Kati Kelley and Hallie Bess give their portions of a presentation on the West Virginia Pumpkin Festival to students at the Buckingham School in Lima, Peru. Both girls are students in Lora Rice’s Spanish I class at Milton Middle School. The school is participating in a learning alliance as part of the West Virginia National Guard’s State Partnership Program.  (Photo by Sgt. Anna-Marie Ward, JFHQ-WV Public Affairs Office)
SHARETweet about this on TwitterShare on FacebookEmail to someonePrint this page

Weekly Privatization Report 3-5-2018

1) National/California: “Expensive restaurants. Moonlighting as an NBA scout. A Mercedes GL450.” A new report from In the Public Interest documents systemic fraud and waste in California’s charter schools. Public funding of California’s charter schools now tops $6 billion annually. Despite this substantial investment, governments at all levels are unable to proactively monitor the private groups that operate charter schools for fraud and waste. Most public school districts aren’t given adequate resources to oversee operators, especially large charter management organizations (CMOs), while all lack the statutory authority to effectively monitor and hold charter schools accountable.

The report builds on existing research to show that, due to this lack of oversight, an untold amount of public funding is being lost each year. Only the tip of the iceberg is visible, but this much is known: total alleged and confirmed fraud and waste in California’s charter schools has reached over $149 million. The report is recommended by education historian and school privatization opponent Diane Ravitch, who notes that the report “also includes an analysis of flaws in existing oversight, recommendations for reform, and an appendix of instances of fraud and abuse from 1997 through 2017.”

2) National: A new report by the Offices of Senator Elizabeth Warren and Representative Katherine Clark finds that the first year of education secretary Betsy DeVos’ tenure, “marked by damaging conflicts of interest,” has been “a boon for for-profit colleges, student loan companies, and advocates of school privatization. And her actions have harmed public education and students of all ages.” DeVos “has spent her time in office meeting with school choice and privatization advocates, while largely ignoring the needs of public school students and teachers.”

3) National: The GEO Group, the largest for-profit prison corporation in the U.S., has released its 2017 annual report. Net operating income for 2017 was $562,925,000, up slightly from $529,209,000 in 2016. It also issued its full year 2018 and First Quarter guidance: “GEO expects full-year 2018 total revenue to be approximately $2.3 billion,” which “does not assume the reactivation of GEO’s approximately 7,000 idle and underutilized beds or any share repurchases under GEO’s $200 million share repurchase program.”

Included in the report is a summary of current litigation facing the company (p. 153):

GEO Group is being sued by the State of Mississippi over “several statutory and common law claims, including violations of various public servant statutes, racketeering activity, antitrust law, civil conspiracy, unjust enrichment and fraud. The complaint seeks compensatory damages, punitive damages, exemplary damages, forfeiture of all money received by the defendants, restitution, interest, attorneys’ fees, other costs, and such other expenses or damages as the court may deem proper.”

From the 10-K: “On October 22, 2014, former civil immigration detainees at the Aurora Immigration Detention Center filed a class action lawsuit against the Company in the United States District Court for the District of Colorado (the ‘Court’). The complaint alleges that the Company was in violation of the Colorado Minimum Wages of Workers Act and the federal Trafficking Victims Protection Act (‘TVPA’). The plaintiff class claims that the Company was unjustly enriched as a result of the level of payment the detainees received for work performed at the facility, even though the voluntary work program as well as the wage rates and standards associated with the program that are at issue in the case are authorized by the Federal government under guidelines approved by the United States Congress. In February 2017, the Court granted the plaintiff-class’ motion for class certification which the Company appealed to the 10th Circuit Court of Appeals. On February 9, 2018, a three-judge panel of the appellate court affirmed the class-certification order. The Company is seeking a rehearing en banc of the panel decision. The plaintiff class seeks actual damages, compensatory damages, exemplary damages, punitive damages, restitution, attorneys’ fees and costs, and such other relief as the Court may deem proper.

