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12 States Now Moving to Curb Reckless Outsourcing of Public Services

Six more states have joined what appears to be a national movement to reign in reckless outsourcing of public services to for-profit corporations.

Momentum Keeps Building as LA, MD, NJ, NM, TN and WA Introduce Bills to Put Taxpayers Back in Charge of Schools, Roads, Other Services
Washington, DC – Six more states have joined what appears to be a national movement to reign in reckless outsourcing of public services to for-profit corporations. Lawmakers in Louisiana, Maryland, New Jersey, New Mexico, Tennessee and Washington introduced proposals that would, in various ways, promote responsible contracting by improving transparency and accountability standards. In all, a dozen states have now introduced legislation to curb recklessoutsourcing so far this year.
“It appears taxpayers across the country are reasserting control over their schools, roads and other public services by demanding more accountability and transparency,” said Donald Cohen Executive Director of In the Public Interest Action Fund. “Lawmakers in Louisiana, Maryland, New Jersey, New Mexico, Tennessee and Washington State should be applauded for standing up for taxpayers and common sense.”
In Louisiana, Representatives Kenneth Havard, John Berthelot, and Brett Geymann have introduced H.B. 128, the Privatization Review Act, which would require contracting proposals to be reported publicly and mandate any private company that takes over a public service to demonstrate cost savings without affecting the quality of the service. Additionally, the proposal would ban companies that have broken state or federal law from receiving contracts.
In Maryland, Senator Victor Martinez has introduced a measure that would strengthen Maryland’s existing statute preventing companies that have broken the law from obtaining contracts. Delegate Joseline Pena-Melnyk has unveiled a proposal that strengths Maryland’s oversight and auditing laws for public contracts. Delegate Pena-Melnyk has introduced which would require online reporting of contracting information. And Delegate Keith Haynes has introduced legislation that enhances existing taxpayer protections requiring contract audits to be public record.
In New Jersey, Senator Raymond Lesniak has introduced S.B. 679, legislation that would require an economic impact study before the state can outsource school services, including cafeteria and custodial services. The study would determine the direct and indirect costs of outsourcing to the community as a whole. A 2009 study conducted by Rutgers University found that outsourcing of school service workers resulted in a $4-6 per hour reduction in pay, forcing many public service workers onto taxpayer-funded public assistance.
In New Mexico, Representative Mimi Stewart introduced HB 341, a bill that would prohibit guaranteed profits in contracts, such as lockup quota provisions, require approval by a government agency before any fees are adjusted, and would require outsourcing companies to maintain open records. The open records provision is of particular importance in New Mexico. In 2011, a resident of Truth or Consequences, NM, requested video of city council meetings. The city had contracted with Sierra Community Council, Inc., to record the meetings. The city refused to hand over the recordings, claiming that they were not subject to open records laws because they were in the possession of a private company.
In Tennessee, Representative Mike Turner and Senator Thelma Harper have introduced HB 2197 and 2394, respectively, a set of proposals that would curb reckless outsourcing. One proposal would ban contract language that guarantees corporate profits at taxpayers’ expense, including “lockup quotas” – language that mandates private prisons be filled at or near capacity or else taxpayers are forced to pay for empty beds. Last year, ITPI found that 65% of state and local private prison contracts studied included lockup quotas, including the Metro Detention Facility in Nashville. An investigation conducted by the Tennessean found that Metro Government paid Corrections Corporation of America nearly half a million dollars for not meeting a 90 percent lockup quota. Senator Thelma Harper, in the form of SB 2394, has introduced similar language in the Senate.
In Washington State, Representative Sam Hunt introduced HB 2743, the Washington Taxpayer Protection Act, a proposal that would require a demonstrated cost savings of 10 percent before a service can be outsourced and ban contractors from using taxpayer resources for public gain. The proposal also requires private entities that perform public services and are paid by taxpayers to open their books, just as public agencies do. HB 2742 was approved by the House Appropriations Committee on Tuesday.
These states join California, Georgia, Oklahoma, Nebraska, Vermont and West Virginia amid increased nationwide scrutiny of outsourcing deals, many of which have had disastrous unintended consequences for taxpayers. For example, in 2009 Chicago signed a 75-year contract with a consortium of companies backed by Wall Street giant Morgan Stanley for the operation of the city’s 36,000 parking meters. Though Chicago got $1.2 billion in the deal, Chicago drivers will pay the private companies at least $11.6 billion to park at meters over the life of the contract. Meanwhile, upon signing the contract, the company dramatically increased parking rates to $7 for two hours of parking in some parts of the city, and extended paid parking to seven days a week. Downtown businesses blamed the price increases for a decrease in economic activity. Residents complained that parking downtown was cost prohibitive. And taxpayers must reimburse the company whenever the city needs to temporarily close its streets, even for community parades and street fairs.
Across the country, cash strapped state and local governments have handed over control of critical public services and assets to private entities that often operate them slower, costlier and worse. Too often, these “deals” leave behind only broken promises and undermine transparency, accountability, shared prosperity and competition. ITPI documented several of these broken promises in its recent report, “Out of Control: The Coast to Coast Failures of Outsourcing PublicServices to For-Profit Corporations.”

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