Category Archives: Public Policy and Governance

Selling Indiana: Update

This past weekend, the LA Times and the Northwest Indiana Times both had stories about Mitch Daniel’s privatization initiatives.

The Northwest Indiana article reported on the impending default of the private operator of the Indiana Toll Road. While a default would probably not cost Indiana taxpayers–the private operator paid us in advance–it might well cost us what little control we retained over the Toll Road, and depending upon how the default played out, might require some legal fees.

The LA Times article, on the other hand, was the sort of in-depth reporting that has become all too rare nationally, and virtually non-existent here in Indianapolis.  It traced the disaster that was Indiana’s effort to contract out welfare intake, and it is well worth reading in its entirety. High points include a description of ACS ties to Indiana political figures and “movers and shakers”–especially Stephen Goldsmith, Mitch Roob and the Barnes Thornburgh law firm–together with a list of associated campaign contributions, and several examples of the harm done to vulnerable elderly and disabled people who depended on the program.

The Star did do several stories early on, when the failures of IBM and ACS were at their most glaring, and again when Daniels admitted defeat and pulled IBM’s (but not ACS’) contract. And it ran a story when IBM sued the state. But there was no effort to “connect the dots” and nothing even close to the comprehensive investigation provided by the LA Times.

That lack of a full picture matters, because without it, reporters fail to recognize the context within which we must understand related information.

A couple of weeks ago, the Daniels Administration announced that it had received an award from the federal government for cutting the food stamp program’s negative error rate–how often cases are incorrectly closed or denied. The Administration bragged that Indiana’s error rate was below the national average.  The Star dutifully reported the (accurate) claim. What didn’t get reported was the fact that from 2001 to 2007–prior to welfare privatization–Indiana’s error rate had also been below the national average, but in 2008, one year after IBM and ACS took over, the error rate had more than doubled, to 13%.  It was the largest increase in the country, and the celebrated “improvement” was measured from that high point.

Context matters. So does journalism.

Surprise, Surprise

Last week, there was a fair amount of publicity about a study issued by the Justice Policy Institute that found—drum roll, please–that private prison operators lobby for more stringent criminal laws.

In other news, the sun rose in the east yesterday.

There are certainly instances in which government outsourcing makes sense, but operating prisons is not one of them. As many observers of what I call “privatization ideology” warned when the first private prisons began operating, incarceration for profit is simply untenable: the incentives involved are inconsistent with good public management.  Prisons aren’t businesses, and they cannot and should not be run as businesses.

When a company’s profits depend upon jailing more people for longer periods, it shouldn’t come as a surprise that those companies will lobby for ever-more draconian laws and extended sentences. If that lobbying is successful, it will cost taxpayers much more than they saved by outsourcing (assuming the much-touted savings are real to begin with.)

It isn’t just prison outsourcing that threatens to distort policy-making. The United States no longer has a military draft, and we currently have more “contractors” in Iraq and Afghanistan than we do citizen-soldiers. As I pointed out in a paper several years ago, in the wake of the Abu Ghraib scandal, there are significant moral, legal and strategic problems that arise when governments essentially hire mercenaries to do their dirty work. For one thing, it is far easier to opt for a military “solution” to a problem when the Congressman casting the vote can simply “hire” soldiers, and doesn’t have to go home to his district and justify drafting his constituents. For another, the multi-national companies that provide the “soldiers for hire” have a vested economic interest in military combat.

Private prison operators lobby for stricter sentencing. Does anyone really believe that private companies providing combat services won’t lobby for war?

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For Once, a Good Day

Yesterday was a trifecta for those of us who live in Indiana and care about public policy.

Two separate federal judges enjoined major parts of two of the most shameful acts passed by the most recent Indiana General Assembly–the immigration bill and the anti-abortion bill. (The latter not only defunded Planned Parenthood, but also required doctors to give women medically inaccurate information. Both provisions were enjoined.) The ideologues who “serve” in the Indiana legislature had been repeatedly advised that both measures had serious constitutional infirmities, but hey–why let a little thing like the constitution get in the way of serious pandering and outright nuttiness?

If the issuance of those injunctions wasn’t satisfying enough, late last night New York State passed a bill authorizing same-sex marriage, and Governor Cuomo came to the floor to sign it.

There was a lot to relish about that victory for fundamental fairness and basic civil rights.

The New York legislature is controlled by Republicans, but the majority party did not block the vote, and four Republican votes provided the margin of victory. The Governor was one of the bill’s strongest supporters. Michael Bloomberg, Mayor of New York City, hailed the bill’s passage. And New York’s authorization doubled the number of Americans who now live in a state where same-sex marriage is legal.

A few minutes after the bill passed the New York Senate, the Empire State Building “went Rainbow”–the building was bathed in rainbow lights that had been purchased for the city’s Pride Parade that, in a happy coincidence, was scheduled for today.

Granted, yesterday was only one day, but it was a welcome recess from the pettiness, stupidity, anti-intellectualism and bigotry that have characterized our civic and political life for far too long. I don’t know about you, but I plan to savor it.

