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This Week’s Outsourcing Scan 9-19-2016

1) National: Nearly a decade ago, Tim Shorrock revealed that 70% of the intelligence budget goes to contractors. Now, writing in The Nation, he reveals that spying is dominated by five corporations, and looks at four—Booz Allen Hamilton, CSRA, SAIC, and CACI International. Shorrock says, “intelligence privatization has been largely ignored by both the national media and Congress,” despite the fact that “these developments are incredibly risky for a country more dependent than ever on intelligence to fight global wars and prevent domestic attacks. (…)  ‘The problem with just five companies providing the lion’s share of contractors is that the client, the U.S. government, won’t have much alternative when a company screws up,’ says David Isenberg, the author of Shadow Force: Private Security Contractors in Iraq. Moreover, the fact that much of this privatized work is top secret—and is generally underreported in the press—undermines the accountability and transparency of our spy agencies. That should deeply concern the American public.”

2) National: Three Bond Buyer reporters do a deep dive on public school systems’ recent adventures in capital markets, touching on reform plans for the Chicago Public Schools, battles between Illinois Gov. Rauner and unions over the governor’s legislative effort to weaponize Chapter 9, small liberal arts colleges, charter schools, and John Oliver. [Audio]

3) CaliforniaCharter schools are fighting for access to public school construction bond funds. “As California charter school enrollment has increased, so have conflicts over their access to school construction bond funds. Enrollment at charter schools increased from 3.4% of the state’s K-12 population in 2005-06 to 9.2% in 2015-16, according to an Aug. 2 report from the state Legislative Analyst’s Office. Some of these conflicts over state and local bond funds have come to the fore in Southern California, home to a large share of the state’s charters.” [Sub required; LAO Report]

4) District of Columbia: In the Public Interest’s Donald Cohen blows the whistle on a potentially disastrous plan to privatize the parking facilities of Washington’s Metro system. Shades of the Chicago parking privatization disaster? Privatization, he says, would be foolish for a number of reasons. It would discourage the use of public transit by raising parking fees for people who want to use the Metro to get into town. It would end public control of public assets. And it would send close to $50 million a year “to a private company instead of the public. In Chicago, Morgan Stanley is on pace to make back its $1.2 billion upfront payment by 2020, with more than 60 years of meter money still to come. The potential deal begs a fundamental question about public goods and services. Who do we want to control them? Us, or a small handful of investors and Wall Street banks?”

5) IndianaAnother Indiana road ‘public private partnership’ project is in a jam as S&P Global Ratings further downgrades its junk-rated private activity bond by two notches, to BB-minus. “The rating remains on CreditWatch with negative implications. ‘The rating action reflects our view of increased construction risk at the project, which is eight months behind schedule and about 56% complete,’ said S&P Global Ratings credit analyst Tony Bettinelli.”

P3 proponents often argue that P3s do better on construction performance. Two weeks ago, the Indiana Finance Authority and Indiana Department of Transportation “issued a notice of non-performance to I-69 Development Partners over non-payment of subcontractors. The delay in payment has prompted at least one subcontractor to halt work on the project.” The contractor, Isolux, is blaming geological and permitting issues, but the Indiana Financing Authority shot back: “the statement Isolux issued to the media late yesterday afternoon is littered with inaccuracies and some directly untrue claims, demonstrating a lack of understanding of legal requirements, contractual obligations and relationships, and proper permitting requirements.” [Sub required]

6) Maine/NationalThe Portland Press Herald points to the Maine Veterans Administration’s health care system as a positive example of what can be done to fix the VA’s problems without privatization. “Privatization has been the goal of free-market reformers and health care corporations for some time, and the scary initial headlines related to the 2014 VA scandal gave that goal momentum. But, after two years of investigation, it is clear that the problems at the VA are not nearly as momentous or harmful to patient health as they were first portrayed.” And, as the Center for Investigative Reporting reveals, “Veterans Choice” has problems of its own. “Sole-sourced to two private companies to administer, the program has been criticized nationwide for not living up to its promise. Many veterans call it ‘No Choice’ or ‘Bad Choice.’”

