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Weekly Privatization Report 2-27-2017

1) National: The Trump administration revokes DOJ guidance for the Bureau of Prisons to stop using private, for-profit prisons, and has moved toward a program of greatly expanded mass incarceration and detention—including an end to “catch and release.” The for-profit prison companies see the implications for themselves clearly. George Zoley, the GEO Group’s CEO, told investors last week that the Trump move is “really an escalation of capacity need for all three federal agencies as a result of the president’s new executive borders redirecting the approach to border security for the three federal agencies.”

Zoley sees it proceeding along these lines: “The first agency that will need additional capacity is ICE. Because the Border Patrol will catch the individuals and then send them to an ICE facility. Subsequently there will be a need by the U.S. Marshals Service for those people that have committed criminal acts and need to be detain for adjudication and further on down the line BOP will need additional capacity as well for those people who’ve been sentenced and need to serve their time in one of the CAR facilities.”

Sentencing will also be an issue. Asked if there is something that could drive up demand further to the point where more beds would have to be constructed, Zoley said: “That is a possibility because there’s other issues that may come into play such as Kate’s Law. If that passes that will create a certain additional bed capacity that we haven’t contemplated as yet in any of our discussions, but I’m sure the Bureau of Prisons who would be responsible for incarcerating individuals under that law are—doing their planning work in the event that law is eventually passed and put into place.” If Kate’s Law (HR 361), which extends mandatory minimums for illegal reentry from 2 years to 5 years passes, it will dramatically push up prisoner numbers (see this).

More draconian sentencing would automatically push up the GEO Group and CoreCivic’s occupancy and profit forecasts, enabling them to bill the government for more and also borrow money against what Wall Street would see as a more solid demand outlook. Responding to the Trump administration’s harsh new detention and deportation measures, Bishop Dwayne Royster, the political director of the PICO National Network, an interfaith organization that provides services to immigrants, said “these policies are destructive to families. The president, with malicious intent, is attempting to destabilize our nation and communities by breaking up families through deportation and detention.”

Additionally, a crackdown on marijuana sales would also be a boon to the prison profiteers by filling prisons and detention centers with low-level drug offenders—a process that heavily contributed to the incarceration boom beginning in the 1990s. The prospect of reduced sentencing or pardons for low-level drug use were one of the main risks to its business model cited by the for-profit industry during the Obama administration.

2) NationalAFSCME President Lee Saunders immediately denounced the Trump administration’s decision to end the policy of winding down for-profit prisons. “Today’s Justice Department decision,” Saunders said, “puts corporate interests first. It’s been demonstrated time and time again that prisons-for-profit provide less security at a higher cost to taxpayers. And they contribute to the mass incarceration epidemic that is devastating so many communities. Private prisons are dangerous and overcrowded, with inexperienced staff and unsanitary conditions. At all levels of government, we should be phasing them out, not propping them up.”

3) National: The possible expansion of the federal government’s use of state and local lockups to absorb the increase in prisoners and detainees would also boost the private prison industry’s bottom line. Zoley told an analyst last week that there are “two contracting techniques available to ICE. One is to obtain the facilities through an intergovernmental agreement that means a host local community, and we have several of those in place. The other is through two year emergency contract. Both can be put in place—relatively quickly, approximately 60 to 90 days.” Currently, the GEO Group gets more than a quarter of its revenue from state facilities (slide 12), so a boom in state and local lockups would further drive a profit prison surge. Alternet’s Steven Rosenfeld has been tracking this process, and sees ICE reopening shuttered private prisons and adding beds in county jails.

