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This Week’s Outsourcing Scan 10-05-2015

1) National/OhioOhio Auditor Dave Yost says he’s “shocked” that the federal government gave Ohio a $71 million charter schools grant despite the charter school corruption scandal now rocking the state. “The Dispatch reported this week that draft grant-application documents released by the department last month show that they described Ohio as a beacon of charter oversight. A few days later, David Hansen, the state official leading the grant effort, resigned for scrubbing data to make charter sponsors look better than they were. Asked this week if the U.S. Department of Education was aware of the circumstances surrounding Hansen’s resignation, the department’s spokeswoman, Dorie Turner Nolt, said the competition was scored by independent peer reviewers who don’t work for the department.”

2) NationalSailbus Research provides an overview and analysis of the school bus privatization sector. Their analysts believe Student Transportation Inc. is 20% overvalued even though it pays a 12% annual dividend yield. School districts are facing financial headwinds which offset lower fuel prices. “The industry has an estimated 4,000 private providers of school bus services who cover 33% of the market (up from 30% in 2011), the rest is provided by government agencies and school districts.” Market share of the privatized transportation industry: Student Transportation Inc. (49%), First Student USA (29%), National Express USA (12%), Illinois Central (2%), all others (8%).

3) National: Last week 16 Democratic lawmakers, led by Keith Ellison (D-MN) and Janice Hahn (D-CA), called on the Obama administration to forgive the debt of all students who attended the bankrupt, for-profit Corinthian Colleges. “The Department and Special Master should take immediate action to develop an outreach plan to contact all affected students. Failing to implement an outreach plan compounds the hardship facing the Corinthian students who are struggling to make payments on enormous student debt they never should have incurred. In order to ensure the greatest number of students receive debt-relief, the Department should contact all affected Corinthian students and inform them of their eligibility for debt cancellation.”

4) National: Education secretary Arne Duncan announces his intention to resign, and the Obama administration says John King will replace him. BAT, an education activist group, has reacted critically. Diane Ravitch recommends reading Andrew Rotherman’s “five lessons on Duncan’s departure.”

5) National: American Water, one of the leading privatizers of water and wastewater in the U.S., releases its Institutional Investor Presentation, touting its projected dividend growth, its “O&M efficiency stretch target of 34% by 2020,” its goal of developing “shale and water-energy nexus opportunities,” and expanded contracting with the military. It also points to “recent legislations [sic] promoting acquisition of troubled systems” in New Jersey, California, Illinois, Kentucky, Missouri, Pennsylvania, and Virginia. The company will hold its earnings call on November 5 and have an investor day on December 15.

6) National: Zacks Investment Research says Sen. Bernie Sanders’ (I-VT) proposed Justice is Not For Sale Act “could have a major effect on the publicly-traded companies that hold these contracts.” Zacks says “the bill would effectively kill the private-prison industry, which depends on government contracts. (…) Investors  should be weary of prison stocks as justice-system reform becomes an increasingly hot issue.”

7) NationalThe GEO Group has signed a new 9-year, six month contract with U.S. Immigration and Customs Enforcement for the continued management of the GEO-owned, 1,575-bed Northwest Detention Center in Tacoma, Washington.

8) NationalThe Hill reports that “public and private sector postal workers are fighting with each other over more driving hours.” APWU is challenging a request for more hours by private trucking companies, and the National Star Route Mail Contractors Association has “requested an exemption from driving safety rules for the private trucking companies that contract with USPS to deliver mail.” APWU President Mark Dimondstein says “private trucking firms are willing to risk safety on the roads so they can squeeze a few extra hours of labor from already-overworked truck drivers. This is a dangerous proposal and regulators should reject it.”

9) National: Bloomberg looks at “How Local Governments Got Burned by Private Prison Investments.” Lauren Etter and Margaret Newkirk report that “as of July, eight detention center deals were being investigated over their tax-exempt financing, according to an IRS document. Several other counties in Texas and Arizona have settled with the government, paying as much as $1.9 million and refinancing their prisons with taxable debt, including at least three developed by Parkey and his network. In most cases the deals were ‘basically snake oil,’ says Bob Libal, executive director of Grassroots Leadership, a nonprofit in Austin opposed to private prisons.”

