Privatization Report: CoreCivic gets downgraded as banks leave industry | Online charter school scams explode | and more

EDUCATION

1) NationalEmails show education secretary Betsy DeVos’ aides pulled strings for failing for-profit colleges. “Making matters worse, the college is accused of enrolling new students and taking their taxpayer-supported financial aid dollars even after some of its campuses had lost their accreditation, which rendered their credits worthless. Company emails, documents and recordings show that part of why Dream Center kept going is that it thought the Education Department, which under Ms. DeVos has rolled back regulations on for-profit education, would try to keep it from failing. Mr. Barton emailed other Dream Center executives that the department’s head of higher education policy — Diane Auer Jones, a former executive and lobbyist for for-profit colleges — had pulled strings to help the company’s schools in their effort to regain a seal of approval from an accreditor, despite their perilous positions. In another instance, Dream Center’s chief operating officer told faculty at an endangered campus that Ms. Jones was changing departmental regulations to help the schools obtain accreditation retroactively.” 

2) National: The New York Times reports on How Charter Schools Lost Their Shine. “Charter school executives have recently started to acknowledge shortcomings, as questions about whether they are fulfilling their mission have mounted. Democratic presidential candidates have turned away from the charter movement. Last month, Gov. Andrew Cuomo said the New York State Legislature would not raise a cap on the number of charters in New York City, halting the growth of the model in the country’s largest school system.”

3) National: The online charter school scam stories keep rolling in, now in Indiana, Oklahoma, and California

4) California: Writing in the Progressive, Cynthia Liu asks why “California’s Strong Charter Accountability Bills [were] Weakened by the Governor.” She writes, “once the bills moved to the State Senate, and teachers and families finished the academic year in June with a parallel slowdown in grassroots momentum, however, privatization forces came out of the shadows to insert amendments to weaken the bills. The surprising source of those bad amendments? Governor Newsom. (…) The adulterated versions of 1505 and 1507 passed the State Senate Education Committee on July 10, and only a few more opportunities remain for additional amendments to be stripped or offered to alter the Governor’s amendments at the State Senate Appropriations Committee meeting in August. The people have spoken; the state’s electeds must yield to their wisdom. This includes the Governor.” 

5) CaliforniaDissent within the statewide task force has added tension to California’s charter school debate, EdSource’s John Fensterwald reports. “[Gov.] Newsom hasn’t taken a public position on the 13-page report by the California Charter School Policy Task Force, which he asked State Superintendent of Public Instruction Tony Thurmond to convene. But the four members affiliated with charter schools on the 11-member task force say they’re concerned that the report misconstrues what the group supported. They are particularly critical of a package of proposals that Thurmond presented to the task force, put to a vote and then included in the report. Thurmond ran the task force meetings and oversaw the writing of the report. Thurmond dismissed the criticisms as off-base and defends the wording of the report and the decisions behind it. Some committee members agree with him.”

6) District of Columbia/Maryland: In the Public Interest’s Jeremy Mohler joined Eugene Puryear and Sean Blackmon to discuss “school privatization in Washington, DC and how state and local officials use infrastructure projects for political capital while wasting important resources.” [Audio, at 36:00, about 20 minutes] 

7) Idaho: State Attorney General Lawrence Wasden says the charter school commission probably violated the open meetings law when it held a discussion involving sharp criticism of charter schools by officials. “During the two-hour meeting, charter commissioners were sharply critical of several charter schools and their leaders. They lamented lax financial management and low student performance at several charter schools. They singled out test scores at Heritage Academy—a Jerome charter school with high student poverty rates and a large Hispanic population. At one point, Reed expressed regret that Heritage remained open. At another point in the meeting, someone suggested Heritage administrator Christine Ivie applauded the low test scores, since her school would qualify for increased funding.”

8) IdahoA Blackfoot city commission is ordering a charter school to stop using its current facility. “‘The facility has no valid (conditional use permit) and is out of compliance with the city land use code,’ Blackfoot city planner Kurt Hibbert wrote to the embattled charter school, at the behest of the planning and zoning commission. ‘Use of the facility as a school must cease immediately.’”

9) Maryland/National: As Trump launches more racist attacks against an African-American member of congress for conditions in his district, “studies have found Baltimore schools are underfunded by at least a quarter of a billion dollars a year.” The newly elected president of the Baltimore Teachers Union, Diamonté Brown, says “we can’t, we can’t have the best test scores, we can’t be the best students if we’re not put in the proper environment. If we had to leave every single time it’s cold, if the building has to be let out, or if we had to leave every time it’s too hot to stay in the building, or if our teachers don’t have enough materials to teach us the proper things, it makes it hard to be these students that everybody wants us to live up to be.”

