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This Week’s Outsourcing Scan 11-23-2015

1. Illinois/National: The Chicago city council has passed a long fought-for ordinance that makes “bone-headed” privatization deals, such as the notorious parking meters concession, “a little less likely.” The ordinance requires a 90-day review period, a public hearing, a city council meeting, an independent financial review, contractor-funded city oversight of the transaction, that the asset be returned in good condition at the lease’s end, and that 10% of the proceeds of large long-term concessions be set aside in an intergenerational trust fund. The ordinance is the fruit of a tough and steady battle by a number of lawmakers, especially 6th Ward Alderman Roderick Sawyer, and by public interest groups and AFSCME. They have called attention for years to similar lax laws and regulations on privatization in states and municipalities across the country. [Text: Privatization Transparency and Accountability Ordinance]. There are no major deals in the works currently, and Mayor Emanuel says “we will only approve privatization agreements that are good deals for Chicago’s taxpayers.” [Sub required]

2. National/Indiana: Applause erupts in a city council meeting when Gary’s mayor announces that the GEO Group is withdrawing a proposal to build an immigration detention center near Gary Airport. “A group of protesters held a prayer vigil prior to Tuesday’s council meeting in an effort to keep their opposition to the immigrant detention center in front of public officials.”

3. National/Illinois: Ten years after it was privatized, the Chicago Skyway is being sold off to three Canadian public pension funds by Ferrovial and Macquarie. “The Canada Pension Plan Investment Board (CPPIB), Ontario Municipal Employees Retirement System and Ontario Teachers’ Pension Plan will each take on a 33.33 percent stake in the Skyway Concession Company, which plans to continue operations and maintenance as per the original agreement. Each of the pensions reportedly came to the table with equity checks of $512 million.” [Sub required]

4. NationalUnitedHealth Group warns it may pull out of state exchanges created by the Affordable Care Act in 2017 if losses persist. UnitedHealth is projecting it will post $500 million in exchange-related losses next year. “Among the changes [CEO] Hemsley said he would like to seeing going forward for the exchanges are ‘adequate’ entry and exit controls, a ‘robust’ number of participants and prices that are set by ‘sustained underwriting to ultimately reflect the true cost’ of the population covered. The CEO said UnitedHealth has taken steps to minimize exchange enrollment in 2016 by cutting back on marketing, reducing or eliminating commissions, increasing rates substantially and reducing what plans it offers so that it’s only ‘higher-priced’ in most places.” [Sub required]

Los Angeles Times columnist David Lazarus says “supporters of healthcare reform will view UnitedHealth’s warning as further proof that for-profit companies shouldn’t be making money off the sick. Critics will see evidence of Obamacare’s failed promise of fixing a broken healthcare system. They’re both right. The bigger issue, however, is what we’re going to do about it.”

5. National: Walter Kulakowski, an infrastructure and ‘public private partnerships’ banker who worked on Harrisburg’s lease of its parking facilities and sale of its incinerator, is hired by Chicago-based Mesirow Financial. [Sub required]

6. Arizona: A Department of Corrections report says that the GEO Group, CCA, and Management and Training Corp (MTC) are mainly in compliance with state policies for contract prisons. “Along with the inspection report released Friday, the Department of Corrections announced changes to its contract monitoring procedures. Those changes are designed to ferret out problems like those at Kingman before they become a major problem.” [Contracted Private Prison Assessment Report]. The 10-member assessment team that wrote the report was composed of Arizona Corrections Department employees, each with decades in the department (pp. 1-2). No independent assessors were brought in.

7. California: Los Angeles school board members want answers by a December 15 meeting about whether a massive increase in charter schools is financially or operationally feasible. Board president Richard Vladovic says “if we can’t afford it, there’s no sense in even dreaming about what we could do.” Board member Monica Ratliff, who chairs the budget, facilities, and audit committee “said she did not believe that a majority of school board members want to turn LAUSD into an all-charter district.”

8. California: Fitch Ratings warns that a 2016 ballot initiative could cause delays in infrastructure projects. The measure would require all project financings larger than $2 billion to go through the public approval process. “Championed by the No Blank Check initiative, the measure has garnered the necessary support to appear on the 2016 ballot, California Secretary of State Alex Padilla’s office confirmed earlier this month. No Blank Check is backed by a coalition of labor, business, water, and agricultural entities who believe the project will ‘hijack’ local water resources for use in industrial agriculture.” [Sub required]

9. California: State Treasurer John Chiang announces a new open data website to track debt. DebtWatch “includes debt issued by the state, local governments, cities, special districts, K-12 schools, community colleges and public universities. The cost of issuance, and bond and tax election results are also available.”

10. CaliforniaSan Bernardino outsources trash collection to Burrtech, despite some concerns about the Request for Proposals process. “Employees, city officials and residents largely applauded the move, which the city included in its bankruptcy exit plan as a way to bring $5 million upfront and then $2.8 million a year in franchise fees for the city for the next 10 years. The company also pledged to keep all 72 existing full-time employees, move 28 part-time employees to full time, retain salary levels and benefits, and give employees a bonus of another $500,000 total (which would be $6,900 per full-time employee if split evenly).” The city council will vote on a contract when it is prepared, which should take 60 days.