10) National: The St. Louis Post-Dispatch says “clean water isn’t free, and the bill is coming due.” But “when it comes to figuring out how to pay, localities are largely on their own. The AP article notes that federal programs for repairing water system infrastructure provide ‘just a drop in the bucket.’”

11) National: Nathan Newman of Data Justice looks into proposals to privatize certain functions of the IRS. “While campaign donors may benefit from such contracts, the clearest problem with privatizing the IRS is that there is a documented history of such outsourcing failing to deliver the savings promised and in fact costing more than allowing civil service employees to do the job. As the Project on Government Oversight (POGO) detailed in a comprehensive report, the government routinely pays twice the compensation paid to government employees when using contractors without any evidence of savings to justify those increased costs.”

12) National: Energy Transfer Equities’ $37.7 billion buyout of the Williams Companies will create the largest private energy infrastructure company in the U.S.

13) California/National: Federal authorities are investigating whether a University of California Berkeley contractor—Performance First Building Services—underpaid its workers who cleaned up stadiums after sporting events. Workers have alleged 80-hour workweeks with no overtime. “The investigation comes as the University of California system, the state’s third-largest employer, faces increasing scrutiny from lawmakers into the working conditions of thousands of contracted employees who provide essential services such as cleaning, security and landscaping. The state Legislature passed a bill last month that would require UC contractors to pay wages and benefits on par with direct employees of UC who perform comparable work. The bill has not yet been signed by Gov. Jerry Brown.” Last week UC Santa Cruz raised the minimum wage for employees, including contract workers, to $13 an hour.

14) California30 private companies are interested in taking a stake in the first phase of California’s $67.5 billion high speed rail project. “Respondents [to the RFEI] included Acciona Infrastructure, Barclays, Bechtel Infrastructure, John Laing Investments, Macquarie Capital (USA), Meridiam Infrastructure, Plenary Group, Vinci Concessions, as well as consortia from China and Japan.” [Sub required]

15) Colorado: Controversy swirls around private corporate influence on research at the public University of Colorado. “The controversy centers around three reports: one completed for the American Petroleum Institute, and two commissioned on behalf of a partnership that included the Common Sense Policy Roundtable—a policy research association that’s become known as a pro-fracking industry front group.”

16) DelawareA public hearing will be held on October 12 to discuss whether Dover needs a new charter school. “During the September 17 Delaware State Board of Education meeting the charter school submitted a required modification application. It requires the applicant to demonstrate the need for a school in the area, what impact it will have on the surrounding community and other school districts, and the financial impact of the move on the school itself.”

17) District of Columbia: After private energy company Exelon launches a months-long public relations offensive and shifts some of the proposed terms for its buyout of the Washington, DC-area PEPCO, DC Mayor Muriel Bowser announces that she has reached agreement with Exelon on a buyout. But the DC Public Service Commission cited Exelon’s “conflicts of interest” with the public interest in rejecting the proposed merger in August, and it is unclear if the new draft proposal addresses that key issue. “But environmental advocates, who said they had been briefed on concessions that the mayor was prepared to make, are worried that Bowser is about to cave by failing to protect the city’s long-term commitment to alternative energy.” 80% of Exelon’s energy comes from nuclear power. The PSC will decide on Wednesday whether to accept the new $6.8 billion deal.

18) FloridaAuditors raise a red flag about “nonprofit” work “as possible fraudulent schemes fraught with ‘obvious’ conflicts.” The Florida Times-Union reports that “auditors said the payments made by Wealth Watchers and Helpful Citizens Inc. appear to be a violation of their contracts with the city, which gave the organizations grants to renovate rental homes that are offered as affordable housing.” The politically-connected Wealth Watchers organization’s “public private partnership” with Jacksonville was “highly touted” last year by the former mayor, Alvin Brown.

