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Weekly Privatization Report 6-19-2017

1) National: A DOJ criminal probe is shaking the massive government contracting sector. Booz Allen Hamilton, the 14th largest government contractor with over $3 billion in dollars obligated by the government, saw its stock tank after reporting that its cost accounting and indirect cost charging practices with the U.S. government are under civil and criminal investigation by the Justice Department. [Sub required; SEC filing]. The news is “rippling through the rest of the government services sector, with larger rival Leidos (LDOS) off almost 3% and Science Applications International (SAIC) and CACI both down more than 4%. Most other rivals also lower, though KBR narrowly higher, while BAH itself has shed almost 19% with volume 10 times the historical norm.” [Dow Jones Institutional News, 16 June 16, 2017]. Poor oversight of Booz contracts has been a longstanding problem.

2) National: Jamie Dimon more than doubles down on incarceration-for-profit. “JPMorgan Chase & Co. boosted its stake in shares of Geo Group Inc. by 285.8% during the first quarter, according to its most recent disclosure with the Securities and Exchange Commission.” GEO Group “receives more taxpayer dollars for immigration detention than any other ICE contractor,” according to Community Initiatives for Visiting Immigrants in Confinement (CIVIC).

3) National/Michigan: Students attending charter schools run by for-profit organizations “perform worse academically than their peers attending charters run by nonprofits, according to a study by one of the leading researchers on charter school performance.” The report was produced by the Center for Research on Education Outcomes (CREDO) at Stanford University. “The findings could fuel the already robust debate over for-profit run charter schools. The architects of charter schools in Michigan initially saw them as grassroots efforts by teachers, parents and others who would provide an alternative to the traditional public schools. But the charter sector in the state has been dominated by for-profit companies.” Michigan “has the largest percentage of charter schools run by for-profit companies in the nation.” The report may feed a growing political rift between for-profit and non-profit charter schools.

4) National: Kay Whitlock of Political Research Associates turns a critical eye on the “Bipartisan Reform Consensus” on criminal justice. “But what, exactly, are bipartisan advocates seeking to reform?” she asks. “A mix of public-private for-profit and nonprofit institutions, ranging from municipal drug courts to privately-run probation systems to corporate corrections behemoths like The Geo Group to local prisoner aid organizations, community corrections, as a category, provides uneven quality of services and technologies. Every possible arena becomes a potential corrections and surveillance site. In practice, this matrix is often plagued with profiteering, scandal, and corruption.”

5) National: Quartz takes an in-depth look at the U.S. Marshals Service, whose jail system is “a shadowy complex of agreements that tucks detainees in wherever there’s available space.” It finds “the marshals service’s oversight of these private facilities has been woefully lacking” and that “more than one-third of USMS’ detainees are in private facilities, which is a larger share of the population than in either federal or state prisons overall. (This data comes from Freedom of Information Act responses from the USMS, obtained by the privatization watchdog In the Public Interest and the ACLU, and provided to Quartz.)”      Criticism of the industry centers on the incentive structure: “By profiting off of detention, private prison companies have the perverse incentives to make business decisions that lead to more people behind bars,” said Benjamin Davis, analyst for In the Public Interest.”

6) National: Victoria Law takes a close look at how courts are letting phone companies gouge incarcerated people. “After activists waged a decades-long campaign to lower prison call rates, the FCC voted to cap the costs. Different facilities maintained different rates, but no incarcerated person, under Obama’s new rules, would be paying more than 49 cents per minute for a call to someone in the same state where their prison was located. On Tuesday, much of that progress was undone when the U.S. Court of Appeals for the D.C. Circuit ruled against limiting the cost of intrastate prison phone calls. For 2.2 million people behind bars and their families, the ruling represents a severe setback in their lengthy struggle for affordable phone calls.” Global Tel*Link was one of the plaintiffs.

7) National: Robert T. Jones, a board member of Management and Training Corporation, a major for-profit prison company, praises President Trump for announcing a program for vocational training—shortly after Trump proposed slashing federal spending on vocational training by 40%. MTC has been awarded $132,119,767 in federal funds this year, and received over $400 million in 2015.