11. FloridaThirteen private health insurance companies owe Floridians $60 million in rebates. “The Affordable Care Act requires health insurance companies in the individual and small group markets spend at least 80 percent of premium dollars on health care and activities that improve the quality of health care, rather than on administrative costs such as salaries and marketing. In the large group market, issuers are required to spend at least 85 percent of premium dollars on medical care and related activities. Insurance companies that fail to meet this standard owe consumers a refund in the form of lower premiums or a check, CMS said.”

12. Florida: Department of Juvenile Justice Secretary Christy Daly faces questions from lawmakers about YSI, a private contractor that has “had continual problems within the state, and has been terminated in some areas.” Sen. Jeff Clemens (D-Lake Worth) said “‘This is not a new problem: YSI. And, so the question becomes: how many incidences need to happen before we’re able to just say, “we’re no longer going to do business with YSI in the state of Florida,” he asked. But, Daly says it’s difficult to terminate the private provider altogether.”

13. Florida: In addition to Gov. Scott’s proposal to cut business taxes by $1 billion next year, “Enterprise Florida, the state’s public-private economic development agency, would also get another $250 million under Scott’s plan for incentives to lure new businesses to the state.” [Sub required]

14. Georgia: The governor’s education reform commission has finished its work and issued its report, which has set off more debate about funding, including how charter vs. traditional school funding should be worked out. “While there was unanimous consent from ERC members on most of the recommendations, there were a number of commission members that dissented and voted against a number of recommendations to offer more financial and other support to charter schools,” said Dr. Sid Chapman, president of the Georgia Association of Educators. “Two of the proposals for tax credits for private schools and voucher-like saving accounts for parents were voted down by the commission which was a great victory for public education. We would like to thank the bipartisan legislators and other commission members that stood together to vote these proposals down. However, GAE has major concerns about most of the charter school recommendations that did pass.”

15. IllinoisChicago teachers will rally today “to speak out against CPS’ ‘broke on purpose’ proposals and policies that will lead to larger class sizes, fewer teachers, clinicians and paraprofessionals, unsafe facilities, more standardized testing, flawed evaluations and more charter schools and other privatization schemes.” The rally will be addressed by CTU President Karen Lewis, and will prepare members for an upcoming strike authorization vote.

16. IowaThree state senators head to Washington to urge federal officials to block Gov. Branstad’s Medicaid privatization schemeBlog for Iowa’s Dave Bradley writes, “tuning in to a Medicaid listening session being held by the Centers for Medicare and Medicaid Services (CMS) Thursday it became obvious very quickly that there has been very little planning by the Branstad Administration beyond cutting checks to the managed care plan companies. Calls were received from a broad cross section of people and organizations that deal with Iowa’s Medicaid program. From every corner the message was quite clear that the Branstad Administration’s only planning has been in the area of giving our money to the managed care people. One participant noted that the MCOs (managed care organizations) have been guaranteed 15% off the top. What a waste!”

17. Louisiana: Although the election of Democrat John Bel Edwards as governor raises hopes that the state will accept expanded federal Medicaid funding under the Affordable Care Act, the new governor has supported expanding privatized Medicaid to into care for the elderly and developmentally disabled.

18. Mississippi: The City of Jackson votes to advertise outsourcing of its parking meter operations. “‘They are antiquated,’ [City Deputy Chief Administrator Marshand Crisler] said of city parking meters. ‘Other cities are gaining revenue from their parking meters. We have requested proposals and as soon as we get these proposals in we will share the information with you.’ Councilman De’Keither Stamps said he favors an upgrade but is opposed to privatization because it could lessen the amount of revenue the city could collect.”

19. New Jersey: Pushing back against a privatized model of patchwork “education reform,” Newark Mayor Ras Baraka issues a call for well designed and implemented citywide system of community schools, and that “schools, non-profits, health, police, housing, libraries, churches, unions and parents sit at the table together to plan, implement and assess the work.”

20. New York: Albany school bus drivers are complaining that their employer, Durham School Services, “is keeping them dangerously short-staffed and without the right equipment to ensure safety for staff and the students they bus.” The Durham employees “recently voted to join the Civil Service Employees Association, driven by growing discontent with staffing, workload and safety, among other things, said Amy Burns, a driver with Durham. ‘We organized because we felt we needed a way to have our safety concerns heard by management, and instead of working with us to actively improve those safety concerns Durham has chosen to use intimidation tactics and chilling terminations of good workers and safe drivers, causing a whole new set of problems,’ she said. ‘They are losing focus of what our priority is.’”

