Warren, Ocasio-Cortez scrutinize private equity investments in prison services

In the Public Interest’s weekly analysis of privatization in the news and in communities nationwide, in order by sector. Not a subscriber? Sign up.

This week’s highlights

  • Congress members, including Senator Elizabeth Warren (D-MA) and Rep. Alexandria Ocasio-Cortez (D-NY), are concerned about private equity investment in jail and prison services.
  • A major scandal has erupted in Jacksonville over efforts to ram through the privatization of the city’s electrical facility without public input.
  • St. Louis Democratic committeewoman Marie Ceselski says, “Unless someone has a brilliant idea and sufficient resources to put behind it, St. Louis Airport Privatization is a done deal.”

Education

1) National: Education Secretary Betsy DeVos has enlisted the support of Trump adviser Kellyanne Conway to help push her $5 billion tax credit scholarship program, which has encountered widespread opposition in Congress and beyond. Education Week’s Andrew Ujifusa says “it’s possible that when the House and Senate negotiate a final spending package (when exactly that will happen is unclear) that Education Freedom Scholarships could be included. But it’s not a good sign for the proposal that so far that the two relevant spending bills so far have iced out the scholarships. And from a political perspective, if the Trump administration failed in its push for Congress to pass new (albeit differently constructed) school choice initiatives when the GOP controlled the House and Senate in 2017 and 2018, there’s no clear reason why Democrats now running the House would grant DeVos what she wants most out of Congress.” DeVos and Conway appeared together at the American Enterprise Institute. Betsy DeVos’ husband Dick DeVos is on its board

2) California: Comment is pouring into the media on Gov. Newsom’s signing of Assembly Bill 1505, which makes major revisions to California’s charter school law. E. Toby Boyd, president of the California Teachers Association, said  “today’s a good day for the 6.4 million students of California. Working together, we made monumental changes to improve outdated and broken charter school laws. For far too long, students and taxpayers have paid the price. We proudly appreciate Assemblyman O’Donnell and the governor for their hard work and leadership commitment to fixing these flawed laws. Today we see the fruit of the labor of educators, parents, social justice advocates, community groups and our union partners. I want to recognize CFT, SEIU, CSEA and the state labor fed who are here with us today. I want to thank the thousands of educators who talked to their lawmakers and rallied here at the Capitol. After years of trying to fix these laws to hold all taxpayer-funded schools to the same high standard in quality and transparency, we’ve made significant progress on behalf of our students.”

3) California: Capital & Main’s Bill Raden reports that public school supporters and parents are demanding an investigation into the activities of pro-charter Los Angeles Unified school board member Nick Melvoin for leaking a confidential district legal strategy that proved beneficial to the California Charter School Association. “As this email makes clear, CCSA lobbyist Jason Rudolph saw the SPF as “another pathway for [charter] access to facilities” occupied by public schools that posted subpar SPF numbers. SPF will next get a hearing on October 8, when the board’s Curriculum and Instruction Committee considers a Jackie Goldberg-authored resolution to pull its plug. Dore and the moms are demanding swift board action on what their online petition asserts is at the very least a violation of Melvoin’s ‘oath to represent the interests of all of the students in his district (LAUSD District 4)‚ not just the students attending charter schools.’” 

4) Louisiana: Thomas Ultican reports on the inefficiencies of New Orleans’ privatized school system. “New Orleans’s public schools were targeted by the destroy-public-education (DPE) movement even before hurricane Katrina struck,” he writes. “A huge problem with low attendance bedevils the privatized system and an extraordinary 30% of NOLA teachers resigned last year. The latest state test scores (LEAP) were released, and the scores in New Orleans stalled or dipped.” Former Assistant Secretary of Education Diane Ravitch adds: “Do not look to New Orleans for lessons about school reform. But do admire it as a shining example of propaganda and spin paid for by Bill Gates and other billionaires who don’t like public education, democracy, or local school boards.” 

