Media Scans
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This Week’s Outsourcing Scan 6-15-2015

Update: Upcoming Outsourcing Issues. June 15, 2015

1) National/Washington: Donald Cohen of In the Public Interest reports on a union-led, state accredited program to give former inmates a chance to make it economically once they are released. Public-union partnerships are also spreading to other states. “Trade Related Apprenticeship Coaching (or TRAC) is a state-accredited pre-apprenticeship program involving three construction tracades unions—the Laborers (LIUNA), Carpenters and Ironworkers—and the state women’s prison in Gig Harbor, Wash. TRAC addresses a problem that faces every community in the United States—how to ensure that those formerly incarcerated can lead productive lives and not commit new crimes. Nationwide, more than four out of 10 adult offenders return to prison within three years of their release. Too often, they return to crime because they can’t get a job, yet they can’t get a job because of their prison record.”

David Rothenberg of the Fortune Society writes of the tragic suicide of Kalief Browder, who left Rikers Island after three years of beatings and solitary confinement. “We paid at least $68,000 a year to hold him in jail, but no state or city support system was provided upon release.”

2) National/Mississippi: A new study by Anita Mukherjee of the University of Wisconsin-Madison’s Wisconsin School of Business finds that inmates in private prisons serve longer terms without any reduction in future crimes. “The study is believed to be the first effort to compare time served in public and private prisons. (…) Fueling the increase in time served is the widespread use of prison conduct violations in private facilities. Mukherjee found that prisoners in every demographic, offense, and sentence length category accumulated more infractions if they were assigned to a private prison.” [Report]

3) National: Federal officials grill a top executive of the bankrupt, for-profit Corinthian Colleges chain about exorbitant executive salaries and quick bonus payouts to executives as the company sank. “Friday’s session was a public hearing that is part of the bankruptcy proceeding. It gives creditors and Federal bankruptcy watchdogs a chance to gather information outside of court. Participants include former students saddled with more than $1 billion in loans taken out to attend a school that federal officials allege deceived students by using misleading alumni job statistics.” [Sub required] Last week, education secretary Arne Duncan said the federal government would provide loan relief to some students victimized by Corinthian, though some expressed skepticism. Major investors in Corinthian have included Wells Fargo and union pension funds such as CalPERS and the New York State Teachers Retirement Fund.

4) National: James Billington, the longtime head of the Library of Congress, is to finally leave his post after years of criticism, including over poor oversight of contractors. The search now begins for a successor.

5) National: Netflix’s popular Orange Is the New Black series will introduce the issue of prison privatization in its third season. “Desperate to keep the penitentiary running, Caputo initiates a deal with the devil—to get a privatized-prison corporation, represented by a disinterested and bleakly bottom-line-only Mike Birbiglia, to take over Litchfield. Prison is terrible but it can always get worse, especially when there’s money to be made.”

6) National: Zacks Investment Research downgrades the shares of G4S PLC, a security company that provides “care and justice services,” prisoner escorting, electronic monitoring and police services, to sell.

7) National: The New York Times looks into the broken bail bond system. “Defense lawyers, scholars and even some judges say the high bail amounts set for some Baltimore protesters highlight a much broader problem with the nation’s money-based bail system. They say that system routinely punishes poor defendants before they get their day in court, often keeping them incarcerated for longer than if they had been convicted right away. ‘It sets up a system where first there’s the punishment, and then there’s the opportunity to go to court for trial,’ said Paul DeWolfe, the Maryland state public defender.”

8) National: The water privatization company SUEZ Environnement has opened a new North American corporate headquarters in Paramus, NJ. “In 2014, the New Jersey Economic Development Authority approved a $5.5 million state tax break to keep the company and its jobs in New Jersey.”

9) National: Water privatization companies are more optimistic that they will get access to federal support, pinning their hopes on WIFIA, Qualified Private Infrastructure Bonds, and 2016 budgetary support for “public private partnerships.”