7) Maine: Gov. LePage’s effort to outsource the state’s welfare-to-work program to Fedcap Rehabilitation Services is raising concerns about job losses. “Ramona Welton, president of the Maine State Employees Association SEIU Local 1989, estimated that 51 workers now handling the ASPIRE program could lose their jobs. Welton said she does not believe the contract being negotiated between DHHS and Fedcap includes any language allowing current employees to transfer their jobs to the nonprofit. ‘The lack of a guarantee is concerning.’” Still, no one showed up for a hearing last week on rule changes being proposed for the agency that LePage wants to privatize, though written comments can be submitted until next Monday.

8) Mississippi: Walnut Grove state prison, the privately-run “scene of horror and corruption,” closes. Human rights advocates and for-profit prison investors are watching closely to see if individual states follow the lead of the Bureau of Prisons and end private prison contracts. Last week a Biloxi businessman was sentenced to 87 months in prison for a kickback scheme with the Mississippi Department of Corrections Commissioner in exchange for lucrative contracts with the state and county. “From approximately 2005 through 2011, Health Assurance L.L.C. contracted with the Harrison County Jail to provide inmate medical services. The owner of Health Assurance LLC paid Simmons a consulting fee which, at the end of the contract, was as high as $10,000 a month. Throughout this period of time, Simmons made payments in the amount of $2,000 a month to a Harrison County Supervisor for assistance provided in securing the contract at the Harrison County Jail for inmate medical services.”

9) Nevada: Las Vegas and Nevada political leaders push ahead with plans for a new NFL stadium to poach the Oakland Raiders. On Thursday, the Southern Nevada Tourism Infrastructure Committee passed a proposal, including raising  taxes on the public, and sent it on the Gov. Sandoval (R), who would have to call a special session of the legislature to approve the deal. “The 11-member committee unanimously supported the stadium developers’ preferred funding option, which requires $750 million of bonds and would allow the private partners to reap all stadium profits during the lifetime of the Raiders’ lease.” [Sub required]

But the Associated Press reports that “opponents question whether it’s appropriate to put public dollars toward a project spearheaded by one of the richest men in the world. They also wonder whether the bonds used to finance the project will put taxpayers at risk in an economic downturn or if tax revenue underperforms.” The Brookings Institution recently published a report saying that private professional sports stadiums built with tax-exempt bonds have cost the federal government $3.7 billion over the last 16 years, and recommending that such financing be eliminated or sharply curtailed.

10) New JerseyAtlantic City’s elected leaders are resisting the forced privatization of their water system by the Christie administration. “One of the terms in the July 29 bridge loan agreement called for the city to dissolve Atlantic Municipal Utilities Authority by Sept. 15 or use the water authority as collateral in the case of a default. The city council has been unwilling to support the ACMUA measure, which effective [last] Thursday would result in a default under the loan terms, meaning the state could demand immediate repayment of the monies.” Mayor Guardian says “we just need the time to finish the plan and to present it publicly. In the end, we think this will be the best plan to move Atlantic City forward while at the same time maintaining our sovereignty and decision making rights now held by locally elected leaders.” [Sub required]

11) New York: Republican Nassau County Executive Mangano forges ahead with plans to privatize the county’s sewer system despite widespread criticism. Last week the county legislature’s rules committee, led by a courageous Republican lawmaker who broke ranks with his colleagues, tabled a contract Mangano wants to sign with KPMG for financial advice. The committee meets again next Monday. “Privatization of public utilities does not guarantee better results,” says Alan Rubin, a resiliency expert and director of business development at New York-based Tigress Financial Partners. “It also refutes the public input and generally enhances only the individuals who are vested in the selling of the unit and then the consultants who recommend it.” [Sub required]

Long Island residents and the local media have been subjecting privatization deals to tougher scrutiny in recent years, have raised questions about the proposed sewer deal—and are bringing up other privatization debacles: “Take Nassau’s contract with Armor Correctional Health Services. On a spreadsheet, the contract to turn jail inmate health care over to a private, for-profit concern—which has saved Nassau about $5 million a year compared with what the county paid Nassau University Medical Center to provide medical care for inmates—looks good. But the county, and Armor, are being sued in federal court by the families of four inmates who died at the East Meadow jail since Armor took over medical care in 2011.” And “then, there’s the contract with Transdev to manage Nassau’s bus service.”