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Will the Last Reporter Please Turn Out the Lights?

The title of this post is the title of the textbook I plan to use in the fall, in my class on Media and Public Affairs. Unfortunately, the message it conveys–traditional media is dying–gets truer every day.

Yesterday, the Indianapolis Star announced that 60 employees were being let go. This is in addition to prior downsizing that has already resulted in a newspaper hardly worth the name.

Of course, the Star is not alone; its parent company, Gannett, has cut jobs across the board (while awarding its CEO a bonus of 1.25 million and doubling his salary just last March).

Without going into my usual rant about corporate ownership of the media, and the huge, unnecessary debt acquired during those acquisitions, let me simply share a personal anecdote that illustrates what’s wrong with trying to “save” newspapers by cutting staff.

A couple of weeks ago, I went online, and finally stopped my subscription to the Star. Someone from the sales office called, and offered me a discounted price if I would continue my subscription (clearly, they need to be able to show advertisers numbers–they’d probably have given it to me free if I’d asked). I said thanks but no thanks, at which point the salesperson asked why I was discontinuing the paper after so many years. I explained that I no longer found much worth reading in it–the paper was thinner every day, the proportion of actual news to “human interest” and “how to” stories was unacceptably low, and coverage of local and state government had become totally inadequate. With respect to national news, by the time the Star ran the few items that still made it into the paper, I’d already heard or seen them.

In short, there is no longer any “there” there.

Cutting staff will simply exacerbate this vicious downward cycle, and hasten the day that the newspaper simply ceases publication. When that day comes, I am pained to admit that there will be little of value left to lose.

The bigger question is: what will take its place? How can we rejuvenate journalism? There are more and more outlets–web sites, blogs, cable TV, radio–offering various kinds of information of widely varying quality, but there is on balance more noise, more celebrity gossip, more emphasis on sex and scandal, and less and less actual news. The question–to which we seemingly have no answer–is “who will watch local, state and national governments? Who will tell us the things we truly need to know if we are to be informed citizens?

What will happen when the last reporter turns out the lights?

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TIFS as Crony Capitalism?

I’m on the mailing list of the libertarian Cato Institute (and the Republican and Democratic parties, among other strange bedfellows). I am fond of Cato–not because I agree with them on very many issues, but because–unlike the Republican Party–they are intellectually consistent. So I was very interested to receive a (snail mail–no link) report titled “Crony Capitalism and Social Engineering: the Case against Tax-Increment Financing.”

For those of you unfamiliar with TIFs, the concept is fairly simple. In order to induce development of projects that would not otherwise be economically viable (sometimes called the “but for” test, as in “but for the economic assistance, the project wouldn’t be built), the municipality caps the property taxes at the rate being paid prior to the new development, and plows the added taxes into the development for a period of time, in order to bridge the gap.

The Executive Summary makes several points:

1) By diverting the “extra” tax dollars generated to the project, those dollars are lost to the schools, libraries, fire departments and other urban services. In a sense, those services are also subsidizing the development. (To which proponents of TIF financing would respond, yes, but if the project would not otherwise get built, and if the abatement ends after a reasonable period of time–after which those urban services do receive the extra income–everyone benefits.)

2) Studies have shown that cities are not really applying the “but for” test. Many of these projects would have been built without the extra help. (Whoops!)

3) The new developments impose added costs on schools, fire departments, etc., so other taxpayers are either subsidizing the added burden imposed by the development until such time as the abatement ends, or getting reduced services during that time.

4) No matter how well-intended these programs, officials will often give in to the temptation to use TIFs as a vehicle for crony capitalism, providing subsidies for developers who in turn provide campaign funds to those same officials.

The Cato report has other problems with TIF financing, primarily because it is often used to support denser in-city developments over suburban low-density ones. In my opinion, that’s an argument FOR rather than an argument AGAINST–as the techies might say, that’s a feature, not a bug. But it is hard to argue with their other criticisms.

This is what makes policymaking so difficult. If  TIFs are used as originally intended–and used selectively–they can be a very useful tool.  When I was in city hall, in the early days of their use, I was a proponent. But at that time, TIFs were being used by urban governments to level the playing field–to compete with the lower costs of suburban development. Over the years, the tool has been adopted by smaller bedroom communities like Carmel and Greenwood–and developers have learned to play “let’s make a deal,” in essence turning TIFs into bargaining chips. One result has been that the “but for” test is history. And when the “but for” test was gone, so was the original justification for the program.

Unfortunately, selective use of TIFs has gone the way of the “but for” test. Here in Indianapolis, if news stories are to be believed, the Ballard Administration is proposing to turn the whole urban core into TIFs. (Okay, maybe I’m exaggerating a bit. But not much.)

It’s just further evidence that the Cato report is correct when it notes that TIFs have “become a way for city governments to capture taxes that would otherwise go to rival tax entities such as school or library districts.”

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