21. North Carolina/National: Transportation Secretary Nicholas Tennyson says he is dubious about availability payments for ‘public private partnerships,’ annual public subsidies to guarantee a return to investors and/or operators. “‘We are concerned that those payments that can go on for 30 or 40 years will count against our debt ceiling,’ he said. The benefit of an availability arrangement is that it can more realistically account for the long-term upkeep of a transportation asset, Tennyson said. ‘The payments can look massively expensive but that’s because state government doesn’t seem remotely adept at understanding their maintenance costs,’ he said. ‘It punctures the myth that the only cost of an infrastructure asset is its initial cost.’” [Sub required]

22. PennsylvaniaPhiladelphia’s school district runs out of patience with the private contractor, Source4Teachers, that promised to fix its substitute teacher provision problems. “Source4Teachers has failed to provide the ‘guaranteed’ number of substitute teachers for the district, resulting in a chaos of vacancies.” The contract will be revised. “Susan Gobreski, executive director of Education Voters PA, understands the decision— to a point. ‘They need to cancel this contract, but I understand why they might need a little time,’ she said.”

23. Pennsylvania: Scranton, which defaulted on some of its debt in 2012, is looking to return to the capital markets once it secures the blessings of the rating agencies. The city has a three-year plan in conjunction with consultants HJA Strategies and Public Financial Management of Philadelphia. Business administrator David Bulzoni told reporters “we’re working on significant asset monetizations.” Two months ago the city “chose 501(c)(3) nonprofit National Development Council to run its parking garages and meters under a 40-year public-private partnership lease agreement designed to eliminate most related city-guaranteed debt. City officials are also exploring a sale of the sewer system.” [Sub required]

24. Puerto Rico: Gov. Alejandro García Padilla appoints the head of the Public-Private Partnerships Authority, Grace Santana Balado, as his chief of staff. Santana Balado will continue to run the P3 Authority after she assumes her new post on December 9.

25. Vermont/National: As legislators move to downsize the number of inmates sent outside the state to GEO Group’s Baldwin, Michigan facility, an inmate there paints a bleak picture of life in the private prison. “Men that go out of state become depressed,” Peter said. “I’m not sure why the state doesn’t find halfway houses, find some kind of programming somewhere so these guys that are in here, young kids that are in here, you know, they don’t have [a] way to get out, they don’t have a place to go.”

26. Think Tanks: The National Highway Users Alliance is releasing a report today, “Unclogging America’s Arteries 2015,”  that “identifies and ranks the nation’s top 50 traffic bottlenecks with detailed analysis on the top 30, including the size and costs of the delay, and environmental and safety impacts of those bottlenecks.”

27. Think Tanks: The National Bureau of Economic Research releases a report on the impact of school vouchers. “We find that subsidy programs created a large transfer of public funding to private schools, suggesting that every dollar of funding increased revenue by a dollar or more.”

Legislative Issues

1. National: Bryan Kendro of Public Solutions and Strategies says it’s a “shame” that the House and Senate transportation measures will cut federal TIFIA financing for infrastructure. “The House plan would cut TIFIA funding from the current $1 billion per year to $200 million per year. The Senate would reduce TIFIA to $300 million per year. ‘It’s a reflection of trying to get the bill done,’ Kendro said ‘It’s a zero-sum game. If more money is put into TIFIA, it has to come out of something else.’” Shailen Bhatt, executive director of the Colorado Department of Transportation, calls the federal government the “most unreliable funding partner out there right now.” [Sub required]

2. National: Sens. Michael Bennet (D-CO) and Rob Portman (R-OH) introduce a bill to “allow tax-exempt private activity bonds to be usedto help power plants and industrial facilities finance projects to capture and store carbon dioxide.” [Sub required]

3. KansasLawmakers call for closer scrutiny of foster care contractors. “Democrats pushed for an audit of the system in July, but it narrowly failed when five Republicans voted it down. At Tuesday’s hearing, though, the majority party members expressed serious concerns as well. ‘The kind of system we’ve created isn’t working,’ said Sen. Julia Lynn, a Republican from Olathe.” The system was privatized in 1997.

4. Puerto Rico: Moves are afoot in the legislature and elsewhere to try to deal with Puerto Rico’s financial crisis by privatizing education. “CNN Money reported that a group of 34 hedge funds led by Fir Tree Partners funded a report by three economists that calls for Puerto Rico to close some schools, reduce university subsidies and fire teachers so it can pay back its debt. The privatization of Puerto Rico’s schools is a way to address the tens of billions of dollars in debt that Puerto Rican politicians have accrued over the past several decades. Will Puerto Rico satiate their addiction to debt on the backs of impoverished children? The answer hinges on the passage of 1456.”

5. Utah: Ogden Republican Sen. Ann Millner introduces a bill to provide for a $7 million expansion of the state’s preschool program. Claims of success for a preschool social impact bond program sponsored by Goldman Sachs and the Pritzker Foundation have been criticized for lax methodology. Its supporters have defended the program. Millner says her bill would not involve the Goldman-Pritzker School Readiness Initiative, but “would make use of that initiative’s School Readiness Board—representing the House, Senate, state school board and Utah Department of Workforce Services—in order to distribute grants to school districts and charter schools to create or expand high quality preschool. The size of those grants would be determined by the board, Millner said, and school districts would be encouraged to commit to match funds or partner with online and private preschool programs.” But Holladay Democratic Rep. Carol Spackman Moss pushed against “the suggestion that state funds intended for the public education system could be handed to private educators. (…) ‘That sounds like vouchers to me,’ she said.”

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