5) MichiganState budget cuts will hit charter schools hard, hampering expansion. “As it stands now, Governor Gretchen Whitmer’s plan slices $240 in per-pupil funding for those in charter schools. Nearly 10% of Michigan’s children go to charter schools. The cuts are a huge blow to the Old Mission Peninsula School, which is only in its second year of operation.”

6) Nevada17 charter schools in the state have been put on notice because of poor performance. “Nevada’s public charter school authority has put 12 schools on a notice of concern after the latest star rating results showed low performance. The Las Vegas Review-Journal reports that the authority gave five more schools a notice of breach of contract because of routine underperformance.”

7) New York: A state review of Long Island charter schools has found their managers fail to follow their own expense report rules. “Five senior managers at one of Long Island’s fastest-growing public charter schools charged more than $60,000 in credit-card expenses without receipts or itemizations required by their school’s own rules, state auditors reported. The state’s review of spending practices at the Academy Charter School in Hempstead found that 17% of credit-card transactions sampled, totaling $36,329, were approved for payment without supporting receipts, auditors said. Another 12% of sampled purchases, totaling $25,342, had receipts that were not itemized.”

8) North CarolinaSix Democratic candidates for state school superintendent set out their ideas on charter schools in a forum in Raleigh, contrasting themselves with Republican Superintendent Mark Johnson and the GOP-led state legislature. “The six Democrats were uniformly critical of Johnson, saying they’d work to improve the strained relationship between the superintendent’s office and the State Board of Education. ‘If we continue with the superintendent that we have and the General Assembly that we have, then we’re going to have more charters, more vouchers and more privatization,’ Mangrum said.”

9) Texas: A Dallas charter school CEO has been convicted of three counts of wire fraud and one count of conspiracy to commit mail and wire fraud. “Houston-Woods and Anyanwu were indicted in December 2017. Houston-Woods was accused of using her position as head of Nova Academy to steer the federal contract to ADI in return for kickbacks. ADI botched the job and shouldn’t have gotten the contract in the first place, prosecutors said. Fusco said Nova’s staff and outside consultant in March 2011 chose CMC Network Solutions, the school’s longtime IT contractor, to receive money from a government program, called E-rate, that pays for telecom and internet services for disadvantaged schools. But Houston-Woods was angry because the staff had ‘picked the wrong company,’ Fusco said.”

10) Virginia: VCU Prof. Kristin Reed says “as teachers in Chesterfield Public Schools begin to speak out against privatization, it’s time for us to build more alliances across districts and across education levels.” A thread: “If public schools are a public good, why is so much of our education system privately controlled? (…) Energy monopoly CEO and local oligarch Tom Farrell is exceptionally skilled at consolidating wealth and power, but he doesn’t actually have any training or experience in education. Why do we allow him so much undemocratic control over our schools? (…) Farrell is a major player in Higher Ed, where I work. He chaired the Governor’s Commission in Higher Education. He served on the State Council for Higher Education. He served on VCU’s board. (…) He’s also very involved in pre-k through 12 education locally. In 2007 he demanded RVA eliminate its elected school board in favor of a board appointed by … him. More recently Farrell chaired the search team that hired RPS superintendent Jason Kamras. (…) Farrell has built a whole coalition around the privatization of public education, which in Virginia today includes everyone from the other 25 signatories in his infamous ‘gang of 26’ letter to the RTD to Amazon Web Services, which is colonizing our curriculum from the bottom up.”

Infrastructure

11) National: Stateline reports that climate change could make borrowing costlier for states and cities, raising borrowing costs for everything from infrastructure investment to public services. “Someday soon, analysts will determine that a city or county, or maybe a school district or utility, is so vulnerable to sea level rise, flooding, drought or wildfire that it is an investment risk. To be sure, no community has yet seen its credit rating downgraded because of climate forecasting. And no one has heard of a government struggling to access capital because of its precarious geographical position. But as ratings firms begin to focus on climate change, and investors increasingly talk about the issue, those involved in the market say now is the time for communities to make serious investments in climate resilience—or risk being punished by the financial sector in the future.” 

