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This Week’s Outsourcing Scan 2-29-2016

1) National: In its just-released 2015 annual report, Corrections Corporation of America cites risks to its business from potential changes in federal and state immigration and corrections policy. Risks cited by CCA include “changes in government policy and in legislation and regulation of the corrections and detention industry that affect our business, including, but not limited to, California’s utilization of out-of-state private correctional capacity and the continued utilization of the South Texas Family Residential Center by U.S. Immigration and Customs Enforcement, or ICE, and the impact of any changes to immigration reform and sentencing laws.” CCA also says that inmate levels have declined over the past two years and are expected to decline this year, but “we do not expect a significant impact on us because BOP inmate populations within our facilities are primarily criminal aliens incarcerated for immigration violations rather than drug trafficking offenses.”
 
In its 2015 annual report, GEO Group says that a federal impasse on “immigration reform” could “result in material payment delays, payment reductions or contract terminations.” It also says “the loss of, or a significant decrease in, business from the Bureau of Prisons, ICE, the U.S. Marshals Service, the State of Florida or any other significant customers could seriously harm our financial condition and results of operations. We expect to continue to depend upon these federal and state agencies and a relatively small group of other governmental customers for a significant percentage of our revenues.”
 
2) National: The Vanguard Group ($3 trillion in assets under management) has raised its considerable stake in GEO Group, the for-profit prison corporation. “Vanguard Group Inc. boosted its position in the GEO Group by 5.6% in the fourth quarter. Vanguard Group Inc. now owns 11,865,353 shares of the real estate investment trust’s stock valued at $343,028,000 after buying an additional 628,120 shares in the last quarter.” 
 
On Friday, presidential candidate Sen. Bernie Sanders called for banning private prisons, citing Geo Group’s and Corrections Corporation of America’s combined $361 million in profits last year, and research from the Programs Not Profits campaign showing how the private prison industry drains resources from the criminal justice system. [Vanguard’s board of directors]
 
3) NationalProPublica and the Chronicle of Higher Education report that for-profit colleges are supervised by executives from for-profit colleges. “ACICS, which oversees hundreds of for-profit colleges, is now the target of two government investigations. A ProPublica analysis also found that schools overseen by ACICS had the lowest graduation rates compared with other accreditors. So who are the people behind the beleaguered accreditor? They include executives from some of the most scandal-plagued schools in the country.”
 
David Halperin of the Republic Report has covered the most recent “negotiated rulemaking” session to draft new regulations governing claims by student borrowers that they were defrauded by for-profit colleges. The session was stacked with industry lobbyists and lawyers. But “the students’ remarks were recorded, and you can watch them here and here.”
 
4) National: The Veterans Administration is reportedly “outsourcing healthcare paperwork for American veterans to low-paid workers in the Philippines, a nation where the minimum wage is a dollar a day.”
 
5) National: Writing in the Boston Globe, Suzanne Gordon says privatizing the Veterans Administration system is a bad idea, and would fragment primary care. “The problem is that veterans with brain injuries may also need a hearing aid or treatment for asthma or diabetes. These overlapping health problems can only be managed in a system in which primary care is, in fact, primary. Which is why improving and strengthening the integrated VHA system is something worth fighting for. So I have a question for all the presidential candidates as well as the American public they seek to represent: Is this a system we really want to destroy?”
 
6) National: Moody’s warns of the negative credit implications of taxpayer subsidies and contingent payment obligations for ‘public private partnerships.’ Although funding for PPP projects may be spread over long periods of time, “PPP payment obligation risks can add stress on a procuring government’s credit profile, particularly during economic downturns or on governments with low creditworthiness.”
 
7) National: Antony Loewenstein, a journalist and author of Disaster Capitalism: Making a Killing Out of Catastrophe, outlines private prison companies’ profiteering from immigration detention in the U.S., Norway, Australia, and Britain. “In recent decades, many Western governments have increasingly outsourced prisons to private companies, claiming that doing so saves money. As the number of migrants and asylum seekers has grown, governments have found a new use for the private-prison model. It has become a multimillion-dollar industry.”
 
