From the abstract:
This backgrounder brief provides examples of cases where, when cost savings aren’t realized or service quality declines, many governmental entities are turning to reverse privatization, or “insourcing,” to bring contracted functions back in-house. It explains the benefits of insourcing for the general public interest and addresses examples from multiple levels of government across a wide array of sectors including corrections, water, IT services, and more. It includes an appendix with more examples.
A nonprofit organization that contracts with Massachusetts to provide services to residents with autism and other developmental disabilities should repay nearly $350,000 in state funds that it used improperly to pay staff, Auditor Suzanne Bump said Monday. The amount included more than $138,000 to the May Institute’s president and chief executive officer, and nearly $211,000 for wages to 10 management staff during the 2010 and 2011 fiscal years, according to the audit….According to financial filings, the May Institute president’s payment amounted to more than $376,000 in 2010 and $451,000 in 2011, and the state reimbursed the Randolph-based nonprofit about $140,000 each year in accordance with salary reimbursement limits. State auditors found the May Institute improperly charged the state for additional compensation for the president, which included expenses he should have paid out of his own pocket, such as the personal use of two vehicles, a home health aide for his wife, and day care fees for his grandson. All that time, he was living in Georgia as the agency’s operations in that region of the country were struggling.
Lawmakers are once again contemplating loosening the strictures of a law that governs whether state services can be privatized, which one of the law’s chief backers said would return the state to the hands-off governing style responsible for Big Dig construction problems. Sen. Marc Pacheco, D-Taunton, said the Taxpayer Protection Act, dubbed the Pacheco Law by many, fosters a good use of public dollars by requiring a demonstration of savings to be had in any privatization of government services valued at more than $500,000. … The House Ways and Means Committee’s fiscal 2014 budget would have increased the threshold that triggers the law to $2 million, though House leadership lowered the threshold to $750,000 through an amendment before the budget cleared the House. Rep. James O’Day, D-West Boylston, and others had sought to completely scrap the increase. The Senate Ways and Means Committee did not include a change to the law in its $34 billion state budget, though other changes to the law are likely to come up for debate on the floor when the Senate debates the budget beginning on Wednesday. … Tarr said the law creates an unfair advantage for public employees seeking to avoid privatization, allowing the employees to use state resources to compete in bids with private sector companies, allowing a union involved in a bid to “unilaterally change its collective bargaining agreement” to outmatch a competitor, and he said the estimate for state employees bidding to keep their work is “based on the most efficient scenario.” …
A total of 34 Lexington METCO students were transported to area hospitals following a school bus accident this morning in Newton. Only 11 of the middle-schoolers were complaining about pain or injuries at the scene, and two made it to school after being released from the hospital earlier this morning…. Preliminary reports indicated the bus rear-ended a vehicle stopped at a traffic light, causing the struck vehicle to rear-end another vehicle, Newton Patch reported this morning. The bus is equipped with a camera that could provide additional details of the accident, according to Pilarski. According to 7News at noon, the bus and driver were also involved in another accident this year, but was not at fault. Investigators will provide a full accident report to LPS and METCO officials and to AA Transportation, the bus company that handles transportation for METCO students, when one becomes available.
Related: Metco bus crashes in Newton; 34 students and driver taken to local hospitals, State Police say
Source: Lauren Dezenski and Brian Ballou, Boston Globe, April 30, 2013
In a prudent move, particularly in fiscally tight times, the House Ways and Means Committee’s budget proposed giving state officials more power to pursue savings by hiring private companies to provide state services. That would have saved an estimated $10 million in public funds. But under the threat of a floor battle instigated by legislative allies of public-employee unions, the House leadership largely backed down. It was a clear case of lawmakers putting the unjustified demands of those who work for state government ahead of the interests of taxpayers.
Currently, the anti-privatization statute known as the Pacheco Law makes it difficult for agencies to seek savings; it requires that any proposed privatization contract for more than $500,000 first be reviewed for savings by the state auditor, under assumptions that tilt the outcome sharply in favor of the status quo. The law has basically shut down all privatization efforts in state government.
