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Weekly Privatization Report 4-9-2018

1) National: As the battle over privatization of the Veterans Administration deepens, Jeremy Mohler of In the Public Interest examines the experience of Medicaid privatization in Kansas and Iowa, which shows “why outsourcing the VA would have tragic, even fatal, consequences.” Problems with the existing VA “choice” program are “eerily similar to the experiences of states that have privatized administration of Medicaid, public health care coverage for the nation’s poor and disabled. (…) While privatization was saving the state money by 2016, it was failing on quality outcomes, including coordinating physical health, behavioral health, and daily support services for people with disabilities. Within months of Iowa privatizing Medicaid in 2016, a majority of providers said they weren’t being paid on time and their administrative costs were increasing, putting lives at risk.”

2) National: For the first time in American history, students in more than half of all U.S. states are paying more in tuition to attend public colleges or universities than the government contributes. David Ruccio reports that “the privatization of public education has been under way for decades but this inflection point was hastened by deep cuts states made to their higher-education appropriations in the midst of the Second Great Depression. For the United States as a whole, according to a new report from the State Higher Education Executive Officers Association, students and their families were forced to come up with almost half (46.2 percent) of total educational revenue for public colleges and universities in 2017. They had to pay only 28.8 percent of the total in 1992, a share that had risen to 36.2 percent in 2007. Increasingly, public higher education in the United States is public in name only.” This while public funds are going to for-profit college tuition.

3) National: A venture capitalist, Ted Dintersmith, visited more than 200 charter schools in 50 states and rejects school privatization myths. In an interview with the Washington Post’s Valerie Strauss, he says “business principles aren’t the key to improving U.S. education. If choice and competition improve schools, I found no sign of it. Pitting schools against each other in a test-score ‘Hunger Games’ drags everyone down. I saw no sign of union status affecting a teacher’s dedication or effectiveness. There is, though, one business principle that applies to education.  If you want insight, spend time with those in the trenches. Our teachers know how to engage our children, to inspire them to race ahead, to prepare them for adult life. With the futures of millions of children at stake, we need to listen to our innovative teachers and trust them to be the powerful forces for informed, aspirational change in our schools.”

4) National/ColoradoThe Denver Post staff sounds the alarm about the possibly fatal effects of their hedge fund overlords’ savage staff and other cutbacks by publishing multiple critical articles on the opinion page. Alden Global Capital, which owns the Denver Post, has been accused of “strip mining 200+ newspapers nationwide.” The Postcovered Corrections Corporation of America’s (now CoreCivic) move to extract its “pound of flesh” from taxpayers, and once ran an op-ed calling for an end to for-profit prisons in Colorado.

Former Post reporter and current executive director of the Colorado Freedom of Information Coalition Jeffrey A. Roberts reminds us “What Investigative Journalism Means For Our Communities.” Roberts writes, “We need professionally trained journalists to sit through those long, often-tedious government meetings that determine policy and how tax revenue is spent. We need them to pore over government documents and databases, which they often must fight to obtain, sometimes for fees amounting to hundreds or thousands of dollars. We need them to develop sources who will help them explain to the public what’s really going on in their state, city, county and school district.” For an example, see the story below on an intrepid publication fighting two Pennsylvania charter schools to release their audits to the public.

5) National: Prominent financial analyst and columnist Barry Ritholtz writes that Congress, not Amazon, messed up the U.S. Postal Service. “Then there is the Postal Accountability and Enhancement Act of 2006 (PAEA), which some have taken to calling ‘the most insane law’ ever passed by Congress. The law requires the Postal Service, which receives no taxpayer subsidies, to prefund its retirees’ health benefits up to the year 2056. This is a $5 billion per year cost; it is a requirement that no other entity, private or public, has to make. If that doesn’t meet the definition of insanity, I don’t know what does. Without this obligation, the Post Office actually turns a profit. Some have called this a ‘manufactured crisis.’ It’s also significant that lots of companies benefit from a burden that makes the USPS less competitive; these same companies might also would benefit from full USPS privatization, a goal that has been pushed by several conservative think tanks for years.”

6) NationalThe Intercept reports that Guled Muhumed, one of 30 Somali ICE immigrant detainees who say they were subjected to a horrifying week of abuse at the for-profit West Texas Detention Facility run by LaSalle Corrections, has been deported. Recently the San Antonio Express-News demanded that “allegations of beatings at the West Texas Detention Facility in Sierra Blanca must be seriously investigated. More than that, if the charges that African immigrants were beaten down have substance, the Department of Homeland Security must re-examine the use of private corporations—in this case, Louisiana-based LaSalle Corrections—to run immigrant detention centers.”

