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This Week’s Outsourcing Scan 7-20-2015

Update: Upcoming Outsourcing Issues. July 20, 2015

1) National: Donald Cohen of In the Public Interest compares the experiences of two cities with water privatization. Coatesville, Pennsylvania’s city officials sold off the municipal water system to American Water, landing the city’s low income residents with hefty rate hikes. Missoula, Montana’s elected leaders and attorneys courageously and successfully fought for the right to regain control of their public water system after it had been privatized.

2) National: As Medicare turns 50, the Philadelphia Inquirer hosts a discussion of whether it should be privatized. Robert I. Field, professor of law and health management and policy at Drexel University, says “that’s the direction we should be moving: toward savings that are achieved through better care that’s coordinated and patient-centered, and addresses the challenges patients face once they return home. Privatization—especially when it’s forced upon vulnerable populations like seniors living on fixed incomes, often with multiple, chronic health conditions—doesn’t lower costs, it simply shifts the risk onto those who can least afford it.”

3) National/Kansas: The Kansas City Star looks at boom and bust turmoil in “the swarming world of education entrepreneurs.” Joe Robertson reports that “I’m crazy enough to believe people will invest in it,” she said. “Why not have some imagination and believe in magic?”

4) National/NevadaJeb Bush campaigns at a Carson City charter school.

5) National: The American Federation of Teachers, which has endorsed Hillary Rodham Clinton for president, asked some leading Democrats for their positions on a number of issues, including privatization of education and outsourcing of public services. Some excerpts: 

Hillary Clinton: “I do not believe that we should be contracting, outsourcing, or privatizing work that is inherently governmental in nature, including school services and state and local government services.”

Bernie Sanders: “I am strongly opposed to the outsourcing and privatization of public services. The reality is that many private contractors provide jobs with low pay and no benefits with little or no training. (…) In the long-term, in most instances, privatization leads to poor service, high turnover, and an overall increase in taxpayer dollars.”

Martin O’Malley: “Providing excellent and innovative education should be the goal of charter schools—not expansion for the sake of profit. We need strong standards, oversight, and transparency to ensure that charters are acting in the best interest of our kids — and are serving the goals of our education system as a whole.”

6) National: As President Obama becomes the first sitting chief executive to visit a federal prison, and the media are filled with stories of liberal-conservative cooperation on sentencing reform, William C. Anderson sounds a note of caution about the Koch brothers’ commitment to the issue. “So what’s motivating the corporate elite’s interest on this social justice issue? One likely answer is that there are special interests who see prison reform as an opportunity to push for privatization, and make money.”

7) National: Writing in National Review, Victor Nava of the Donors Trust-backed Franklin Center looks at growing concern across the ideological spectrum about corporate data mining in the classroom by private companies. “The classroom should be a safe space for students to learn, not for corporations to learn about them.”

8) Arizona: The story of why prisoners rioted at the MTC-run Arizona State Prison in Kingman is emerging. Pressure had been building for months, and a former employee says they knew a riot was coming. “‘Pure chaos’ is how one inmate described the riot in a letter to his mother that was provided to the NBC affiliate in Phoenix. The man also said inmates rioted because they felt officers mistreated them and were excessive in the use of Tasers and pepper spray.” Other factors included the deterioration of healthcare once MTC took over that responsibility, and that “employee morale is horrible … since correctional officers are made to work copious amounts of overtime—sometimes 16 and even 20 hours a day—and fatigue … could have played a role in the riot and disturbances.”

9) California: The Sacramento Bee reports that “Twin Rivers Unified school board President Linda Fowler has received thousands of dollars in consulting fees from a new adult charter school that she was instrumental in establishing last year.”

10) California: Whittier steps up its outsourcing of trash collection, and frets about increased attrition and taking of sick leave. “‘It’s fairly common for these kinds of issues to come up when people are about to lose their jobs,’ Pelser said.”

11) Florida: It looks as if Marion County public library supporters have won a victory. “Privatizing Marion’s library system is ‘not on the table,’ County Commission Chairman Stan McClain said at the beginning of Wednesday morning’s budget workshop. The packed house cheered.” But outsourcing “does remain an option for other services.”

12) Florida: In the wake of reports of misspent funding at the Eagle Arts Academy in Wellington, the Palm Beach Post says “Eagle Arts, one the county’s largest, is not the first charter school to have issues around finances. But it is the first to have questions raised about whether profits are being placed before students. That type of profiteering attitude, legal or not, cannot be allowed to fester.”

13) Florida: Miami Dade County’s proposed budget includes the possible use of “public private partnerships” on county projects. “The proposed budget identifies 689 capital projects across all strategic areas, many of which are ideally suited to be carried out using a P3 model. In the public safety realm, the County is aiming to continue ongoing major capital maintenance projects to all correctional facilities to include communications infrastructure expansion, inmate housing improvements, mental health renovations, and major rehabilitation of the Pre-Trial Detention Center. (…) [This includes] a biosolids processing facility, for which WASD will soon issue a solicitation to design, build, and operate. WASD also plans to issue the final request for qualifications for the South Miami Heights water treatment plant by the fourth quarter of this year.”

