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This Week’s Outsourcing Scan 3-16-2015

Update: Upcoming Outsourcing Issues. March 16, 2015

1) National: This is National Sunshine Week, an initiative to promote open government and access to public information. Over 150 organizations are participating in a series of events across the country. In the Public Interest, one of the participating organizations, has just released a report, Closing the Books, on how government contractors hide public records by circumventing sunshine laws, hiding their fees, hiding how they spend public money, and hide indicators of service quality. ITPI urges state and local decision makers to “adopt a three-step strategy to ensure the public maintains access to information on contracted services.”

2) National: McClatchy takes a look at how the Freedom of Information Act is faring almost 50 years after it was passed. “Nearly a half-century later, news organizations continue to paper federal agencies with written and electronic requests for records and other information under FOIA, a review of agency logs shows, though they are cash strapped and less likely to press their claims in court. Meanwhile, over the past decade there’s been a surge of requests from bloggers, advocacy groups, corporate lawyers, researchers and even foreign nationals tapping the promise of open records.”

3) National: The size of the federal contracted workforce is unknown. Despite the administration’s stated commitment to reducing its size, a clear overall numerical yardstick does not seem to exist. [CBO report]

4) National: As public sector workers come under increasing attack by the right wing, private equity companies are looking for ways to profit from the potential decline in public pension fund investments, a significant source of their capital. Topping the list, according to EPI’s Eileen Applebaum, is marketing to retail investors. “The industry’s future growth prospects are tied, in no small part, to its ability to tap the estimated $6.6 trillion in 401(k) accounts. Moreover, attitudes of pension funds and other institutional investors in PE funds are changing–slowly to be sure, but these investors are becoming more skeptical about how PE funds allocate fee income and fund expenses, and about reported fund returns. Fewer questions can be expected from less experienced, less sophisticated individual investors.” Will the SEC step in to protect the public interest?

5) National: Redflex, the red light camera company caught up in a bribery scandal in Chicago, faces additional woes. Its profit has plunged a whopping 414% and it faces a federal investigation of its practices.

6) National: Concern mounts that rule changes will shift priorities in the national parks from public recreation to private fundraising. “There is undeniable value in the nonprofit sector’s support of parks through volunteerism and advocacy, but the increasing dependence by public agencies on private dollars is treacherous. Private funding can distort real budgets over time, leading to unintended consequences, shifting priorities and even decreased congressional budget appropriations.”

7) National: Veteran labor and racial justice activist Bill Fletcher, Jr., traces the long history of efforts to privatize the U.S. Postal Service. “As we can see from other experiments in privatization, in order to prepare the public for privatization it is important to discredit the public delivery of a specific service. This is most often done by financially strangling the institution, whether it is sanitation, water, education, or, in this case, the postal service.” The Postal Service earned a $1.4 billion operating profit in 2014, but has been thrown into a loss by draconian legislation mandating that its fund its pension costs 75 years in advance.

8) California: As the Victorville City Council considers whether to renew a contract with Redflex for red light camera system (which expires in June), it will hear collision statistics from San Bernardino County Sheriff’s Victorville Station Capt. Sam Lucia at its meeting tomorrow. Victorville has paid more than $3.7 million to Redflex under the existing contract.

9) California: Phillip A. Washington, Denver’s transportation chief, will become CEO of the Los Angeles County Metropolitan Transportation Authority. “Washington also oversaw Denver’s first public-private partnership for transit, a $2.2-billion commuter rail network that will be built, paid for and operated by a private company. That made him a strong candidate for the Metro job, sources said, because Los Angeles County may seek private-sector financing for some of its more ambitious projects, including the Sepulveda Pass tunnel.”

10) California: Liquid Waste Management Inc. wants to almost double the size of its waste disposal site near McKittrick. The Central Valley Regional Water Quality Control Board will have a hearing on the matter at its June 4-5 meeting.

