Houston, TX, September 13, 2008--Cars pass through flooded areas following Hurricane Ike.

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Weekly Privatization Report 8-28-2017

1) National/Texas: ProPublica reports that unregulated metropolitan growth has contributed to massive flooding in Houston from Hurricane Harvey. “Many scientists, experts and federal officials say Houston’s explosive growth is largely to blame, along with climate change. As millions have flocked to the metropolitan area in recent decades, local officials have largely rejected stricter building regulations, allowing developers to pave over acres of prairie land that once absorbed large amounts of rainwater. In the decade after Tropical Storm Allison, about 167,000 acres were developed in Harris County, home to Houston.” The construction of “large-scale public works projects—like drainage basins” is lessening the risk, according a local officials.

2) National: Massive flooding from Hurricane Harvey has put the federal flood insurance program under the spotlight. The program, which is $24 billion in debt, is up for reauthorization next month, and presents a number of complex problems for lawmakers. Although there are proposals out there to privatize the program, the consensus seems to be that this would not work for the whole program since flood insurance is “simply not a profitable venture.” Privatization proposals at this point amount to allowing private insurers to cherry pick customers by eliminating federal non-compete provisions. Another issue: the program is currently skewed toward the wealthy, and 25% of explicitly subsidized properties are vacation homes. Even ardent, antigovernment libertarians have morphed into rent-seeking statists when it come to flood insurance: “One of these homeowners receiving government money to live on the beach was John Stossel, the former ABC and Fox News pundit. He saved thousands annually on insurance for his waterfront property in New York.”

3) National: Bruno Alves, the editor of Infrastructure Investor, expresses doubts about whether, after his Charlottesville comments, Trump can deliver the unifying message needed to support an infrastructure development program. “Unfortunately, things might still get worse,” says Alves. “Privatization and public-private partnerships are not uncontroversial subjects in the U.S. Many a PPP has collapsed at the 11th hour because of political opposition. As for privatization, it’s not surprising to learn the administration has met with the leading lights of Australia’s infrastructure industry, for U.S. efforts would greatly benefit from the virtuous narrative attached to that country’s ‘asset recycling’ initiative. The worst outcome now would be for Trump’s $1 trillion infrastructure program—with its emphasis on private capital and PPPs—to become hopelessly politicized. Once that happens, it can be hard to reverse.” [Sub required]. Not all “narratives” attached to “asset recycling” are “virtuous.” See here, here, and, from the home of “asset recycling,” here.

4) National: Lydia O’Neal of International Business Times offers five examples of where irresponsible contracting led to “horror stories of so-called ‘P3s’ gone wrong,” and suggests steps to avoid falling into the trap. A lack of public transparency in contracting and project evaluation is a central problem. Another is the illusion created by taxpayer subsidies (“availability payments”) that private investment comes for free. Shar Habibi of In the Public Interest explains, “If you’re a city and you issue a bond, that debt shows up on your balance sheet. But if you’re paying an availability payment, that doesn’t show up on your balance sheet, but you’re still obligated to pay that availability fee.”

5) National: UMass economics Prof. Gerald Epstein, a co-director of the Political Economy Research Institute, warns that Trump’s infrastructure proposal is designed to solidify his political base, and cautions progressives about cooperating with him.

6) National: The National Association of Bond Lawyers has called for the elimination of a mortgage prohibition in bond financing for charter schools. [Sub required]

7) National: Education blogger Steven Singer says a new report shows that “closing schools where students achieve low test scores doesn’t end up helping them learn. Moreover, such closures disproportionately affect students of color.” But the source of the report is somewhat surprising. “Stanford-based CREDO is funded by the Hoover Institution, the Walton Foundation and testing giant Pearson, among others. They have close ties to the KIPP charter school network and privatization propaganda organizations like the Center for Education Reform. If they can’t find evidence to support these policies, no one can!” [CREDO school closure study]

8) National: A Congressional Research Service report has been published on “Airport Privatization: Issues and Options for Congress.” The report concludes that increasing interest in airport privatization is likely to require a number of significant policy changes, including the following: 1) Making privatization more attractive to public-sector owners by facilitating the use of privatization revenue for non-airport purposes; 2) Providing similar tax treatment to bonds issued by public-sector and private sector airport operators, as public-sector operators now have access to less costly long-term finance than private operators; 3) Easing requirements for private owners to comply with assurances previously made by public-sector owners to obtain federal Airport Improvement Program (AIP) grants; 4) Accelerating the application and approval procedures for the [Airport Privatization Pilot Program].

Opponents of privatization are also working hard. In the second quarter of this year (through June 30), Airports Council International—North America, which represents commercial airports and opposes ATC privatizationwhile calling for adequate financing of airport infrastructure, spent $440,000 on lobbying, including on “Air Traffic Control System Privatization” and “Airport Improvement Program Municipal Bonds.”

