States Move to Curb Outsourcing Public Services, Protect Taxpayers

National Watchdog Group Lauds Groundbreaking bills in NE, VT, WV
Publication Date: 
1/30/2014

For Immediate Release: January 29, 2014

Contact: Richard Allen Smith / rasmith@inthepublicinterest.org / (202) 327-8435

Washington, DC – Adding momentum to a national trend of reigning in reckless outsourcing of public services to for-profit corporations and other private entities, legislators in Nebraska, Vermont and West Virginia recently introduced transparency and accountability legislation aimed at protecting taxpayers and putting them back in charge of their public services. 

In Nebraska, LB 1006 would ban language in outsourcing contracts that guarantees profits regardless of the quality of services rendered. For example, last year ITPI found that 65 percent of state and local private prison contracts include “lockup quotas,” – language that mandates prisons be filled to at or near capacity or else taxpayers must pay for empty beds. LB 1006 would ban lockup quotas as well as language in other contracts that puts taxpayers on the hook for guaranteeing corporate profits. In addition to LB 1006, LB 371 would require making contracting costs public.

In West Virginia, HB 4323 would protect taxpayers in a number of ways: banning any company that has evaded taxes or broken the law from receiving contracts; capping outsourcing contracts to five years; and requiring fair pay and reasonable benefits for private sector workers.  

In Vermont, S 240 and H 623 would provide Vermont taxpayers with some of the strongest protections in the country against predatory outsourcing. S 240 would ensure taxpayers maintain control of services making it easier for taxpayers to cancel a contract if the company doesn’t provide promised quality and cost savings.

"It’s encouraging to see legislators standing up for taxpayers and good old fashioned common sense,” said Donald Cohen, Executive Director of In the Public Interest Action Fund. “Nebraska, Vermont and West Virginia are taking the lead in putting taxpayers back in control of their services, and making sure that we don’t cut corners to improve corporate profits at the expense of public health and safety.”

The legislation comes amid increased nationwide scrutiny of outsourcing deals. Across the country, cash-strapped state and local governments have handed control of critical public services and assets to private entities that often operate them less efficiently, less cost effectively and with lower quality. Too often, these “deals” leave behind only broken promises and undermine transparency, accountability, shared prosperity and competition. ITPI documented several of these broken promises in its recent report, “Out of Control: The Coast to Coast Failures of Outsourcing Public Services to For-Profit Corporations.”

For example, in 2009, Chicago signed a 75-year contract with a consortium of companies backed by Wall Street giant Morgan Stanley for the operation of the city’s 36,000 parking meters. Though Chicago got $1.2 billion in the deal, Chicago drivers will pay the private companies at least $11.6 billion to park at meters over the life of the contract.  

Meanwhile, upon signing the contract, the company dramatically increased parking rates to $7 for two hours of parking in some parts of the city, and extended paid parking to seven days a week. Downtown businesses blamed the price increases for a decrease in economic activity. Residents complained that parking downtown was cost prohibitive. And taxpayers must reimburse the company whenever the city needs to temporarily close its streets, even for community parades and street fairs. 

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In the Public Interest Action Fund is a comprehensive resource center on outsourcing, responsible contracting, and best practices for good government.www.inthepublicinterest.org