8) National: In a visit to Sandy Springs, Georgia, a privatized city, Republican presidential candidate John Kasich comes out in favor of privatizing “everything from prisons to some Veterans Affairs medical services to Pentagon bureaucracy.” The New York Times has reported that “the prospect of more Sandy Springs-style incorporations concerns people like Evan McKenzie, author of Privatopia: Homeowner Associations and the Rise of Residential Private Government. He worries that rich enclaves may decide to become gated communities writ large, walling themselves off from areas that are economically distressed.”
 
9) National/Georgia: Hartsfield-Jackson International airport’s threat to privatize security screening of passengers seems to be producing results. Their frustration was over short-staffing and growing lines. “After conversations with TSA, [Hartsfield-Jackson International chief Miguel Southwell] said, ‘I believe we have the commitment that we were seeking,’ with plans for TSA to work with Hartsfield-Jackson to “provide as many employees as possible” in the next 30 to 60 days.” Southwell plans to meet with the TSA administrator today.
 
10) California: Raucous Daly City council meeting debates outsourcing city police dispatch services to the San Mateo County call center. “The dispatchers and their union oppose the proposal, claiming it would jeopardize public safety. All of the city’s rank-and-file police officers have signed a petition against the outsourcing. During Monday’s council meeting, City Manager Pat Martel explained why she favors the county proposal. But the city manager’s presentation was repeatedly interrupted by the dispatchers’ union representative, Teamsters Local 856 Principal Officer Peter Finn.” An expert report says outsourcing would not save the money claimed by its proponents.
 
11) Iowa: The Federal Center for Medicare and Medicaid Services approves Iowa’s plan to privatize in Medicaid system, moving it from a fee-for-service to a managed care system. A bill to block the privatization is stalled in the state House. “The transition plan also is being challenged in court by the Iowa Hospital Association, which argues the privatization should not be allowed because it moves millions of dollars from a dedicated hospital trust fund to managed care companies.” April 1 is the new transition date allowed by CMS. [American Health Line, February 25, 2016; Sub required]
 
12) Minnesota: Gov. Mark Dayton (D) plans for a Water Action Week in April to get citizens more involved in water issues. “The governor says he hasn’t decided exactly what that will entail, and still needs to digest the ideas generated during his water summit” over this past weekend.
 
13) New Jersey: Virginia Darnell, president of the Atlantic City White Collar Professional Association, denounces Republican governor Chris Christie and Democratic Senate President Stephen Sweeney for leading a campaign to bust union contracts. “The financial situation is the result of hundreds of millions of dollars of tax appeals, not the cost of services provided by employees, whose salaries start in the low-$20,000 range. Additionally, the state continues to take millions of dollars in tourism taxes.” Mayor Guardian has called the takeover plan an “insult to democracy.”
 
14) Louisiana: The Public Service Commission has blocked Macquarie and other foreign investors from acquiring Cleco, a privately-owned public utility. “‘I did not think that Cleco customers should serve as an ATM for a conglomeration of foreign companies, just so top Cleco executives could walk off with millions, leaving customers with long-term risk,’ LPSC chairman Clyde Holloway said in a statement, stressing that since the deal concerns a monopoly, the utility’s customers do not have a choice when it comes to purchasing their electricity.” [Sub required]
 
15) MinnesotaA coalition of groups has been formed to resist the reopening of Prairie Correctional Facility in Appleton, which would be leased to for-profit Corrections Corporation of America. “Leasing the facility would give a ‘foothold in our criminal justice system to a company that has shown itself to be a bad actor by repeatedly failing to follow basic regulations and standards,’ said Eliot Seide, executive director of the American Federation of State, County and Municipal Employees Council 5, which is part of the coalition opposing the lease.”
 
16) New Mexico: Enrollment declines at Albuquerque Public Schools. Rose-Ann McKernan, executive director of APS’ Office of Accountability and Reporting, “cited a combination of factors behind the downward enrollment trend: lower birth rates and movement of students to charter schools, other districts within New Mexico and other states.” The decline is affecting the system’s budget.
 
17) New York: On Friday, Success Academy, the private charter school chain that is embroiled in a controversy over alleged abusive practices, suffered a defeat in a high profile legal battle with New York City, when “the state education commissioner ruled that the city could require the charter school network to sign a contract to receive funding for its prekindergarten program.” The for-profit chain had “refused to sign the city’s contract for prekindergarten providers, arguing that it gave the Education Department improper oversight over its operations.”
 