12) Arizona: EPCOR, an Alberta-based manger of water utilities in Canada and in Arizona and New Mexico, is waging a determined fight against Arizona Proposition 415, which would enable Bullhead City to remuncipalize its water utility. “A ‘For’ vote will authorize the city’s acquisition of EPCOR Water Arizona, Inc., and as practical, any other privately owned water utility, in and around Bullhead City, and the issuance and sale of bonds for the acquisition.” The Mohave Valley Daily News reports that “Robert F. Powelson, president and CEO of the National Association of Water Companies, spoke about community water systems and the challenges such systems face. He spent nearly a year on the Federal Energy Regulatory Commission becoming head of the water utility industry group.” 

Prop 415 supporters have filed a complaint about EPCOR’s statements about the system’s fair market value. “The fair market value of EPCOR’s Bullhead City holdings is at the center of Proposition 415, the referendum asking Bullhead City voters for authorization for the city to pursue acquisition of EPCOR’s local water system. Proposition 415 was the city’s response to ongoing rate requests by EPCOR to the ACC that already have significantly increased monthly water bills for residents and businesses.” An all-mail general election will be held November 5. 

13) FloridaA major scandal has erupted in Jacksonville over efforts to ram through the privatization of the city’s electrical facility without public input after a gag rule on the terms of the deal was imposed on lawmakers by city officials. On Friday, “just hours after posting an ad promising a $3-billion windfall from a potential sale, JEA deleted the ad from social media and pulled it from future rotation. The move comes after the segment sparked a firestorm of criticism—both online and in City Hall. What bothered observers is the fact that JEA appeared to be openly campaigning to sell the utility, even as efforts have been made to silence JEA employees and city officials, to prevent them from discussing the terms of a sale.” 

“This isn’t a one way street—they get the uranium mine we get the shaft,” said Jacksonville City Councilmember Tommy Hazouri. “That doesn’t work that way. We’re supposed to be working together, ‘One City One Jacksonville.’ Right now we’re one JEA—no Jacksonville.”

Florida Times-Union columnist Nate Monroe says “JEA leaders and their cadre of lawyers have taken laws designed to guarantee transparency and prevent corruption in government and somehow mutated them into a justification for negotiating the sale of Jacksonville’s utility in a ‘cloaked process,’ one during which no one will know who has made an offer and public officials with concerns can’t voice their dissent.” Some City Council members are pushing for an outside attorney. Bid will be unsealed today.

Two leading Florida public power groups have objected to JEA’s privatization pitch. The head of the Florida Municipal Electric Association says “we strongly object to recent attacks by JEA on the public power model and reject the characterization by JEA that public power cannot function as a sustainable, modern electric utility. Contrary to your recent assertion to your Board that the ‘root problem is being government with government constraints in a competitive market,’ public power is thriving and growing in Florida, and across the nation.” 

14) Missouri: St. Louis 7th Ward Committeewoman Marie Ceselski, noting In the Public Interest’s research on privatization, says “unless someone has a brilliant idea and sufficient resources to put behind it, St. Louis Airport Privatization is a done deal.” There will be no public vote for the airport lease. @tweets_nativesays, “hidden in plain sight within the RFQ is confirmation of what @flystl privatization has always been about: Unfettered real estate development. An airport just happens to come with the real estate.” At issue is the sale of airport land to private developers. The Request for Qualifications (RFQ) can be found here. A lengthy account of the backstory to the airport privatization deal pushed by billionaire Rex Sinquefield has just been published in St. Louis magazine, written by Jeannette Cooperman. [Watch the video of the October 2 meeting of the Airport Commission; about an hour]

15) New Jersey: The public and unions are outraged and are demanding responsible contracting after reports that nuclear decommissioning work at the Oyster Creek nuclear power plant is cutting costs by using low pay contractors, the Asbury Park Press reports. “When the Exelon deal to sell the closed plant to Holtec was first announced, there was a chorus of concern voiced by environmental and community groups. An area of trepidation was whether the company would cut safety corners in favor of a speedy decommissioning and cost savings. It appears the red flag was prescient.”

