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Weekly Privatization Report 1-30-2017

1) National: With the promulgation of Trump’s executive orders on “terrorist entry” and border security and immigration, private prison/surveillance companies and related contractors are poised to rake in profits. CNN reports that the order “could amount to a vast expansion of authority for individual immigration officers and a dramatic increase in efforts to detain and deport undocumented immigrants.” In the “border security” executive order, Trump opened the door to an expansion of prison construction and rental of facilities from for-profit prison companies on a scale not seen since the prison-industrial complex’s vast expansion beginning in the 1990s:

Sec. 5
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Detention Facilities
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(a) The Secretary shall take all appropriate action and allocate all legally available resources to immediately construct, operate, control, or establish contracts to construct, operate, or control facilities to detain aliens at or near the land border with Mexico.

It is still not clear whether a major expansion of American detention capacity would be through new construction of federal facilities, a major ramping up of the use of state and local prisons and jails for these purposes, expansion and leasing of private facilities, or a mixture of all these approaches. Another executive order promises a major expansion of “criminal immigration offenses,” and thus a likely expansion of CAR private prison facilities.

The CEO of CoreCivic is hoping to get a slice of the financing and funding from Trump’s infrastructure program (see Donald Cohen of In the Public Interest’s article on this). Private prison company executives have also frequently touted their expertise in prison construction, so even if any new prisons were to be federally owned and operated, they could be expected to try and cash in on the construction piece.

In addition, The New York Times reported this weekend that security contractors are poised to cash in from Trump’s plan to build a wall on the southern border. In the last “wall” project, begun under the Bush administration and cancelled by President Obama, contractors made money: “Boeing was not the only winner. The security company Wackenhut Corporation, now known as G4S Secure Solutions, received more than $119 million. I.B.M. won more than $56 million, and ManTech International, the technology company, received upward of $43 million.”

2) National: The Trump administration has ordered a hiring freeze for the federal government, the effects of which will be felt throughout the country. Both union leaders and lawmakers denounced the move as misconceived and counterproductive. “‘President Trump’s action will disrupt government programs and services that benefit everyone and actually increase taxpayer costs by forcing agencies to hire more expensive contractors to do work that civilian government employees are already doing for far less,’ J. David Cox, national president of the American Federation of Government Employees, said in a statement. The National Treasury Employees Union said a federal hiring freeze could lead to ‘disastrous short-term and long-term impacts.’ Budget cuts have already forced agencies to cut personnel, said Tony Reardon, NTEU national president. ‘Arbitrary cuts will leave agencies scrambling to serve the public,’ he said in a statement.  ‘A hiring freeze takes away the agencies’ ability to make strategic decisions about their workforce.’” Rep. Stephen Lynch (D-Mass.) and 106 other lawmakers have said a hiring freeze would achieve undesired outcomes for government, citing a 1982 Government Accountability Office study on past federal hiring freezes. [White House Memo]

Richard G. Thissen, president of the National Active and Retired Federal Employees Association (NARFE), said “under a hiring freeze, work now performed by federal employees is likely to be outsourced to contractors at an even higher cost to taxpayers. That’s exactly what happened during the hiring freezes initiated by the Carter and Reagan administrations, according to a 1982 audit report on the policies by the Government Accountability Office (GAO). The GAO found that those hiring freezes provided only an ‘illusion of control’ over federal workforce levels, and that they were ‘not an effective means of controlling federal employment.’” The memo itself says, “contracting outside the government to circumvent the intent of this memorandum shall not be permitted,” but it remains to be seen whether this will be observed.

3) National: With the National Park Service already under fire from Trump over photos showing lackluster attendance at his inaugural, new rules signed at the end of December have paved the way for opening up the parks to commercialization—though they were improved slightly from earlier proposals. “‘The finalization of Director’s Order #21 signals a dangerous shift toward opening our parks up to an unprecedented amount of commercial influence,’ Kristen Strader, a campaign coordinator at Public Citizen. Consumer advocacy groups have opposed the rule change, but said the final draft has made some improvements. ‘The original sweeping plan suffered from sloppy drafting and poorly thought-out concepts,’ said Jeff Ruch, executive director of Public Employees for Environmental Responsibility, ‘We are pleased the Park Service edged away from its complete corporate embrace.’” It remains to be seen if the Trump administration will introduce draconian privatization measures at NPS, though. [Park Service staffers and ex-staffers are pushing back—and the ACLU is reminding government workers that they still have free speech rights]

4) NationalTomorrow the Senate HELP Committee votes on education nominee Betsy DeVos. While The Washington Post’s Valerie Strauss thinks it’s unlikely Democrats can block her confirmation, they are trying to gain a few Republican votes. “DeVos is seen as a champion of school choice to supporters but as a radical who wants to privatize public education to critics, someone who once called America’s public schools ‘a dead end.’ Even some school reformers who support education views that are similar to DeVos’s have come out against her, questioning her stated desire to help traditional public schools improve. (…) Senate offices have been swamped with calls, emails and letters; the National Education Association said more than a million emails opposing DeVos went to senators through a recent campaign. There are petitions and there have been protests, including Sunday on Capitol Hill.” Protests also took place in Portland (OR), Nashville, and Holland (MI), her hometown. Democrats sent DeVos over 800 questions, but as of last night had not received a response.