4) National/California: The campaign to get universities and governments to disinvest in Wells Fargo over practices including its financing of for-profit incarceration is gaining steam. The city of Alameda has taken the first steps toward divesting more than $36 million from its accounts at the bank, and Seattle and the city of Davis did the same earlier this month, as did the University of California system and the city of East Orange, NJ. Philadelphia and Minneapolis are also considering cutting their ties. In the Public Interest (ITPI) research and policy analyst Benjamin Davis told the Alameda city council that “by financing private prison companies, Wells Fargo is not only promoting the abusive practices behind private prison walls but also profiting from mass incarceration.” ITPI executive director Donald Cohen says these divestments send a message that the public won’t tolerate their money being used to finance Trump’s draconian detention and deportation scheme. “GEO Group and its main competitor, CoreCivic (formerly CCA), rely on financing from Wells Fargo, along with five other banks, including JPMorgan Chase and Bank of America. That means Wall Street profits from deportation.” This certainly jibes with the New York Times’ view, which after doing the math pronounced Trump’s detention/deportation plan a case of “where deeply shameful collides with truly stupid.”

5) NationalThe GEO Group acquires Community Education Centers in a $360 million all-cash deal. “CEC is based in New Jersey and is a private provider of rehabilitative services for prisoners, and provides management services for government correctional and detention facilities. Founded in 1996, the company owns or manages more than 12,000 beds nationwide.” BNP Paribas seems to be playing a particularly active role in GEO’s dealings. In GEO’s conference call on Thursday, CEO George Zoley reported that “the transaction will be supported by a term loan financing commitment from BNP Paribas and borrowings under our existing revolver.”

In its recent report on how banks profit from the private prison industry, In the Public Interest reported “BNP Paribas is the administrative agent for GEO Group’s revolving credit. Similar to the role Bank of America played as administrative agent for CCA’s revolving credit, BNP Paribas brought the other banks together and crafted the credit agreement with GEO Group. Similarly, when GEO Group draws on its credit, either via a conventional loan or swingline loan, BNP Paribas coordinates the transfer of money from the syndicate of banks to GEO Group. BNP Paribas along with Bank of America and HSBC have agreed to issue letters of credit on behalf of GEO Group. As of June 2016, the banks had issued letters of credit to GEO Group worth $54.2 million part of which were used to guarantee the financing, construction, and operation of the company’s facilities in Australia and South Africa.”

6) National: Problems continue to plague the underfunded and understaffed Indian Health Service, and contracting out services has failed to address the issue: “Although IHS has increased funding for contracting out some health-care services, the GAO reported that the program ‘is unable to pay for all eligible services, and that these gaps in services sometimes delay diagnoses and treatments, which can exacerbate the severity of a patient’s condition and necessitate more intensive treatment.’”

7) National: A federal court ruling has dealt a possibly fatal blow to efforts by Wall Street speculators to profit from a privatization of Fannie Mae and Freddie Mac. The court upheld the government’s authority to wipe out equity shareholders following Fannie and Freddie’s collapse in the 2008 financial crash. But some are still holding out hope based on the possibility of an appeal or shareholders pursuing a breach of contract claim. Treasury Secretary Steve Mnuchin voiced support for privatization, but then did a flip-flop last month.

8) California: Harry Saltzgaver of the Long Beach Gazettes analyzes some of the problems that contracting out in shared services agreements can create for the provider government units. “But, and here’s a big but, the contract is scheduled to start on June 1. Even on the best of days, the [Long Beach Police Department] doesn’t hire and train one officer in three months, let alone 30. In fact, it takes about a year and a half for someone to complete the police academy and field training to become a full-fledged patrol officer. So the LBPD would cover the contract in the short term by assigning a few full-time officers and cover must of the work with people on overtime.”

9) District of ColumbiaTeachers at Paul Public Charter School, one of the oldest charters in the district, publicly announced their intent to unionize. “As in other cities where charter teachers have formed unions, the Paul educators are forming their own local—the District of Columbia Alliance of Charter Teachers and Staff (DC ACTS)—which will be affiliated with the American Federation of Teachers (AFT). Seventy-five percent of Paul’s teaching staff signed a petition in support of joining DC ACTS, and asked administrators to voluntarily recognize their union.” But “Union opponents may see an opportunity to overturn the NLRB’s charter rulings in the Trump administration, given that Trump has named Philip Miscimarra as the board’s new acting chairman.” Miscimarra “argues that charter labor law should be left to state and local regulators.”