7) National: How widespread are prevailing wage violations in ‘public private partnerships’? In one case concerning the Virginia 95/495 just settled by the FHWA, the Spanish contracting giant ACS was suspended and the agency proposed disbarring it from future government contracting, which would have been a devastating blow to the company. On March 6, an FHWA announcement declared “FHWA Suspends Transportation Contractors for False or Noncompliant Payrolls: On March 6, 2018, the Federal Highway Administration (FHWA) suspended and proposed to debar Midasco, LLC (Midasco), Actividades de Construccion y Servicios (ACS Group), and Imes API, SA (Imes). The suspension and proposed debarment was based on a civil settlement between the three entities, the United States, and the Commonwealth of Virginia to settle False Claims Act allegations. On July 28, 2017, Midasco, ACS Group, and Imes agreed to pay $450,000 to the United States and the Commonwealth of Virginia. The payment settled allegations that Midasco (a subsidiary of Imes and ACS Group) submitted false or noncompliant certified payrolls to the Virginia Department of Transportation, and failed to pay the proper prevailing wages for work performed on the I-95/I-495 High Occupancy Toll Lanes Project. The settlement agreement represents neither an admission of liability by Midasco, ACS Group, or Imes, nor a concession by the United States that its claims were not well founded.”

The case was settled on March 28 when the FHWA “determined that ACS and Imes do not present an immediate threat to the Federal-aid Highway System, the public interest, or the integrity of future Government contracts. The suspension of and proposal to debar Midasco remains in effect.”

But if Trump and the privatization industry have their way, these enforcement actions will go away, because his infrastructure plan “quietly exempts numerous projects” from Davis-Bacon prevailing-wage law, as David Dayen has reported. Even with the infrastructure plan dead in the water, will FHWA enforcement efforts weaken?

8) National: Road privatization advocates are trying to put a brave face on the latest train wreck in the Trump infrastructure initiative, the resignation of chief infrastructure adviser D.J. Gribbin. News of the departure surfaced shortly after Trump said nothing could be expected in Congress until next year, undercutting Gribbin’s efforts to dig the administration’s infrastructure policy out of a hole. The municipal bond market is weighing in to try and get the administration to appoint “a new infrastructure voice inside the White House who supports traditional financing tools” to succeed Gribbin, a longtime Transportation Department and Macquarie activist promoting ‘public private partnerships.’ [Sub required]

9) National: In a new report, Good Jobs First calls for transparency and democratic participation in the bidding for Amazon’s second headquarters. “In veering to secrecy, Amazon took a project that revealed an enormous public appetite for democratic participation in the future economic development of our cities—and then abruptly tried to frustrate it. But that hunger persists, as evidence from many cities demonstrates. Both Amazon and most of the 20 finalist governments that have not yet disclosed can start to salvage this opportunity for real public participation if they will disclose their first-rounds bids. The need for civic engagement is especially urgent because such a large project will induce costly growth. More teachers and classrooms, more lane-miles and transit, more public safety and trash-hauling, and more water and sewer service will be needed. If Amazon bears few or none of those new costs, incumbent residents will inevitably face lower-quality public services and higher taxes.”

10) National/MississippiThe New York Times reports that a trial has uncovered “Casual Horrors At a Private Jail.” Management & Training Corporation, “the private company that runs the East Mississippi facility near Meridian in Lauderdale County, already operates two federal prisons and more than 20 facilities around the nation.” Times reporter Timothy Williams writes, “So many shackled men have recounted instances of extraordinary violence and neglect in the prison that the judge has complained of exhaustion. The case, which has received little attention beyond the local news media, provides a rare glimpse into the cloistered world of privately operated prisons, at a time when the number of state inmates in private facilities is increasing and the Trump administration has indicated that it will expand their use.”

11) National/Louisiana: A Louisiana charter school owner presented oral arguments before the federal Fifth Circuit on Thursday, claiming that it is a public workplace and thus outside of the National Labor Relations Board’s jurisdiction. The case is Voices Intl Bus and Educ, Inc. v. NLRB, and the Fifth Circuit has very helpfully and promptly posted the recording of the oral argument, and not behind a paywall [43 minutes]. The school is International High School of New Orleans. For background see Rachel Cohen’s September 2017 article in the American Prospect.