5) National: Trump’s new FCC chief has been a strong opponent of efforts to protect prisoners and their families from being price-gouged by corporations that provide phone services in prisons and jails. “As chief of the Federal Communications Commission, Ajit Pai will oversee regulation of the prison phone business, a sprawling, $1.2 billion industry dominated by a handful of private for-profit companies, including Global Tel* Link and Securus Technologies.” GTL and Securus are in court trying to block a fee cap, in a case due to be heard on February 6. “The central question will be whether the FCC has the authority to regulate in-state rates in addition to interstate rates.”

6) NationalAlex Friedmann of Prison Legal News takes Harley Lappin of CoreCivic to the woodshed. Responding to Lappin’s op-ed extolling the supposed virtues of his company, Friedmann runs down a few of the items on the list of its shortcomings. “While lauding the firm that pays his salary and gives him lucrative stock benefits, Lappin failed to mention a few things.”

7) National: The Trump infrastructure team is moving along with its project selection process for its infrastructure plan, as wish lists circulate and the jockeying and lobbying ramps up. States are vying to be part of the plan, with more than 300 projects being submitted to the Trump team by 43 states. [Sub required]. Last week McClatchyDC surfaced a preliminary list of projects that are reportedly under consideration for funding or financing. “Another more detailed documentobtained by the Kansas City Star, circulated within the congressional and business communities, proposes financing an almost identical list of 50 projects as public-private partnerships, with half the money coming from private investment.” Last month the Treasury Department produced a list of 40 projects of major economic significance, which unlike the Trump lists contains rankings of their net economic benefits and cost-benefit ratios.

Last week Trump also issued an executive order to streamline environmental review of infrastructure projects, requiring “the chairman of the White House Council on Environmental Quality to coordinate “expedited procedures and deadlines for completion of environmental reviews and approvals” for infrastructure projects designated as a high priority by a governor or the head of a federal department or agency.” [Sub required]. It is unclear how these concept will fit in with existing regulations. Law firm Beveridge & Diamond PC thinks “some of these concepts may also find their way into new regulations or guidance by CEQ or individual agencies whenever the current regulatory freeze is lifted.” [CEQ was created in 1969 with the enactment of the National Environmental Policy Act (NEPA). Eliminating or radically scaling back NEPA regulations has long been a priority for the road privatization industry.]

8) National: The Democrats have rolled out their ideas for an infrastructure plan, with an emphasis on new federal money rather than tax breaks to back it. “‘If the president wants to do a trillion-dollar infrastructure package like ours, I’m sure we can find common ground,” Sen. Brian Schatz (D-Hawaii) told The Hill. “Count me as doubtful.” In a talk at a GOP policy retreat last week, Trump told lawmakers, “we will build new roads and highways and tunnels and airports and railways across the nation,” the president told GOP lawmakers. We will fix our existing product before we build anything brand new, however.”

Today Trump’s choice for Treasury Secretary, former Goldman banker Steve Mnuchin, gets his nomination vote. Last week Mnuchin wrote to the Senate Finance Committee that he would favor a major expansion of Private Activity Bonds to finance infrastructure. “Mnuchin’s comments about private activity bonds came after Sen. Sherrod Brown, D-Ohio, asked him what steps he would take to modernize private activity bonds (PABs). ‘There are areas where we can improve [PABs], including changing volume caps for certain types of projects,’ Mnuchin responded. ‘If confirmed, I plan to review ways to enhance [PABs] with the goal of driving more private investment into American infrastructure.’”

9) National: President Trump’s nominee for HHS Secretary, Rep. Tom Price (R-GA), says he is no longer in favor of privatizing Medicare. But Prof. Robert A. Freeman of University of Maryland Eastern Shore’s School of Pharmacy says that privatization is “at the top of the list on House Speaker Paul Ryan’s legislative agenda.” Freeman writes, “privatization would end a social contract between generations and place seniors and future beneficiaries at significant risk for financial ruin due to medical bills. (…) And those 11 million beneficiaries under age 65 who have complex medical conditions and are receiving not only Medicare but also Medicaid, would be unable to afford coverage if Medicare were privatized and if Medicaid was ended as we know it.” Republicans have scheduled a vote on Price tomorrow.

10) National: Ellen Brown, the founder of the Public Banking Institute, says that the cost of infrastructure could be radically reduced if it was financed through state and city-owned public banks. “Reliance on costly private capital for financing public needs has limited municipal growth and reduced public services, while strapping future generations with unsustainable debt. By eliminating the unnecessary expense of turning public dollars into profits for private equity interests, publicly-owned banks can allow the public to retain ownership of its infrastructure while cutting costs nearly in half.”