8) National: Diane Ravitch denounces PBS for repeatedly airing a pro-privatization propaganda piece on schools that was lavishly funded by right wing foundations. “It is puzzling that PBS would accept millions of dollars for this lavish and one-sided production from a group of foundations with a singular devotion to the privatization of public services. The decision to air this series is even stranger when you stop to consider that these kinds of anti-government political foundations are likely to advocate for the elimination of public funding for PBS. After all, in a free market of television, where there are so many choices available, why should the federal government pay for a television channel?” The current chairperson of PBS is Donald A. Baer, the Worldwide Chair and Chief Executive Officer of Burson-Marsteller.

9) NationalThis Wednesday and Thursday, the Federal Accounting Standards Advisory Board will meet to discuss, among other things, revisions to the rules governing federal leases. Among the staff recommendations made: “Recommended Changes: Add to the current scope exclusion: 1. Privatization Agreements/Public private partnerships: The private entity does not have control over the asset; therefore it does not meet the definition of asset and in turn will not meet the definition of a lease.” (p. 22; 41 on PDF). [Materials can be found here].

10) District of Columbia: Educators at Cesar Chavez Public Charter School at Chavez Prep Middle School become the first to unionize in the District, voting 31-2 to collectively bargain. “The educators organized through the District of Columbia Alliance of Charter Teachers and Staff, which is affiliated with the American Federation of Teachers, one of two major education unions in the country. Staff at the school say they want to unionize to give teachers a voice in decision-making. Jenny Tomlinson, the school librarian, told WAMU in May that staff hoped unionizing would reduce teacher turnover, increase teacher input in the curriculum and attract more experienced teachers.”

11) Florida: A potential financial lender to a charter school in Collier County offered the school a lower rate loan if board member Kelly Lichter resigned from the school’s board. Lichter refused, saying the offer was inappropriate. Board member Laura Miller defended Lichter, saying “this last week has been incredibly disquieting and I’m extremely disappointed in the conduct of members of this board who have reacted in a way that’s not, in my opinion, in support of the mission of this school.”

12) Illinois: As the state hurtles toward possible default on June 30, Gov. Bruce Rauner (R) calls a special session of the legislature starting today to try and work out through budget impasse with Democrats. The state has not had a budget for going on three years, and masses of unpaid bills are mounting up. Over the weekend Comptroller Susana Mendoza warned that new court orders “in lawsuits filed by state suppliers that are owed money mean her office is required to pay out more than Illinois receives in revenue each month. That means there would be no money left for so-called ‘discretionary’ spending—a category that in Illinois includes school buses, domestic violence shelters and some ambulance services.” House Speaker Michael Madigan (D) said “House Democrats will continue our work on the budget from Springfield, but as Governor Rauner has met each of our attempts to date with refusal, it is clear that the onus is on the governor to show that he is finally serious about working in good faith to end the crisis he has manufactured.” [Sub required]. The Bond Buyer reports that in the event of no agreement, “S&P Global Ratings will likely drop Illinois’ $26 billion of general obligation bonds to junk—a historic occurrence for a sovereign state. Fitch Ratings will also then act on the state’s rating, now at BBB.” [Sub required]

13) Indiana: The state is moving to take control of the troubled I-69 ‘public-private partnership’ as its Private Activity Bonds “slide toward default.” The Bond Buyer reports that “the state is not on the hook for the bonds, which IFA sold in 2014 on behalf of the developer I-69 Development Partners LLC. The financial burden should the state assume control of the project, which needs an additional $165 million in funding to complete, is not expected to pose a credit risk, Fitch Ratings said in a Monday report. The prospects for a deal with bondholders are uncertain and a global deal with all stakeholders appears unlikely since efforts on that front have been abandoned. The current status prompted a fresh round of downgrades from Fitch and S&P Global Ratings that have left the PABs, issued with low investment grade ratings, deep in junk and near default.” [Sub required]

14) Indiana: Diane Ravitch shares a post from a teacher who describes the experience of going from teaching in a charter school to teaching in public schools. “I was force fed [Teach for America] propaganda, pummeled with articles about data from pro-TFA researchers, and forced to watch videos on the TFA YouTube channel to bring my thinking into the same place as the inexperienced teachers and administrators that demonstrated they knew nothing about how public schools work. As a teacher of over 30 years, with all kinds of recognition and accolades for excellence, I am regarded as an out of step relic who can’t possibly know what I am doing.”