10) Massachusetts:Increases in state school funding are not expected to impact the budget-draining effect of charter schools. Chelmsford Town Manager Paul Cohen “said that slight increase pales further when considering the district’s hefty charter school assessment, estimated at just under $1.8 million, according to Fiscal 2020 cherry sheet estimates released Friday. He said people in town may hear about the statewide funding increase and think it will help mitigate increases in their real estate taxes, but that’s not the case. ‘It’s a drop in the bucket,’ Cohen said. ‘It doesn’t help us meet the ongoing cost. The burden continues to fall on the property tax.’”

11) MassachusettsQuestions linger over the Saugus school board’s decision to privatize custodial services to the Lynn-based Complete Cleaning Company. “Members Lisa Morgante and Liz Marchese voted against the change. Marc Magliozzi, Jeannie Meredith and Linda Gaieski voted in favor. (…) A secretary was not present at the executive session when a vote was taken, said Marchese. Because of that, she said she did not believe anyone took notes for meeting minutes or recorded the wording of the vote taken. In the wake of this, six Open Meeting Law complaints were filed against the committee calling on the action to be invalidated. ‘I believe that decisions to privatize the jobs of 21 town custodians who work in the Saugus Public Schools was done in private and without public discourse,’ said Fairview Avenue resident Ryan Moore in a complaint filed June 19. ‘This process should have required a public meeting and vote, but that was not done by the Saugus School Committee.’”

12) Ohio: As lawmakers weaken rules for closing failing charter schools, poster GregB on Diane Ravitch’s blog reports that “we are being inundated with K-12 ads for the rebranded version of ECOT.” 

13) Oklahoma: State Rep. Sheila Dills, a freshman Tulsa lawmaker, used a rarely invoked legal provision in state law to sit in on the state board’s executive session, which was discussing investigations into Epic Charter Schools. “The Oklahoma State Bureau of Investigation is investigating the online school system on allegations of embezzlement, obtaining money by false pretenses and racketeering.”

14) Pennsylvania: Stroud Township resident Merlyn Clarke, in a letter to the editor, says charter school operators are rent-seekers. “Because these expenditures are in the form of mandates, if the government doesn’t have enough money, it must raise taxes—take more money from people—to meet these legal obligations. The classic example is charter school tuition payments that school districts must pay for students to attend these schools, even though they are duplicates of the public schools. Economists call these methods ‘rent seeking.’ Rent seekers do have some overhead. They must line the pockets of legislator facilitators with campaign contributions.”

15) International@hondurassol reports “5 high school students & one adult have been arrested by Honduran police in northern city of San Pedro Sula while protesting privatization of education. They are being held in police station. Honduran authorities are refusing to release them. This is why young people flee”

INFRASTRUCTURE

16) California: The San Francisco Chronicle’s J.D. Morris explains Why hedge funds are fighting for control of PG&E—and what it means for you. “The bondholders are trying to make a good deal so they can make a whole bunch of money when PG&E comes out of bankruptcy and buy the company as cheap as they can buy it,” Frank Pitre, a Bay Area attorney who represents wildfire victims against PG&E, said. “The equity owners are trying to preserve shareholders. Right now it’s a game between the two … and each one has their own interests.”

17) California: A forum was held at ILWU Local 34 in San Francisco last week on the privatization of Howard Terminal at the Port of Oakland and other issues. [Video, about an hour and 40 minutes]

18) Florida: The board of JEA, Jacksonville’s public electrical utility, has voted to explore privatizing the huge company, setting the stage for a big battle. Any change would have to be approved by the city council. “Daniel Henry, chairman of the Democratic Party in Jacksonville, said it appears JEA is pushing ahead for a sale but is trying to rebrand the idea. ‘Any kind of privatization would encumber some type of compensation, which is a sale in any other sense of the word,’ Henry said. ‘Privatization. Sale. It’s synonymous. It’s the same thing.’”

First Coast News reporter Shelby Danielson makes the connections—what is at stake is public control: “As JEA explores privatization, today we learned the Jax Public Library privatized part of its taxpayer funded building, leading them to kick us out of that area and keep us out. An interesting look at how privatizing something limits our access to it … Details @ 6 & 11 @FCN2go.” The reporter waskicked out of a public library where JEA, a public utility, was having a meeting

But here’s the good news: they got the real story anyway. “As for the consultants hired by JEA, we now know that J.P. Morgan Securities LLC. and Morgan Stanley & Co. LLC were brought on as financial advisors and Pillsbury Winthrop Shaw Pittman LLP and Foley & Lardner LLP were brought on as legal advisors ‘to assist the utility with the execution of a competitive and open solicitation process.’”