11) District of Columbia/Think Tanks: After years of fierce battles over school privatization and charter schools, the new Republican majority in Congress and Trump/Republican control of the White House will likely lead to radical changes in the District, including vouchers for private and religious schools, says Heritage Foundation director of education policy Lindsey Burke.

12) NevadaThe charter school debate is heating up in the state. “Could Nevada’s Achievement School District be doomed before it even began? The divisive charter school initiative has encountered a rocky start, with strong opposition from Clark County School District parents and staff who are steadfastly against any charter takeover. But events Wednesday—during National School Choice Week, no less—took the debate to another level. After an L.A. Times story revealed that the Celerity Educational Group was under federal investigation, the Nevada Department of Education revoked its conditional approval as a charter operator for the achievement district. And did so within hours of learning that the FBI had raided Celerity offices.”

13) Virginia: Allianz Global Investors, the German company, has bought the Pocahontas Parkway for $300 million. “The financing came out of a process in which Allianz clients pledged to provide financing in the bid made for the 89-year-old road by Globalvia, a Madrid-based infrastructure management firm, Allianz said. The investment consists of two bullet tranches of 35-year bonds privately placed with US and European investors. Allianz’s financing comes after other large investments recently made from its infrastructure debt platform. The firm also invested $700 million in the acquisition of the Indiana Toll Road, part of a $5.73 billion acquisition by IFM investors. Its third toll-road investment was for the Chicago Skyway, part of a $2.8 billion transaction in which three Canadian pension funds reportedly took control of the road.” [Sub required]

14) International: Melanie McCartney has written a good piece on the Trade in Services Agreement (TiSA) and prison privatisation in Australia. “Private prisons, TiSA and the Human Services Privatisation Creep” is a deep dive on how the proposed deal will drive more privatization of public services. “Australia has the highest rate of private incarceration per capita of any country in the world. We imprison more people now than in any time in history. (…) Should our tax payer dollars be used to pay private, overseas companies bonuses for fulfilling their contracts? If companies need incentives to do a good job it sounds like human services belongs in the hands of public. When will state government’s using private, prison operators admit that a lack of staffing appears to be much of that sectors problems?”

15) International: With summer in South Africa at its height, Durban beachgoers are celebrating the tremendous success of their new public beachfront. “Even the city’s fiercest critics cannot deny that that new beachfront is a triumph of urban development and management. Writing in The Mercury recently, former city manager, Michael Sutcliffe, reminded us about the spatial nature of under-development in South Africa and how far we have come in terms of integrating city spaces. It is truly wonderful that thousands and thousands of people have the chance to enjoy the beachfront over the festive season. The beachfront is now an open and democratic space that is open to all residents in our city that is as impressive as any public space anywhere in the world. It is certainly the best-constructed, best-managed and most impressive public space anywhere in South Africa.”

16) Think Tanks: The Koch-funded Reason Foundation has produced a report with a target list of thousands of state and local-level public assets and services that it says can be privatized. They also propose a radical expansion of tax breaks for P3 deals so that private investors can get involved. They want to “generalize the existing surface transportation Private Activity Bond (PAB) program to apply to P3 projects for all categories of public-purpose infrastructure; and allow the new PABs to be used to acquire and reconstruct existing infrastructure, not just to build new projects.” They are especially disturbed that private investors are currently being forced to repay taxpayers for their investment in public assets, targeting “an OMB rule requiring that if a facility that has received federal aid is privatized, the grant money must be repaid.” [Federal Barriers to Private Capital Investment in U.S. Infrastructure]. They have also released their annual report on privatization at the state level.

17) Think Tanks: The Prison Policy Initiative helps us Follow the Money of Mass Incarceration in a new report. “To be sure, there are ideological as well as economic reasons for mass incarceration and over-criminalization. But at this moment, when crime is near record lows and there is increasing attention to the role of privatization in the justice system, we need a far more expansive view of how our criminal justice system works, whom it hurts, and whom it really serves.” PPI also points to another informative recent report, the Homeland Security Advisory Council’s Report of the Subcommittee on Privatized Immigration Detention Facilities (December 2016). The HSAC report contains some recommendations for “monitoring of contractor performance in detention facilities” that will be useful in the coming months and years.

Legislative Issues

1) National: The House Transportation and Infrastructure Committee will hold its first major hearing this Wednesday on the proposed massive infrastructure package that is on the horizon. Among the witnesses will be Fred Smith, the president and CEO of FedEx, Rich Trumka, head of the AFL-CIO, the board chair of the Vermeer Corporation, the president and CEO of BMW North America, and David W. MacLennan, CEO of Cargill. The event will be livestreamed at 10 am.

2) Texas: A bill has been filed to increase charter school funding to equal traditional school funding. “Farish Mozley, a spokesman for [State Rep. Jason Villalba (R-Dallas)], said that funding for this program, if passed, would not come from existing public school funding. ‘The funding … will come from general revenue,’ Mozley said.” [HB 1269]

 

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