12) New YorkA pro-charter school Super PAC, New Yorkers for Independent Action, got walloped in the primary elections last Tuesday. “The PAC was involved in seven primary contests: five Assembly and two Senate. It supported four challengers and three incumbents, all Democrats. All four of the challengers it backed lost. According to the group’s September 2 filing with the state Board of Elections, it had spent a total of $1,682,000. Future filings will likely reveal more spending in the final days of the primaries. New Yorkers for Independent Action is also expected to be heavily involved in the general election, which is November 8.”

13) Texas: Glenn W. Smith looks at “Lt. Gov. Dan Patrick’s zealous promotion of the use of public tax dollars to educate wealthy kids in private schools,” and asks, “is it just a coincidence that private school funding schemes are gaining steam as a far more diverse bunch of kids are sitting in our public classrooms?” The policymakers responsible for “atrocities” such as turning down Medicaid funding, refusing to raise the minimum wage, and abandoning “hundreds of thousands of special needs children by arbitrary cuts to special education … are the same ones telling us their school privatization plans are intended to help the very people they are punishing in every other major policy area—from health care to political representation to economic opportunity.”

14) TexasThe San Antonio Express-News publishes a major story detailing what went wrong with SH 130 and providing some object lessons on the pitfalls of road privatization. The debt-laden operators of the road, which had been touted as a brilliant model for other ‘public private partnerships,’ filed for bankruptcy in March. Taxpayers are getting it in the neck: “the company owes federal taxpayers more than a half-billion dollars and is engaged in a years-long dispute with TxDOT about maintenance and construction problems on the sparsely traveled road. And so far, it has paid the state only about $3 million in toll revenue.” And the public is still being kept in the dark about what the original traffic projections were—with the complicity of the U.S. Department of Transportation and the Texas Attorney General’s Office, which have declared the numbers private property.

Despite their roles in the bankruptcy and tax issues, Cintra continues to lobby the U.S. Department of Transportation and Federal Highway Administration for more federal road financing, such as TIFIA loans (the SH 130 concession company had a $430 million TIFIA loan); and Zachry on tax credits and the corporate tax rate.

15) Utah: A grateful student remembers what his public school teachers did for him, and laments how undervalued today’s teachers are by some of Utah’s politicians. “For the last three decades, if not longer, public school teachers have been the focus of much negative comment by the advocates for school vouchers and other privatization of public education efforts. Collett, Rush and Nagle are the Platonic ideal of what a teacher should be, and of equal importance the indelible mark they make on their students and their families. It is a sad tale of our time that our governor and the Legislature can’t see their way to paying our teachers a living wage with benefits and insurance coverage. Whereas Dean has been at Highland for six decades, too many talented teachers leave our public schools after six years.”

16) International: David Boys, the deputy general secretary of Public Services International, met with top governmental policy aides late last month in preparation for the meeting this Wednesday of the High-Level Panel on Water during the UN General Assembly. Heads of state are supposed to provide impetus to reaching Sustainable Development Goal 6—universal access to water and sanitation by 2030. PSI said “our core concern is that the HLPW will advance the privatization agenda that failed under [the United Nations Secretary General’s Advisory Board on Water and Sanitation]. Mexican President Peña Neto is clearly in favour of the privateers, and his government is doing his best to advance that agenda throughout Mexico (the resistance is growing, but that is another story). Our union in Mauritius is also concerned that their government is advancing the same agenda. PSI worked with our allies in the water movement to send clear messages to the HLPW.” Addressing the donors, PSI said “can we ask the donors and [international financial institutions] to put at least as much energy supporting [public-public partnerships] as you do on [public-private partnerships]?  It is much cheaper than bringing in the high-priced consultants from Deloitte or Price Waterhouse, and there will be no threat of leveraged buyouts or hostile takeovers, let alone [return on investment] of 25% per year.”

