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This Week’s Outsourcing Scan 6-20-2016

1) NationalThe Orlando attack turns a spotlight on G4S, whose 9-year employee Omar Mateen committed the massacre. “It now faces questions about its vetting practices—a paramount skill for a security company—with the disclosures that Mr. Mateen remained an employee after it learned in 2013 that he had been investigated by the Federal Bureau of Investigation, and that a local sheriff that same year insisted on his removal from the courthouse where he was a contract security guard.” A psychiatrist that G4S told the state of Florida had screened Mateen “said she did not see him and she was not even living in Florida at the time when G4S security firm ordered the evaluation.” G4S is a significant government contractor, providing security services to federal, state, and local entities and law enforcement agencies across the country.
 
2) National: Ghita Schwarz of the Center for Constitutional Rights and Silky Shah of Detention Watch Network call for an end to prison lockup quotas, secret perks for corporations in federal contracts, and profiting off jailing immigrant families. They say “dramatic increases” in GEO Group and CCA’s earnings “are attributable in significant part to lucrative immigration detention contracts with special prerequisites: ‘guaranteed minimum’ payments, contractual provisions that require the government to pay local jails to incarcerate a minimum number of people per day. These guaranteed minimums function as local lockup quotas, incentivizing the detention of immigrants in specific facilities, almost all of which are operated or serviced by private contractors.” 
 
CCR and the Detention Watch Network have just released a report on the issue, Banking on Detention: 2016 Update. The report draws on documents from three FOIA sources: “a subset of contracts recently obtained through FOIA litigation by the National Immigrant Justice Center (NIJC), a different subset of contracts ICE made available through its FOIA Library, and a spreadsheet obtained by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University through a FOIA request.”
 
3) NationalLA Times columnist Michael Hiltzik says “finally, the feds move to fire an incompetent watchdog over for-profit colleges.” Last Wednesday, Department of Education staff recommended the revocation of the Accrediting Council for Independent Colleges and Schools’ recognition as an accreditation body. ACICS accredited the now-bankrupt
Corinthian Colleges for-profit chain. The recommendation now goes to the National Advisory Committee on Institutional Quality and Integrity, which meets this week. Then education secretary John King will make a decision. Hiltzik says “the ACICS case underscores the drawbacks of governmental outsourcing of its regulatory authority to outside agencies, especially self-regulatory bodies.” [DOE staff report]
 
4) National: Season four of Orange is the New Black is out, and it deals with some of the problems created by for-profit prisons illustrated in Season 3. Piper Kerman, author of the book that OITNB is based on, says “a new research brief from In the Public Interest, a nonprofit advocating for best practices in government contracting, details the several ways private prison companies negatively impact prisoners, correctional workers, their families, their communities, and American taxpayers.”
 
5) National: Fitch Ratings says American colleges and universities will be increasingly relying on ‘public private partnerships’ for their expansion and redevelopment needs. “According to the report, the benefits of the P3 model include protecting the college or university from operation and management costs, lifecycle renewal costs and construction risk. ‘In addition, the P3 procurement process, using multiple bidders, can lead to innovative approaches,’ Fitch states. (…) Higher education institutions have traditionally raised debt to fund capital improvements. The debt has generally been secured by general revenues or by revenues generated from a particular service—parking, dining and/or housing. ‘This model is expected to remain a primary choice for capital investments, and similarly, has tended to work well over time,’ Fitch states.” [Sub required]
 
6) NationalPrivate healthcare companies tout their services to public jails and prisons. In the Public Interest has published a report, Buying Access, on how corporations influence decision makers at corrections conferences, trainings, and meetings.
 
7) NationalPro-charter school pressure groups say online charters need tighter regulation. “While the organizations note that they generally ‘support full-time virtual schooling … the results clearly show that significant problems exist within this part of the charter school movement.’ The groups based their conclusions on October 2015 research from the Center for Reinventing Public Education, Mathematica Policy Research and the Center for Research on Education Outcomes that examined online charter school performance.” [Report]. K12 Inc., the widely criticized cyber charter chaindenounces the report as “not collaborative.”
 
8) National: American Postal Workers Union President Mark Dimondstein gave an impassioned defense of the public postal service at the Democratic National Committee (DNC) Platform Committee on Thursday. “‘The public Postal Service, run without tax dollars, is indeed a national treasure. Ecommerce makes it as crucial as ever,” Dimondstein told the panel. ‘Yet its mission is being threatened by many corporate and Wall Street forces that seek to undermine it and privatize it.’” The APWU is hoping to address the Republican National Committee (RNC) Platform Committee as well.
 