16) Tennessee: In an important victory for public interest campaigners and elected officials, a judge has ruled that Nashville violated its own lawswhile negotiating a deal to outsource its parking meters. “Council member Freddie O’Connell criticized the city’s approach to the parking deal. ‘I think a better approach is for Metro to pursue modernization on its own through procurement of better infrastructure and better policies and procedures related to enforcement,’ he said.” 

17) Texas: In the wake of Tropical Storm Imelda, which dropped 36 inches of rain on Houston, the question of infrastructure climate resilience has taken on a new urgency. But daunting challenges for public officials remain because of years of inaction. “Large-scale infrastructure projects, such as deepening drainage canals or building pits to store rainwater, often take years to complete. In August 2018, Harris County voters approved a $2.5 billion bond to fund such projects. But most are still in the design phase. Then environmental permits must be obtained, as well as the acquisition of property rights. Only then can construction begin.” 

Did a lack of public funding and planning staff driven by years of anti-government conservative ideology contribute to this? The Progressive reports that “Houston’s ‘flood czar,’ developer Stephen Costello, had a staff of zero before [Hurricane] Harvey, and was given a staff of one after the hurricane. Now the recovery czar, his main task so far appears to be maximizing compensation from FEMA. (…) There have been no legal charges filed against any city officials for spurning any flood mitigation efforts commensurate with the rampant development going on for the last twenty years. And this is despite Tropical Storm Allison offering a preview in 2001 of what was to come. If anything, Harvey has been solicited to boost the city’s mythology of hardscrabble frontiersmanship and volunteerism operating under minimalist regulation. There is yet to be an accounting of the fact that Houston recklessly paved over essential wetlands, and added magnitudes of impermeability at an unsustainable pace.”

Criminal Justice and Immigration

18) National: Forbes reports that GEO Group is running out of banks “as 100% of banking partners say ‘no’ to the private prison sector.” Morgan Simon writes, “this shift represents an estimated shortfall of 87.4% of all future funding to the industry, which depends on these bank credit lines and loans to finance their day to day operations. Together, these banks commitments—alongside a federal judge’s block on the Trump administration’s plans to expand family detention this weekend, new policy initiatives such as California ending all contracts with private prisons, and Democratic primary candidates publicly raising the idea of a federal ban on for-profit incarceration—lead many to speculate a threat to the survival of the private prison industry all together.” However, in June GEO Group’s revolving credit facility with lenders was extended to May 2024. CoreCivic’s revolver matures in July 2020.

The Washington Post reported last week that “without the major banks, CoreCivic could seek out other sources of funding, including issuing new stock or finding a non-bank lender such as a private equity investor or hedge fund, the analysts said. But those sources are less stable than major bank funding, [Fitch analysts Gabriel Foguel] said, and it remains unclear whether those alternatives will be enough. ‘We’re waiting to see if they will be able to reach some of those [alternative financing deals] in the next one to two years,’ [Fitch analyst Stephen Boyd] said.”

19) National: Senator Elizabeth Warren (D-MA) and Reps. Mark Pocan (D-WI) and Alexandria Ocasio-Cortez (D-NY), have written to five private equity firms—BlueMountain Capital Management, H.I.G. Capital, American Securities, Apax Partners, and Platinum Equity—that own companies “providing support services to prisons, including health care, food service, and telephone services, highlighting how private equity firms deliver poor quality food and services at exorbitant prices, making huge profits off of incarcerated people, their families, and taxpayers.” [Read the letters; 30 pp.] In their letter to Platinum Equity (Detroit Pistons owner Tom Gores’ firm; see this article by In the Public Interest’s Donald Cohen) the lawmakers say they have “concerns about the rapid spread and effect of private equity investment in many sectors of the economy—including the correctional facility support services industry. (…) This is why we have introduced legislation that will force private equity funds to take responsibility for the outcomes of companies they take over and to disclose important financial information that will provide transparency on their composition, financial status, and profits.” They have asked that the firms provide answers to a series of questions on their relevant holdings and revenue by October 14.

