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This Week’s Outsourcing Scan 2-8-2016

1) National: Donald Cohen of In the Public Interest explains why the immigration debate is also a debate about privatization. Private companies profit from almost every function of America’s immigration detention system. “This ‘efficiency’ too often falls on the backs of detainees,” Cohen says. “Just last week, we learned the tragic stories of Claudio Fagardo-Saucedo and Martin Acosta. Fagardo-Saucedo, a Mexican immigrant, died of an HIV-related infection after two years of not being seen by a doctor in a facility operated by GEO Group. Acosta, from El Salvador, was finally diagnosed with stomach cancer after four and a half months of clear signs of illness and severe pain at the same facility. (…) You might think that we should simply require companies to do the right thing. But the problem is in the very process itself—private contracting.”
 
2) National: Some investors are betting that the water poisoning scandal in Flint will spur privatization. Private water company stocks have been way up in a flat overall market over the past year, largely due to their dividend performance, but may now be propelled because “Flint puts a spotlight on the issue of water safety.” However, communities should beware the pitfalls of water privatization, as In the Public Interest, Public Citizen, and Food and Water Watch have pointed out. As the privatization industry says, “desperate government is our best customer.”
 
3) National: According to Public Citizen, the National Association of Water Companies, the water privatization trade association and lobbying organization, “intensively and perennially lobbies Congress and the Environmental Protection Agency to refrain from adopting higher water quality standards. The NAWC also persistently requests that all federal regulations be based on sound cost-benefit analysis, which means that public health is compromised for the sake of higher profits.” [NAWC federal lobbying]
 
Last April NAWC launched a propaganda campaign “to undermine advocates who want municipal water systems operated and owned by local, democratically elected councils—not by big companies accountable to shareholders.” In a House hearing last week, GOP lawmakers focused their outrage on the weakness of EPA regulations and actions that contributed to the Flint disaster. However, The New Republic has detailed their consistent opposition to its regulatory actions. Notwithstanding the congressional criticism of EPA’s failure to oversee Michigan authorities a few days before, in Saturday night’s Republican debate Jeb Bush called for sending “EPA delegated authority, back to the states.
 
4) National: The EPA has a pilot program to assist local communities to make the best financing and technical decisions on water infrastructure and operations, including analyzing the right mix of public and private financing. Its Water Infrastructure and Resiliency Finance Center “is developing a compendium on rate assistance and household affordability program best practices and welcomes information on barriers and success stories that water and wastewater utilities have seen through implementation of these programs.” The compendium should be available later this year.
 
5) National: RH Reality Check’s Tina Vasquez calls out the media and presidential candidates for failing to address the issue of immigrant detention. “Whether they are run by Immigration and Customs Enforcement (ICE) or a for-profit entity, detention centers are alarming for a number of reasons, as are the connections some politicians have to them. Before examining the candidates’ stances on—and ties to—detention, it’s important to understand which institutions are behind the current explosion of facilities here in the United States.”
 
6) National: As the future of the Veterans Administration becomes a subject of debate in the presidential campaign, the VA is moving to adopt a more flexible system for managing contractors. Washington Technology says “VA officials are looking to industry for potential acquisition strategies that would take both financial and performance risk off the government’s shoulders. Furthermore, the VA wants to collaborate with health care systems and commercial vendors. Officials recognize a need for vendor teams because, otherwise, they likely won’t have the breadth of highly specialized expertise in product knowledge and technical architectures. In addition, system designs must be compatible with reference architecture and other standards so the department can participate in the marketplace.” [Sub required]. Last week, the VA issued a Request for Information for feedback.
 
The future of the VA came up in the most recent Democratic and Republican debates. In their one-on-one debate last Thursday, Democratic candidates Hillary Clinton and Bernie Sanders reiterated their strong opposition to Republican efforts to privatize the VA. Clinton said she supports efforts to “fix what’s wrong with the VA,” calling privatization another part of the “Koch brothers agenda. They’ve actually formed an organization to try to begin to convince Americans we should no longer have guaranteed health care, specialized care for our veterans.” Sanders said “Secretary Clinton is absolutely right, there are people, Koch brothers among others, who have a group called Concerned Veterans of America, funded by the Koch brothers. (…) I had a hearing. I had all of the veterans groups in front of me. And I said to them, tell me when a veteran gets in to the V.A., understanding there are waiting lines and real problems, when a veteran gets into the system, is the quality of care good? Without exception, what they said, good, excellent, very good. We’ve got to strengthen the VA. We do not privatize the VA.”
 