12) National: The widely-trumpeted $40 billion Blackstone infrastructure fund, for which the Saudis were meant to pony up $20 billion, has been slow to match the hype. The privatization industry and its flacks often claim that a tsunami of private financing is just waiting in the wings if only the public sector would “leverage” it by selling off or concessioning bits of its infrastructure and subsidizing investor profits. In the short term, Blackstone’s goal now is to raise a total of $15 billion, reports the New York Times. “Blackstone—whose co-founder and chief executive, Stephen A. Schwarzman, is a prominent supporter of President Trump—rushed to unveil the infrastructure fund during the pomp-filled presidential visit to Saudi Arabia last May. (…) Last month, Mr. Schwarzman mentioned the fund-raising efforts at a New York investment conference with about 200 people in the room. ‘We’re raising other money,’ he said, according to a transcript of the event. He invited anyone in the audience who was interested to come forward after his speech. ‘Don’t be hesitant. Don’t be embarrassed.’”

13) National: Will deteriorating U.S.-China trade relations affect the future of private infrastructure financing in the U.S.? “If its all-cash purchase of Canada’s Aecon Group Inc. is approved in the next few months, China’s civil works giant China Communications Construction Inc. (CCCI) will have bought a seat next to ACS Group, Flatiron, and other major players who are leaders in the Canadian and U.S. P3 market.” [Public Works Financing, March-April 2018; sub required]

14) Alabama: Parents are resisting efforts to turn five Montgomery County schools into charter schools. “The Montgomery Education Foundation has applied to convert five Montgomery schools into charter schools. Parents and citizens voiced their concerns Thursday evening at a listening session. And they had plenty to say. ‘Today the Ed Foundation, the business community, under the guise of improvement, they are assassinating public education in Montgomery!’ said grandparent Rev. Willie Welch.”

15) Arkansas: Notwithstanding the headwinds facing the ‘public private partnerships’ industry nationally with the stalling of Trump’s initiative, Arkansas lawyers are still bullish and no doubt hopeful of getting a slice of the pie, to judge from Mitchell, Williams, Selig, Gates & Woodyard’s glossy new pro-P3 brochure.

16) California: In an effort to recruit and retain educators, San Francisco is looking for private sponsorships for several proposed “teacher incentive” programs that potentially could help them tackle credential-related debt and pay rent. The city faces a crisis of affordable housing, which is hobbling its efforts to recruit and retain teachers. The median home price for San Francisco has soared in just one quarter by over $100,000 to over $1.6 million, a 24% jump from a year earlier.

17) California: A Solano County sheriff’s supporter points to his starting charter schooling in jail. “Sheriff Ferrara implemented a charter school education program in all three of our detention facilities in September of 2015. The Five Keys Charter School provides classroom education, independent study and special education to Solano County inmates.”

18) Colorado/National: The state public utilities commission has finally given a tentative green light for the Denver rail ‘public-private partnership’ to move forward after a long delay over crossing gates. “‘It is in the public interest to allow … RTD to move forward,’ said PUC chairman Jeffrey Ackerman, following the advice of the PUC’s rail expert Pam Fischaber. Ackerman said once PUC staff have verified crossings are working as advertised, the agency will step back. The PUC has taken heat from communities in the past few months, especially Arvada.” Two weeks ago, Colorado Public Radio reported that records show “Blown Stops, Speeding And Other Issues On RTD’s Commuter Rail Lines.”

The long impasse over the gates approval issue for the Denver Eagle P3 project caused near-panic in the P3 industry, with Public Works Financing warning in its latest issue that “the demise of the first P3 rail project in the U.S. would permanently shift the risk reward equation against urban rail development contracts here.” The federal FTA paid half of the project’s capital costs, and FHWA’s TIFIA office loaned RTD $280 million, which is “now in technical default.” [Public Works Financing, March-April 2018; sub required].

Despite the PUC action, troubles persist, and the public Regional Transportation District (the owner) may have to pump in more funding. Last week Moody’s Investors Service revised the outlook to negative from stable for Denver Transit Partners, LLC (the concessionaire) because of “continuing uncertainty about the ability of the project to obtain final timely approvals from the Colorado Public Utilities Commission (CPUC) enabling RTD revenue payments to commence across all lines. While the CPUC’s March 28th decision approved aspects of DTP’s request, several related issues remain unresolved making it increasingly less likely that that DTP can meet the current June 2, 2018 revenue service deadline without further relief from RTD.”

