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This Week’s Outsourcing Scan 6-27-2016

1) National: In “When You Dial 911 and Wall St. Answers,” The New York Times takes an in-depth look at how Wall Street private equity firms are taking over and transforming public services—for the worse. “The business of driving ambulances and operating fire brigades represents just one facet of a profound shift on Wall Street and Main Street alike … Since the 2008 financial crisis, private equity firms, the ‘corporate raiders’ of an earlier era, have increasingly taken over a wide array of civic and financial services that are central to American life.
 
“Today, people interact with private equity when they dial 911, pay their mortgage, play a round of golf or turn on the kitchen tap for a glass of water. And in many of these businesses, The Times found, private equity firms applied a sophisticated…playbook: a mix of cost cuts, price increases, lobbying, and litigation. (…) Cities and towns are required to offer citizens a free education, and they generally provide a police force, but almost everything else is fair game for privatization.”
 
2) NationalMother Jones publishes a blockbuster insider account by Shane Bauer of what it’s like to be a corrections officer inside a Corrections Corporation of America prison: “‘Welcome to the hellhole,’ a female CO greeted me the first time I visited the segregation unit. A few days later I’m back at Cypress with Collinsworth and Reynolds to shadow some guards. The metal door clicks open and we enter to a cacophony of shouting and pounding on metal. An alarm is sounding and the air smells strongly of smoke. (…) Toward the end of a long hall of cells, an officer in a black SWAT-style uniform stands ready with a pepper-ball gun. Another man in black is pulling burnt parts of a mattress out of a cell. Cypress can hold up to 200 inmates; most of the eight-by-eight-foot cells have two prisoners in them. The cells look like tombs; men lie in their bunks, wrapped in blankets, staring at the walls. Many are lit only by the light from the hallway. In one, an inmate is washing his clothes in his toilet. ‘How are you doing?’ says a smiling white man dressed business casual. He grips my hand.”
 
Listen to an interview of Shane Bauer by Reveal, a project of the Center for Investigative Reporting.
 
In an accompanying sidebar, Clara Jeffery, editor in chief of Mother Jones, details how she was sent a warning letter “from the same law firm that had represented a billionaire megadonor in his three-year quest to punish us for reporting on his anti-LGBT activities. When he lost, he pledged $1 million to support others who might want to sue us, and, though we won the case, were it not for the support of our readers the out-of-pocket costs would have hobbled us.” Recode’s Noah Culwin reports on efforts to intimidate the media.

3) National: In the Public Interest releases a report on how private prison companies increase recidivism. Research on Minnesota found that “incarcerating a person in a private prison increased the chances of the person being rearrested by 13 percent, and increased the chances of the person being reconvicted by 22 percent.” In Oklahoma, “incarcerating people in private prisons increased the likelihood of recidivism by up to 17 percent.” In Florida, another study found “incarcerating young people in public facilities instead of private facilities reduced the likelihood of them being charged with a criminal offense within one year of release between 7.3 and 8.5 percent.” 
 
In the Public Interest also reports that “prison telephone companies charge high calling rates and fees and influence legislators to ban prisoner cell phones, which has the combined effect of reducing the contact between prisoners and their home communities, increasing recidivism.”
 
4) National: In the second installment of its series on privatization (the first being Donald Cohen’s history of privatization) TPM publishes a report by David Dayen on profiteering by private companies in the prison-industrial complex. “It’s so pervasive that the phrase we use to describe the industry – “private prison companies” – is far too limiting to accurately depict the situation. Actual housing of convicts in prisons and jails is only one part–perhaps the smallest part–of the overall industry revenue stream. Private companies seek to pull profits from the moment someone is suspected of a crime to the final day they meet with a parole officer.”
 
5) National/Michigan: Veterans, union workers, and family members protest the proposed privatization of veterans care at dozens of VA hospitals across the country. The rallies are being organized by the American Federation of Government Employees, which represents 230,000 VA doctors, nurses, psychologists, benefits specialists, and other workers across the country.
 
The protests continue this week. “Amie Pounds, a national organizer for AFGE, and James Jr. agreed that the congressional commission’s assessments have been not only inaccurate but also swayed by private corporations’ profit interests. According to Pounds, of the 15 members on the commission, not one can be linked to a mainstream veterans service organization. Rather, the panel is comprised of primarily private hospital executives who stand only to benefit financially from privatizing the VA. ‘They’re Koch Brother employees, big CEOs for Henry Ford or work for the Cleveland Clinic—they have a vested interest in getting their fingers in the VA’s health care pocket book,’ Pounds said, referring to the congressional commission.”
 
6) National: In a major victory for opponents of for-profit colleges, the National Advisory Committee on Institutional Quality and Integrity pulls the plug on their largest accrediting agency, ACICS. The agency protested that it was making improvements, but panelist Paul LeBlanc of Southern New Hampshire University, replied, “Are we being asked to believe that the team that oversaw this systematic failure will be the team to turn it around?”
 
7) National: Sen. Charles Schumer (D-NY) calls on the Department of Education to promptly notify students if their colleges are classified as being in a financial danger zone. “The fact that college closures across the U.S. are on the rise demands the U.S. Department of Education implement this warning system requirement as soon as possible,” Schumer said in a statement.
 