10) National: Accenture pushes its cloud-based fare collection system to transit agencies. The company claims “it can be integrated into an existing technology infrastructure without requiring additional hardware.”

11) National: Writing in Capital and Main, Donald Cohen of In the Public Interest looks at a growing wave of IT insourcing by public authorities. “It’s become painfully clear that governments can no longer afford to simply buy the claims of corporations seeking multimillion dollar contracts. Claims of “cost-savings” and “efficiencies” must be properly evaluated and compared directly with the current provision of public services. Insourcing might just be the newest trend in IT services, and it is great news for taxpayers.”

12) National: Health Affairs looks at several examples of what it sees as successful “public-private partnerships” between state health agencies and large private employers and commercial health plans. No less-than-successful models are discussed.

13) National: Terry Brown of Wired2Fish.com warns of the impact of the privatization of water on lakes and rivers. “Private interests have a right to use public water as long it’s not to the detriment of a healthy public watershed.”

14) California: CalPERS, the public pension fund, is to hire more external managers for its infrastructure portfolio. This is an exception “as it looks to reduce the cost, risk and complexity of its portfolio by reducing the number of direct relationships with external money managers from 212 to about 100.” [Sub required]

15) Florida: A federal judge has cleared the way for issuance of $1.75 billion of Private Activity Bonds to finance the private All Aboard Florida rail line. [Sub required]

16) Indiana: Gov. Pence cobbles together a secret deal with GTECH to lower income targets for the Hoosier Lottery after income from the privatized system falls short. “Under the plan, GTECH Indiana is entitled to half of all lottery profits above $290 million during the 2016 budget year that begins July 1, instead of having to make $360 million before collecting a dime other than its approximately $13 million annual management fee.” At the time of the privatization, “a consultant hired by the state had projected the lottery could increase its profits by 40 percent to 60 percent simply by changing some of its own operations. But in the end, Browning insisted the state would do better by hiring a private company.”

17) Indiana: The Indianapolis City-County Council again rejects a plan to build a criminal justice center “public private partnership.” Democrat Frank Miscari “said scaled back or not, it doesn’t have enough support—especially with the sheriff and courts coming out against it. ‘It’s not going to pass, hopefully with the next mayor that gets in we’ll come up with some sort of plan for that,’ said Miscari.”

18) Maryland: The Washington Post reports that Maryland transportation secretary Pete Rahn is backing a scaled down version of the Purple Line light rail “public private partnership” if “the price tag is trimmed by about $300 million from the estimated $2.45 billion cost and that Montgomery and Prince George’s counties pay a bigger share.” It is unclear whether the counties will agree to the higher subsidies.

19) Maryland: Privatization is causing laundry costs to soar, says the Hospital Employees’ Union. “Financial statements obtained by the HEU show payments for private laundry contracts made by Vancouver Coastal Health, Fraser Health and Provincial Health Services authorities, as well as Providence Health Care (PHC), grew by $23 million, or 170 per cent, since 2007.”

20) Maryland: The state has applied for a $27.8 million federal grant to study the possibility of building a high speed MAGLEV rail line from Washington to Baltimore. The “privately sponsored rail initiative” would also receive financing support from the Japanese government.

21) Michigan: The Michigan Daily denounces the reopening of the Baldwin prison for GEO Group’s use. “Outsourcing criminal justice initiatives to for-profit companies is a strategy that hasn’t worked well in Michigan in the past. It has created human rights violations that are a stain on the Michigan Department of Corrections, and there’s no indication of any significant change. (…) Allowing this prison to reopen puts Michigan on the wrong side of criminal justice reform. An industry that relies on mass incarceration to profit will not work to rehabilitate prisoners, but will instead strive to keep more prisoners for longer periods of time.”

22) Missouri: The state is reviewing bids for a consultant to study private financing of public infrastructure. “But exactly what might be built with the new financing model is a mystery. (…) The RFP itself provides only vague clues about what might be financed.”