9) ArizonaThe state is to pay off GEO Group’s debt for the building costs of Kingman prison and take ownership, though GEO will still run the prison. In exchange GEO will give correctional officers a raise. “‘It sounds like they’ve made a decision to keep their profits instead of pay … what it takes to reduce their turnover,’ said Sen. Steve Farley, D-Tucson. ‘That’s a business problem for them that we are not under any obligation to solve. We’re bailing them out and helping to support a corporate strategy to pay their people peanuts.’ Rep. Eric Meyer, D-Paradise Valley, also made a point to mention that GEO Group’s CEO took a $2.3 million pay raise last year.”
 
10) Florida: A state court judge refuses to block a tax-exempt bond conduit from selling $1.75 billion of tax-exempt bonds for a private passenger rail project. But Indian River and Martin counties have “filed separate federal lawsuits seeking to challenge the U.S. Department of Transportation’s approval of $1.75 billion in private activity bonds for the project. The federal suits—the first ever to contest a USDOT bond allocation—are pending in the U.S. District Court for the District of Columbia. USDOT and All Aboard Florida have filed motions to dismiss the cases, and a hearing is scheduled June 30.”
 
11) Hawaii: Barry Shanoff, general counsel of the Solid Waste Association of North America, gives a rundown of the legal battles over refuse privatization in Hawaii. “So far, organized labor has more than held its own,” he writes. AFSCME Local 646 and United Public Workers have waged aggressive legal battles over efforts to outsource.
 
12) Hawaii: The United Workers Union and Attorney General Doug Chin file a joint status report affirming they are having productive discussions on future plans for Hawaii hospitals. Last month a federal appeals court blocked the state’s plans to privatize Maui’s hospitals. “The parties asked the Court to require a further joint status report on June 30, 2016.” On Friday, a federal court issued an order “allowing the state to resume the transfer of three public hospitals on Maui and Lanai to Kaiser Permanente Hawaii, but is still barring the close of the deal indefinitely.”
 
13) IllinoisKevyn Orr, the private bankruptcy attorney brought in to be Detroit’s emergency manager, floats the idea of a Chicago bankruptcy. “Another panelist, Laurence Msall, president of the local government research organization the Civic Federation of Chicago, took a different tack. ‘We don’t believe that bankruptcy would be an effective way for either the Chicago Public Schools or the city of Chicago to deal with their financial challenges,’ he said, adding that Chicago has the assets and tax base to meet its obligations.” [Sub required]. Jones Day, Orr’s law firm, scored $58 million in fees for the Detroit bankruptcy
 
14) Kansas: In a scorching letter to Republican governor Sam Brownback, whose austerity and tax-cutting policies have savaged public services in the state, Jeff Blackwood, CEO of Pathfinder Health Innovations, announces he’s pulling his business out of the state. “The developmentally disabled continued to suffer when Brownback’s administration pushed a program to privatize the state’s Medicaid program KanCare while at the same time refusing millions of dollars in federal support to expand Medicaid services. Now, three insurance companies administer KanCare as a profit center, and the results are dramatic – significant delays in determining eligibility, inexplicable loss of coverage, caseloads increased, providers struggling to get paid.”
 
15) MarylandThere was mixed news last week on the Purple Line light rail ‘public private partnership.’ While the $5.6 billion project was finally granted an $874.6 million federal TIFIA loan, a lawsuit is being pursued to stop the project. “Lawyers for a group of Maryland residents who oppose the Purple Line said this week in oral arguments before a U.S. District Court in Washington that the project should be halted to determine if the Metro system’s maintenance problems would reduce its projected ridership. The plaintiffs filed a federal environmental lawsuit in 2014 to stop the light-rail project. Passengers that use Metro for a portion of their journeys are expected to account for up to a third of Purple line riders. U.S. District Judge Richard J. Leon said a six-month project moratorium so the state could assess the effects of Metro’s maintenance woes would be reasonable.” Briefs will be filed later this month, after which the judge will rule on the challenge. [Sub required]
 
16) MichiganLansing school board votes to privatize custodial jobs. “The district will begin negotiations with SodexoMAGIC, a partnership between Sodexo Inc. and the Earvin ‘Magic’ Johnson-owned Magic Johnson Enterprises next week, said Superintendent Yvonne Caamal Canul.” Magic Johnson has faced criticism over labor practices before.
 