19) Maryland: Llowell Williams says Baltimore’s banning of water privatization could become a model for the country. “This confirms what would be expected in most situations of utility privatization: artificially created scarcity used to justify price increases. When water is commodified by the private sector, its value inevitably changes to be something to generate profit.”

20) New York: Gothamist’s Jake Offenhartz asks whether the public should take over Con Edison. “A quick scan of the alternative power companies is less than reassuring. The most likely replacement would be National Grid, a privately-owned monopoly gas provider for the region with a reputation for unannounced shut-offs. Free-market advocates see a promising future in smaller electricity suppliers known as ESCOs, but since arriving in the city in the early 2000s, the industry has been plagued by allegations of price gouging and fraud. Meanwhile, a growing coalition of New Yorkers are making the case that the best successor to Con Ed is neither a private company nor a collection of them, but the public itself. Thanks to a growing interest in clean energy and a heightened awareness of the city’s creaking grid, advocates say the time is right to consider a public takeover of the private electricity industry.”

21) Wisconsin: The Bad River Band of the Lake Superior Tribe of Chippewa Indians has filed suit against the pipeline giant Enbridge “to force it to remove an aging pipeline whose easement through the reservation has expired.” The tribe is demanding that Enbridge cease operation of its Line 5 pipeline on the Bad River reservation and remove the pipe. Presidential hopefuls Jay Inslee and Bernie Sanders have weighed in to oppose the Enbridge pipeline.

22) International: Sarah Leonard of AJ+, Dissent and The Nation posts an informative twitter stream on privatization in Greece. “In Greece, a battle over the country’s largest port has revived centuries-old fights over ancient history and the nation’s future. @sarahrlnrd explains how the privatization of Piraeus fits into a long history of foreign meddling in Greek culture.”

CRIMINAL JUSTICE AND IMMIGRATION

23) National: Writing in Common Dreams, James Goodman reports that communities across the country are pushing back against immigration prisons. In addition to her activism against private companies profiteering from immigrant incarceration, Kelly Leibold, twenty-three, “is director of the local chamber of commerce, [and] went on to get elected to the city council last November.” In June 2018, Leibold was among the many residents of Pine Island, Minnesota, “caught by surprise when its city council passed a resolution supporting a for-profit prison company, Management & Training Corporation, that wanted to locate a detention facility for U.S. Immigration and Customs Enforcement, or ICE.”

24) NationalFitch Ratings has downgraded the for-profit immigration detention and prison company CoreCivic, including its Long-Term Issuer Default Rating, to “BB” from “BB+.” Fitch also revised CoreCivic’s rating outlook to negative from stable. “reflect negative capital access trends for private prison operators, including CXW. The list of banks that have publicly announced plans to exit lending and providing financial services to private prison operators due to environmental, social and governance (ESG) concerns has recently grown beyond the largest U.S. money centers to include regional and European banks. Increased institutional lender and investor focus on ESG could reduce the company’s access to attractively priced public equity and debt capital.”

“Fitch will assess the company’s ability to replace existing bank syndicate members and access new and existing capital sources during the one-to-two year Outlook horizon, including public and private bonds and equity. Prison real estate generally lacks secured property mortgage access, a key contingent liquidity source for equity REITs, making it more reliant on bank and debt capital markets access.” They say “the private prison sector also faces negative headwinds from social pressures, and longer-term correctional trends are shifting away from imprisonment of non-violent offenders and toward rehabilitation and re-entry for minor drug offenses and other misdemeanors.”

There is also a sting in the tail of Fitch’s assessment concerning CoreCivic’s status as a Real Estate Investment Trust and the nature of its assets: “The lack of alternative uses and absence of secured debt financeability of CXW’s corrections assets results in Fitch analyzing the company more like a traditional cash flow-generating corporate entity, as opposed to an asset-rich equity REIT, despite the tax election.” 

Among the things Fitch will be watching for that could negatively impact CoreCivic’s rating down the road: “Material political decisions negatively affecting the long-term dynamics of the private correctional facilities industry.” CoreCivic holds its earnings call next Monday.

25) National: Last week Sen. Jeff Merkley (D-OR) became the tenth U.S. senator to co-sponsor the Dignity for Detained Immigrants Act of 2019 (S.1243). The bill was introduced by Sen. Cory Booker (D-NJ) at the end of April and has been referred to the Judiciary Committee. Other sponsors beside Booker and Merkley, all Democrats, include Sens. Patrick Leahy, Catherine Cortez Masto, Edward Markey, Tammy Duckworth, Kirsten Gillibrand, Richard Blumenthal, Mazie Hirono, Kamala Harris, Patty Murray.  