23) New York/Pennsylvania: New York City terminates Corizon’s $131 million contract, one of the for-profit company’s largest, to provide heath services at Rikers Island after a scathing report. “The Report highlighted acute failures in Corizon’s hiring processes and treatment of mentally ill inmates. The investigation also revealed the City’s Department of Correction and Department of Health and Mental Hygiene, both responsible for supervising Corizon, failed to properly oversee the company’s hiring and supervision of clinical staff.” Corizon rejected the findings of the six-month investigation. NYC chief of investigations Mark Peters discussed the report and the city’s plans on Brian Lehrer’s show last Thursday.

Allegheny County also fired Corizon after “10 inmates died and the inmate mortality rate at the jail increased to double the national norm.” The county and Allegheny Health Network are teaming up to provide inmate health services. Corizon “has lost five contracts with state prison systems over the past three years and is fighting to hold on to others.” The company is owned by Valitas Health Services, which is backed by the private equity group Beecken Petty O’Keefe. Private equity has moved in to reap profits from prisoner healthcare needs.

24) New York: Staten Island DA candidate calls on the Mayor’s office to build a justice center using a “public private partnership.”

25) Ohio: Dr. Barbara Brothers, Dean Emeritus, Youngstown State University, and current chair of the Education Committee of the Greater Youngstown League of Women Voters, looks into the monopoly role of Pearson in the state. Pearson “has been given enormous control over K-12 public schools in Ohio by the Ohio legislature and governor. Pearson effectively controls what is taught, who graduates, and even who gets a second chance at a high school diploma through the General Education Diploma (GED) examination. (…) Since 2013, Pearson tests even license teachers in Ohio. Because the tests are designed and graded by Pearson, the company and its employees determine what teachers need to know in all particular teaching fields–English, science, history. Colleges must address what Pearson puts on the tests so that their students will be licensed to teach in Ohio initially and, later, when a teacher seeks professional advancement.”

26) Pennsylvania: In an important victory for responsible contracting, Philadelphia International Airport workers win their battle for $12 an hour. “What’s more, the airlines promised they would send a strong message to their contractors that the airlines will not oppose union organizing efforts. (…) Gabriel Morgan from the Service Employee International Union tells us, ‘Finally, at least they will have their legal rights respected and they will actually make at least $12 an hour. We think that is a great first step.’”

27) Pennsylvania: Parents and the Philadelphia Federation of Teachers are fighting efforts to outsource the jobs of school nurses. “Helen Gym, who by virtue of her May primary victory is a shoo-in for a Democratic at-large City Council seat, noted that schools were a top issue in recent races. ‘If elections matter, then let this one be heard loud,’ Gym said. She railed against privatization, saying that parents support teachers, nurses and their union. Labor leader John Dougherty echoed that sentiment in a statement, saying parents want certified, unionized nurses.”

28) Pennsylvania: Scranton looks for solutions to deal with its aging and underutilized parking garages. “As it is unlikely that privatizing garages and meters would produce enough revenue to retire the authority’s debt of around $53 million, the city still would be on the hook to cover the remainder, called ‘stranded debt.’ The city has ballpark-estimated that privatizing parking could produce $22 million, leaving $31 million of stranded debt, but actual numbers would depend on privatization bids.”

29) Texas: Wrangling continues over HOV vs. tolled extra lanes in Dallas. “I told him this: My daughter lives in McKinney and drives to work in Dallas every day. She complains that Central’s HOV lanes are so lightly used they’re a joke. Why, I asked Leach, shouldn’t the excess capacity be available to busy commuters for a price? His comeback was this: Why shouldn’t the lanes be converted wholly into a free lane, since taxpayers paid for them already?”

30) Virginia: General Assembly delegate’s 30 year career is upended, in part due to his failure to oppose the Midtown Tunnel “public private partnership.” His opponent’s statements on tolls damaged Johnny Joannou’s Democratic primary chances. “Heretick alleged that Joannou was absent when the state negotiated the public-private partnership that brought tolls to the Downtown and Midtown tunnels to pay for a second Midtown tube.”