“Since the Colorado suit was initially filed, three similar lawsuits have been filed—two in Washington and one in California. In Washington, one of the two lawsuits was filed on September 9, 2017 by immigration detainees against the Company in the United States District Court for the Western District of Washington. The second of the two lawsuits was filed on September 20, 2017 by the State Attorney General against the Company in the Superior Court of the State of Washington for Pierce County. On October 9, 2017, the Company removed the lawsuit to the United States District Court for the Western District of Washington. In California, a class-action lawsuit was filed on December 19, 2017 by immigration detainees against the Company in the United States District Court Eastern Division of the Central District of California. All lawsuits allege violations of the respective state’s minimum wage laws. However, only the California lawsuit, similar to the Colorado class-action, also includes claims based on violating the federal TVPA.”

4) National: Jake Bittle, writing in The Nation, explains how postal workers are shouldering the burden for Amazon, saying “the tech giant’s rise has pushed mail clerks and carriers to the breaking point.” He reports that “around one-third of the packages Amanda handles are shipped by Amazon. As the Seattle-based tech giant commands an ever greater share of the retail market, the number of packages handled by the USPS keeps increasing. But employees say Postal Service management hasn’t responded to the surge in heavy items by investing in staffing or infrastructure. Instead, its leadership has cut costs and resorted to what union leaders call ‘management by stress.’ ‘We absolutely don’t have proper staffing for the amount of packages we get,’ said Amanda, who withheld her full name for fear of workplace repercussions. ‘Everyone in the office is overwhelmed by it, but the only way management’s going to respond is if you file an incident report. People are just so busy that they’ll say, ‘It’ll be fine tomorrow.’ It’s not.”

5) National: Sydney Boles and Rowan Lynam analyze how grassroots campaigns defeated efforts, especially in Elkhart, Indiana, by CoreCivic and GEO Group to open for-profit prisons. “County Commissioner Mike Yoder, a centrist Republican torn between his Trump-voting constituency and his own track record of supporting immigration reform, is one of three commissioners who would have voted for or against the detention center. Once the CoreCivic proposal got approval from a zoning board, Yoder and his two fellow commissioners, Suzanne Weirick and Frank Lucchese, would have voted the final yes or no. It was towards these three local politicians that the coalition directed their substantial activism.”

6) National: Fitch Ratings has reaffirmed its issuer default rating for CoreCivic at BB+, citing its good credit metric but noting that this was offset by “flat occupancy rates and margins. CXW’s revenue growth has been muted despite a favorable political administration and increased enforcement of immigration laws. Even as retention/renewal rates remain high on expiring contracts, a number of select large contract losses and renegotiations, in particular the contract for the company’s South Texas Family Residential Center (STFRC), led to lower revenue for full year 2017 versus the previous two years. Fitch expects only modest EBITDA growth over next several years. Margins also continue to compress as the company struggles to maintain similar profitability on its new and renewed contracts.” Fitch also asserts that the company might have some running room on prison construction, because “the cost for states to build, operate or repair facilities remains significantly higher than those of the private operators.”

7) National: The DHS Inspector General reports that U.S. Immigration and Customs Enforcement “did not follow federal procurement guidelines when contracting for detention services.” Government Executive says “ICE officials told the IG they chose to modify the IGSA because it was ‘more expedient’ and offered ‘much greater flexibility’ than a normal procurement process.” The Inspector General “faulted ICE for negotiating directly with the subcontractor rather than the entity legally responsible for the agreement.” Private prison companies spent nearly $3.5 million on federal lobbying in 2017, according to the Center for Responsive Politics.

8) National: @davidsirota shares a history lesson. “1987: Robocop predicts a dystopian future of cartoonish hyper privatization. 2018: Wall Street private equity firm celebrates its move to buy up a private corporation that does ‘electronic toll collection and violation management.’”

9) National: The infrastructure privatization booster industry seems to be kicking into higher gear once again,according to a survey—at a P3 promotion event. “However, Charles Renner, a Husch Blackwell partner who leads the firm’s PPP practice, told Infrastructure Investor a portion of the survey respondents are potential market entrants.”