20) National: The Associated Press and Frontline report that the Trump administration is continuing to privatize migrant child detention. “So far this budget year, the Office of Refugee Resettlement funded 46 organizations running more than 165 shelters and foster programs to care for over 67,000 migrant children either separated from their parents or caregivers at the border, or who came to the U.S. on their own. (…) Confidential government data obtained by the AP shows that in June about 1 in 4 migrant children in government care was housed by CHS. That included more than 2,300 teens at Homestead, and more than 500 kids in shelters in southern Texas. Andrew Lorenzen-Strait, who until recently helped run adult custody programs at U.S. Immigration and Customs Enforcement, said some former ICE staffers now at HHS have brought the agency the concept of privatizing migrant child detention. He said it mirrors a similar shift that occurred with ICE’s adult immigration detention centers, where populations soared after immigrants were moved from county jails and into for-profit, private facilities. After 18 years of government service, he recently quit in frustration about the agency’s actions including the treatment of migrant children.”

21) National: As Trump cracks down on immigrants and asylum seekers, the private, for profit company GEO Group has stepped up its lobbying efforts, CNBC reports. “The Boca Raton, Florida-based company paid Ballard Partners, one of the most influential lobbying firms in Washington, a whopping $120,000 to lobby on its behalf for “public-private partnerships in correctional services,” according to second quarter reports. Ballard Partners is run by Brian Ballard, who was a leading fundraiser for Trump’s 2016 campaign and was named regional vice chairman of the RNC finance leadership team a year later.” Denise Maes, public policy director at the American Civil Liberties Union, says “they’re lobbying so that the government can give them more dollars. They’re just making a profit out of detaining people.” 

22) Arizona: KJZZ’s and NPR’s intrepid reporter Jimmy Jenkins has provided a great summary of a major new report by an expert hired by a federal judge to review Arizona’s prison health care system. The exhaustive report says the state is wasting money and risking patient safety by forcing the Arizona corrections department to contract with a private vendor. “Privatization of correctional health care costs the state more than self-operation,” writes Dr. Marc Stern. “The report notes frequent transitions between private contractors have directly endangered patients. One of many cases of inadequate care detailed in the report focuses on a cancer patient whose treatment was delayed during the switch from Corizon Health to Centurion.” Jenkins writes that “after reviewing the report, Judge Silver could call a hearing to discuss the findings with the parties. Attorneys for inmates have asked the judge to take the entire prison health care system into receivership.”

Public Services

23) National: Trump has launched a backdoor attempt to privatize Medicare by issuing an executive order expanding Medicare Advantage, a program operated by private, for-profit companies. Nancy Altman of Social Security Works said of the effort, ““Medicare Advantage is a hustle designed to allow for-profit corporations to suck up public dollars. For years, Republicans have shoveled money into Medicare Advantage plans and allowed them to offer benefits that traditional Medicare is forbidden from covering. This is a ploy to push seniors into Medicare Advantage plans instead of traditional Medicare. Medicare Advantage is stealth privatization intended to undermine traditional Medicare, which is an effective, popular government program and therefore loathed by Republican ideologues. (…) Medicare Advantage plans are also a terrible waste of public dollars. They have overcharged Medicare by $30 billion in the past three years alone. Today’s executive order is yet another giveaway to the corporations that run Medicare Advantage plans.” Barbara DeVane, secretary of the Florida Alliance for Retired Americans, said during a press conference, said “Trump and his cronies have already proposed drastic cuts to Medicare: $845 billion—billion with a “b”—in cuts in Medicare over the next ten years. Now that’s a fact, folks. You know it, I know it.” 