In its budget proposal, the Ways and Means Committee called for raising the threshold for the auditor’s review to contracts over $2 million, projecting savings to taxpayers of up to $10 million from that reform….
…More than 30 states have enacted legislation encouraging PPPs so far. In addition, former Governors Ed Rendell of Pennsylvania and Arnold Schwarzenegger of California, along with New York Mayor Michael Bloomberg, formed the Building America’s Future Educational Fund – a Rockefeller Foundation-funded group dedicated to rebuilding infrastructure via alternative methods that include PPPs. The Brookings Institution’s Hamilton Project estimates that infrastructure PPPs have increased fivefold in the wake of the Great Recession. These contracts typically enjoy high renewal rates, demonstrating the ability of a well-planned PPP to deliver high quality services and innovative solutions, illustrated by a number of examples….
City of Holyoke, Massachusetts & United Water… Tampa Bay Water & American Water & Acciona Agua… Seattle Public Utilities & CH2M HILL…
It’s become popular among Republicans (and plenty of Democrats) to decry public workers as overpaid and inefficient. They love to contract out, claiming the private sector can deliver services more cheaply and cost-effectively. But the reality is quite different. There is often little or no accountability for the use of these government funds. Stacks of tax dollars are going to private organizations that fail to follow their own missions. Politicians are eager to privatize, and employers are eager to take advantage of lax—and sometimes inefficient or corrupt—regulatory systems….
…The case of mental health patients is one of the most obvious examples of the misuse of public funds. It is now 20 years since Northampton State Hospital closed its doors, after a state commission recommended shifting mental health services to private vendors. The last of the NSH patients were reassigned to other facilities, such as the private, for-profit Charles River Hospital West. NSH used to provide care (albeit with a long history of problems) to thousands of Massachusetts residents with mental health issues. By 1993, many patients had already been sent to live in the “community.” Many never adequately assimilated to living there, and were soon living on the streets or died. This was all supposed to save the state money. But a state audit showed that the restructuring produced no savings—in fact, a loss—and revealed big problems with the quality of services patients received at the new for-profit facility. Five years later, Charles River Hospital West went bankrupt and closed its doors, and criminal charges over misuse of funds were filed against its owner. …
In January 2013, Rikers Island kicked off a new program called the Adolescent Behavioral Learning Experience, aimed at reducing the number of 16- to 18-year-olds who reoffend…. New York City is paying for this $9.6 million, four-year program by becoming the first entity in the country to enter into a social impact bond. It’s a new financial tool that may be able to make an impact of some of the country’s most intractable problems….
Social impact bonds are a way to bring new money into old problems. Costa said governments select a population and set goals—such as creating a 10 percent reduction in the number of homeless people sleeping on the street six months or more—and decide what they’re willing to pay for the results. An outside group, called an intermediary, sets up the contract language, finds investors willing to finance the project and manages the service providers. The government repays the money only if the goal is met, as judged by an independent evaluator. If the program works better than anticipated, the funder earns a small profit on its investment….
Across the country, cities are showing a renewed interest in taking over the electricity business from private utilities, reflecting intensifying concerns about climate change, responses to power disruptions and a desire to pump more renewable energy into the grid. .. Over the years, many localities have examined creating municipal utilities, usually around the time their franchise agreements with private electric companies are to expire. But officials and advocates are now examining municipal utilities as concerns rise over carbon emissions from fossil fuels, especially coal, and as the ability to use renewable energy sources like solar and wind increases.
From the summary:
…This research examines the potential long term savings that could be realized through greater regional consolidation of select local government services, specifically emergency call handling and dispatch, public health, and high-level government administrative services. It focuses especially on the expected long term savings in the New England states, with specific estimates for Massachusetts and Connecticut.
The report finds that regional service-sharing can be an effective means to achieve savings, particularly for services that rely on high levels of technology, capital, or specialized expertise. The author recommends that the state consider playing a stronger role in encouraging local regionalization through measures such as instituting quality standards and using funding to promote and facilitate consolidation….