Tag Archives: privatization

Audacious in Chicago

This morning’s New York Times reports that Rahm Emmanuel will announce a 7.1 billion-with-a-b infrastructure improvement plan for Chicago. Improvements will be made to everything from the water system to the airport, from public transportation to parks. The improvements will be financed primarily through a public-private investment trust, details of which Mayor Emmanuel is supposed to announce later today.

I found this paragraph particularly interesting:

Some public-private partnership projects have been criticized as giveaways to the private businesses that take them over — including two prominent cases in Chicago itself, the privatized Chicago Skyway and the city’s parking meter system, which obligate the city to leases that span generations. Mr. Emanuel says that the city has learned an important lesson, and that “I am not leasing anything,” or selling off the city’s assets, he said in an interview. “I’m using private capital to improve a public entity that stays public.”

Great cities are places people want to live. As former Mayor Hudnut repeatedly reminded us, livable cities are first and foremost “cities that work.”

Most of us don’t want to live in housing that is unkempt and run-down, but we also understand that we aren’t improving our situation if we sell the stove to pay for new carpet.

In order to build a great city–especially in these days of fiscal hurt–its leaders need vision, and the audacity to insist that investment in the public square is both necessary and important. The audacity to refuse to sell off public goods to private profiteers.

The audacity to defend and maintain great urban spaces for the generations of citizens who will enjoy them.

There’s No “We” in Mitch Land…

When Steve Goldsmith was Mayor–talking incessantly about government’s “customers” while shifting costs from the operating to the capital budget in order to “reduce” taxes (i.e., push the costs to the next administration)–I used to grouse that his vision of the ideal government would be one that eliminated all municipal services so that the City-County Building could be rented out to give taxpayers a rebate of 50 cents each.

I’ve often considered Mitch Daniels to be a Goldsmith clone. They share a touching belief that privatization cures cancer–a belief that appears unshakable no matter how many times they’ve been bitten by poorly-thought-out contracts. (They also share a patronizing attitude that lets you know they think they know more than anyone else–and most definitely more than those annoying yahoos elected to legislative bodies.) I’m not the only person who has noticed the resemblance: the joke that made the rounds when Mitch was first elected was that he was Steve Goldsmith with a personality.

Now Mitch has confirmed my snarky “rent out the City-County Building” description of their shared governing philosophy.

According to the Governor, Indiana has suddenly “discovered” 320 million dollars that we somehow didn’t know we had. Assuming the accuracy of his description–i.e., assuming the administration really didn’t know the money was there–most of us would first question the competence of the administration employees involved. After all, how do you “lose” 320 million dollars? Then–in a sane universe–we might begin a discussion to see which of the recent, draconian cuts to public services we might mitigate. Our bridges are crumbling, our parks are untended, our schools struggling, early childhood education still largely unfunded. Foster parents have just taken a big hit, and the administration has continued its unremitting war on Medicaid recipients. Granted, 320 million won’t restore all that–or even come close–but it would help.

But that’s not the way officials think in “Mitch land.”

Mitch doesn’t want to apply that money to improve the state’s infrastructure, or to ameliorate the suffering caused by cuts to social services during an economic downturn. He wants to trigger an automatic “rebate”–to return it to individual taxpayers. Rather than applying the windfall to improve public services or the public goods we all share, he wants to give each taxpayer a refund. Elementary math suggests that refund might be enough to buy a couple of coffees at Starbucks–it certainly won’t be enough to repair that tire you ruptured on one of our neglected roads, or to pay the tutor you hired to supplement your child’s inadequate math instruction.

In Mitch land, government can do no good and the private sector can do no wrong. Applying “found” money (forgive the quotes and my skepticism) to education or infrastructure is “waste”–but sprinkling it among hundreds of thousands of taxpayers is “good government.”

Maybe Mitch can rent out the statehouse, and send each of us enough to buy an hour or two of privatized parking.

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The Shadow Government

A fair amount of my academic research has addressed issues of government privatization–or more accurately, contracting out. (Privatization, as Morton Marcus frequently notes, is what Margaret Thatcher did in England: selling off government enterprises to private sector owners. In the US, privatization means providing government services through for-profit or nonprofit contractors–a very different thing.)