11) California: Debate rages over plans to privatize Kern County libraries. SEIU Local 521 chief Regina Kane told the council that “privatization would reduce the number of days and times libraries are open and decrease the knowledge and professionalism of library staff. Public speakers and library supporters questioned supervisors’ interest in bringing in a private company to run the libraries. Library employee Theresa Becker, costumed as the book ‘Diary of a Whimpy Kid,’ asked supervisors why they would want to send taxpayer dollars to a Maryland corporation. County Administrative Office staff have said that a proposal to privatize the libraries will likely come before the board later this month. Library Systems and Services LLC is reportedly the only company which offers private library management services–and former LSSI employee Nancy Kerr is the new Kern County Library Director.”

12) District of Columbia: As a petition campaign gets underway to urge Mayor Muriel Bowser to reopen the bidding process for DC correctional healthcare, Corizon, the widely criticized company awarded the contract last year, teams up with a local provider, MBI Health Services.

13) Florida: United Water opens an office in Miami-Dade just as the county plans to spend $13.5 billion on its water infrastructure. United Water is taking the name of Suez Environnement, its parent company, after Suez announced a consolidation of its subsidiary namings.

14) Illinois: The Chicago Teachers Pension Fund has issued a Request for Information for an infrastructure investment manager. The deadline is March 20.

15) Indiana: The bidding to take over the bankrupt operator of the Indiana Toll Road has been finalized, with Australia’s IFM Investors (Australian pension funds plus others such as CalSTRS) winning out for a price of $5.725 billion. They will operate the road for the next 66 years. The two Indiana counties that bid on the deal lost out. The creditors will get back around 95 cents on the dollar (so speculators will benefit handsomely from the deal, which was expected to price much lower), and toll rates are still supposed to be pegged to the inflation formula in the original deal. The deal needs approval by the Indiana Finance Authority and other bodies. [Subs required]. Industry experts are hoping the high price will stimulate the P3 sector.

16) Indiana: In an ironic twist pitting different sectors of the privatization industry against one another, Marion County says it can help pay for a privately-run criminal justice center by cancelling its contract with Corrections Corporation of America. A draft report says that the county, which includes Indianapolis, could save $22.8 million per year from 2019 to 2024 by ending the contract with CCA. The report also projects $10 million in savings through county staff reductions. “Few disagree that a new facility is needed, but several council members have expressed concerns about the project’s eye-popping cost, and wonder if the public-private partnership used to finance it is the best option available to taxpayers. Under the proposal, private consortium WMB Heartland Justice Partners would design, build, operate and maintain the center for 35 years for a fee that starts at around $45 million a year. Adding fuel to the council’s skepticism, the savings assumptions used to justify the project have largely been kept under wraps, with administration officials saying that they’re still a work in progress.”

17) Massachusetts: Having been “beaten back by common sense” in the state legislature, charter school promoters “are now apparently hoping the courts will sanction their push to privatize public education in the state. Three high-powered lawyers, Paul F. Ware Jr., Michael B. Keating and William F. Lee, say they plan to bring their suit to overturn the cap on charter schools before either the state Supreme Judicial Court or Superior Court.” Barbara Madeloni, president of the Massachusetts Teachers Association, “was among those to question the veracity of such an argument. ‘Any claim that the charter school cap is the basis of Massachusetts children being denied their civil rights is appalling and deceptive,’ she said.”

18) Massachusetts/Think Tanks: Massachusetts Taxpayers Foundation issues a report calling for the Massachusetts Bay Transportation Authority to privatize more services, including bus maintenance. “However, such a step would require the Legislature to change the state’s Pacheco Law, a proposal that has met stiff resistance among lawmakers in the past.”

19) Michigan: Fitch Ratings downgrades Wayne County’s jail bonds, saying they are “politically vulnerable.” “The jail bonds are more vulnerable than other of the county’s debt in part because the jail project remains half-finished and a political hot potato for the cash-strapped county that has its seat in Detroit, said Fitch. The debt, issued as taxable stimulus bonds in 2010 through the Wayne County Building Authority, carries the county’s limited-tax general obligation pledge and is not subject to abatement or appropriation, Fitch noted. ‘Our concern is that if the squeeze continues to get tighter and tighter and if there is a state intervention, or if there is eventually a Chapter 9 filing, that debt could politically be vulnerable,’ Fitch Ratings analyst Arlene Bohner said.”