31) Virginia: The Virginian-Pilot suggests that if the companies comprising U.S. 460 Mobility Partners ever hope to bid on future “public private partnership” deals, “their willingness to return unearned money will be necessary to restore public trust.” The partnership was paid $256 million for a P3 road that never got built.

32) International: The Ontario Health Coalition is leading a series of Regional Days of Action to protest hospital cuts, closures and the privatization of hospital/home care services.

33) Think Tanks: The Detention Watch Network and the Center for Constitutional Rights publish a new report on private profiteering from immigrant detention. “The study examines how private contractors have used guaranteed minimums to profit from detention centers. That pressure, the study says, may have caused Immigration and Customs Enforcement to increase the number of immigrants they detain and to hold those immigrants for significantly longer periods than needed.” [Report]

34) Industry Report: ACE Group (ACE Construction) has produced a short report on the insurance and other risks faced by construction companies in “public private partnerships.” “‘The use of P3s has started to gain ground in the U.S., and many contractors are encountering these partnerships for the first time, particularly in states such as Florida, Texas and California,’ observed Mr. Buonpane. ‘While there are significant benefits to P3s, the complexity and long-term nature of these projects creates a set of unique risk challenges from which the traditional insurance program approach may no longer be a fit. Before engaging in P3s, participants should work with their brokers and an insurer who has demonstrated experience in both the construction industry and with P3s to help mitigate this new host of expanded risks.’” [Report]

Legislative Issues:

1) National: Solid labor unity blocked congressional consent to “fast track” the sweeping Trans-Pacific Partnership. Public employees and service workers joined together with private sector unions in a well-planned and tough campaign. Among their concerns was that TPP would promote privatization of public services, and undermine environmental, financial services, and other regulations. “Allowable regulations could not be ‘more burdensome than necessary to ensure the quality of the service,’ according to TiSA’s domestic regulation annex.”

2) National: Congressional underfunding of affordable housing leads to pilot privatization program. “Infill housing calls for some of the ‘underused’ spaces in public housing projects to be leased out to private developers, who will then be charged with building a mix of low- and market-rate housing on the sites. Among some advocates, the plan has fueled fears that the city is opening the door to privatization.”

3) National: The House Transportation Committee is unhappy with the U.S. Army Corps of Engineers for not yet producing implementation guidelines for the 2014 Water Resources Reform and Development Act, especially on WIFIA, the finance section of the law. WIFIA promotes private financing. [Sub required]

4) National: Sen. James Inhofe (R-OK) urges Congress and the Defense Department to delay privatization of military commissaries. “If Congress wants DoD to look at privatizing commissaries, Congress should direct DoD to specifically research that effort so that we can make an informed decision. This is why I and Sen. Barbara Mikulski, D-Md., have introduced a bipartisan amendment that would put the brakes on privatizing commissaries and first require an assessment of how this would impact our military and veterans as well as their families.”

5) Alabama: The possible privatization of the state’s liquor stores will be considered by lawmakers. “The new Alcoholic Beverage Control Reform Task Force will study the issue and outcomes in other states and report its recommendations by January.”

6) Hawaii: Gov. Ige signs legislation that “authorizes the Maui Region of the Hawai‘i Health Systems Corporation to enter into negotiations for a public-private operational and management agreement. The partnership would be subject to approval by the Governor, the HHSC and the Maui region Board of Directors.”

7) Texas: Lawmakers pass a bill creating a “public private partnerships” agency. “The new legislation, which has been sent to Governor Greg Abbott for signing, would create the Center for Alternative Finance and Procurement, which would provide consulting services to state entities on P3 best practices and alternative public infrastructure procurement, the Texas Infrastructure Council, a P3 advocacy group formed in 2014, said in a statement.” [Sub required]