26) National: Inkoo Kang, writing in Slate, says Orange Is the New Black’s final season is the best the show has been in years. “The two most wrenching moments belong to the ICE storylines, in which freed convict Maritza (Diane Guerrero) gets caught up in a demonstrably worse system than prison, and a new character, Karla (Karina Arroyave), exemplifies some of the most unjust plights of our current border horrors.”

PUBLIC SERVICES

27) National/Iowa: Unionized VA workers walked out of the VA Hospital in Des Moines last Wednesday “to protest the federal government’s attempt to privatize veteran healthcare services and to fight for fair contracts.” Gregg James, the national vice president for the American Federation of Government Employees, “said the picket line in Des Moines was part of a nationwide protest. He said the VA Hospitals are down 50,000 employees across the country, and the government is trying to take away the union’s collective bargaining rights through executive orders.” 

AFGE local treasurer Nicole Lage “said she joined in the protest because the national organization has proposed to cut 28 articles out of its master agreement. ‘It is going from over 300 pages down to 98 pages,’ Lage said. ‘They’re cutting out telework. They’re cutting out flex-in-and-out schedules. No compressed tours. They’re taking away our rights for our annual leave and sick leave and leaving it up to a supervisor’s discretion, and that’s not right. We earned that.’” Democratic presidential candidate Pete Buttigieg “sent a letter to the AFGE, which said, ‘This administration’s ongoing attempts to privatize veterans’ health care and hamstring workers are a national shame. VA Secretary Wilkie should have the interests of workers and veterans at heart, not corporations who will exploit taxpayer dollars for profit.’” 

28) National: Social justice activist and actor Danny Glover says “black families stand to be the hardest hit by the Trump administration’s proposals to sell off the Postal Service to for-profit corporations. A presidential task force plan to move in that direction calls for privatizing parts of the service, reducing delivery days, closing post offices, and jacking up prices on most package and mail deliveries. It would also get rid of the collective bargaining rights that have helped postal workers maintain decent wages. My parents’ generation fought for and won those rights in 1970.”

29) National: Jeremy Mohler of In the Public Interest says people should be paying close attention to Uber’s designs on public transit. “In documents filed with the Securities and Exchange Commission (SEC), the rideshare corporation’s executives see a ‘massive market opportunity’ in the estimated 4.4 trillion miles traveled each year by people using public transit in 175 countries. This is alarming for a number of reasons. Ride-hailing tends to make cities more congested and polluted. Because they’re for-profit, corporations like Uber and Lyft have no obligation to serve low-income communities, the elderly, non-English speakers, or people with disabilities. The average Uber driver makes the equivalent of $9.21 in hourly wages, barely enough to live on as the cost of living rises. In fact, Uber is investing heavily in technology that would get rid of drivers altogether, like driverless cars and flying cars. Like so many privatizers before them, Uber wants corporate, private control over a core democratic, public good.”

30) National: The Southeastern PA Area Labor Federation (AFL-CIO) says “We can put an end to @USPS ’ legislatively fabricated financial crisis & privatization push with the #USPSFairnessAct(H.R. 2382). Both @APWUnational &@NALC_National support this bill.#USMailNot4Sale#Unfairburden.” The bill has 206 bipartisan co-sponsors.

31) Alaska: The Alaska State Hospital and Nursing Home Association is suing the state of Alaska and the Department of Health and Social Services, “arguing that the administration of Gov. Mike Dunleavy improperly used emergency regulations to slash Medicaid payments to doctors, clinics and other health care providers.” The Anchorage Daily News reports that “the suit is one of several significant legal actions against the Dunleavy administration since it took office in December. The administration has been accused of illegally vetoing money from the Alaska Court System budget, illegally firing state employees (two separate suits were filed), improperly seeking the privatization of the Alaska Psychiatric Institutefailing to implement a school funding law passed by the Legislature, improperly delaying the distribution of school funds, and improperly setting the location of the ongoing special session.”

32) CaliforniaWhittier city officials, pointing to budget woes, plan to privatize several public services. “Billy Cosby, president of the Whittier City Employees Association, said he is disappointed in the decision to lay off employees. ‘The employees they’re laying off provide great quality work for the city and residents,’ Cosby said. ‘It’s very hard. We’re all in shock. This will affect their finances and personal lives.’ The first change is expected to occur Aug. 1 when Los Angeles-based GPC Inc. will take over graffiti removal services. The three employees who provide that service now will fill other vacant positions in the Public Works Department, [City Manager Jeff Collier] said. In August, Collier plans to ask the City Council to expand its contract with Anaheim-based West Coast Arborists, which already provides some tree trimming services. He’s also planning to go out to bid for park and landscape maintenance services.” 