19) Delaware: A former charter school principal who pleaded guilty to embezzlement is to pay the full amount back and serve over a year in prison. “According to court records, he opened credit cards in the school’s name at Home Depot, Lowe’s, Sam’s Club and Staples, in addition to using the charter school’s state-issued procurement card and siphoning money from a state education voucher program. He purchased camping equipment and personal travel, among other things. His public defender said in a memorandum that Rodriguez was ‘in over his head’ as principal.”

20) Florida: Heather Rosenberg, an adoptive parent to three children with special needs, weighs in on how special needs education is handed. “Some charter schools are managed by for-profit entities, typically large education management companies outside the community. Others [such as SASE] are managed by working boards of members with strong ties to the local community.” She writes, “at SASE, the whole family learns how to function within the broader school family, and parents are strongly encouraged to be involved with their child’s education. The entire curriculum is rooted in the idea of social-emotional learning and development that teaches children how to self-regulate, problem solve, and increase resilience. It equips the teachers with the skills to decrease problem behaviors, power struggles, impulsiveness and aggression. The same skill set is also taught to parents.”

21) Indiana: The first state-mandated study of charter schools has been releasedChalkbeat highlights the results, including “while district students as a whole did better on state tests than those in charter schools, students of color in charter schools posted better results than their peers in district schools,” and, concerning the authorizers, “the Indianapolis mayor’s office has the highest share of schools rated A and B at 50 percent, compared to the state charter school board at 41 percent and Ball State at 21 percent.”

22) Montana: Gov. Steve Bullock (D) has rejected an offer from CoreCivic to extend its contract to manage Montana’s only private prison, “because the company asked for what he considers a 15 percent increase in payments.” Bullock told the media, “the idea that we’re cutting rates for human services (across the state), and then to end up increasing by about 15 percent the rate that this private prison makes? It doesn’t make sense for Montanans.”

23) Louisiana: The Republican state attorney general, Jeff Landry, a member of the Tea Party caucus, has ruled that a Jefferson Parish charter school doesn’t have to follow the same bidding rules as public schools do. “The private organization, The Friends of Discovery Health Sciences Foundation, Inc., doesn’t fall into any of the categories defined by state law as public entities, Attorney General Jeff Landry’s office wrote. (…) Under the proposal outlined in the opinion, the Foundation would sublease the land from the Academy and use private money to build the new facility. The Foundation would then lease the building to the Academy.”

24) New York: Developers are looking at ‘public-private partnership’ deals for JFK Airport. “Traditionally, airport capital projects at New York City airports have taken place on a terminal-by-terminal basis, and not necessarily under an airport-wide coordinated process,” said Roddy Devlin, a project finance and P3 attorney at Squire Patton Boggs, which was bond counsel on a $2.4 billion private activity bond deal in May 2016 for the LaGuardia Airport overhaul. “That changed with the Terminal B P3 project at LaGuardia, where the Port Authority and the governor were actively involved in crafting an airport-wide solution that anticipated and facilitates future development.” Nicole Gelinas, a senior fellow at the Manhattan Institute for Policy Research, “said that participating airlines in the $10 billion redevelopment likely would not agree to tackle major upgrades if they didn’t think investments could be repaid through profits. She said the Port Authority was wise to budget $1 billion in its capital plan for improvements throughout JFK Airport, but was also ‘prudent’ to not invest too much.” [Sub required]

25) Pennsylvania: Abby Diebold, writing in the Daily Gazette, says Delaware County should “deprivatize” its prison. “George Hill and other GEO-managed prisons have reported unusually high rates of suicide among inmates. Many of these deaths have been deemed the result of insufficient medication or attention to mental health,” Diebold reports. “At the end of 2017, a group of Delaware County citizens formed the Delco Coalition for Prison Reform (Delco CPR). The organization’s overarching goal is to work towards criminal justice reform and ending mass incarceration; their first project is ending Delco’s for-profit prison. The group is led, in part, by former inmates at George Hill, who come together to share their experiences with the broader community at rallies and community meetings. Their action regarding George Hill is timely—GEO Group’s lease of the prison expires this year. If the County Council votes not to renew the lease, the prison will once again be publicly-run.”