17) MichiganEastern Michigan University, a public institution, moves to privatize its food services. “A variety of speakers voiced opposition to privatization on Tuesday, June 14, at EMU, in addition to releasing an online petition which approached 700 signatures that evening, urging the university and its Board of Regents not to privatize University Dining Services. (…) Privatizing University Dining Services eventually will jeopardize jobs of AFSCME workers long-term, being replaced by those hired by the vendor, said Professor Howard Bunsis, leading to ‘lower-paid, less-secure employees. The bottom line with privatization is, it may not happen tomorrow, but eventually there is no doubt there are going to be job losses in that unit,’ said Bunsis, the treasurer of EMU-AAUP faculty union. ‘I don’t know how quickly that will happen, but they will eventually be replaced.’”
 
18) New JerseyHackensack residents pack a city hall meeting to denounce a proposal to privatize trash collection. The city has already issued Requests for Proposals. “The Rev. Gregory Jackson, pastor of Mount Olive Baptist Church, raised the racial implications of privatization at the meeting. Most of the minorities employed by the city work in the sanitation department and would be most affected by the plan, he said. ‘If you privatize the sanitation department, you literally destroy any kind of equity in terms of racial equity in our community,’ he said. Mark McCart, a labor representative for United Public Service Employees Union, which represents Hackensack sanitation workers, said the community would continue to be a presence at council meetings until bids are opened Aug. 17. The workers, meanwhile, must cope with the uncertainty of their situation.”
 
19) New York: Addie J. Russell (D-Theresa) introduces a bill in the state assembly to allow Massena Memorial Hospital to affiliate with other hospitals without privatizing. This led the town council to table a motion supporting or refuting the proposal until they could hear the MMH board’s thoughts. Some officials have been waging a determined effort to get the hospital to privatize. However, Town Supervisor Joseph Gray “said he doesn’t think its likely the state government would be able to do anything this session, which has less than a week to go. It would have to clear both legislative houses, plus get the governor’s signature, but there’s no companion bill in the Senate. ‘I don’t think it will be done this session. It will probably be in January,’ he said.”
 
20) New York: Josmar Trujillo, writing in City Limits, says that the weakening of public involvement in city planning has drained the life out of public space. But “will getting out the vote or attending community hearings change this dynamic? Unlikely. Protests that remind us there can be no planning without justice may lead to new doors. [However,] a homogenized, privatized and gentrified city that places people in zones is no city at all.”
 
21) Puerto Rico: The government development bank sets up a registry of investors so it can keep channels of communication open and make it “easier for them to take ‘collective actions,’ which may include debt restructuring votes.” The government cannot “guarantee that the registry would be private because of the Freedom of Information Act.” [Sub required]
 
22) TexasLocal officials reject Serco’s efforts to get into the immigration detention business in Jim Wells County. “‘We wanted to make an informed decision that is best for everybody and we felt were not able to do that because of Serco’s limited time frame,’ said judge Pedro Trevino Jr, the presiding member of the Jim Wells commissioners court. ‘If something would change that could take us back and make us rethink it,’ Trevino said. ‘It would have to be something solid.’ Trevino said he became concerned when Serco told him the facility would be used to house ‘whole families’ including men. ‘Changing what they said in the beginning drew a red flag. I don’t think they were forthcoming.’”
 
23) Washington: State attorney general Bob Ferguson vows to defend the state law banning public funding of charter schools. There is still an impasse on funding for public schools, however. In a brief Friday, “Ferguson said lawmakers should no longer be held in contempt [by the state supreme court for not observing the law] because they have submitted a plan identifying the final steps needed to comply with the court order by 2018 and pledged to reform education funding to offer competitive teacher pay and eliminate dependence on local levies.”
 
24) International: The French Creek Residents Association in BC Canada moves to insource its water system, joining a worldwide trend. “The FCRA’s Rob Williams told the Regional District of Nanaimo (RDN) board Tuesday night that the association wants the RDN to buy the community’s water system because ‘it is privately owned, it’s predicated on profit… we’re paying double the cost on capital expenditures for money we could borrow through the municipal finance authority.’”
 
25) InternationalChina is using an “entrusted school” management model in Shanghai, which “involves high-performing schools providing management and professional support to low-performing schools. The city government backs up this arrangement with substantial financial transfers based on performance. This model differs from the U.S. charter school movement in that often excellent public schools take over low-performing schools, rather than private entities. The twinned schools form joint management and teaching teams.”
 
