WASHINGTON - President Donald Trump delivers remarks to employees of the Department of Homeland Security in Washington, D.C. Jan. 25, 2017. President Trump praised the new Secretary of DHS, Gen. John Kelly saying: “Secretary Kelly will deliver for the American people,”. Official DHS photo by Jetta Disco.
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Weekly Privatization Report 3-20-2017: Trump’s budget, charter school fraud in New Jersey, and more

1) National: Trump’s 2018 budget outline, released last week, advances privatization in several key areas—education, air traffic control, and private detention—and has created deep concern over the fate of public interest programs and regulations in areas ranging from the future of scientific research to “meals on wheels.” House Minority Leader Nancy Pelosi (D-CA) called it a “systemic deconstruction of the federal government.” Sen. Bernie Sanders (I-VT) called it “morally obscene and bad economic policy.” The U.S. Conference of Mayors, National Association of Counties, and National League of Cities issued a joint statement saying that Trump’s plan to eliminate Community Development Block Grants “mortally wounds the places where the majority of Americans live, work and play. Such a move risks ending or harming programs that keep Americans safe, help them find better-paying jobs, improve their health and keep public facilities in good shape.” AFSCME President Lee Saunders said Trump’s budget “is even worse than we could have imagined. His proposed cuts are so large, so dangerous, and so harmful to the basic well-being of American families that they may prove too extreme even for the extremists in Congress.”

2) National: As part of Trump’s budget blueprint, the national air traffic control system would be spun off from the FAA into a government-controlled corporation or nongovernmental organization—a move that parallels an unsuccessful effort last year by then-House Transportation Committee chair Bill Shuster (R-PA) to pry air traffic control out of public hands. It was also part of the Heritage Foundation’s blueprint for Trump (Heritage has been producing these blueprints for right-wing presidents back to Reagan). Heritage said “following the privatization of the ATO, the elimination of FAA grant programs, and the relocation of safety programs, the FAA could be disbanded.” (p. 88)

Critics have denounced Trump’s plan:

“The House Transportation Committee’s ranking Democrat, Rep. Peter DeFazio (D-Ore.), decried the Trump administration’s ‘Skinny Budget,’ on several counts, starting with what critics of the ATC spin-off describe as a ‘privatization’ of the system that favors airlines. “For the last two years, opponents of this short-sighted plan have raised serious concerns about whether ATC privatization would guarantee safety, protect national security, expedite new technology, and keep our aviation system solvent,” DeFazio said. ‘Proponents have failed to answer any of the serious questions we have raised. Air traffic control privatization will not benefit the flying public and it definitely will not benefit taxpayers who will be on the hook for bailing out the private ATC corporation if it fails.’

“Americans Against Air Traffic Privatization, a coalition of liberal organizations, said the ATC spin-off would do more harm than good to travelers and taxpayers. ‘A Republican-led Congress has already rejected this proposal because of vast opposition from a bipartisan coalition including legislators on both sides of the aisle from appropriators to tax writers, rural and consumer advocates along with several aviation unions who all agree that the risk and the cost far outweigh the reward,’ the group said. ‘Today, the same plan remains on the table—a plan that would separate ATC from the FAA and hand over control of our airspace to an unaccountable organization controlled by the airlines for free.’”

In addition, “the Alliance for Aviation Across America released a letter to Congress from over 115 mayors in all 50 states expressing concern about the impact of air traffic control privatization on communities across the country, especially those in rural regions of the country.”

3) National/Think Tanks: Tomorrow the Eno Center will be holding a briefing at the National Press Club to discuss “Delivering Modern Air Traffic Control.” Eno supports “taking air traffic control out of the Federal Aviation Administration in favor of either a government corporation or an independent, non-profit organization. It also proposes a new funding structure that relies on user fees, rather than the current mix of taxes and general funds.” Last month Eno produced a report advocating for its position, which critics have denounced as a form of privatization driven by the airline industry.

4) National: Trump’s budget outline has sown further confusion in the discussion of national infrastructure renewal and investment and the role of private finance in it. Although some are thinking that Trump’s infrastructure plan may not materialize at all or was just a campaign gimmick, White House officials have been clear that in terms of their legislative priorities they are going to do healthcare first and tax reform after that. OMB director Mark Mulvaney reiterated last week that the plan will be released in the late summer or fall. “We have to do Obamacare repeal and replace first, then tax reform second,” Mulvaney said. “That leaves infrastructure probably third, which may come after the August recess in Congress.”