15) Maryland: Federal Judge Richard Leon says Maryland has only itself to blame for losses stemming from the court-ordered delay in its $5.6 billion Purple Line ‘public-private partnership’ light rail project. “The state made a mistake when it signed a 36-year concession agreement with the private partners in April 2016 before the legal issues had been resolved, Leon said. ‘Maryland was the one that took the risk,’ Leon said. ‘You’re the ones who came up with the deal. Why should the court bail you out of the gamble you took?’ The state could have included an escape clause in the P3 agreement to protect it from adverse court rulings, he said. ‘You chose the litigation strategy that put you in the position you’re in today,’ Leon said. (…) A new environmental review might find that opting for a bus rapid transit system rather than light rail could reduce the required federal funding, Leon said. ‘Perhaps under a more modest approach it could cost $300 million, $500 million,’ Leon said. ‘It could better protect taxpayers.’” [Sub required]

16) Massachusetts: Tensions have risen after Haverhill’s school union, the Haverhill Education Association, votes to reject the Silver Hill Horace Mann Charter School’s renewal application. “The school’s charter comes up for renewal every five years. In past renewals, only teachers at Silver Hill voted. But this year, HEA President Lisa Begley, after consulting with state education officials and the Massachusetts Teachers Association, ordered a vote among all the district’s teachers. Some parents of students at the charter school had been expressing fear that the school’s charter would not be renewed.”

17) New Jersey: Even as revenues from the state’s privatized lottery system continue to fall short, Gov. Christie backs legislation that would sell it to the state’s financially challenged public pension system. “But the lottery revenue isn’t found money: It is currently used to help pay for institutions including the state’s universities, psychiatric hospitals and a home for disabled soldiers. The state would still need to pay for those programs; officials say the move would not increase costs for taxpayers.”

18) Ohio: Electronic Classroom of Tomorrow, one of the nation’s largest charter schools, sues the state Board of Education “over how the board handled a vote to have the school repay $60 million in funding.” ECT “alleges board members violated state public-meetings law by voting without first hearing public comment or substantive deliberation on the matter at Monday’s meeting.”

19) Oklahoma: Asked to delay privatization, the state’s Medicaid agency has opted to cancel the idea. Sen. Rob Standridge “said data from other states shows that privately managed Medicaid is a financial drain when companies come back saying they aren’t being paid enough to run the programs. “I didn’t see anything in the three-year analysis where we would experience any significant savings, and I think some of the states around us made us nervous whether we could ever experience savings,” said Standridge, R-Norman.”

20) Tennessee: CoreCivic threatens inmates with solitary confinement if they mention the scabies outbreak at Nashville’s privately-operated jail, according to a federal lawsuit filed on Friday. “Inmates attempted to inform their family members about the scabies infestation over the phone and asked their families to research scabies on their behalf. Because (CoreCivic) monitors all phone calls, those inmates immediately had their phone privileges revoked, in retaliation for attempting to bring light to the epidemic.”

21) Utah: Should charter schools be allowed to seize land? “Beyond the plight of a single school, the so-called ‘train wreck’ has catalyzed a debate over who can condemn property for charter use. ‘Charter schools sold themselves to Utah as cost-effective alternatives to traditional, neighborhood schools. They were also supposed to be innovative,’ state school board member Carol Lear wrote March 24. ‘Bullying neighbors and property owners seems outside of that initial mission.’”

22) International: The horrific fire in London that killed possibly over 58 people and injured dozens more has raised fundamental questions about government oversight of public housing, privatization of key safety functions, deregulation, official indifference toward poor and working people in gentrifying neighborhoods, broken government oversight of the multiple contractors responsible for repair and safety, the class politics of austerity and deregulation, and stressed out public service workers in underfunded downsizing agencies. Among the issues raised is the privatization of inspection regimes, a trend which is also seen in the United States(despite reservations). Speaking of the London Grenfell fire, Ben Bradford, a fire safety expert who is managing director of the risk consultancy BB7, said “that the partial privatization of the building inspection regime sometimes led to a ‘race to the bottom’ to reduce fees and limit the number of safety inspections carried out.” The essential point, architect Deon Lombard writes, is that “public safety should not be privatized. Putting a monetary value on human lives is unacceptable.”