10) Arkansas: State officials have identified over 200 buildings and pieces of property that can be sold off for charter school use. “School districts that object to the state classification of their properties as vacant or underused are allowed to appeal the decision, said Brad Montgomery, director of the [Arkansas Division for Public School Academic Facilities and Transportation].”

11) California: The Santa Monica City Council is trying to come to grips with problems in its bus system, but is promising not to contract out. “The council values those employees,” said Council Member Kevin McKeown. “To the extent possible, we want to keep every good, middle-class job we’ve created in this city.”

12) Illinois: Gov. Bruce Rauner (R) vetoes a bill promoted by Chicago Public Schools that would have “curbed the authority of the Illinois State Charter School Commission, which has overruled CPS and funded charter schools the district rejected for failing to meet standards.” The Chicago Teachers Union, “which bargained to have a cap on charter schools CPS can authorize, chided the governor, saying he ‘embraces local control for municipalities when they seek to crush unions. Yet Rauner demands top-down control for his pet projects—like overruling local school boards’ decisions on how best to manage their schools,’ CTU Vice President Jesse Sharkey said.”

13) IowaThe Des Moines Register says that the state’s new Medicaid director, Mike Randol, “is excluding the public from meetings where social-service agencies are expected to air their problems with Medicaid privatization, a disaster foisted on Iowa by Gov. Terry Branstad in 2016 and championed by [Gov.] Reynolds. (…) Many agencies have complained that the for-profit companies now administering the taxpayer-funded insurance program are denying or delaying payments for services. Iowans should be able to hear what these providers have to say.”

14) Louisiana: The State Board of Ethics has asked a panel of judges to order the firing of Doris Roché-Hicks, CEO of the Friends of King Schools charter school, for violating nepotism laws. “At the end of the five-hour hearing, the judges asked Zanders and the state Board of Ethics to file written arguments by March 20. It could take three months for the judges to rule on the case.”

15) Missouri/South Dakota: Overburdened public defender systems around the country are leading to more attorney outsourcing. In Missouri, it has led to pressure to contract out some of the work. “The defender system already contracts some cases to private attorneys, primarily when a local defender office faces a conflict that prevents it from representing defendant. A bill introduced this year by Rep. Robert Ross, a Texas County Republican, calls for radically expanding that system by contracting out all cases involving class C, D, and E felonies, as well as all misdemeanors, traffic cases and probation-violation cases. Similar bills have been considered in previous sessions.” [Sub required]. In South Dakota, “the [Minnehaha County] commission recently put out requests for private attorneys to submit proposals of set prices in exchange for a certain number of court-ap­pointed cases. Commissioners are also exploring the possibility of contracting out some of the attorneys’ mental health hearing responsibilities. Twice-weekly mental health hearings for clients can take up about 20 hours of work for an attorney.”

16) New York: New York City’s tab for charter school rent is going up 63% this year, to $44 million, from $27 million last year. “The city says costs are increasing because rents have risen and that many eligible charter schools are continuing to expand to serve higher grades. Another reason costs have increased: This year, the state upped the amount of funding the city is required to spend on charter space.”

17) Oregon: Ashland maintains its own in-house tree removal service instead of contracting it out. “McBartlett says their own crews keep a good eye on the weather and prepare their trucks for weekend storms by putting chains on the wheels in case somebody gets called out on Saturdays or Sundays.”

18) West Virginia: As teachers continue their strike, a central aim of which is to fix the West Virginia Public Employees Insurance Agency (PEIA) system to make it affordable and useful for public employees, talk of PEIA privatization is in the air. Wheeling Registered Nurse Chrystal Myers, pointing at problems with the privatized workers compensation system, says “I implore the voters and state employees to not let this happen.”

19) International: India has awarded Macquarie Infrastructure and Real Assets a $1.5 billion rights deal “to collect tolls on nine highways in India for the next 30 years under a Toll-Operate-Transfer contract tendered by the country’s highway authority.”