In the Republican candidates’ debate on Saturday, asked if he favors privatizing the VA, Jeb Bush replied “we need to give veterans more choices. A veterans card to be able to go to a private provider will enhance the quality of the service.” John Kasich said veterans “should get health care anywhere they want to go.” Marco Rubio said “veterans should be able to take their VA benefits to any hospital or any doctor they want to go to.”
 
7) National: Moody’s says the boom in stadium building is taxing the financial strength of municipalities. “‘This can weaken a government’s credit quality, owing to the reliance on the potentially volatile revenue streams, as well as budgetary strain due to higher debt and uncertainty about future government costs related to the stadium,’ says Alex Cimmiyotti, a Moody’s vice president and senior analyst. State and local governments also face the potential of having to deal with a stranded asset if a team relocates, a situation currently faced by St. Louis now that the NFL Rams have decamped for Los Angeles.” If President Obama’s proposal to do away with tax exemption for professional sports facilities passes, this would add to the burden. [Sub required]
 
8) National: GEO Group announces it will hold its Q4 earnings conference call on February 17, and announces a $0.65 dividend per share.
 
9) Alabama: Gov. Bentley proposes an $800 million bond issue to build four new prisons. He says closing and consolidating existing prison facilities will pay back the bonds. The governor did not say who would build the new prisons.
 
10) California: The debate over the Adelanto jail location has been revived after the GEO Group requests changes to the development agreement. “The terms for the facility were initially approved 3-2 by the City Council in late October even amid concerns that the jail would be situated just about 1.5 miles from Adelanto High School. On Tuesday, Mayor Rich Kerr revived an argument he made three months ago in opposition to the plan. ‘I can assure you … there will not be a prison next to the high school,’ Kerr said.”
 
11) California: A Kern County public hearing last week was dominated by opponents of library privatization, who demanded a one eighth-cent sales tax increase be put on the June ballot. The board of supervisors will take up the issue on March 1. In the meantime its staff will come up with a formula that could be put on the ballot, and eventually issue a request for information from Library Systems and Services. “However, county administrative officer, John Nilon, said that it likely would not be ready before the June election.” The Los Angeles Times responds, “a handy sign that a local government is shirking its public duty [is] privatizing the library,” pointing to LSSI’s cutbacks, contemptuous approach to public employees, and refusal to disclose its profits.
 
12) California/National: Taxpayer-backed early earthquake warnings go to a secret list of for-profit companies, LA Weekly reports. “ShakeAlert has been developed under a public-private partnership with significant contributions, for example, from Caltech, a private university. For that reason, and despite significant contributions from your wallets, Margaret J. Vinci, the school’s office manager of earthquake programs, says those private beneficiaries of the ShakeAlert warnings will remain private.”
 
13) California: Los Angeles mayor Eric Garcetti and the city council face a tough choice over how to finance an upgrade of the city’s convention center. A complicated ‘public private partnership’ might be one option, or it could be publically financed, although that would add to city debt. The city council is evaluating a consultant’s report. If approved by chief administrative officer Miguel Santana, “business case and value for money studies could be presented to the city council as early as this summer.” [Public Works Financing, January 2016; sub required]
 
14) California: Attorney General Kamala Harris issues an advisory opinion saying that contract attorneys hired as bond counsel by municipalities should not be paid on the basis of a percentage of bond issues. “Such a practice is illegal because the law prohibits specified ‘city officers or employees’ from being ‘financially interested in any contract made by them in their official capacity,’ the opinion said.” [Sub required]
 
15) District of Columbia: The DC Metro has hired Kevyn Orr, the former Gov. Snyder-appointed emergency manager of Detroit, to help fix its troubled finances. His law firm, Jones Day, will be paid $1.7 million. Steps could include “restructuring debt, taking a hard line against wage and benefit hikes in labor negotiations this year and trying to wrest more money from Washington-area jurisdictions.”
 
16) Florida: State corrections officials hire Centurion of Florida to take over its prison health services. “Centurion, a joint venture between Centene Corp. and MHM Services, will be paid a maximum of nearly $268 million to fill in for Corizon, which exercised a 180-day cancellation provision in its contract with the state.” On Friday, Centene itself lost a long legal battle over its inappropriate termination of a contract with the state of Kentucky. The Kentucky Court of Appeals “found that the company breached its contract and ordered that the state is entitled to damages. The Cabinet for Health and Family Services called the court’s opinion ‘far-sighted and well-reasoned.’” Centene also recently announced that it lost the health records of 950,000 clients. Last year, Centene prevailed in a lawsuit brought by one of its former executives, who accused the company of engaging in illegal cost-cutting moves.
 
