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This Week’s Outsourcing Scan 7-5-2016

1) National/IowaThe Des Moines Register gives strong backing to In the Public Interest’s warnings about the risks of privatising government services. “All too often, the short-term savings realized by privatization are negated by the cost of overseeing the work; by poorly conceived contracts that result in diminished public service; by a lack of public accountability and transparency; and by good old-fashioned profiteering. Because so many government employees are unionized, projected savings from privatization are often tied to reduced wages and benefits for workers, or to layoffs. One has to wonder about public agencies that negotiate wages and benefits for their employees and then seek to relieve themselves of those obligations by simply eliminating the jobs.”
 
2) National: VA privatization will be in the news this week as the panel created by Congress to overhaul the VA is expected to release its final recommendations tomorrow. “It will come amid controversial proposals to give all veterans a card to access private doctors and to turn the VA into a not-for-profit corporation. Those efforts to push the department toward privatized care caused near universal blowback from national veterans groups. Unionized VA employees were staging opposition rallies across the country due to fears over privatization in the lead-up to the commission’s VA report. ‘This is about closing VA medical center—closing them, locking them up and doing away with them,’ said J. David Cox Sr., national president of the American Federation of Government Employees.” Stars and Stripes reports that “it remains uncertain how much of the proposal will survive into the final recommendations set to be delivered to President Barack Obama.”
 
3) National: Insourcing Wall Street? As the hedge fund and fund-of-funds industries shrink under performance pressure, public pension funds are bringing their talent in-house. “‘Definitely, there is a lot of talent from funds-of-funds looking for a home,’ says Michael Ashmore, a hedge-fund principal with the Ontario Municipal Employees Retirement System (OMERS). Ashmore would know. He spent five years at FoFs, and departed for OMERS months before Carlyle shut down his former employer, Diversified Global Asset Management (DGAM).” Another DGAM alumni says “I think the biggest factor is that investors are becoming more sophisticated. They’re doing their own work.”
 
4) National: The Wall Street Journal offers an account of the “teachers union and hedge funds war over pension billions,” charter schools, and public education. One episode: “The billboard kicked off a campaign against Ms. Weingarten by the Center for Union Facts, including radio and newspaper advertisements. (…) After the billboards appeared, Ms. Weingarten opened several new lines of attack. Her union group helped launch an advocacy group, Hedge Clippers, that lobbied against proposed New York legislation to increase the charitable deduction for donations to public and private schools.”
 
5) NationalThe Walton Family Foundation is continuing to plow money into charter schoolsForbes reports. “The new initiative, which is in addition to the $1 billion already announced, will provide low-interest loans to non-for-profit lenders that will help finance school facilities. There will also be more resources made available through real-estate, technical and financial advice. The Waltons say they hope their investment will act as a ‘vote of confidence’ for charter schools and inspire others to follow their lead.”
 
6) NationalIs private contracting posing a health risk to immigrant detainees? “Although the entire detainee population at Eloy Detention Center has been inoculated for measles, mumps and rubella, as many as 40 percent of the facility’s employees have not provided proof of immunity to health officials,” despite an “urgent request.” The facility is operated by Corrections Corporation of America.
 
7) National: In the wake of a federal court decision knocking down an FCC policy to cap phone charges for prisoners and their families, price gouging by for-profit prison phone companies shifts tack from interstate to intrastate calls. “Now, it appears the biggest prison calling firm, Securus Technologies, has raised intrastate rates to make up for lost revenue. This rebalancing, writes Paul Wright of the Human Rights Defense Center (HRDC), has the ‘net result of higher costs to prisoners’ family members.’ Last week, the HRDC, an inmate advocacy group, filed a complaint to the FCC about the increase. In it, the group notes that several customers around the country are reporting price increases from Dallas-based Securus Technologies, a private firm that told the International Business Times it booked $531 million in gross revenue in 2015.” Rick Smith, the CEO of Securus, has defended the phone charges.
 
8) NationalA bid to buy the largest for-profit college company by former Obama administration insiders is raising questions. “The investors include a private equity firm founded and run by longtime Obama friend Marty Nesbitt and former Deputy Education Secretary Tony Miller. The firm, Chicago-based Vistria Group, has mounted a charm offensive on Capitol Hill to talk up the proposed sale of the troubled for-profit education giant, which receives more than $2 billion a year in taxpayer money but is under investigation by three state attorneys general and the FTC.”
 