10) Florida: The failure of public officials to properly monitor conditions at an MTC-run for-profit prison in Gadsden County (the state’s only county with an African-American majority population) leads to inmates being deprived of heat and hot water for months. “‘I’m a policymaker. I’m not a monitor. I’m not their auditor. Why is it that I’m out there fixing water heaters?” said State Rep. David Richardson, D-Miami Beach. “For Richardson, who has been on a one-man mission to force change in Florida’s troubled prison system, it’s another frustrating example of the failure of the state to monitor and hold accountable its prison operators.” In August, a USDOJ Inspector General report found that, at the federal level, “in most key areas, contract prisons incurred more safety and security incidents per capita than comparable BOP institutions and that the BOP needs to improve how it monitors contract prisons in several areas.” The finding contributed to a decision to phase out the use of privately operated prisons, which Trump has now reversed.

11) Illinois: The American Federation of State, County and Municipal Employees Council 31, the union representing the largest number of Illinois state employees, announces that 81 percent of its members voted to authorize a strikethe first statewide strike ever. AFSCME 31 represents the 38,000 workers who help the disabled, work in state parks, care for veterans, and perform numerous public services. AFSCME 31 says that “instead of working toward compromise, Governor Rauner has been seeking the power to unilaterally impose his own extreme demands, including a 100% hike in employee costs for health care that would take $10,000 out of the pocket of the average state worker, a four-year wage freeze and an end to safeguards against irresponsible privatization.” For details on the negotiations, and AFSCME’s fact sheet on the Rauner administration’s “half-truths” on privatization, see its State Contract Information Center.

12) Kentucky: Murray State University is considering outsourcing “healthcare and mental health services for students, faculty and staff, based on recommendations from consulting group Hodgkins Beckley on Friday.”
 
13) New Jersey: As cutbacks in school support services hit school districts nationwide, a shortage of substitute teachers is deepening the problem. “Some districts outsource substitute services, but Galloway handles the task in-house,” reports the Galloway Current. “Subs are also needed for nursing, food service and custodial work.” The national average for sub pay is $25,781.

14) New YorkBKLYNER reports that Brooklyn tenants fought back and won their battle to prevent privatization of their homes. A day before the co-op board vote, “Council Member Cumbo staged a rally against the privatization of the St. James Place Towers, the Mitchell-Lama development located in Clinton Hill that provides affordable rentals and co-op units for moderate- and middle-income families. ‘After nearly fifty years of affordability, the shareholders of the St. James Place Towers must now make a tremendously difficult decision that will impact the outlook of Clinton Hill for future generations,’ Cumbo stated. ‘As gentrification continues to displace long-term area residents, the Mitchell-Lama program is among the few counteractive measures that currently exists to preserve affordable housing for middle-income families. Privatization undermines our city’s commitment to New Yorkers of all background—affordability for all,’ she said.”

15) Tennessee: Gov. Haslam (R) is stirring up another political hornet’s nest with his ongoing privatization plans for Fall Creek Falls State Park. “Tennessee architects and engineers have jumped into the political battle between the administration on one side and, on the other, state employees and Van Buren County who oppose outsourcing hospitality services at the remote Cumberland Plateau Park considered the ‘jewel’ of Tennessee’s park system. The architects and engineers say the administration’s request for proposals (RFP) to privatize hospitality services also has provisions that affect them and would largely bypass the State Building Commission, which oversees state building and renovation projects.”

16) InternationalUniversity of Guelph staffers could go on strike over outsourcing by mid-March. “The workers’ main areas of concern are the contracting out of their work, along with maintaining good jobs and job security into the future. ‘These issues have been ongoing for well over a year. [Local 1334 of the Canadian Union of Public Employees (CUPE)] had served notice to bargain last February but the University did not meet with us until November” [President Janice Folk-Dawson] said. ‘The entire campus has been subject to reduced levels of service due to unfilled positions and the cloud of uncertainty in the air has added to our workplace challenges.’”