17) International: The pro-privatization position of Brazil’s new president Michel Temer has set off a mad scramble among private multinationals for its energy assets. “We won’t know whether Brasilia honors its promises for several months. But some investors are not waiting to find out. Recently, it emerged that a consortium led by Brookfield’s infrastructure group is in the home stretch of acquiring a 2,500km network of Brazilian gas pipelines from Petrobras for more than $5 billion. The group, which is said to include China Investment Corporation and Singapore’s GIC, had been in talks with the state-owned giant since at least last spring.”

18) Think Tanks: The Center for American Progress weighs in with recommendations for the Homeland Security Advisory Council on how to end the use of private, for-profit companies in immigration detention. The advisory council is to report by the end of November. “As the advisory council conducts its review,” CAP says, “it should consider the substantial evidence that the problems found at privately run BOP facilities often plague privately run ICE facilities as well.” It also urges “taking steps that include ending the unnecessary detention of vulnerable populations such as families, LGBT people, and asylum seekers; providing bond hearings before an immigration judge for people detained for prolonged periods of time; and expanding the use of alternatives to detention. This, in turn, would help the department eliminate its use of private prisons.” It also urges Congress to end bed quotas.

19) Revolving Door News: On November 1, Anne Rung, the former chief purchasing officer of the U.S., will be joining the Amazon Business team as global leader of its public sector division. “Rung spent the past two years as the administrator of OMB’s Office of Federal Procurement Policy, and before that she served as the General Services Administration’s associate administrator for the Office of Government-wide Policy and the Commerce Department’s senior director of administration.”

Legislative Issues

1) National: There are 145 ballot measures in 35 states this November, including on a charter school capping level (Massachusetts), state-level charter authorization (Georgia), education funding (California, Maine, and Utah), and transportation funding and financing (Illinois, Louisiana, Maine, New Jersey).

2) National: Congressional Republicans, led by Randy Neugebauer (R-TX), are pushing back against the Obama administration’s efforts to rein in the federal government’s use of private prison companies. “‘We are concerned that the DOJ’s instructions put politics ahead of policy,’ states the letter, which is also signed by Will Hurd (R-TX), K. Michael Conaway (R-TX), Kevin McCarthy (R-CA), Austin Scott (R-GA) and Earl L. Carter (R-GA). ‘We ask that the DOJ and the BOP step back from this directive … until you provide Congress with additional implementation and budgetary details about this change in policy.’”

3) National: The Senate Republican leadership has blocked a vote on a widely-supported, bipartisan criminal justice reform bill, effectively killing it for now. The New York Times cites the effects of Donald Trump’s “law and order” campaign and opposition by three right wing southern senators as key factors in the “stunning display of dysfunction given the powerful forces arrayed behind legislation.” Hard working supporters of the bill, such as Sen. Dick Durbin (D-IL), are hoping to bring back the legislation in 2017.

4) National: The Senate passes the long-stalled Water Resources Development Act of 2016, which will make more financing available for water ‘public private partnerships’ through the WIFIA loan program. The bill would “make WIFIA permanent and provide $70 million for credit subsidies to allow the Environmental Protection Agency to make secured loans for infrastructure investments. Of that $70 million, $20 million could not be used in conjunction with tax-exempt bonds.” The bill was applauded by the water industry’s chief lobbyist. [Sub required]

Food & Water Watch has denounced the legislation, which it says “will pave the way for corporate control of community water systems,” and is urging Congress to pass a better aid package for Flint. On WIFIA, FWW says that “because it requires communities to have a high bond rating, by law, WIFIA cannot help cash-strapped communities with the serious water needs like Flint. (…) WIFIA will undermine and compete with the established, reliable State Revolving Fund programs, taking money away from cash-strapped community water systems to fund corporate water projects.”

 

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