20) New York: Juan Gonzalez of the Daily News lifts the curtain on hedge funds and campaign cash in the push to expand the charter school industry in New York State. “Hedge fund executives have unleashed a tsunami of money the past few years aimed at getting New York’s politicians to close more public schools and expand charter schools. They’ve done it through direct political contributions, through huge donations to a web of pro-charter lobbying groups, and through massive TV and radio commercials. (…) The single biggest beneficiary has been Andrew Cuomo, who received $4.8 million from them.(…) All that money and lobbying triumphed when Cuomo and the Legislature approved up to $2,600 more per pupil for charter school facilities, with New York City expected to pick up a big portion of that.”

Rebecca Mead, a staff writer for The New Yorker, has also written an excellent piece on the testing crisis in New York State under Gov. Cuomo’s “education reform” policy.

21) New York: Public education supporters protest outside the Greenwich, Connecticut, home of hedge fund mogul Paul Tudor Jones, a charter school supporter. “The group, a coalition of New York Communities for Change, Strong Economy for All and the Alliance for Quality Education, calls itself the Hedge Clippers. It also demonstrated outside a charter school symposium at the Harvard Club Tuesday.” Last Wednesday, supporters of public education also rallied in Albany, denouncing the “expansion of privately-run charter schools which lack accountability and divert funds form public schools.”

22) North Carolina: Rowan County is looking to save money by cutting down on the cost of feeding jail inmates. The county manager wants to switch to a private contractor. “The contract with Trinity values each inmate’s meal at 35 cents, less than a third of what Church estimates for a permanent contract. (…) When asked about the quality of meals provided at the projected minuscule price points, Auten referred to the calorie counts listed on the county’s request for proposals.”

23) Ohio: Toledo sues the state over the constitutionality of state restrictions on red light cameras. “The city of Akron filed a lawsuit last month in Summit County Common Pleas Court, which also claims the law unconstitutionally violates its home-rule authority and infringes on its contract with its camera company, American Traffic Solutions.”

24) Pennsylvania: City Council members who blocked the privatization of the Philadelphia Gas Works say “I told you so” after the company bidding for the project sells itself off to a Spanish company. “One of the many reasons my Council colleagues and I were opposed was that the sale agreement did not protect the city and PGW’s customers and employees from this very possibility,” [Councilwoman Marian Tasco] said. Tasco then went on to describe the mayor’s plan as ‘flawed and shortsighted,’ and blasted the news media in Philadelphia for supporting it. ‘The Inquirer, the Daily News, the Committee of 70 (watchdog group) and other pundits purposefully ignored this and all of our other well-founded concerns,’ she said. (…) ‘I got news for you, my friends:  We on Council did our homework, and we passed with flying colors.'” The council is exploring more sensible deals for private involvement in the facility.

25) Pennsylvania/Illinois: Echoing the role of school privatization in the Chicago mayoral race, outside money begins to pour into the upcoming Philadelphia mayoral race.

26) Utah: Iron County Commission votes to privatize their ambulance service and sell off its assets. “The next step is the transfer. Brinkeroff and Adams said that the final negotiations to hand off the service to Gold Cross will take place over the next month after they determine a fair market value for all the assets, vehicles and for the two locations in Cedar City and Parowan.”

27) Revolving Door News: The Securities and Exchange Commission tells Citigroup, Goldman Sachs and Morgan Stanley that they must allow shareholder proposals on government service payouts. “The AFL-CIO’s shareholder proposal calls for requiring the banks to prepare a report disclosing the vesting of equity-based awards for senior executives that voluntarily leave to go be public servants. The report would have to identify which executives are eligible for government service golden parachutes and the estimated value of their packages.”

28) Think Tanks: Moyers and Company’s Katie Rose Quandt interviews Ed Bender of the National Institute on Money in State Politics. “The year before last, when Florida was trying to privatize their prison system, the grassroots organizers, the faith community, they all understood what a boondoggle it was. They were able to use our data and our reports about the business model of privatization of prisons and how that impacts public policy. They were able to take our list, go into committees and say, ‘Gosh, you got contributions from Corrections Corp of America and you want to give them a contract that will cost taxpayers millions, if not hundreds of millions of dollars?’ That’s how the data can empower citizens to confront powerful interests.”