19) MassachusettsPro-charter school coalition kicks off its campaign for a referendum to lift charter schools caps. “But not everyone at the Lawrence event seemed to favor an increase in public charter schools. Quin Gonell, a social studies teacher on the Lawrence High School campus, expressed concerns about accountability if organizations from outside the city came in to expand charter schools. ‘They’re billing it as doing it for the community,’ Gonell said. ‘In my opinion, it’s against the interest of the community because we’re taking the schools away from the community.’”

20) MissouriSt. Louis may privatize healthcare at its jails. Three companies have submitted bids, which are being reviewed by “an 11-member team from the Department of Public Health, Department of Justice Services and the county executive’s office.” They will make a recommendation to the county executive by mid-October. ShadowProof’s Brian Sonenstein comments that although the new contractor would have to maintain accreditation with the industry-influenced American Correctional Association and the National Commission on Correctional Health Care, “there are virtually no baseline requirements for the number of staff, or the amount of time they must spend tending to inmate medical needs.” St. Louis Public Radio reports that “a recent addition to the county’s Request for Proposals required bidders to provide detailed staffing patterns for their contract proposals, and to give priority consideration to employment applications from current St. Louis County employees.”

21) New JerseyAmerican Water is moving to take over Camden’s water and wastewater system. “American Water, which already has a presence in New Jersey, has presented a plan to City Council that it says would save money and improve water quality. Council might vote by December on the contract, which would then go into effect early next year. State agencies must also approve the deal. As the council considers the plan, the company is also mulling a possible move to Camden. In June, the state Economic Development Authority authorized American Water to receive $164 million in tax credits if the company relocates to the city. Company representative Denise Venuti Free said the EDA application was ‘completely unrelated’ to the proposal to take over Camden’s system.”

22) New YorkThe American Society of Civil Engineers pans New York State infrastructure. “The report card from the New York chapter of the American Society of Civil Engineers gave the state’s infrastructure an overall grade of C-minus, but awarded New York Ds for its bridges, roads and wastewater.” The 86-page report includes recommendations. [Report]

23) New HampshireVideo: Nashua custodians rally against privatization plan. “In a move that took many by surprise, the board voted 7-1 earlier this month to seek bids from private contractors to take over the district’s custodial services—and union members aren’t taking the move sitting down.” AFSME Council 93’s Jim Durkin says “these contract vendors are basically a cleaning crew. They pay very low wages, no benefits, and as result there’s extremely high turnover. You contrast that with men and women who have been doing these jobs for 10, 20, even 30 years. They’re part of the fiber of the school community.”

24) OhioFour people implicated in a charter school kickback scheme in Dayton go off to jail.

25) Ohio/Upcoming Meeting: Public Education Partners will be holding a conference on the theme of “Public Education Matters,” Saturday, October 17 in Dublin.

26) Pennsylvania: Shippensburg school officials are frustrated that even though they are facing intense budget pressures “they must continue to make payments on a cyber charter school bill.”

27) Pennsylvania: The Philadelphia Regional Port Authority gets expressions of interest from 16 potential bidders on the Southport Marine Terminal Complex “public private partnership” DBFOM project. An RFP is expected in December. [Sub required]

28) Washington: Charter schools in the state face a crisis as there isn’t enough private money to keep them open in the wake of a Supreme Court decision declaring public funding unconstitutional. “Tacoma Public Schools spokesman Dan Voelpel said the district has the capacity to accommodate those students.” But “on September 24, state Attorney General Bob Ferguson filed a motion for reconsideration, asking the court to re-examine its decision. The court has given the charter association until October 23 to file a similar request.”

29) International: Barbara Adams and Jens Martens of the Global Policy Forum publish a major report on the privatization of U.N. functions, “Fit For Whose Purpose? Private Funding and Corporate Influence in the United Nations.” Gita Sen says “this incisive and thoroughly researched report shows how the United Nations has become rather Humpty Dumpty’ish in its use of the word ‘partnerships.’ By sanitizing the deep inroads that the private sector has made into global governance and agenda-setting, and already weakened by unstable financing, the U.N. runs the risk of becoming unfit for any purpose other than alignment to private corporate agendas as governance and democracy are fragmented, and become ever less transparent and accountable.” [Full report]

