That RFQ would be due in the Governor’s Office less than six weeks from now — and released to the public just two weeks later. By mid-February, the state would provide notice of the companies that would be allowed to bid. A formal solicitation for the final contract would be issued May 30th, with bids due from those companies just two weeks later. By July 5th, the state would announce which company would be awarded the job.”

35) Virginia: The Virginia Public-Private Partnership Advisory Committee accepts a finding by the transportation commissioner that a private partner on the I-66 upgrade project would enable the state to shift risk. “The Virginia DOT will now compare the P3 options endorsed in Kilpatrick’s analysis with the costs of conventional public financing for the I-66 project, [Transportation Secretary Aubrey Layne] said. The decision on how to finance the project is expected in November.” A decision on whether to issue a request for qualifications to interested bidders will be decided by September 16 by Layne and the Commonwealth Transportation Board.

36) Virginia: Danville considers outsourcing the operations of its water utility while “the city would still be responsible capital expenses of the plant.” Bids may go out next week.

37) International: Critics charge that extensive privatization schemes for water, electricity and trash collection have led to a collapse of services and ignited a popular uprising in Lebanon. Earlier this month a conference of activists and human rights workers at the Lagos Water Summit called for “an end to the World Bank’s promotion of water privatization and an investment in public alternatives that uphold the human right to water.”

38) Think Tanks: The National Immigrant Justice Center publishes thousands of pages of Department of Homeland Security (DHS) immigration detention center contracts and inspections. NIJC says the documents “provide an unprecedented look into a failed system that lacks accountability, shields DHS from public scrutiny, and allows local governments and private prison companies to brazenly maximize profits at the expense of basic human rights.”

Legislative Issues:

1) Alaska: The Greater Fairbanks Chamber of Commerce is pushing state lawmakers to privatize services. Newsminer.com reports “privatization is one solution that didn’t get much discussion during the legislative session.” The next legislative session opens January 19, 2016.

2) Illinois: A strike by AFSCME-represented state workers looms as Gov. Rauner rejects arbitration legislation. House members reconvene on Wednesday, and may call for an override.

3) Minnesota: Lawmakers and the Swift County board chair meet with representatives of Corrections Corporation of America and the Goff public relations firm to discuss reopening the CCA-owned prison in Appleton. According to the Swift County Monitor, the state corrections department will ask lawmakers for $85-$100 million in bonding authority in 2016 and 2018 for prison expansion.

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