Legislative Issues:

1) National: The American Road & Transportation Builders Association (ARTBA) unveils a federal highway and transit funding proposal that it hopes will jump start the stalled transportation funding debate in Congress. ARTBA says the “‘Getting Beyond Gridlock’ plan marries a 15 cents-per-gallon increase in the federal gas and diesel motor fuels tax with a 100 percent offsetting federal tax rebate for middle and lower income Americans for six years. It would fund a $401 billion, six-year highway and mass transit capital investment program and provide sustainable, user-based funds to support it for at least the next 10 years.”

2) Alabama: Terri Michal, co-chair of Moral Monday Alabama, opposes the pro-charter Alabama School Choice and Opportunity Act. “In these proposed bills they will be condemning our children to classrooms with no certified teachers, corporations will be able to convert entire school systems to charter schools against the will of the people, the non-profits holding the license to the charter will be able to take the local, state and federal dollars it obtains, that should be used for our children’s public education, and funnel it through for profit companies where it will be almost impossible to trace and use it, instead, to line their pockets.”

3) Arkansas: Tension mounts over a possible legislative move to force the privatization of school districts deemed to be in “distress.” Max Brantley reports that “it’s monumental legislation that would make all school teachers and administrators fire-at-will employees without due process rights. It would destroy one of the two last remaining teacher union contracts in Arkansas. It allows for the permanent end of democratic control of a school district or those portions of it privatized. It would capture property tax millage voted by taxpayers for specific purposes, including buildings, and give them to private operators. It would allow seizure of buildings for private operators at no cost.” The legislation. he says, “is the work of the Walton Family Foundation.” [HB 1733]

4) Florida: An amendment to state Senate legislation would force school districts to share construction money with charter schools. “Orlando-based Fund Education Now calls the amendment a money-grab and says they’ll oppose it. Real estate is often a profitable venture for charter school management companies or financiers.”

5) Kentucky: “Public Private Partnership” bill dies in the Senate–for now. The bill would have paved the way for tolls on the Brent Spence Bridge P3 project. But opponents are keeping a sharp eye out for efforts to “sneak it in the back door of another bill that’s still in conference.”

6) New York: As the budget fight over charter vs. traditional public school funding heats up, the Senate budget bill includes substantial tax breaks for private corporations and individuals who invest in school vouchers. Rick Cohen of NPQ writes, “donations up to $1 million would receive a 90 percent tax credit, and total donations up to $300 million would be split between scholarships to “cover tuition at private schools–which critics see as a backdoor voucher program—and public school foundations like New York City’s Fund for Public Schools.” That doesn’t seem very backdoor to us. A tax credit is much more attractive than a tax deduction, as nonprofits know all too well. It isn’t hard to see corporations and hedge fund players lining up to finance private school vouchers—and get a nice tax benefit along the way.”

7) Texas: Lawmakers want to tighten ethics rules on contracts. “A leading government ethics advocate, though, criticized the bill for not being as tough on ‘revolving door’ activity by former state employees. Tom ‘Smitty’ Smith, director of the Texas office of Public Citizen, a consumer-rights advocacy group, also advocated a sort of ‘death penalty’ for bad vendors.”

8) Hawaii: Hospital P3 bill passes House, heads to Senate.

10) Wisconsin: Pushback becomes bipartisan against Gov. Walker’s attempt to shift control of the state university system away from the state and onto a public board, “with a top Republican lawmaker saying he’s now skeptical and a national faculty association calling it ‘a radical assault’ on the statewide system.” The AAUP “criticized the [proposed] authority but for very different reasons, saying it doesn’t go far enough to ensure current shared governance and tenure policies would remain intact once taken out of state law. Walker’s proposed changes ‘appear to be motivated by a desire to fully privatize the university system,’ the association said in a statement, calling the plan “a radical assault on one of the nation’s premier institutions of public higher education.'”