26) Pennsylvania: On Thursday, Lincoln Charter School approved two years of overdue audits during a meeting, but school officials refused to release the audits for public review. There was no discussion held regarding the approved audits. “A representative for the school refused to provide copies of the audits after the meeting and said a Right-to-Know Law request would need to be filed in order to obtain them. The York Dispatch has filed a Right-to-Know Law request for copies of the audits. Deja vu: The Lincoln Charter School board’s action is similar to that of the Helen Thackston Charter School board, which held a last-minute meeting Jan. 30 to approve what members said were three years’ worth of overdue audits. However, the board did not make copies of the audits available and refused to allow members of the public to inspect them. In Thackston’s case, board members wouldn’t even describe what was in the documents. That board also required The York Dispatch to file a Right-to-Know Law request for the public documents.”

27) Puerto Rico: As the Commonwealth plans to close 283 schools this summer, teachers are fighting against privatization, and participated in a one-day strike last month. “Lawmakers and the island’s governor recently approved legislation to allow charter schools and voucher programs throughout the territory, and in response, a teachers union filed a lawsuit aiming to stop the island from further privatizing its school system.” Truthdig reports that “Edwin Morales, who heads a teachers union, was arrested after breaking into the Education Department building to ask questions about the decision to allow charter schools and vouchers. According to PBS NewsHour, Morales says Hurricane Maria is being used as a pretext to replace the public system with charter schools and introduce private investment to education. He said, ‘We are talking about vouchers. We are talking about charter schools. We are talking about the possibility of firing teachers that, for us as a union, doesn’t help the island to recover.’”

28) International: The International Air Transport Association (IATA) says “100% Of Air Privatizations [are] a Failure.” In a speech in New York, Alexandre de Juniac, Director General and CEO of the International Air Transport Association (IATA), “We have yet to see an airport privatization that has, in the long-term, delivered on the promised benefits of greater efficiency for airlines and a better experience for our customers. To date there has been no regulatory formula that effectively balances the interest of private owners to earn a profit with the public interest to have the airport serve as an engine of economic growth.” [Public Works Financing, March-April 2018; sub required].

Legislative Issues

1) National: The Performance Based Buildings Coalition (PBBC) is pressing Congress to amend a portion of the recently passed tax bill they say is posing a grave threat to ‘public private partnerships.’ “As a measure of the harm done, PBBC’s tax advisor modeled a highly leveraged (95%) social infrastructure project, financed using availability payments. It found a ‘skyrocketing effective tax rate’ for a company that has $100 million of income before interest expense—from 40% before tax reform to 95% under the new bill. The impact on a net present value basis is 6 to 10%, which has a substantial effect on the internal rate of return, the advisor says.” [Public Works Financing, March-April 2018; sub required]

2) National: Hat tip to Libby Watson of Splinter for highlighting Brian Ballard’s GEO Group work in Politico’s profile of the mega-lobbyist, and for taking Politico to task for giving him a soft ride, “credulously pass[ing] along Ballard’s claims of innocence about his time as a Florida lobbyist.”

3) Georgia: A lawmaker has resigned his committee chairmanship after being overruled on charter school accountability. “The legislation proved explosive in the Senate, where the leader of the Education and Youth Committee resigned his chairmanship over the way the bill was handled. The senator, Lindsey Tippins, R-Marietta, a former member of the Cobb County school board, was concerned about accountability with state charter schools. His committee amended the bill to require higher performance in exchange for more money, but the leader of the Senate, Lt. Gov. Casey Cagle, didn’t agree with the changes. The full Senate rejected them. Now, if Deal signs it, state charter schools will get as much as or more money than many traditional public schools.”

4) Maryland: Lawmakers have passed a bill that will protect state-funded transit projects from the threat of non-compete clauses in state contracts with private toll lane operators. This would be a boon to investment in transit operations. “In Maryland, the Hogan administration has proposed an extensive P3 to construct express toll lanes on I-270 and the Capital Beltway which will in all likelihood include such a clause.” The legislation introduced by Delegate Lierman—HB 816—bans such clauses from inhibiting transit projects. The Governor needs to either sign the bill or allow it to go into law without his signature.

5) Massachusetts: State lawmakers have condemned the Massachusetts Department of Elementary and Secondary Education for approving a new charter school for West Side. “The news didn’t sit well with Mayor William C. Reichelt, who believes opening a West Springfield branch of the Chicopee-based Hampden Charter School of Science will have a ‘deleterious impact’ on city public schools and lead to higher taxes. Sen. James T. Welch and Rep. Michael J. Finn, the Democratic state lawmakers who represent West Side on Beacon Hill, are also opposed to a charter school opening in town. Both legislators have raised concerns about the lack of public input before the plan was approved by the state.”

 

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