24) Alaska: Veteran columnist Dermot Cole reports that the Dunleavy administration has failed once again to find a contractor conducive to its intention to privatize the Alaska Psychiatric Institute. “On Wednesday, the state health department scrapped the latest effort to have a consultant demonstrate the virtues of putting API in private hands. The cancellation said the bids it received were ”not in the best interest of the state” and that the contractors seeking the $185,000 job did “not provide for consideration of all factors of significance to the state.”

On the same day, the state issued a new request for proposals for a privatization study, with offers due by Oct. 24. The longer this is delayed, the less time there will be for careful analysis and the more likely the Dunleavy administration will insist that privatization is the only path forward. The series of events here is troubling. The health committees of the Alaska Legislature should be investigating the repeated announcements about the API analysis that hasn’t happened.” 

25) CaliforniaGov. Gavin Newsom (D) has signed a bill into law enabling cities and counties to set up public banks. “Supporters say the change sets the stage for funding infrastructure demands or providing loans to developers to help meet affordable housing needs. Assemblyman David Chiu, who co-authored the legislation with assemblyman Miguel Santiago, said the bill’s “signing sends a strong message that California is putting people before Wall Street profits.” The Democratic congresswoman Alexandria Ocasio-Cortez tweeted her support on Wednesday after Newsom signed the bill, writing: ‘Public banking is next level!’” 

Yes! Magazine’s Ananya Garg asks whether this can spread to the rest of the country. “Sushil Jacob, a senior staff attorney for economic justice with the Lawyers’ Committee for Civil Rights of the San Francisco Bay Area, was instrumental in drafting the bill Gov. Newsom just signed. Jacob says that while it is important to pressure the federal government, the real changes are going to take place at the state and local level, which is where public banks come into play. They’ll be necessary to provide funding for local projects as the economy transforms from one based on extractive industries to one that supports democracy, the environment, and community well-being, especially in low-income communities of color and other marginalized groups.”

26) International/National: As the disastrous results of United Kingdom postal privatization sink in and further assaults on postal workers are rammed through, David Ward, general secretary of the Communication Workers Union, presents an alternative vision of what the future of a public interest postal service should be.

27) International/National: The London-based Institute for Government has produced a 96-page report on Government Outsourcing: What has worked and what needs reform? “The IfG report recommends, among other things, that public bodies develop and use commercial blueprints to improve decision making around outsourcing. Contracts are often complex and difficult, but the senior-business level commercial skills needed have been in short supply within the public sector. With a solid blueprint, bodies can detail the complexity of contracts and proposals, and work out what skills are needed and how to acquire them. ‘It has been quite difficult for government to attract talented people into these areas—in the UK, commercial roles aren’t always seen as “the place” to go if you’re in the civil service,’ [co-author] Sasse says.”

Odds and Ends

28) National: “You could write a pretty good history of neoliberalism using the privatization of ‘Sesame Street,’ a longtime public good, as a case study,” says Princeton Ph.D. student David Walsh. 

Governing for the Common Good

29) CaliforniaTens of thousands of California child care providers gained new rights to bargain for better wages and health benefits under a new law signed by Gov. Gavin Newsom (D). “Charlotte Neal, who runs a 24-hour child care business out of her home in Sacramento, worked with the unions to advocate for the bill and is one of the providers the new law will affect. She said her pay varies month to month and that it’s difficult to make a living wage. ‘It’s a struggle every month to decide what I’m going to pay for,’ Neal said. ‘I love my kids, they’re just like my own kids, but it’s hard.’ Two labor unions, the American Federation of State, County and Municipal Employees, AFL-CIO. and the Service Employees International Union California, co-sponsored the bill.”