9) California: In a new report, state auditors have blasted the University of California Office of the President for enforcing its employee displacement guidelines and overseeing its outsourced services contracts. “By not enforcing the guidelines, the Office of the President undercut its commitment to requiring adequate justification for displacement decisions,” the report said. “Further, the displacement guidelines do not address situations in which university locations could hire new employees rather than contracting for the services. Nine of the 31 service contacts were for services that university employees might have been able to perform. We also observed that services contract workers generally received less compensation in wages and benefits than university employees who performed similar work. (…) Specifically, one‑quarter of the vendors did not provide any form of either health or retirement benefits to their workers. Further, nearly one‑third provided either health or retirement benefits, but not both.”

10) California: On Friday the Labor Video Project posted video of a forum on the “privatization and destruction of City College of San Francisco” on YouTube. “State union busters and privatizers used the privately run accreditation ACJC agency to attack faculty, staff and students as well as downsizing the college and outsourcing CCSF facilities such as the bookstore and selling off the Gough campus.”

11) California: Columnist Dan Walters asks “Is California’s PUC Too Cozy With The Utilities It Regulates?” He says “Over the past few years,” he says, “two natural gas disasters and a scandal involving the closure of a nuclear power plant underscored long-standing criticism that, as Senate President Pro Tem Kevin de León said last Wednesday, ‘the PUC is very cozy with the utilities it regulates.’ The occasion was a Senate Rules Committee hearing on Gov. Jerry Brown’s nomination of two of his senior advisers, Martha Guzman Aceves and Clifford Rechtschaffen, to the powerful agency that holds sway over at least $50 billion in utility rates each year.”

13) Colorado: Meridiam and Kiewit have been chosen to design, build, finance, operate, and maintain a $1.2 billion public-private partnership project to provide upgrades for parts of I-70. “The project has a four-year construction timeframe, expected to begin next spring. Once finished, KMP will have a 30-year operation and maintenance agreement and receive availability payments over the length of the concession. Financial close on the PPP is expected later this year or in early 2018.” [Sub required]

14) Colorado: Brookings’s Rob Puentes tells us that in November Denver will ask voters to approve a $937 million bond referendum, including $416 million for “lots of mobility projects.”

15) Florida: Volusia County School District officials grill charter school operators as three schools hope to open in 2019. “At a time when the charter school movement is beginning to accelerate across Florida, the rounds of questions also stirred up district concerns about the proposed schools’ financial stability and ability to serve all types of students.” The Daytona Beach News-Journal reports that “district officials raised concerns about Volusia Charter Academy’s financial independence and additional concerns about the Ivy Hawn schools’ ability to create a diverse student body. The School Board will vote on the charter school applications in October.”

16) Kansas: Department for Aging and Disability Services (KDADS) Secretary Tim Keck outlines the future of Osawatomie State Hospital to employees, community members, and public officials. “Keck was joined by representatives of Correct Care Recovery Solutions, which was the only qualified company to respond to a request for proposal (RFP) for privatization that was issued last fall.”

17) Kansas: A deadly shooting in Westport has renewed calls from business owners to privatize stretches of two streets.

18) Maryland/National: The courtroom battle over the 36-year, $5.6 billion Purple Line light rail ‘public private partnership’ concession project is coming to a head. A federal judge voided state and federal approvals of the environmental impact statements for the project in August 2016 until the project sponsors could account for potential ridership declines resulting from problems on the DC Metro system, which could impact revenues and thus the funding model. Last month an appeals court reinstated the approvals, but did not dismiss the environmental lawsuit. Transportation Secretary Elaine Chao and Maryland Gov. Larry Hogan (R), who have met several times over the past few weeks, will sign the funding agreement that covers the Purple Line today, and briefs will be accepted until the end of September. Oral arguments will then be scheduled. Part of the case involves litigating the issue of what is in the public interest, with the federal government and Maryland advancing claims contradicted by the local residents’ group. [Friends of the Capital Crescent Trail].

Last Wednesday the road builders’ lobby, ARTBA, filed an amicus brief supporting the Trump administration and Maryland governor’s position. Their brief argued that if the Purple Line P3 goes down for legal reasons, it could harm the entire P3 industry in the U.S. [ARTBA brief]. Trump’s infrastructure plan, which may be released next month, is expected to rely heavily on ‘public private partnerships.’