20) International: A parliamentary inquiry in Australia has been told the enormous increase in the public sector’s use of private consultants from companies like Deloitte, PwC, KPMG, Accenture, and Ernst & Young (EY) has contributed to a deficit in public service knowledge. “Following an Australian National Audit Office report in December that found that spending on specialist consulting contracts had grown from more than $200 million in 2012-13 to more than $500 million in 2016-17, the joint committee of public accounts and audits has asked government departments and agencies to explain their procurement spends.” Perhaps Congress could hold similar hearings and investigations here in the U.S.?

21) Think Tanks: Former California Superintendent of Public Instruction Bill Honig does a deep dive on the issues of high stakes testing and privatization. “This article examines the problem of low student performance and the flawed approach used by conventional reformers who support Test-and-Punish and market-driven solutions. It will summarize the evidence that documents the reform policies’ lack of success and describe the considerable collateral damage these policies have caused.”

22) Think Tanks: Joseph Oluwole of Montclair State University and Preston Green of the University of Connecticut ask “Are California’s Charter Schools the New Separate-But-Equal ‘Schools of Excellence,’ or Are They Worse Than Plessy?” Their suggestions: States should only permit school districts to be charter school authorizers; States should seriously consider banning education management organizations (EMOs) from operating charter schools; States should allow school districts to base chartering decisions on their economic impact to serve all of their students.

Legislative Issues

1) National: Lawmakers continue to be divided about how much public funding and private financing is necessary for a major infrastructure package. “Democrats continued to criticize the plan for repurposing other transportation funds and questioned its strategy of using a $200 billion federal commitment to generate a $1.5 trillion infrastructure package. ‘I was surprised when I finally saw that the administration’s plan devoted 15 pages to permitting, while the word ‘pay-for’ failed to appear even once. Even once,’ ranking Environment and Public Works Committee member Tom Carper (D-Del.) said during the hearing. ‘Maybe I missed it, but I don’t think so.’” Democrats say “our plan is bigger than Trump’s.”

The bottom line, at least in the Bond Buyer’s thinking, is Congress isn’t going to enact any infrastructure legislation this year. “Lawmakers on both sides of the aisle want an infrastructure bill. Plenty of legislative activity is expected. Bills will be introduced. Hearings will be held. There may even be an attempt to enact some infrastructure provisions in an omnibus appropriations bill later this year. But there’s no consensus on how to pay for a bill and there seems to be too little time to bridge the differing views and reach some agreement.”

2) National: In a big win for public interest advocates and the general aviation industry, Bill Shuster throws in the towel on air traffic control privatization. “‘This is a huge victory for air traffic safety and the traveling public,’ said Andi Parker, president of the National Federation of Federal Employees Local 1340, which represents FAA employees. ‘Neither the science nor the data was there to show proof to the claim that privatization will increase safety or save money. In fact, the evidence dictated the exact opposite.’ NFFE President Randy Erwin drew parallels between the air traffic control debate and the ongoing issue of health care for veterans.

3) National: Aqua America has released its 2017 annual report, in which it reported on current rate increase applications to public utility commissions. “To date in 2018, the company’s state subsidiaries in Pennsylvania, North Carolina and Ohio have received rate awards or infrastructure surcharges totaling $11.1 million. Additionally, the company currently has rate proceedings pending in Illinois, New Jersey and Virginia of $15.8 million. The timing and extent to which the rate increases might be granted can vary by the applicable regulatory agency, and the outcome of these filings are expected to consider the effects of the recently enacted Tax Cuts and Jobs Act.”

4) Arizona: Diane Ravitch directs a pointed question to Arizona taxpayers: do they care about the state’s “corrupt and failing” charter schools? She was reacting to an in-depth report on how indifferent state lawmakers have been on the issue by Arizona Republic columnist E.J. Montini, who says “turning a blind eye while charter schools rip-off taxpayers, spurn state laws and screw innocent public school students has been standard operating procedure from the moment the Legislature decided to allow the number of charter schools to explode without providing any serious oversight.”