My research has convinced me of three things: 1) while contracting may be appropriate under some circumstances, it is not the panacea that so many politicians seem to think. Sometimes it makes sense, often not. 2) the cost savings that are touted by privatization advocates are largely mythical, the result of omitting the cost to government of contract management–or the even greater costs of failing to manage those contracts. And 3) far from shrinking the size of government, as proponents contend, contracting actually expands both the size and scope of government, while at the same time making that expansion less visible and government less accountable.

Two recent studies confirm those latter conclusions.

A few weeks ago, the Government Accounting Office released the results of its investigation of contracting costs. It found that contracting was often more costly than providing the same services in-house. And just a few days ago, during a debate over a proposed federal contracting rule, the number of of federal contract workers–people working full-time for the federal government who are contract workers rather than federal employees–was estimated at approximately 7.1 million. That’s in contrast to the full-time civilian federal workforce of 2.1 million.  The Economic Policy Institute estimates that 43% of all employees who do the government’s work are employed by contractors. (It further estimates that 20% of that 43% are paid “poverty wages.”)

It isn’t only the federal government, of course. When you add the “shadow” employees working under contract for state and local governments, estimates of the number of contracted government employees run as high as 17 million. It’s impossible to know for certain, because there is very little data available that would allow governments to monitor these workers, and considerable resistance from the business community to the Obama administration’s recent efforts to collect and analyze such information.

It’s very difficult to hold government accountable when you can’t see government at work. Contract workers need to come out of the shadows.

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A Clear Choice

Yesterday, the Indianapolis Star did profiles of the candidates for Mayor, and focused on their respective “visions.” It was easy to agree with Melina Kennedy’s priorities–education, economic development and public safety–but in fairness, despite successful performance as Deputy Mayor charged with economic development in the Peterson Administration, she hasn’t been responsible for public safety or education. That’s an inescapable element of elections–voters have to decide which candidate is most likely to fulfill such pledges. Ballard promised to reduce crime when he ran four years ago, and despite his insistence that being a Marine was preparation for combating crime and managing the complexities of a 21st Century urban metropolis, has been unable to do so.

Let me be honest: there is no way I would vote for Mayor Ballard in November. His manifest lack of background for the job, and his subsequent dependence upon the political insiders who have actually run the city,  determined my vote before I ever knew who would run against him. And I am very impressed with Kennedy–who, I will remind everyone, is NO RELATION. But if I had any inclination to rethink my evaluation of this Mayor, his response to the Star yesterday would have killed it.

Here is the Mayor’s defense of his performance. “After three years in office, Ballard, 56, has faced frequent criticism from Democrats and others that he has lacked a coherent vision. He says they aren’t paying enough attention. He points to efforts to regain control of the city Police Department, privatize parking meters, rein in city and county spending and commit public money to private development projects. And his sale of the city’s water and sewer utilities kick-started his RebuildIndy infrastructure project with $425 million in proceeds.”

Let’s deconstruct that response. He has “made an effort” to regain control of the Police Department. That effort has been visibly, embarrassingly unsuccessful. The FOP endorsed his opponent, backing a Democrat for the first time in 50 years. More importantly, crime–despite some creative statistical spin by the Administration–is up. Worse still, the increase is most notable in the “violent” category. Most significant for the Mayor’s political prospects, people in Indianapolis feel less safe than they did four years ago.

Ballard also cited efforts to reign in spending. He had no choice; the ill-conceived property tax caps made it imperative. Those tax caps are choking cities throughout Indiana, forcing cuts to important services. Incredibly, in the very next sentence following that boast about his efforts to reduce spending, he lists as an “accomplishment” that he committed public money to private development projects. (Not to mention, sports teams and venues.)

Can we spell tone-deaf?

But what REALLY pissed me off was the Mayor’s evidently pride in his decision to privatize water and sewer services and parking meters. I’ve written a lot about these wrongheaded transactions, especially the 50-year giveaway of parking revenue the city desperately needs, and some of the ethical concerns surrounding it. But I’ll just quote a good friend of mine–a very successful businessman, civic leader and long-time Republican: You don’t sell capital assets to fund operations. Businesses that do so are soon bankrupt.

If Ballard’s list of “accomplishments” is indicative of his “vision,” we’d better be sure to elect Melina Kennedy.

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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.