33) International: The British Labour Party is promising an “insourcing revolution” if it comes to power. “With speculation of an autumn general election mounting, the Labour Party has announced details of proposed legislation to reverse decades of contracting out for local services. The party’s shadow chancellor, John McDonnell, promised to end privatisation of council services and create a new partnership between local government and central government. Policy plans and proposed solutions were set out in detail in its policy document, Democratising Local Public Services: A Plan for Twenty-First Century Insourcing. The party wants to bring back under council control, contracts such as school meals, cleaning and building maintenance. Labour said it would legislate with a Local Public Services Act to create a presumption that councils automatically would take control of services when a contract ends. This would reverse current laws forcing contracts to go out to tender.” Model contracts will be part of the policy package.

See also In the Public Interest’s recent research brief, Insourcing Often Leads to Better Service and Cost-Savings.

34) International: The Alberta government in Canada is planning to insource some medical testing services. “Hoffman’s review, conducted by the Health Quality Council of Alberta, echoes many of the minister’s views on the subject, including her belief that there has been insufficient evidence to justify an increased role for private providers. The review chastised AHS for failing to properly investigate alternate options for medical testing and said increased privatization would bring enhanced risks around costs, labour relations and advancement of research.” 

OTHER

35) National: Eileen Appelbaum, Co-Director and Senior Economist of the Economic Policy Institute has written a detailed analysis of the harmful role of private equity in a letter supporting Democratic presidential candidate Elizabeth Warren’s reform legislation. “Your proposal would address the worst abuses of this business model while preserving productive investments by requiring PE firms to face accountability for their management decisions, limiting their ability to loot the companies they take over, empowering investors to fully understand private equity and other private funds, and protecting workers, customers, and other stakeholders or businesses across the country.”

36) National: Political scientist Steven Davis explains what people lose when public land is privatized. Davis is the author of In Defense of Public Lands: The Case against Privatization and Transfer. “Offering a fair, good faith overview of the privatizers’ best arguments before refuting them, this timely book contemplates both the immediate and long-term future of our public lands.” [Audio, about 15 minutes] 

37) National: As the Trump administration continues to push its massive deregulation agenda, The New York Times reports on how the deeply compromised regulatory system at the FAA—which was preceded by years of ideological agitation by the right wing—worked to favor Boeing and its bottom line. “An F.A.A. panel investigated the complaint. It found managers siding with Boeing had created ‘an environment of mistrust that hampers the ability of the agency to work effectively,’ the panel said in a 2017 report, which was reviewed by The Times. The panel cautioned against allowing Boeing to handle this kind of approval, saying ‘the company has a vested interest in minimizing costs and schedule impact.’ By then, the panel’s findings were moot. Managers at the agency had already given Boeing the right to approve the cables, and they were installed on the Max.”

38) Kentucky: Alarm bells are ringing about the possible privatization of public pensions

39) Virginia: Arlington county officials agreed to alert the tech and retail giant Amazon “whenever someone files a Freedom of Information Act (FOIA) request for public records involving the company. Both Arlington County and the Commonwealth of Virginia have agreed to the deal, which has been criticized by open government advocates who fear it make public records harder to access.” Megan Rhyne, Executive Director of the Virginia Coalition for Open Government, says “has blogged about the differences between this agreement and others Arlington previously struck up like with Nestlé in 2017. She says the language specifying the warning window (48 hours) and requiring Arlington to only release only the ‘mandatory’ records is new.” The county will also provide information to Amazon on the filers of FOIA requests, which has not been previously done. 

Amazon’s HQ2 threatens to displace up to 10,000 Latinx residents, The Dogwood reports. “The report, from Tenants and Workers United, a non-profit, non-partisan community group, and George Washington University, surveyed 285 Arlandria families renting units among the 3100 ‘moderately-priced’ apartments in the Arlandria neighborhood.”

40) International:The Australian federal government is to launch a follow-up inquiry into the costs of outsourcing public services. The first report “The report revealed that the cost of an internal [Information and Communications Technology] worker was about $134,000, while a similar contractor cost $214,000 annually. The prominence of IT contractors in the public sector became an election issue, with Labor promising to crack down on large tech vendors poaching digital staff from the public sector, and pledging to improve the digital skills within the public sector.”