18) OhioFollowing a report by ProgressOhio, the Ohio Inspector General has opened an investigation into a clearinghouse for online learning materials at Ohio State University. The clearinghouse is “closely connected to the politically powerful founder of the state’s largest and one of its worst-performing charter schools. (…) At the center of the investigation is William Lager, the founder and operator of the Electronic Classroom of Tomorrow (ECOT) charter schools. Lager and his allies have been big donors to top Ohio Republicans, who long have supported ECOT despite its dismal record. More, Lager and his lobbyists are working to weaken recently enacted charter school reforms.” The report by ProgressOhio showed “showed that Lager, employees of his charter-school related companies and his chief lobbyist, Bob Klaffky, a [Gov.] Kasich confidante, donated more than $1.5 million in campaign contributions to Kasich, other Republican candidates and committees from 2010 to 2015.” [Report]
 
19) PennsylvaniaOutsourcing substitute teacher fill-ins leaves the Philadelphia school system in an even worse position. “This year, Source4Teachers pledged to deliver a 75 percent fill-rate on the first day of school, and a 90 percent rate by January 1. The firm fell well short of those promises. Rates were in the teens system-wide in the first weeks of classes. In the days before Christmas, it peaked at 37 percent. (…) At James G. Blaine elementary in Strawberry Mansion, one of the district’s ‘internal turnaround’ schools, Source4Teachers filled six substitute positions for 363 teacher absences.”
 
20) OhioThe state attorney general is suing the fiscal officer and sponsor of a Springfield charter school that closed in 2008. “The state’s lawsuit points to a finding from the Ohio Auditor’s Office that sought about $158,000 from Carter due to his involvement in improper payments to UMD during his time as treasurer. None of that has been repaid, and Carter now owes about $194,000 including fees and interest, according to the lawsuit. UMD, the management company, also owes $202,000, according to the lawsuit.”
 
21) Ohio: Ohio State University moves toward issuing a Request for Proposals for privatizing its energy management. “Officials said the next stage does not mean it definitely will enter into a partnership. In the email the school said ‘we want to be crystal clear that the only decision at this point is to continue exploring this project.’”
 
22) UtahKeith Buswell, who is simultaneously vice president of business development for a construction company and a member of the Utah State Board of Education, urges the public to pressure lawmakers to reform rules governing the state’s $2 billion education trust fund.
 
23) Wisconsin: Writing in the La Crosse Tribune, Don Foy says water privatization doesn’t work for citizens. Superior, Wisconsin residents have to pay more than double the state average for water. “The PSC allows Allete, the company that runs the utility, a 9 percent return on investment, again, higher than any in the state. For a private company to make a profit when it takes over a government function, either service or employee pay has to decrease, or prices have to increase, or both. Efficiency suffers because the new bosses lay off reasonably paid government workers, who know their jobs, and replace them with more poorly paid workers who will have a higher rate of turnover. The whole undertaking wobbles along on the edge of crisis, and when it fails, it’s replaced with another company that makes flashier promises and appropriate campaign donations.”
 
24) International: Canada’s Infrastructure Ontario issues a Request for Proposals for a $1.2 billion light rail ‘public private partnership’ project in Toronto (including operations). Potential bidders will spend most of this year preparing their proposals, with announcement of the winning bidder expected next year. [Sub required]
 
25) InternationalDeutsche Welle says German companies are making “bumper profits” off of caring for refugees, but municipalities are stretched too thin and “are giving in to the temptation to outsource any service they can.”
 
26) Revolving Door News: David B. Horner, a former US transportation department deputy assistant secretary for policy and chief counsel of the Federal Transit Administration, returns to the law firm Hunton & Williams as a partner in the firm’s infrastructure ‘public private partnerships’ practice. Hunton says “Horner is known for his work in representing governmental entities in P3 infrastructure transactions.”
 
27) Revolving Door News: Corrections Corporation of America continues its role as a leading revolving door company as it appoints Tennessee Governor Haslam’s former state finance commissioner Mark Emkes as chair.
 