17) Florida: The cutback of federal TIFIA loans in the new FAST Act has dimmed prospects for two major road ‘public private partnerships’ in Florida—an extension of the I-4 Ultimate managed lanes, and Tampa Bay Express. As a result, DOT secretary Jim Boxold says FDOT is looking for other sources of “long term, patient capital.” Public Works Financing also reports that “the P3 industry is also concerned about the impact of a bill currently under consideration in Florida, Senate Bill 756. It would create a new nonprofit Transportation Financing Corp. for the exclusive use of FDOT. In raising new debt using the state’s taxing authority. All projects financed by the authority would have to be approved by State Bond Director, Ben Watkins, who is a P3 skeptic.” [Public Works Financing, January 2016; sub required]
 
18) Illinois: Will a Wall Street austerity pinch on Chicago schools lead to an emergency manager? Chicago mayor Rahm Emanuel headed to Wall Street last week to deal with the third downgrade in 15 days of the Chicago board of education’s bond rating, and the board’s postponement of a bond sale. “The planned debt sale came after Illinois Governor Bruce Rauner, a Republican, called for the state to take over the district and potentially authorize bankruptcy, which currently isn’t allowed. That idea was immediately rejected by Democrats in control of the legislature and Emanuel, who have unsuccessfully pushed for an influx of state aid.” The sale eventually went through, but at an extremely high price. The Chicago Teachers Union and the city are currently locked in difficult contract negotiations. The CTU has called the district’s plans to slash school budgets and stop paying most of the teachers’ pension costs “an act of war.”
 
19) Illinois: Illinois Gov. Rauner (R) pulls an end run around state lawmakers and directs the economic development agency “to work with a not-for-profit corporation the administration formed to recruit businesses.” Lawmakers had blocked an effort to privatize the agency “when Democratic House Speaker Michael Madigan inserted a requirement that the public-private partnership be repealed after three years.” The bill would also require that the privatized agency would be treated as a contractor under open records laws.
 
20) Illinois: Gov. Rauner proposes using a ‘public private partnership’ toll lanes project to expand I-55. “Under a 2011 state law, IDOT can pursue projects using public-private partnerships, as long as the General Assembly approves a resolution supporting the project.”
 
21) Maryland: Public Works Financing says Gov. Hogan will shortly announce the winner of the bidding war to build the light rail Purple Line ‘public private partnership.’ Industry insiders think it’s likely to be Fluor. But “sticker shock is still an issue, says a source, which may be one reason for the delayed announcement.” [Public Works Financing, January 2016; sub required]
 
22) Missouri/National: With the NFL Rams gone, St. Louis taxpayers are still stuck with stadium debt. “St. Louis Board of Aldermen President Lewis Reed has asked the NFL to help pay off the stadium, but so far has gotten no response. (…) Across the country, cities have gotten stuck with substantial costs after sports teams leave or even move across town. Often, local governments must pay bonds, maintenance costs, or demolition fees after a team is gone.”
 
23) New Jersey: Newark’s privatization of its sanitation department leaves it defenseless in the face of a blizzard. “During an appearance before the City Council Tuesday morning, Mayor Ras Baraka revealed that Newark—the largest city in New Jersey—had just nine vehicles for plowing and salting roads during a storm that paralyzed much of the city for days. By comparison, South Orange, with a population of just over 16,000, claims at least 30. Baraka claimed the fleet was decimated as trucks were sold off following former Mayor Cory Booker’s effort to privatize of the city’s sanitation department in 2010, which eventually ended in 92 employees being laid off. ‘Its shameful,’ he said. ‘If we tried to plow the snow ourselves we would be still plowing it.’” The city’s plan to use contractors failed to fill the bill.
 
24) North Carolina: Attorney General Roy Cooper (D) orders an investigation of the proposed I-77 managed lanes project, which has been mired in controversy for years. Cooper may be facing off against Gov. McCrory in November if both get past their primaries. McCrory is being challenged in the GOP primary by Robert Brawley, whose entry into the race “was motivated by the long-running controversy over the state’s approval of a 50-year contract” with Cintra to put in the managed lanes. Cooper has told the Charlotte Business Journal that he doesn’t believe the contract is good policy.
 