Whatever the outcome of the healthcare debate, the battle over tax reform—which is a, perhaps the, top priority of the Republican congress—will determine the shape of any infrastructure plan, since the issue of funding the $1 trillion infrastructure promise that Trump set out depends on either tax credits (the Ross/Navarro infra plan) or on appropriated revenue (which the Democrats want), or a mix of both.

Another key issue will be the fate of tax exemption for municipal bonds, which are currently used to finance most American infrastructure, which is locally-generated but federally supported through this exemption. Here the course of the tax reform debate will be key. At a conference of bond dealers last week, an analyst said that the fate of the muni exemption, and Trump’s infrastructure ambitions, would depend on what happens to Trump’s promised Border Adjustment Tax (BAT) [Sub required]. Muni dealers and local finance officials seem to be hanging their hopes for the survival of muni tax exemption on the possibility that the BAT, rather than an axing of the muni exemption, will be used as the “pay for” for either tax credits for infrastructure or to back a straight fiscal stimulus. But of course, the BAT may not even materialize, and even if it did there are a lot of different interests that would like to get their hands on that money. Stay tuned.

As for the Trump budget itself, there has been a lot of commentary on the fact that the government agencies that have traditionally supported and administered infrastructure construction have seen drastic cuts (the DOT budget down $2.4 billion to $16.2 billion). This included a proposal to eliminate TIGER grants and to slash the Army Corps of Engineers budget by $1 billion to $5 billion. It also includes dramatic cuts to federal transit grants through the New Starts program (Republican lawmakers have been durably hostile to mass transit support through the years). But the Trump budget did include $2.3 billion for state revolving funds and $20 million for the Water Infrastructure Finance and Innovation Act program.

What does seem clear in all this is that despite the cutbacks at DOT, the Trump administration intends to keep control of its infrastructure initiative in the hands of the White House itself—if for no other reason than to oversee the private patronage aspects of infrastructure project approvals as they roll out later this year or next year.

5) NationalPresident Trump has signed an executive order calling for agencies to analyze their efforts in preparation for a major reorganization. The order is intended “to improve the efficiency, effectiveness, and accountability of the executive branch by directing the Director of the Office of Management and Budget (Director) to propose a plan to reorganize governmental functions and eliminate unnecessary agencies … components of agencies, and agency programs.” A debate on privatization is explicitly hard-wired into the EO, which instructs agency heads to consider “whether some or all of the functions of an agency, a component, or a program are appropriate for the Federal Government or would be better left to State or local governments or to the private sector through free enterprise.” [Executive order]

6) National: Trump’s budget outline also proposes a massive increase in funding for school privatization while slashing education support services for public schools. The blueprint contains “a $168 million increase for charter schools, $250 million for a new private school choice program, and a $1 billion increase for Title I, dedicated to encouraging districts to adopt a system of student-based budgeting and open enrollment that enables Federal, State, and local funding to follow the student to the public school of his or her choice.” (p. 17)

Noting that Betsy DeVos will be up on Capitol Hill this week to fight for Trump’s school privatization budget, Politico remarks, “Trump’s plan may be a small down payment on his campaign promise to invest $20 billion in school choice programs but it represents a radical departure for education policy. The question is whether DeVos can convince not just lawmakers but the American public that taxpayer money should be used to help families pay for private school tuition. In fact, she may have a hard time persuading moderates in her own party, some of whom have rejected such ideas in the past and who are sure to balk at cuts to other programs viewed as essential by educators and parents in their districts.” In response, the Network for Public Education is “launching a campaign to fight back against the Trump-DeVos budget cuts to public schools and budget gains for privatization.”

7) National: Donald Cohen of In the Public Interest reports that Trumpcare, the so-called “replacement” legislation for the Affordable Care Act, will open the floodgates for profiteering by private contractors. “What the bill would do to Medicaid, the health care program for poor, elderly, and disabled Americans, plays right into the hands of private contractors looking to score big on taxpayer money. By including Medicaid ‘block grants,’ which is a fancy way of saying ‘cuts,’ the bill would force states to slash costs. And when budgets are tight, corporations come calling, claiming they’ll do the work cheaper, better, and faster. But, whether it’s running private prisons or operating water utilities, their claims often ring hollow, especially when it comes to helping those on the margins of society.”

