JULY 2010                                      Issue #3

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"In-sourcing": Switching from contracts to staff saves millions for schools

As local politicians bluster about saving money with outsourcing, two San Diego education districts have quietly achieved real savings by doing the opposite - bringing contracted services back in-house.

San Diego Unified School District, the second largest school district in California, ended its bus services contract in January and will save an estimated $1 million per year by bringing the routes in-house.  Additionally, in December 2009, the district "in-sourced" the warehousing and distribution of copier paper, at a savings of $153,000 per year.

Meanwhile, the San Diego Community College District is saving $1.1 million a year since it canceled a long-standing IT management contract and brought the entire 62-employee operation in-house. Almost all the 62 employees have kept the same jobs they had with contractor SunGard Higher Education, so "the savings comes from eliminating the profit SunGard was making," said district spokesperson Rich Dittbenner.

"Contrary to the claims of private contractors and their lobbyists, our experience is that workers on the front lines of providing public services consistently identify ways to save money and improve service quality by in-sourcing," said School Board President Richard Barrera. "The key is having workers and management pulling together to actually serve our kids, not subsidizing private profit with taxpayer dollars."

What's your town's in-sourcing story? Send it to Susan@InThePublicInterest.org

The Ballot Battleground

Contractors and other corporate interests are turning to the notoriously manipulative realm of ballot initiatives to push privatization.

A far-reaching municipal outsourcing initiative in San Diego crashed spectacularly in June, but proponents immediately vowed to return for the next election. In Washington state, initiatives are headed for the November ballot that would privatize workers compensation insurance and liquor sales.

Under the guise of taxpayer savings and increased competition, these initiatives are backed by the business groups that stand to profit - government contractors, builders, insurers and, in the case of liquor sales, Costco.

If you know of other privatization ballot measures, tell us! We will spread the word and help alert local media to the true consequences of privatization.

A far-right San Diego city councilmember, Carl DeMaio, rented a limo bus he dubbed the "Competition Express" for a five-stop media circus on June 14 announcing submission of signatures for a ballot measure that would force outsourcing of trash collection, parks maintenance and other city services.

Two weeks later, the registrar of voters' sample count found so many duplicate signatures that the initiative failed to qualify for the November ballot. As Elanor Starmer from Food & Water Watch pointed out, his petition-circulating contractors botched the job! DeMaio has vowed to ressurect the initiative in 2012, when he also is expected to run for mayor.

Besides requiring outsourcing of many essential services, the initiative further rewarded private contractors by banning Living Wage and local hiring requirements. Contractors and developers spent upwards of $450,000 to promote the measure to voters as "Fair and Open Competition in Contracting."

As described in the 2005 Center on Policy Initiatives report Target San Diego, DeMaio is a Newt Gingrich protégé and a former senior fellow at the pro-privatization Reason Foundation. He started a for-profit, right-wing think tank in San Diego before running for City Council. This month he announced a new push to sell corporate naming rights on everything from trash cans to lifeguard towers. Stay tuned!

NJ Privatization Report Claims Savings without Evidence

By Lee Cokorinos.  Within two months of taking office, NJ Gov. Chris Christie launched an aggressive assault on public services and public sector unions, naming a commission to study privatizing state jobs and stacking it with lobbyists, chamber of commerce figures, and veteran pro-privatization ideologues. The commission has finally issued its report.

Christie had promised commission members would separate their private interests from their public responsibility. There's very little evidence they have. The report's extravagant cost-saving claims are unsupported by any detailed data (the tables are littered with "TBD"- cost savings "to be determined"), and the scarce figures provided raise more questions than they answer.

To take just one example, on p.15 the report claims the state can save $3.2 million by privatizing its One Stop Career Centers, then on p.31 says "direct state spending" on the program "is $3.2 million annually." Are we to believe the private sector will run these centers for free?

Elsewhere, the report says experience in Kansas demonstrates that privatizing food services in correctional facilities can save 25%. But Kansas doesn't follow the National Academy of Sciences Dietary Guidelines for Americans, as the Michigan Department of Corrections already responded to a similar claim.  Another report from Temple University concluded that such sloppy methodologies can produce illusory cost savings and lead to degraded services.

Environmental groups blasted the report for recommending privatization of all 58 state parks, while there are many problems with concession contracts already operating on public land.

Contracted city: Transparency & benefits gone

The small Los Angeles suburb of Maywood disbanded its city government as of July 1, fired all 100 employees and contracted with the neighboring town of Bell for all municipal services.  The Center for Public Accountability and InThePublicInterest.org warned that the city-to-city contract raised red flags about accountability.

In fact, the LA Times reported that Bell contracted with an unknown private company to run Maywood, immediately ending all transparency in city government. City Hall was closed to the media and employees were forbidden to talk to reporters or even identify the contractor.

How does this save money? Former Maywood employees are now working for the contractor, and have lost all benefits, including health insurance.

Recent Research

Has Water Privatization Gone Too Far in New Jersey?
Food and Water Watch, June 2010.  Food and Water Watch discusses New Jersey's unsatisfactory experiences with water privatization, including poor service and high rates. 
 
Testimony before Wartime Contracting Commission Hearing
Project on Government Oversight (POGO), June 2010.  Danielle Brian of POGO testified at the June 18 Wartime Contracting Commission hearing, and explained that private security contractors are performing inherently governmental functions. 
 
Go Public: A Study of DOT and NY State Consultant Spending Since 2004
New York State Public Federation of Employees, June 2010.  This report raises concerns about the ballooning costs of New York Department of Transportation consultant contracts and possible conflicts of interest in the contracting process.

State Government Contract Assessment 2010
The Center for the Study of Responsive Law, June 2010.  The CSRL conducted a survey and found that 5 states made progress in providing full-text, online publication of state contracts, compared to their 2009 study.
 
The Wage Penalty for State and Local Government Employees
Center for Economic and Policy Research (CEPR), May 12, 2010. 
CEPR examines the wage penalty for working in the public sector, and finds that state and local government employees earn 4% less, on average, than private-sector workers with similar characteristics in similar jobs.

Public Good vs. Private Profit: Imagine Schools, Inc. in Ohio
Policy Matters Ohio, May 12, 2010.  This report examines Imagine Schools, Inc., the nation's largest for-profit charter school management company and found that it has a poor record of performance in Ohio and a significantly flawed business model.