26) Think Tanks: McKinsey, the global consulting group, releases a report on Bridging Global Infrastructure Gaps. They lay out their “latest thinking on infrastructure financing, including not only strategies for private financing but also measures to encourage public investment.” On privatization and P3s, they say: “Corporate finance makes up about three-quarters of private finance. Unleashing investment in privatized sectors requires regulatory certainty and the ability to charge prices that produce an acceptable risk adjusted return as well as enablers such as spectrum or land access, permits, and approvals. Public-private partnerships have assumed a greater role in infrastructure, although there is continued controversy about whether they deliver higher efficiency and lower costs. Either way, they will continue to be an important source of financing in the future. But since they account for only about 5 to 10 percent of total investment, they are unlikely to provide the silver bullet that will solve the funding gap. Public and corporate investment remain much larger issues.”
 
27) Revolving Door NewsA multibillion dollar hedge fund gained access to internal FDA information by hiring a former high-ranking official turned consultant. “The information flow turned out to be lucrative, leading to $32 million in trading windfalls, federal prosecutors said on Wednesday. (…) At the heart of the case is a former FDA official, Gordon Johnston, the consultant who prosecutors say leveraged his contacts at the agency, where he was deputy director of the office of generic drugs until 1999.”
 
Legislative Issues
 
1) National: Donald Cohen of In the Public Interest points to a feature buried deep in House Speaker Paul Ryan’s new “anti-poverty” plan. “Deep in Ryan’s proposal is a push for something called ‘Social Impact Financing,’ also known as ‘Pay for Success’ or ‘Social Impact Bonds.’ (…) Without careful consideration, this sort of financing could introduce a number of risks into public spending, including perverse incentives, a failure to serve the neediest cases (called ‘creaming’), or a distortion of success measures. It also could limit our imagination about solutions to social problems like extreme poverty and homelessness—due to the way they’re structured, Pay for Success programs typically do not address the complex root causes of many of our social problems.” [ITPI SIB guide]
 
2) National: A bill has been introduced to allow state and local governments to issue $5 billion of tax-exempt private activity bonds to help private interests to buy or upkeep public buildings. The measure seems particularly targeted at public schools. “Kelly’s bill defines qualified government buildings as an elementary or secondary school; public university buildings used for educational purposes; public libraries; courts; hospitals, health care facilities, laboratories and research buildings; public safety buildings including police and fire stations, medical facilities and jails; and government offices. (…) Under current tax regulations, public entities often must choose between taxable P3 financing or a non-P3 structure using tax-exempt bonds. If the legislation were to be enacted, P3 deals could use tax-exempt financing, thus expanding municipalities’ ability to take advantage of the P3 structure for public building projects. Qualified PABs are also commonly used to fund transportation and public works projects.” [HR 5361]
 
3) National: The Project on Government Oversight applauds the passage of FOIA reform legislation. “This legislation enhances the public’s ability to hold its officials accountable and understand the workings of our government. Its most important provisions include: the codification of the presumption of openness; curbs to the excessive use of Exemption; improved dispute resolution; and requirements to make more preemptive disclosures.” President Obama is expected to sign the ill into law.
 
4) North CarolinaThe state may hand over some low-performing elementary schools to charter operators, but experts are cautioning against the move. “Opponents say the plan would ignore the root causes of poor achievement that require additional funding: quality pre-kindergarten programs, teacher retention and socioeconomic-driven barriers like mental and physical health care. Nearly a quarter of North Carolina children live in poverty. “We don’t have a public education problem here in North Carolina, we’ve got a poverty problem,” said Mark Jewell of the North Carolina Association of Educators.” The measure faces an uphill battle in the face of bipartisan opposition in the Senate and House.
 
5) North Carolina: The cost for unwinding the Interstate 77 ‘public private partnership’ project would top $800 million, according to Transportation Secretary Nick Tennyson. “If HB 954 becomes law, the Department of Transportation will not be able to proceed with confidence on other projects if a bill can be used to rearrange or cancel construction contracts, Tennyson said. (…) According to KPMG, while contracts for public-private partnership toll [and] managed lane projects have been renegotiated, no contracts are known to have been cancelled for cause or convenience at this stage in the construction process in the United States to date,” the fiscal note said.” [Sub required]

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