17) Think Tanks: Harry Stein, the Director of Fiscal Policy at the Center for American Progress, says “Trump and his allies in Congress are poised to privatize America’s fiscal strength to further enrich a wealthy few and give corporations more power over ordinary Americans. (…) Instead of falling into the trap of fiscal hysteria, progressives must focus on how Trump is squandering and privatizing America’s fiscal strength. The fiscal system should be a powerful tool to make the economy work better for all Americans. Trump is using it to enrich the wealthy and empower corporations.” [See also Stein’s “America Can Still Do Big Things: Dispelling the Fiscal Hysteria that Thwarts Good Public Policy,” Harvard Law & Policy Review, February 2017]

Legislative Issues

1) National: Amid reports that the Trump administration is planning to delay introduction of his much-touted $1 trillion infrastructure plan until next year, tax-break hungry Wall Street and construction interests and their allies in Congress are awaiting any clarification from Trump in his address to Congress tomorrow. “‘Delaying something for a year is just the first step to never doing it in the first place,’ said Rep. John Delaney, D-Md., who has proposed using corporate tax reform to capitalize a $50 billion federal infrastructure bank. Axios cited Republican sources who said a backup plan is needed because Congress is likely to be busy this year with contentious issues, including a Supreme Court nomination, health care, immigration, and the debt ceiling. Republican leaders hope to ‘push off until next year any consideration of the massive infrastructure plan Trump wants … for roads, airports and other big projects, giving Republican lawmakers more breathing room amid a crowd of issues that’ll require massive effort, time and political capital,’ Axios said. Republicans believe that Democrats will be more amenable during an election year to a Trump infrastructure proposal that would include funding for projects in their districts, according to the Axios report.”

2) Arizona: A state audit panned the Arizona Department of Education’s efforts to oversee state education funds provided to parents who opt their student out of public schools, but is this the solution? “As concerns have mounted over the financial accountability of the ESA program, legislation was introduced this session that would give program administration, including financial management and accountability to private sector money managers. Senate Bill 1281 introduced last month by Arizona State Rep. Steve Smith, R-District 11, would let the Arizona Department of Education contract with private financial management firms to process applications, determine eligibility, administer financial transactions, and approve eligible expenses.”

3) Kentucky: The Lexington Herald-Leader says a charter school bill backed by Gov. Bevin (R) “would put public schools at risk statewide. HB 520 would allow virtual charter schools, which teach via the internet, to enroll an unlimited number of students from all over the state and suck an unlimited number of tax dollars out of Kentucky for out-of-state corporations. Many small districts already struggle financially; some also are reeling from a loss of revenue from the coal industry’s decline. For every 20 to 25 students who transfer to a charter, a teacher would be lost at the students’ former school. Larger districts might absorb such losses; small districts would be hammered.”

4) Maryland: A legislative proposal to centralize the call-in system for reporting possible child abuse needs clarity, says the Baltimore Sun. “The legislation as drafted was not entirely clear in whether it was intended to create a centralized switchboard to re-route calls to the appropriate county or to completely privatize the screening function for reports of possible child abuse, but the DSS directors opposed either interpretation. Total privatization would clearly be problematic, as the local DSS employees who take such calls now are highly trained and have access to confidential databases of case files on children who have come to their attention in the past.”

5) New MexicoA charter school moratorium bill has passed a committee and now goes to the full House. “Sponsored by Rep. Christine Trujillo, D-Albuquerque, the bill is only one sentence long, stating simply that no new applications for charter schools would be accepted or approved between June 1, 2017, and Jan. 1, 2020. The bill follows a report last year by the Legislative Finance Committee that recommended additional guidelines for authorizing charter schools and a new system for funding those schools. The report found inconsistent oversight of charter schools, with charters rarely revoked, despite poor performance.” 

 

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