9) National: Writing on OpenDemocracy.net’s Transformation blog, Daniel Hatcher blows the whistle on state governments that are creaming federal aid from vital educational programs by using private contractors. “In Maryland, the state foster care agency has hired a company called Maximus, Inc. to find children whose parents are deceased and to increase the number of children who are determined to be disabled. This is not to provide them with more help, but to enable the state to take their disability and survivor benefits. In a prior contract to lay the groundwork for this effort, Maximus described foster children as a ‘revenue generating mechanism.’ Not only does Maximus help Maryland to obtain disability and survivor benefits from foster children, the company now runs the entire Baltimore child support office.”

10) National: The labor movement is pressings its priorities on the Democratic Party’s platform committee to protect federal agency missions and employees, and is meeting some success. “Tim Kauffman, a spokesman for the American Federation of Government Employees, said the group has been ‘working closely’ with its parent union, the American Federation of Labor and Congress of Industrial Organizations, to ensure similar goals, such as pay equity and due process protections. AFL-CIO President Richard Trumka testified in front of the committee in June. AFGE also wants the committee to reject proposals to close any Veterans Affairs Department facilities and Social Security Administration offices, as well as block efforts to privatize the Transportation Security Administration.”
 
11) National: Diane Ravitch shares some suggestions for the Democratic Party’s education platform from a teacher in a rural school: “Come on Dems, let’s get real. Please, no more falderal from another era. Race to the Top did very little good. Stop giving billions to hedge fund managers who run for-profit public charter schools. Get down in the nitty gritty of teaching children—safe environment, excellent teaching, proper resources and good leadership. That’s about it for a k-12 platform.”
 
12) National: Rocketship charter schools’ corporate efficiency performance model apparently means putting draconian conditions on bathroom breaks. “I’ve never had second-graders pee their pants except for at Rocketship.”
 
13) National: Wall Street loves making money from imprisoning people for profit all over the world: GEO Group’s stock has jumped nearly 7% in the past two weeks, nearing a 16-month high. The company operates in the U.S., Australia, Canada, New Zealand, and South Africa. [German Company News Bites-Stock Report, July 2, 2016; sub required]
 
14) Colorado: A consortium led by Ferrovial is the preferred bidder for the Denver Airport terminal redevelopment ‘public private partnership’ project. “Over the next six to eight weeks, the airport, along with a consortium that comprises Ferrovial Airports International and a JLC/Saunders joint venture, will work to define the terms and scope of the project. The JLC/Saunders [joint venture] includes Saunders, Magic Johnson Enterprises and Loop Capital. If an agreement is reached it will then go before the Denver City Council for approval in August and will have to be signed off on by Denver Mayor Michael Hancock, [Denver airport] said in a statement.” [Sub required]
 
15) KansasThe Bond Buyer looks at how Kansas, which just ended its fiscal year, had to scramble to keep its schools open following the public financing disaster created by Gov. Brownback’s tax-cutting and austerity policies. Brownback’s answer to the operating funds crisis? Borrow from the capital funds and the state corrections department. “To manage its cash-flow needs for the coming fiscal year, Kansas, through the State Finance Council, will borrow $900 million from its state investment fund. Just as with tax and revenue anticipation notes, the loan must be paid off by the end of the fiscal year. Other measures to make ends meet include diverting $16 million from the state highway fund and $45 million from the Medicaid Fee Fund. State budget director Shawn Sullivan said that another $3 million can be taken from the Kansas Department of Corrections.”
 
16) Maine: The city of Portland may privatize its solid waste collection services. The idea is being pushed by the Maine Heritage Policy Center, which has received funding from the right wing Donors Capital Fund, State Policy Network, and Friedman Foundation for Educational Choice.
 
17) MassachusettsCharter school campaign money is pouring in as the state gears up for the critical November referendum on lifting the caps on charter schools, reports Lauren Dezenski of Politico. “Public Charter Schools for MA, the group supporting a referendum to lift the state’s charter school cap, has reserved $6.5 million in advertising for the seven weeks before election day, according to The Tracking Firm, a service that tracks TV advertising spending. The ads will be produced by DC-based SRCP Media, the same firm behind the infamous ‘Swift Boat Veterans For Truth’ campaign against John Kerry in 2004. The ads will begin airing on Sept. 20.”
 
18) MassachusettsMBTA is plowing ahead with its plan to privatize warehouse operations by October 1, and releases a Request for Proposals. “The move is already prompting fierce opposition—and a request for arbitration—from the agency’s largest labor union, whose members could lose jobs. James O’Brien, president of the Boston Carmen’s Union, pledged to appeal the move, under a federal process that—if successful—the union argues could eventually cost the T significant federal funding.”
 