23) International: Privatization causes higher fees in the ports of Sydney and Melbourne, Australia, and are called a “tax on trade” by Qube chief executive Maurice James. In a statement issued to the Australian stock exchange, “Qube, which has a 50 per cent holding in Patrick, said users of the Port of Botany in Sydney would be charged a new $25.45-a-container infrastructure surcharge from July 1. Existing infrastructure surcharges at Melbourne’s East Swanson Dock will rise almost tenfold, from $3.50 to $32 a container. The major factor behind the rise is understood to be a potential 140 per cent increase in rent charges from owners of the newly privatized Port of Melbourne. Rentals at the privatised Port of Botany have risen by a total of 70 per cent, or an average of 14 per cent a year over the past five years.”

24) Revolving Door News: Two officials who served as staff aides to Mayor Francis Slay when the idea to privatize St. Louis’ Lambert Airport was cooked up have just signed on with, respectively, a potential bidding company on the deal, and for the organization “running the process by which the city determines whether privatizing its top asset is a good idea.” One of them, defending the deal, says “they don’t want a process that is amateur hour.”

25) Think Tanks: It’s Our Economy looks at the hidden costs of privatization. “While the business of business is business, the business of government is not. It has its own functions, an ‘agenda,’ as Keynes puts it. This government agenda must be decided by the interests of the public, and these interests, as we have argued, are not just an agglomeration of individual interests. The public has interests in common, and the determination of these interests, and the actions on them, occur through the institutions of government. (…) The government substantiates the public purpose, keeping it in the conscience of the nation, and this, arguably, is its most important function.”

Legislative Issues

1) National: As the possibility of a border tax to fund Trump’s infrastructure package recedes to the vanishing point, Transportation Secretary Elaine Chao admits she has no answer as to where the $200 billion of new federal money that is supposed to “leverage” $800 billion of private capital will come from. Two possibilities: raising the gas tax and “the sale of federal assets.” The much-touted initiative is being worked on by a task force consisting of representatives from 16 executive department agencies. Chao says they will unveil their work later in the year. “What I can say is that everything is on the table. There are a lot of options, and none of them are attractive.” [Sub required]

2) National: From company stores to company schools? “A rarely applied experiment in education enabling companies to host taxpayer-funded charter schools for their employees’ children may be about to spread. Florida is the only state bringing business-backed charter schools to work sites so far. The first launched in 1999, across the street from the Ryder truck rental company’s headquarters near Miami. Louisiana and Connecticut laws also encourage these charters. Louisiana’s first school, partly financed by a hospital, is slated to open next year. And now North Carolina lawmakers are weighing a law copied from Louisiana’s.” Samuel Abrams, director of the National Center for the Study of Privatization in Education at Columbia University, says “the for-profit companies that operate about 10 percent of U.S. charter schools would favor expanding their market for contracts.”

3) Florida: A sweeping new law is set to shake up the charter school and testing landscape in the state. “The 274-page bill houses a smorgasbord of education policies and is supported by $419 million in funding. After gaining approval from GOP majorities in the legislature, it won the backing of [Gov.] Scott, a Republican, who put his signature to it despite many local district officials urging a veto.” But “some critics have suggested the law might be subject to a legal challenge, alleging it was subject to too many changes with too little public input.”

4) Rhode Island: Legislation has been introduced in Cumberland to limit the financial impact charter schools can have on traditional public schools. “The bill, said Pearson, would help bring Cumberland “back to a normal level of (school) choice.” In Cumberland, some 11 percent of students attend charter schools, about double the standard in Massachusetts, he said. The bills would allow officials to say the school can’t enroll new students unless it gets under a certain percentage again. Pearson said he would ideally prefer his other bill to have the state contribute more money to districts with high charter tuitions, but said state budget constraints will prevent that bill from passing this year.”

   

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