Those who may be hoping for contracting oversight are likely to be disappointed. Phil Mattera of Good Jobs First notes the dire picture for responsible contracting under Trump: “The Office of Federal Contract Compliance Programs, which makes sure government contractors comply with anti-discrimination laws, has not issued a single press release since inauguration day—on enforcement matters or anything else.”

8) National/Revolving Door News: Harley G. Lappin, a former director of the Federal Bureau of Prisons who went on to become Chief Corrections Officer and Chief Executive Officer of CoreCivic, the for-profit prison company, cashes in on Trump’s election and the steep rise of its stock price: 

Harley G. Lappin (Reported Selling; trailing 12 months)

     
Month

No. of Shares

Price, USD

Value, USD

March 14, 2017

9,000 31.94 287,501

February 14, 2017

9,219 30.55 281,663

December 12, 2016

10,000 24.7 247,018
Total 28,219 28.92 816,182

[Source: SEC]

9) LouisianaEight operators want to open charter schools in East Baton Rouge. “The School Board has until June 1 to decide whether to grant one or more applicants a Type 1 charter. The school system is searching, as required by law, for an independent evaluator to review the applications and to recommend the best ones to the board for approval.”

10) New Jersey/Revolving Door News: Linden officials charge that petitions filed in support of the creation of a charter school in Union County were fraudulent. “The state, which under Gov. Chris Christie’s leadership has looked to expand the charter school movement, approved the application and, after the allegations landed in Trenton, reaffirmed its decision. The state official who contacted the firm behind the new charter about Linden’s claims now has an executive job with that firm.”

11) New York: Nassau County’s financial control board has stepped in to stop the Mangano administration’s practice of starting to pay vendors before legislative approval was obtained for their contracts. “The county administration for years has allowed some vendors to start work without legislative approval, but the practice began generating consistent complaints from GOP lawmakers only in the last month. At a Feb. 13 legislative meeting, Deputy Presiding Officer Richard Nicolello (R-New Hyde Park) suggested that the administration ‘is just looking at us as a rubber stamp.’”

12) MississippiNine charter school operators have descended on the state, saying they want to open new schools. None of them run a charter school anywhere else.

13) North Carolina: I-77 opponents are cheering the state’s new transportation secretary, James Trogdon, for promising his department will conduct an independent review of the contract and project to build toll lanes on the road in northern Mecklenburg County. “DOT has created a new public comment link as part of the review, but North Mecklenburg residents have hardly been silent on the project. Their widespread objections contributed to the defeat in November of former Gov. Pat McCrory, who was Charlotte’s longtime mayor. ‘I regret this has become such a divisive issue in this community during the last three years,’ Trogdon told the board, according to his written comments. ‘We can’t change what got us here, but we can change where we go next.’”

14) PennsylvaniaBoyertown is considering privatizing its water and sewer services to Aqua Pennsylvania after the company expressed an interest. The borough’s public utilities committee will meet Wednesday to discuss the proposal.

15) Pennsylvania: The frequently-criticized Philadelphia School Reform Commission is in hot water again, having approved a $150,000 contract with a non-accredited institution, the Relay School of Education, to offer a teacher residency program. “‘Relay is not affiliated with a legitimate college or university,’ testified Deborah Grill before the SRC’s monthly meeting held [last] Thursday evening. ‘It was founded by three charter school networks to train teachers in their charter schools.’ Diane Payne asked the commission what compelled them to make the decision to do business with Relay. ‘I want to know how you have come to the conclusion that Relay is a worthwhile investment of money?’ Payne asked.”

16) South Dakota/National: From progressive blogger Cory Allen Heidelberger at Dakota Free Press: “I will spend none of this weekend watching any basketball games. However, for you South Dakotans who are watching basketball, who broadcasts every game from every state tournament? South Dakota Public Broadcasting. Who provides 21% of South Dakota Public Broadcasting’s budget? The Corporation for Public Broadcasting. Who wants to eliminate all $455 million of federal funding to the Corporation for Public Broadcasting? Donald Trump.”