14) IllinoisThe University of Illinois is to outsource food services at sports venues to Sodexo. “The new arrangement with Sodexo provides economies of scale that allow the athletic department to recoup more income.”

15) LouisianaThe privatization deal for LSU’s Shreveport and Monroe hospitals “seems to be imploding.” The Associated Press says “maybe that was inevitable when university leaders agreed to a contract filled with blank pages or when they chose a manager with no experience running a patient care facility.”

16) Maryland: An old question has resurfaced about the Purple Line: Will the money be there to build it? “Negotiations are underway between MDOT and Montgomery and Prince George’s counties, both of which must cough up more money for the rail line’s construction, the governor said. The likely sticking point: How much cash the state will demand in addition to the counties’ ‘in-kind’ contributions, such as county-owned land along the 16-mile alignment between Bethesda and New Carrollton.”

17) Massachusetts: A week after the legislature passes a budget weakening an oversight law on privatization, Gov. Baker appoints a panel to reform the MBTA transit system. “Joseph ‘Joe’ Aiello, partner and director of business development for North America at Meridiam Infrastructure, is chair of the board. The other members are Steve Poftak, the executive director of Harvard Kennedy School’s Rappaport Institute for Greater Boston; Brian Lang, president of UNITE HERE Local 26, a union that represents hotel and food service workers; Lisa Calise, chief financial officer for the Perkins School for the Blind in Watertown and former chief financial officer for the city of Boston; and Monica Tibbits-Nutt, executive director of the 128 Business Council.” The panel holds its first meeting tomorrow.

18) Massachusetts: Boston shows the world that municipal government can do innovative IT. Still, smaller governments face a challenge.

19) Massachusetts: MetroWest opens its new bus hub in Framingham. “The Authority seeks to privatize the operation, own the assets, and would use a small percent of the revenue generated to underwrite its transit operations.”

20) Michigan: The state is looking to slash costs in the prison system, possibly in healthcare. “In a report by the Michigan Prosecuting Attorneys Association, the corrections budget’s largest expense is prisoner health care, which was at 14.5 percent in 2013.” [MPAA report]

21) Michigan: After arguing that privatization of prison food services would save money, the state will pay an additional $13.7 million over three years to the company that is replacing Aramark, whose contract was terminated. The new deal also includes a food service form of widely-criticized bed guarantees: “The Trinity contract also allows the company to hike meal prices if there are unanticipated increases in the minimum wage or government taxes, or if there is a drop in Michigan’s prison population. The Aramark contract contained no such provisions.” AFSCME is attempting to stop the deal, arguing that public service workers can do better and should be able to bid on the work.

22) Nebraska: As the new head of the state’s HHS department tries to enable the agency to recover from serious problems, including a failed privatization of the child welfare services system, he faces a number of challenges.

23) New Jersey/National: Writing in The Nation, James F. Kelly looks at Gov. Chris Christie’s role in pushing water privatization in New Jersey. Lawmakers “have passed legislation that attempts to silence the voices of communities like Trenton. The Water Infrastructure Protection Act (WIPA), signed by Governor (and presidential candidate) Chris Christie in February, empowers municipalities to sell their water utilities to private corporations without a public vote.”

24) New JerseyJersey City workers warn that 911 services may be outsourced. “Daniel O’Connell, who has worked in the radio room for six months, told the council today that an outside firm would only care about ‘profits.’ ‘Giving us people who truly care for the service we provide … is the first step,’ O’Connell said. ‘A corporation won’t do that.’”

25) New Jersey13 charter school applications have been turned down by state officials; 9 move to the next stage of the selection process for new charters.

26) New York: State education commissioner MaryEllen Elia tells Buffalo to fix its schools or she will step in under a new law to appoint receivers with unprecedented powers. “A receiver could be an individual educator, a nonprofit organization, a charter school or even another school district.”

27) Ohio: Another major charter school scandal hits the state, as a top education official resigns and pressure grows on lawmakers to pass charter school accountability legislation. The Akron Beacon calls for a state investigation, and asks “What did Richard Ross, the state school superintendent, know and when did he know it?” The state education department has halted evaluations and announced it has retracted its evaluations of charter school sponsors. “The Ohio Distance and Electronic Learning Academy and the Ohio Virtual Academy had received F grades but were not included in the schools’ evaluations” by the School Choice director for the Education Department. Officials said David Hansen, who resigned on Saturday, “was legally bound to report all the grades. The omission boosted the ratings of two oversight agencies, which could make them eligible for more state perks. Hansen’s wife is chief-of-staff to Gov. John Kasich.” Before Hansen was hired, he was a lobbyist for the National Association of Charter School Authorizers. [House Bill 2]

28) OhioEmployees unionize three Youngstown charter schools, a first in the state. “As advocates for their students and community, the aspiring Summit Academy members will press for professional respect, greater rights as student advocates, a career path, and greater management transparency” said state Eric Ensley, a teacher at Summit Academy Secondary School and Kylie Luca, a teacher at Summit Academy Youngstown. Work on a first contract now begins.