19) MassachusettsFall River’s privatization of trash collection services is being challenged in court. “Twenty-four city sanitation workers have gotten their pink slips, with their final day of employment being June 30. The fleet of 18 trash trucks still needs to be declared by the City Council as surplus property and then decide how to sell them off. Under state law, the council must attempt to get the best value for the vehicles by either sealed bids or by auction.”
 
20) MichiganWarnings about privatizing the Grand Rapids Home for Veterans seem to be coming true. A former employee of JS2, the company that took over the facility, says it is severely understaffed. “[Amanda] Bockheim says she respected many of the caregivers at the facility for their dedication and hard work but admitted many of them were run down after constantly having to work double shifts to cover for employees who wouldn’t show up for work. ‘You can’t do the job of four people if you have two people,’ Bockheim said. A state audit from the state’s auditor general released this winter found that J2S was short 81 percent of the time over a 4-month time frame. Shortages were as much as 22 on a given day. Despite the problems, J2S is bidding on the contract that will begin on September 1, 2016.”
 
21) VermontSchool boards are warned on privatization. “Nicole Mace, executive director of the Vermont School Boards Association, says it is critical for the board to be clear about all the pros and cons of choosing to close the public schools—especially since the board would no longer be directly accountable for education quality at any of the independent schools chosen by parents. An independent school is a private entity governed by a privately selected board of directors. The school board would still exist to pay tuition to another district or approved independent school for the children in its district, and to present a budget to the voters that is the total of all tuition invoices. It would have no ability to influence or determine the policies, curriculum, budget, entrance requirements, hiring decisions, or any other school-related matter in any of the schools to which the district pays tuition.”
 
22) WashingtonVoters regret their decision to privatize liquor operations. “Washington State residents who voted in favor of privatizing liquor sales were eight times more likely to express a desire to change their original vote than residents who voted against the measure, according to a study from the Alcohol Research Group, a program of the 
Public Health Institute, published today in the Journal of Studies on Alcohol and Drugs. Findings suggested that 20 percent of individuals who voted in 2011 to end the government monopoly on liquor sales have changed their minds after living with the impact of the initiative for the past few years. Initiative 1183, which came into effect in July 2012, called for closing state-run liquor stores and allowing state licensing of private retailers.”
 
23) International: Chris Dando, the defense sector group president for the Public and Commercial Services Union (PCS), says the British government is wasting almost £100 million a year on MoD performance management—the ‘farcical’ efficiency system introduced by conservative governments in Britain and the U.S. “The overwhelming view of the civil 
servants we represent is that it is unfair, divisive, used to bully staff, demotivates people and takes up lots of time without being relevant to day-to-day work. The system has been tweaked along the way but the most contentious feature remains—forced ranking, with bonuses for the top 25% and career threats for at least the bottom 5%.” 
 
Advocates of performance management like to say theirs is the latest view in modern business best practice, but in fact corporate leaders and management consultants McKinsey have rejected it: “The worst-kept secret in companies has long been the fact that the yearly ritual of evaluating (and sometimes rating and ranking) the performance of employees epitomizes the absurdities of corporate life.”
 
24) InternationalPrivatization has become an issue in British politics following the referendum vote to leave the European Union.
 
25) Think Tanks: In its latest newsletter, Partnership for Working Families Executive Director Nikki Fortunato Bas weighs in on infrastructure and community benefits. “Through big development and infrastructure projects, cities have the power to provide local and disadvantaged residents with these much-needed opportunities. Yet all-too-often our communities let this chance slip by unrealized. That’s why around the country PWF and our affiliates are working to ensure that whenever our cities support a major development or infrastructure project, our residents benefit. That means making sure access to good jobs and affordable housing for the people who need them the most are part of the equation.”
 
Legislative Issues
 
1) National: Rep. Matt Salmon (R-AZ) introduces legislation to privatize the St. Lawrence Seaway Development Corporation. Republicans have been trying to defund the operating arm of the waterway, but thus far have been beaten back successfully by Democratic lawmakers such as Sen. Chuck Schumer (D-NY).
 
2) North Carolina: A bill to kill off the already-in-development I-77 ‘public private partnership’ project has died in the state senate under rather murky circumstances. “It is not clear why the Senate Transportation Committee that was considering the bill has decided not to submit it to the full Senate for a vote. Infrastructure Investor contacted Senator Warren Daniel, one of the committee’s two chairmen, but his office could not provide further details. The other co-chairman Bill Rabon had not responded to a request for comment by press time.” [Sub required]

 

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