5) California: North Hollywood High School students are organizing to fight against a proposal to locate a charter school in their school. “‘The primary concern that’s closest to most students’ hearts is the loss of a lot of programs and opportunities on campus that we simply wouldn’t have room for if a charter would co-locate here,’ said Ella Michaels, a North Hollywood High senior who is captain of the debate team and whose brother is a junior.  ‘We’re already strapped for resources as it is.’ North Hollywood High School has nearly 2,525 students enrolled on its campus, according to district officials. Adding the charter school would bring up to 400 more.”

6) Colorado: The $1.8 billion renovation of Denver International Airport’s main terminal will be costing less because “a rush by investors in December to buy tax-exempt private-activity bonds for the project shaved about $65 million off the anticipated cost of the 34-year project, DIA CFO Gisela Shanahan told city council members Wednesday. (…) The savings come from a lower-than-expected starting point for the annual payments, which will rise every year, Shanahan said. (…) Investors also liked the unusual ‘roadshow’ that DIA and the Great Hall Partners did together to promote the bond sale, she said. Typically, the public client in a public-private partnership doesn’t participate in the roadshow with the private partners, she said.” [Sub required]

7) Delaware: The Colonial School District has had to step in to save a failing charter school that trains students to be first responders. “The state will decide this spring if the school will remain open or have to close.”

8) Maine: The LePage administration is contracting out ten positions in the Medicaid applications operation even though it will cost more. “The state chose the vendor without asking for bids from other potential providers. And the annual price tag of $2.7 million is well more than double the $1.1 million set aside in DHHS’ budget for the first year of the contract. The $1.1 million is a combination of state and federal funds.”

9) Puerto Rico/Virgin Islands/National: At an event hosted by the Albert Shanker Institute, which supports public education and the role of unions, lawmakers and AFT President Randi Weingarten backed a bill that would provide $3.16 billion in aid for Puerto Rico and the U.S. Virgin Islands in fiscal 2018 for education and Head Start. “Weingarten said rather than close schools and create charters and vouchers, Puerto Rico should get new community schools, expanded learning time for students, and new professional learning hubs for teachers.” Sen. Bernie Sanders (I-VT) denounced Gov. Ricardo Rosselló’s plan, saying “the school privatization proposal in Puerto Rico would pull much-needed money away from public schools. … The proposal at hand would completely disrupt and destabilize the existing public school system already struggling to rebuild.” See also Jeremy Mohler’s “5 reasons why introducing charter schools in Puerto Rico is a bad idea.”

10) South Carolina: A state senator says the state’s publicly-funded charter school system is in “a state of chaos.” The Greenville News reports that “at the heart of the ‘chaos’ is the effort by four charter schools, deemed failing by the statewide charter school district, to leave the state district for a new boss: a newly formed charter-school authorizer at Erskine College, a private Christian college in the Upstate.”

11) Utah: The performance of Utah’s charter schools has been a ‘grave disappointment,’ according to the Republican lawmaker who created them, reports the Salt Lake Tribune. “Stephenson was presenting his bill, SB173, to members of the Senate Education Committee. The bill would change the membership requirements of the State Charter School Board to include someone with expertise in classroom technology and individualized learning.” [SB 173]

12) West Virginia: It’s possible that legislation on charter schools may come up this year, says Delegate Roger Romine, R-Tyler, a member of the West Virginia House of Delegates Education Committee. The West Virginia Education Association (WVEA) says “charter schools take money away from traditional public schools. The state is in the middle of a budget crisis that continues to  worsen. Our schools lost more than $11 million statewide during a recent midyear cut and stands to lose at least another $15 million in school-aid funding in the next fiscal year. We cannot properly fund our traditional public schools and charter schools will worsen the funding crisis.”


Want our weekly privatization report in your inbox every Monday? Sign up here.