29) PennsylvaniaCharter schools continue to drain students from regular public schools, causing enrollment and financial difficulties. “When students leave districts, state funds follow them to their new schools. Districts pay charter schools between $10,000 and $15,000 a year per student and as much as $34,000 for each special education student. (…) ‘We are literally being destroyed by charter schools,’ Woodland Hills Superintendent Alan Johnson said. ‘It is our number one issue by far.’”

30) PennsylvaniaStandard & Poor’s lowers the investment outlook for Propel Braddock Hills charter school, which has not received a renewal to operate. “Fiscal analysts cited multiple issues with the district’s ‘weak cash position.’ (…) The report also noted the school’s ‘relatively low’ academic performance as a credit weakness and potential hindrance to the school’s charter renewal process.”

31) Tennessee: In the midst of growing national concern over mass incarceration and excessive sentencing, Gov. Haslam is considering longer sentences for inmates in the state. “The enhanced penalties under consideration would boost the prison population in Tennessee by 4 percent over a five-year period, according to a report by Vera Institute of Justice. The discussion occurs as the state already has prisons at capacity, struggles to control incarceration costs and deals with a shortage of correctional officers. It is also being considered as Corrections Corporation of America expands its footprint in Tennessee.”

32) VirginiaIndustry pressure mounts to procure I-66 improvements as a “public private partnership.” A new group, Fix I-66, formed by veteran Republican lobbyist Anthony Bedell, a former chair of the Fairfax County Republican Committee and legislative aide to Bush labor secretary Elaine Chao, has been pushing for a P3. The Transportation P3 advisory committee will consider the proposal at a meeting on August 17. Gov. McAuliffe’s administration has reserved its decision on the I-66 procurement model, and recently passed tough new P3 transparency and accountability legislation. A decision on I-66 will be announced on December 16. [Sub required]

33) Revolving Door News: Sen. Tammy Baldwin (D-WI) and Rep. Elijah Cummings (D-MD) introduce legislation that would bar employees moving to the public sector from receiving incentive bonus payments. “We can’t afford to have a revolving door working to stack the deck in favor of Wall Street and against hard working Americans who are struggling to get ahead,” Baldwin said. [Bloomberg BNA, 7/15/15, sub required; bill text]

34) Think Tanks: David Konisky of Georgetown University and Manny Teodoro of Texas A&M University compare public vs. private compliance rates with federal environmental and other regulations, and look at the incentive structures that help or hinder each to achieve compliance and affordability. “By law, private utilities can set their rates based directly on the cost of their investments, which means they can charge a lot, with little concern for how that impacts low-income consumers.” But it’s also hard “for public utilities to generate the revenue required for crucial infrastructure updates or even simple maintenance.” [Paper: “When Governments Regulate Government,” forthcoming in the American Journal of Political Science]

Legislative Issues:

1) National: As staffers worked over the weekend to try to sort out conflicting positions on a transportation funding bill, agreement is elusive. Last week, a legislative fight broke out over proposed offsets, including an effort to use pension money to finance road projects. LIUNA and others are pushing for a long term bill, the chances of which are receding. After pushing back against Republicans for a long term bill, some House Democrats finally moved behind a short term fix last week. The Senate has yet to make up its mind.

2) National: The Senate passes the Every Child Achieves Act, intended to fix the controversial No Child Left Behind Act. Barbara Mandeloni of the Massachusetts Teachers Association comments, “it is a bittersweet victory to applaud the power of school accountability going back to the states, should this bill become law. While it would allow us to organize locally and make the demands we want for our students and our schools, others have noted that it would mean we have 50 battles to fight instead of one—and that some states are especially weak in their readiness to fight.”

3) National: As the list of untreated veterans grows, the Las Vegas Review-Journal calls for the privatization of the Veterans Administration. Meanwhile, the VA “says it might have to shut down some of its hospitals next month if Congress fails to address a $2.5 billion shortfall for the current budget year.”

4) NationalSens. Portman and Schumer continue to press for tax breaks on overseas corporate profits, with some of the proceeds to go to infrastructure. But Philip G. Cohen, an associate professor of Taxation at Pace University Lubin School of Business, warns that any action on the proposal must not cross “red lines.” Cohen writes, “even under the current international tax system, the Internal Revenue Service has enormous difficulty policing the artificial shifting of profits from the U.S. to related foreign entities. Any international tax reform agreement should be made in a fiscally responsible manner and meaningfully address inversions. It should not provide a major incentive to shift profits or jobs overseas.”

5) NationalU.S. PIRG Tax and Budget Advocate Jaimie Woo has denounced the proposal, writing that “Senate lawmakers caved to special interests and neglected the general public. By offering an international tax reform framework that fails to close tax loopholes, Sens. Schumer and Portman supported a tax system that would accelerate tax avoidance to the worst degree. Rather than prioritizing closing corporate tax loopholes and ending incentives for companies that register their headquarters overseas, the International Tax Reform Working Group chose to move to a territorial-like system, which would exempt most corporate profits from U.S. tax if a company claims they were booked overseas. This would reward the country’s most successful tax dodgers, and further incentivize U.S. multinational corporations to shift profits overseas to avoid tax.” [USPIRG comments on the tax repatriation proposals]