8) National: In a somewhat surprising article, Public Works Financing pours cold water on the theory that long lead-times are hindering the success of infrastructure ‘public private partnership’ project proposals. P3 partisans often point to what they consider burdensome public approval processes to say good projects don’t go through. But even Skanska executive Chris Guthkelch weighs in to cite the benefits of close public scrutiny of P3 deals. “One of the upsides of the amount of 3rd party due diligence required to get to commercial close is that every aspect of risk has been carefully worked through and this assures near certainty that the project is going to be delivered on time and to budget.” [Public Works Financing, June 2016; sub required]
 
9) NationalThe New York Times runs a thorough investigative piece on problems with the new Panama Canal project, a good illustration of some of the complexities and risks that can arise in ‘public private partnership’ infrastructure projects.
 
10) National: Municipal bonds rally sharply after the Brexit EU referendum, further lowering costs to finance public infrastructure.
 
11) National/International: Infrastructure investors express relative confidence that they will be insulated from the effects of Brexit, “but read between the lines and investors sound less sanguine about the repercussions of what many observers qualify as the biggest shock to the continent since the fall of the Berlin Wall. Beyond the personal sadness some privately express, wild jitters on the currency and stock markets, added to longer-term harm to the country’s macroeconomic prospects, are creating a climate that makes many industry players feel uncomfortable.” [Sub required]
 
12) California: Jennifer Muir of the Orange County Employees Association denounces the lazy practice of vilifying public employees, and points to regular disasters in IT outsourcing—which have been fixed by in-house employees—to make her point. “So today I want to provide some exposure to the ‘Golden Hub of Innovation Award,’ presented this month by the Association of California Cities–Orange County, jointly to the County of Orange Information Technology Agency and to the County of Orange Procurement Office. The award was given for the in-house deployment of OC Expediter, an enterprise procurement application. Employees from OCIT and CPO collaborated to deconstruct the county’s outdated procurement process and to develop an IT solution that eliminates redundancies and dramatically reduces the risk of human error.”
 
13) California: A charter school association’s lavish campaign contribution apparently tilted the scales in the 30th Assembly District race on June 7. “It is clear the race was affected to some degree by a committee called Parent Teacher Alliance, sponsored by California Charter Schools Association Advocates Independent Expenditure Committee, which poured $948,432 into Caballero’s campaign in the months leading up to the election. As the political arm of the California Charter Schools Association, California Charter Schools Association Advocates promotes charter schools in the public policy arena by supporting candidates who they believe will prioritize their mission in Sacramento.”
 
14) CaliforniaA charter school principal has charged $100,000 to a school credit card. “Due to the abuse, LAUSD downgraded El Camino Real’s charter school financial rating from a 4 to a 1. Though serious financial mismanagement is cause to revoke a charter school’s charter, LAUSD is working to implement financial reform at the school before exploring other options.” The school is run by a nonprofit that receives $32 million in public funding annually.
 
15) California: The University of California Merced is closing in on a massive $1.3 billion ‘public private partnership’ to nearly double its physical capacity by 2020.
 
16) District of Columbia: The DC Office of Public-Private Partnerships issues an advisory that it is about to release an RFP for a P3 project advisor. A presolicitation conference was held last week.
 
17) Illinois: A charter school board director recognizes that he must cope with the budget realities of the district his school exists in. “Quest Board Director Tom Fliege says when they renewed the school charter in 2015 they changed the financial agreement from five to three years. ‘We clearly recognize that we’re all in the same lifeboat and it’s absolutely inappropriate for Quest to expect to have some different reality than the district does,’ said Fliege.”
 
18) Maryland: The Purple Line ‘public private partnership’ reaches financial agreement. A federal case involving ridership estimates is still pending.
 
19) Massachusetts: Diane Ravitch points us to EduShyster, who “provides insight and detail on the story of the Boston turnaround school that didn’t get turned around. Take a low-performing school in an impoverished neighborhood. Give it to a company that never ran a school before. Run through five principals in two years. What could possibly go wrong? Will anyone be held accountable? Why not Mitchell Chester, the state commissioner who created this fiasco?”
 
20) Ohio: The state auditor, who has criticized the Ohio education department for its lax oversight of charter schools and said it may be the worst agency in the state, passes on his concerns to incoming state school superintendent Paolo DeMaria. “At the end of the day, it’s his job to run the department, not mine,” says Dave Yost. “So I’m hoping that the information that we’re providing to him and the insight from our years of work there may help him to focus the mission of the department. It is too broad, I think.”
 
21) New Mexico: A slow moving federal investigation is holding up lawsuits against a former Corizon doctor, Mark Walden, who is accused of sexually abusing dozens of New Mexico inmates. “Some 77 prisoners have filed lawsuits against the doctor and Corizon, the company that hired him. Many of the cases have been settled out of court under secret terms, but eight involving at least 13 inmates remain open. None of the cases has gone to trial. (…) Lawyers representing Walden, Corizon and GEO Group Inc.—a private contractor that runs some prisons in New Mexico and also is named as a co-defendant in some lawsuits against Walden—say they’ve already turned over thousands of pages of discovery and that a direct deposition of Walden would deprive him of a defense in any potential criminal actions.”
 