30) International: AECOM Australia, a subsidiary of the Los Angeles infrastructure company, settles a claim by the private operator of a bankrupt road over its erroneous traffic forecasts. “The firm received A$2.5 million for its forecasting work in 2006, while the settlement has cost it A$280 million (€177 million; $197 million). According to press reports, the firm forecasted tunnel traffic of more than 100,000 vehicles per day, while the actual traffic volumes have totaled only 22,000 per day.” [Sub required]

31) Revolving Door News: Roberto J. Gonzalez, a former deputy general counsel of the Treasury Department, will join Paul Weiss, “representing banks and other financial clients that face scrutiny from prosecutors, regulators and Congress.” Gonzales was previously Principal Deputy General Counsel at the Consumer Financial Protection Bureau, where “where he led a team of lawyers in resolving foundational questions about the Bureau’s jurisdiction and authority and oversaw the legal review of all rulemakings, enforcement actions, and significant supervisory matters. Previously, he served as Associate White House Counsel and Special Assistant to the President, where he advised on financial regulation, criminal justice, and homeland security issues, among others, and represented the White House in congressional investigations.”

32) Revolving Door News: Evan Nahnsen, senior investment officer for infrastructure at the New York City Retirement System, leaves NYCRS to become vice president for infrastructure debt at AMP Capital. [Sub required]

33) Think Tanks/Upcoming Meeting: The AFT’s Albert Shanker Institute is to hold a series of conversations this year and next on “Reclaiming the Promise of Public Education.” The first in the series is “Florida Education Reform Under Jeb Bush: Miracle or Mirage?” October 14 in Washington, DC.

34) New BookUnderstanding Mass Incarceration by James Kilgore. “In addition to the private prison corporations, a wide range of companies, organizations, individuals, and even towns profit economically or politically from prisons. They all have ‘skin in the game’—and have a definite interest in opposing attempts to reduce or end mass incarceration.”

Legislative Issues:

1) National: A bipartisan group of Senators has introduced a new bill to reform the criminal justice system, though critics say it is not enough. Chief sponsor Sen. Charles Grassley (R-IA), head of the judiciary committee and a longtime holdout on criminal justice reform, agreed to sign on to because it includes mandatory minimum sentences on domestic violence and terrorism. “Despite the optimism, there are concerns that the strength of the bipartisan coalition may not be sufficient to guarantee its passage in a divided legislature and that the bill could flounder in the House.” The bill currently has 9 Senate co-sponsors. [Sentencing Reform and Corrections Act of 2015 (S 2123), summary]

According to Bloomberg Government, the bill is supported by:

American Bar Association 
American Civil Liberties Union 
Americans for Tax Reform 
Brennan Center for Justice 
Center for American Progress 
Coalition for Public Safety 
Drug Policy Alliance 
Faith & Freedom Coalition 
Families Against Mandatory Minimums 
FreedomWorks 
Institute For Policy Studies 
Leadership Conference on Civil and Human Rights 
National Association for the Advancement of Colored People 
National Employment Law Project 
Right on Crime 
Sentencing Project

2) National: Congressional leaders are under heavy pressure to find a new way to fund transportation programs after the collapse of a House effort to use overseas tax breaks for corporations to pay for them, the Wall Street Journal reports. “Meanwhile, Mr. Ryan said he was urging the chairman of the House Transportation and Infrastructure Committee, Rep. Bill Shuster (R-PA), to ‘move forward’ with his own bill without depending on revenue from Mr. Ryan’s tax-overhaul efforts. Mr. Shuster’s response suggested that his committee would move forward quickly with the parts of the measure that don’t involve revenue-raising. Mr. Ryan was expected to test House support for the Senate bill’s revenue provisions in the coming days, said a person familiar with the situation.”

3) CaliforniaA battle over public vs. private control of downtown development in San Diego comes to a head as the issue lands on Gov. Brown’s desk. AB 504 “would allow nearly all projects approved by the land-use nonprofit to be appealed to the City Council. Having fought unsuccessfully for months to kill the legislation, the local business community has launched a vigorous last-ditch effort, including a widespread letter-writing campaign and hiring a long-time friend of the governor to lobby for a veto.”