25) Think Tanks: The National Conference of State Legislators launches a Transportation Funding and Finance Legislation Database, “an up-to-date source for transportation funding and finance legislation introduced in all 50 states and the District of Columbia since 2013.” It includes a toolkit on ‘public private partnerships.’
 
26) Think Tanks: The Network for Public Education releases a report card on the states, including each state’s level of “resistance to privatization.” NPE says, “so what can you do to make a difference? Visit policymakers with the report card in hand.  Discuss how your state can improve. Send it to your local media and newspapers. We will do our best to provide comments, quotes and to answer questions.  Feel free to direct media to us. Send the report card to friends and colleagues. Post the links on your Facebook page. Diane [Ravitch] needs your activism to get it out and help change the direction of education policy.” NPE will be holding its annual conference April 25-26 in Raleigh, North Carolina.
 
Legislative Issues
 
1) National: A battle is shaping up over the proposed privatization of the air traffic control (ATC) system. Republican House Transportation chair Bill Shuster has introduced legislation to spin off ATC, and has gained the support of the National Air Traffic Controllers Association. But House and Senate appropriators, who control the purse strings for FAA, say they oppose privatization. Democrats on the transportation committee, led by ranking member Rep. Peter DeFazio (D), say they prefer “targeted reforms,” including allowing the FAA to keep all the revenue it collects. They will offer amendments [Bloomberg BNA, February 5, 2016]. Other opponents of privatization include Rep. Elijah Cummings (D-MD), Del. Eleanor Holmes Norton (D-DC) and Americans Against Air Traffic Control Privatization, which includes Public Citizen’s Congress Watch, Progressive Congress and People Demanding Action. Legislation for the FAA expires March 31.
 
2) National: Republican House Budget Committee chair Tom Price (GA) is pushing a bill that would amend the NLRA to make it significantly more difficult for federal workers to join a union. The bill would deny unions the right to automatically deduct dues and “would significantly alter the way a unit of federal workers elects to unionize. Currently, just 30 percent of a unit’s employee must agree to form a union. The Federal Employee Rights Act would raise that threshold to 50 percent of a work group. Once a vote to ratify collective bargaining commenced, the legislation would count any individual who declines to vote as a ‘no’ in the final tally.” [Bill]
 
According to Bloomberg Government, the bill has 81 co-sponsors and is backed by Heritage Action, the Competitive Enterprise Institute and the Center for Union Facts. The American Federation of Government Employees has denounced the bill, telling Government Executive “this bill aims to silence the already muted voice that federal employees have in the workplace. The result will be fewer whistleblowers coming forward to expose waste, fraud, and abuse; higher rates of employee turnover; and greater difficulty recruiting the best and the brightest.”
 
3) National: The House Education and Workforce Committee held a hearing last Wednesday on expanding charter schools. In testimony to the committee, Professor Luis A. Huerta of Columbia University Teachers College rejected claims that private schools are more cost effective and efficient compared to public schools. “Using per-pupil expenditures to estimate the potential cost of voucher programs is inappropriate. Any measure of immediate fiscal and educational impacts of voucher or tuition tax credit programs must account for significant cost differentials compared to a comprehensive public school system in order to account for the real cost of voucher and tuition tax credit programs.” Huerta said “measuring efficiency is also dependent on whether the wider goals of a public and democratic education system are upheld by all schools, including citizenship training and workforce preparation.”
 
4) Hawaii: Legislation to permit each county to “enter into agreements with private entities to build, operate, own, or finance newly constructed transportation facilities including toll highways” is introduced and referred to the transportation committee. [HB2064]
 
5) Tennessee: A bill to promote ‘public private partnerships’ for transportation has been referred to the Senate Transportation and Safety Committee. Sponsored by Sen. Bill Ketron (R). [SB 2093]
 
6) Virginia: Wrangling continues over tolling I-66 inside the Beltway, revenues for which are reportedly needed to support the $2 billion Transform I-66 managed lanes P3 project concession [Public Works Financing, January 2016; sub required]. A House committee has approved legislation on statewide tolling policy, but the I-66 issue remains. “If the bill survives scrutiny in the Transportation Committee, it too is likely to end up in Appropriations, where its supporters fear for its fate.”

 

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