22) New YorkBuffalo forces Rural Metro to improve ambulance response times. “The city’s Emergency Medical Services Board voted unanimously to serve the company a ‘notice of inquiry.’ The company will then have 30 days to respond to complaints of poor response times and too few ambulances assigned to the city under its five year contract with Rural Metro.” Buffalo Fire Commissioner Garnell Whitfield, who heads the EMS board, says “from the beginning of the contract until now there’s been a lack of compliance with the terms and conditions of the contract.” 
 
Rural Metro is one of the companies mentioned in Saturday’s New York Times piece on the harmful role of private equity in public services (see above). The Times reports that “while under the control of Warburg, Rural/Metro once sent a $761 collections notice to an infant girl born in an ambulance.”
 
23) New York: The Lackawanna Council wrestles with the issue of how best to provide waste services, and decides not to privatize but to impose a fee. “Third Ward Councilman Joseph Jerge stressed the general distaste for the garbage fee. ‘We tried six different budget scenarios, one of which put the garbage fee back in the budget, but it put us over the constitutional tax limit,’ he said. ‘Every single member of the Council is opposed to the garbage fee. Over two years we’ve subsidized the fee with money from the general fund, but it’s still the taxpayers’ dollar. Privatization would cost residents more than the current user fee,’ Jerge added. ‘One way or the other, you’ll pay it. It was never a free service.’”
 
24) Puerto Rico: Resistance is mounting against PROMESA, the congressionally mandated debt restructuring law, over many issues, including privatization. “In a letter to Congress from several conservation and environmental groups, many environmentally damaging aspects of PROMESA were brought up. The first is a criticism of Section 411, which would enable the federal government to privatize thousands of acres of the Vieques National Wildlife Refuge, a protected natural habitat that is home to at least 14 threatened and endangered species, as part of a larger effort to sell public lands for the gain of private enterprises.”
 
25) TennesseeUniversity of Tennessee workers speak out against outsourcing. Diana Moyer, the president of United Campus Workers and a UT staffer, said “the union hopes the next chancellor will be ‘a good steward of the public good (who) supports academic freedom, social justice, living wages and fair working conditions for our campus community. … The new chancellor will need to be a champion for protecting facilities services and preventing an ill-advised outsourcing scheme.’”
 
26) VirginiaAn effort to privatize the management of Prince William County libraries is overwhelmingly rejected by the county’s Board of Supervisors. One resident offers “congratulations to all the people who spoke before the BOCS and to the BOCS for acting in concert with the peoples’ wishes.” A previous effort to privatize the system to LSSI was  rejected.

27) Wisconsin: The Milwaukee Business Journal looks back at this year’s controversy over alleged plans to privatize Mitchell Airport.
 
28) Revolving Door NewsRhode Island appoints a banker as its new debt manager. “In his new role, [Francis] Quinn ‘will work every day to strengthen the oversight of debt issued by municipalities and quasi-public agencies as well as the state,’ General Treasurer Seth Magaziner said. It was unclear whether the state treasury, which administers and manages investments on behalf of the [$7.5 billion] Employees’ Retirement System of Rhode Island under the direction of the State Investment Commission, would also invest in private debt.” [Sub required]
 
29) Think Tanks: The Roosevelt Institute and the Union Veterans Council (AFL-CIO) host a panel discussion on the future of veterans’ care. “Moderator Jackie Maffucci, research director of the Iraq and Afghanistan Veterans of America, asked the seven panelists what they would tell the presidential candidates about the VA from the vets’ perspective, if they found themselves alone in an elevator with the presumptive Republican and Democratic nominees.”
 
Joshua Ulibarri of Lake Research Partners says he would tell them “veterans like the VA. They appreciate the VA [and] they believe the VA does a good job. They believe that the VA nearer to them does a better job than VA [facilities] far away—of course that’s true of almost everything. That doesn’t mean that they don’t have criticism, or things that they would improve. They [vets] have real concerns about for-profit, private medical care. They do not want to be pushed into a system that is voucher-based.”
 
Legislative Issues
 
1) California: The State Senate takes up AB 2833, the widely-followed private equity transparency bill. The bill is intended to provide public disclosure of fees paid by public pensions and other investors on “alternative investments,” such as private equity funds, venture funds, hedge funds, or absolute return funds. It is now working its way through the Committee on Public Employment and Retirement. The bill has been backed by state treasurer John Chiang, AFSCME, and the California Federation of Teachers, but some object to troubling amendments they say would effectively gut the bill Chiang originally sponsored.
 
2) New JerseyThe Newark Star-Ledger reports Gov. Christie’s radical plan to slash education funding has both traditional and charter school supporters up in arms. “This plan would be a disaster if it had a good chance of becoming law. For the last seven years, it has been the pet project of a few far-right legislators who have been unable to win recruits, even among fellow Republicans. Note, too, that not a single education reform group has endorsed this, nor has any organization representing teachers, principals, superintendents, or school boards.”

 

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