19) New Jersey: The Pemberton Township School District has taken a stance against a proposed charter school, and is calling on the state to deny its application. “The College Achieve Burlington Charter School applied to the state earlier this year to open a school in the township and found support from Rowan College at Burlington County to use its campus. ‘(College Achieve) is a new charter educational service provider that is masquerading as an experienced and trusted educational provider,’ [Superintendent Tony Trongone’s] letter read. ‘It has not adequately demonstrated that it is capable of producing strong education outcomes for its students.’ The district put together a list of issues it had with the proposal, including an inappropriate facility, limited special education services, retention issues, lack of connection to the township, and the school’s rapid expansion.” [Sub required]

20) Pennsylvania: A lack of transparency leads Lycoming County to terminate its contract with the GEO Group. “The county commissioners voted 2-1 recently to halt the program completely, citing transparency issues and a lack of information. At the root of the problem is no access to the state’s contract with GEO, according to Commissioner Rick Mirabito. Without that, the commissioners worry that taxpayer dollars from the county’s reentry program are being connected to the state’s costs, while the state all the while disperses its prison populations to the county.”

21) Pennsylvania: Charter schools are siphoning funding from the state’s public schools. “On top of the cost, cyber charters often are criticized for poor performance. A 2017 report by the National Education Policy Center, nonprofit think tank housed at the University of Colorado at Boulder, reaffirmed existing data showing that Pennsylvania cyber charters ‘performed significantly worse than feeder schools in both reading and math.’”

22) Tennessee: Gov. Bill Haslam (R), who has been under heavy criticism for his sweeping privatization program for public facilities, abandons his plans to outsource management of state parks.

23) Wyoming: Gov. Matt Mead, who is being courted by GEO Group and CoreCivic to build the state a new prison, says he is opposed to the idea. “Mead expressed concern that a private company could be less amenable to workforce training or rehabilitative programs for substance abuse treatment and sex offenders because, ultimately, the company’s goal is to turn a profit. ‘If the facility says, “We can’t do that, it’s not economical for that,” what do we do then?’ he said. ‘It’s not like we can build another building. You’re kind of stuck in that situation.’ The governor’s spokesman said Wednesday that Mead had yet to sit down with the company.”

24) Virginia: The National Education Association says this fall’s gubernatorial election is critically important for public education. “Although Republican candidate Ed Gillespie is often characterized as ‘conventionally conservative,’ some of his affiliations and views on education [are] as extremist as they come, aligned with those of radical conservatives who would defund and destroy public education in an effort to privatize it.”

25) International: Brazil announces plans to privatize its national power company, Eletrobras. Former president Luiz Inácio Lula da Silva says “a company that has already had R$400 billion in investment will be sold for R$20 billion [$6.3 billion—ed.] and they think it’s the best thing to do,” and compared the proposed deal to an unemployed person selling off his furniture. Faced with the prospect of such an asset fire sale, the stock market went wild. The deal faces resistance from opposition parties, civil service workers and trade unions.

26) Think Tanks: Jeb Bush’s pro-privatization foundation ExcelinEd has hired Victoria Bell as a policy analyst. Bell was a Koch Institute Associate from June 2014-January 2015.

Legislative Issues

1) National: A resolution has been introduced in Congress “which calls for an infrastructure bill that would provide millions of quality jobs, paid for through direct public investment, not by selling off roads and bridges to private investors and foreign entities.” [HCR-63 text]

2) National: Texas Senators who voted against aid for Hurricane Sandy are now asking for federal assistance. Bae Talese says it’s “the pure essence of conservatism” to disdain government until you need a bailout.

3) Illinois: The Chicago Teachers Union is calling on state lawmakers to reject a deal to fund school vouchers. “Senate Bill 1 was designed to fix the inequitable school funding formula for the state of Illinois and remedy the state’s position as last in the nation for education. This current deal is a naked attempt by billionaire right-wing ideologue Gov. Bruce Rauner to push through a reverse Robin Hood scheme that siphons money from poor school districts and lets the wealthy avoid paying their fair share in taxes. (…) Mayor Rahm Emanuel’s shameful, tacit support of school vouchers continues to prove that he should have never been given the privilege of heading our school district.” CTU Vice President Jesse Sharkey says, “simply put, the district’s answers to the structural deficit—massive borrowing, cuts, closings and private contractors—are unsustainable.”

4) Iowa: Lawmakers are AWOL on supervising the state’s privatized Medicaid system. “The Legislature’s Health Policy Oversight Committee was tasked in 2015 with evaluating the state’s privatization of its Medicaid system, specifically to ensure the effective administration of the program, which provides health care to 568,000 poor or elderly Iowans. But despite a record number of complaints and a federal lawsuit alleging Medicaid services are being illegally or improperly cut, the 10-member legislative committee has yet to convene in 2017. ‘It was set up, and it was given lots of lip service, and now it hasn’t met,’ said Bill Dodds, president of Optimae LifeServices, a statewide mental health agency. ‘… I just think (Medicaid privatization) is somewhat on automatic pilot, and the goal is focused on money.’”

 

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