17) Vermont/NationalPrice competition—for the market value of incarcerated people—is being sharpened by Trump’s immigration roundup. “Reducing the number of Vermonters behind bars would allow the state to bring home the 265 inmates in a GEO Group for-profit prison in Michigan who will soon be kicked out, probably to make room for detained immigrants. ICE is looking for cells and willing to fork over far more than the $64 a day Vermont pays GEO.”

18) Think Tanks: The Environmental Defense Fund releases a report revealing the appalling record of many states on informing prospective homeowners whether the property they are considering contains a lead pipe water connection. “Grading the Nation: Lead Pipe Disclosure Polices: How Does Your State Measure Up?” lists 12 states, including Virginia, Massachusetts, Vermont, New Hampshire, Utah and Missouri that got an F grade. “People deserve to know if lead pipes and paint are present where they live and work,” says EDF’s Tom Neltner. But, says Neltner, “there are signs of progress. In Washington, DC, the water utility has launched an online map that reveals information that can help improve transparency on lead pipes. Anyone can check online and see what’s known (and not known) about the presence of lead service lines that connect the drinking water main under the street to their home or business. It’s a model other communities should follow.”

Legislative Issues

1) Colorado/NationalAs states head into budget season, the chaos that could be produced by ACA repeal is deepening local debate on the future of public healthcare. Colorado Republicans want to privatize the state’s exchange. “One Republican idea: Get rid of the state health insurance exchange, called Connect For Health Colorado. Republicans say the change could save Colorado some $40 million a year, with health insurance shoppers simply using federal or private-sector resources to buy health insurance. But the proposal to dismantle the exchange faces almost certain doom in the House, where ruling Democrats consider it a premature broadside on Obamacare. Outside the state Capitol, health care analysts are gearing up for a long fight over Colorado’s plans to prepare for health care changes coming from Washington. “The cuts would be so dramatic they would really taint state budgets,” said Adam Fox of the Colorado Consumer Health Initiative, a Denver-based nonprofit that supports the current health care law.”

2) Delaware: State Rep. Paul Baumbach (D) has introduced a bill that would require all agencies and institutions that are subject to the Freedom of Information Act (FOIA) respond to requests for information from non-Delawareans. More than 50% of all U.S. publicly traded companies and 63% of the Fortune 500 are incorporated in Delaware. [HB 75]

3) Georgia: A House committee has killed off a bill that would have allowed the state to collect highway tolls forever. “Senate Bill 183 would have granted the State road and Tollway Authority the power to collect tolls on road projects in perpetuity, rather than letting the tolls expire once road construction project is paid for. But the House Transportation Committee stripped that provision from the bill, which also includes provisions making it easier to create public-private partnerships for transportation projects.”

4) MissouriThe House narrowly passes a bill that will allow charter school expansion in the state. Democratic Rep. Karla May responded by saying “I think this body did a disservice when it allowed rural Missouri and the rest of the state to opt out of charters and used urban areas like Kansas City and St. Louis City as test cases to a failing system. We wasted approximately $683 million on charter schools, and they weren’t even performing better than the schools that weren’t even accredited.” U.S. News reports, “of 35 Missouri charter schools with available data for the 2016 school year, 20 met less than 75 percent of state accountability standards. Six met less than 50 percent of those standards.” The bill now moves to Senate.

5) NebraskaA new charter school bill has been introduced in the legislature. Bills have been defeated for the past three years. “Opponents point out Nebraska already has school choice among public schools. With the opt-in system, any child can attend any other public school, as long as there are seats open. Some districts have more kids wishing to attend than spots available. Another issue is whether to improve existing schools or create new schools.”

6) Oregon: The Beaverton Times praises State Rep. Richard Vial (R) for coming up with an innovative ‘public private partnership’ bill, but says it should die without a hearing 

because it would pair a P3 with a special district

. “Vial’s proposal to create a special district falls into the trap of putting transportation policy ahead of land-use policy, urban and rural reserves policy, and the principle of locally elected bodies having their say on major infrastructure projects going through their own communities. Once cities and counties voted to create this special district, they would lose oversight of it. It’s a Sorcerer’s Apprentice construct that could run roughshod over the very cities and counties that created it.”

 

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