28) Think Tanks: The Center for Budget and Policy Priorities issues a new report calling for the states to boost infrastructure investment. “Opportunities to finance infrastructure investment abound. States often pay for building new schools, roads, airports, water treatment facilities, and the like using debt, a sound practice for financing infrastructure that can serve generations. Today’s historically low interest rates are especially favorable to such borrowing, and state and local debt is below pre-recession levels. States also have many other revenue sources available including user fees like tolls as well as federal grants.” 
 
The report follows the OECD’s call this month for less austerity and more public investment. Reversing its earlier pro-austerity stand, OECD “advocated that all countries should borrow at ultra-low interest rates for infrastructure projects, and that this would lead to stronger growth and lower debt levels. The call reflects the OECD’s concern that investment has failed to pick up during the recovery.”
 
Legislative Issues
 
1) NationalHouse Republicans say they are still bent on privatizing air traffic control. At the beginning of February a short term funding bill was sent to the House floor by the transportation committee, but has encountered increased resistance from Democratic lawmakers. “A spokesman for House Transportation Chairman Bill Shuster, a Pennsylvania Republican, said the panel still intends to pass the multi-year bill that would transform the air traffic control system. Republicans contend that only privatization can reduce flight delays and upgrade the FAA system’s decades-old technology.”
 
2) National: Rep. Gerry Connolly (D-VA) introduces a bill to give federal workers a 5.3% pay raise in 2017. “No other group has been asked to sacrifice more than our federal workforce, who have endured years of pay freezes, increased retirement contributions, no locality pay, sequestration cuts and a government shutdown,” Connolly said. Thirty-two House members are co-sponsoring the Federal Adjustment of Income Rates Act.
 
3) Kentucky: As the state senate consider a bill to expand the use of ‘public private partnerships,’ a debate has broken out over how competent local officials are at vetting P3 deals. The Lexington Herald Leader recently wrote, “we’re less worried about the risks to state government and universities. They have experts to vet deals and protect the public interest; they also already enter into public-private partnerships. (…) Local governments, however, have far less expertise and are more vulnerable to pressure from powerful interests. They would be more at risk of falling for lopsided partnerships in which private businesses, entrusted with public functions, take advantage of unsuspecting taxpayers and ratepayers and lock them into bad long-term deals.”
 
But two execs from the Kentucky League of Cities push back, saying “many, if not more, examples of lucrative state and federal contracts that can be categorized as ‘bad long-term deals.’”
 
4) Maryland: The Washington Post does a postmortem on efforts to privatize the Montgomery County alcohol sales. “But multiple forces doomed the Frick bill. [County Executive] Leggett protested, arguing that the plan was unacceptable without a provision to replace the revenue the DLC produced for the county. The measure was also strongly opposed by the influential Montgomery government employees union—the United Food and Commercial Workers Local 1994—whose members work in the DLC warehouse. On Friday, the county’s House delegation deferred action on the bill. Frick said he will most likely withdraw it next week. ‘It didn’t look like there were the votes to pass it,’ he said.”
 
5) Maryland: A bill to give the state senate a role in selecting the state’s education chief fails to advance. State Senator Paul Pinsky (D) “said Tuesday that the General Assembly would take a more active role in education policy if a new superintendent ‘goes off the rails.’ Pinsky said he worries about vouchers and any effort to privatize public schools.”
 
6) Rhode Island: Lawmakers propose legislation to “level the playing field” between public schools and charter schools. “Under the funding-formula revision in Gov. Gina M. Raimondo’s budget, multiple adjustments would be made that enable school districts to save $350 per student to offset financial losses” from charters.
 
7) Utah: The House Business and Labor Committee considers HB 193 today, “Charter School Property Tax Amendments.” Among other things, the bill “repeals provisions that require a school district to allocate a certain portion of school district tax revenues for charter schools,” and “creates a property tax for charter school funding.” A number of other bills are on lawmakers’ agenda, including on charter school authorizers and school governance.
 
8) Washington: The Republican-led Senate approves a budget on education that Democrats says does too little for the state’s students. The budget would “keep charter schools open by supplying them with $6.6 million from the state’s Opportunity Pathways Account. Last year, the charter school system was ruled unconstitutional by the state Supreme Court in part because of the way it was funded.”

 

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