Reform Government Contracts and Restrict Privatization

This past week, the Dallas Morning News revealed that a key figure who contributed to the privatization of Texas' food stamp eligibility program is now receiving taxpayer dollars to help fix the problems that the private system created.  regg Phillips, who was Deputy Commissioner at the Texas Health and Human Services Commission (HHSC) and led the push for privatization a few years ago, now heads AutoGov Inc., a company that has received $207,500 from the state government in the past four months to assist in eliminating the errors in the provision and eligibility determination of the state's food stamp program.

Portending a sharp increase in corporate political spending, the Supreme Court has ruled (Citizens United v. FEC) that corporations enjoy the same speech rights of citizens when it comes to advocating the election or defeating political candidates. Elected officials, including U.S. President Barack Obama, have denounced the ruling as striking at the heart of our democracy by putting corporations on an equal footing with real people when it comes to basic constitutional rights.

In a meeting with Texas officials last week, Kevin Concannon, Under Secretary of Food, Nutrition, and Consumer Services at the United States Department of Agriculture (USDA), claimed that there had been a drastic reduction in the timeliness and accuracy of food stamp provisions in the state following the implementation of a privatized system.  In fact, Texas now has the worst performing food stamp program in the entire country.

As part of the Progressive States Network’s 2010 Shared Multi-State Agenda, we are advancing a corporate transparency initiative in coordination with key allies and experts.  Demand for transparency in government is rising, but most states still do not collect even the most basic, critical data from recipients of state grants, state contracts or tax breaks.  In this Dispatch, we will examine the need for corporate transparency, recent cases relating to the subject, and how the policy will benefit states dealing with massive deficits.

The lure is the supposed promise that privatization will deliver a short-term budget fix.  Yet many privatization efforts, as this Dispatch will highlight, have cost taxpayers hundreds of millions of dollars and botched services for the public.  That privatization continues to move forward despite such a poor track record reflects pure ideology that the private market delivers the most efficient outcomes, even without demonstrable results.  Some states may also be making the more cynical decision to pursue immediate short-term infusions of capital at the expense of long-term financial cost in pursuit of short-term electoral gains.  In any case, privatization comes at the expense of long-term investments in the community, sustainable budget policy and public accountability.

In this Dispatch, we emphasize that any stimulus spending has to be tied to increased accountability and transparency in spending decisions, especially by government contractors who often operate like a shadow government with little oversight.  One key reality is that those most in need often don't receive help from government spending without transparency and accountability measures built into the rules.  While the recent federal recovery plan made real strides in expanding such accountability, additional measures are still needed if the recovery plan is going to deliver real equity in our economic recovery.

New York's Attorney General, Andrew Cuomo, is in the midst of a two-year investigation into kickbacks paid to state political staff in exchange for the opportunity to profitably manage the investments of New York State's public pension fund.  That investigation has now prompted a national effort with a multi-state task force and the Securities and Exchange Commission working together to uncover rampant pay-to-play abuses.  Nationally there is over $2 trillion in US public pension assets.

As this Dispatch will outline, Buy American policies are a first step in promoting an alternative to the trade and deregulation policies that fueled the current economic crisis.  Ultimately, we need policies that strengthen local tools for economic growth at home, combined with fair trade policies to raise wage standards abroad as well.   Also, as corporate interests increasingly use trade agreements to restrict state authority to protect worker, consumer and environmental interests, states are increasingly reviewing those trade agreements in order to restore states' ability to effectively respond to economic crises and protect the long-term interests of working families.

Given the central role of private contractors in delivering public services, this Dispatch continues our series of Privatization Updates (see November's edition). Today we focus on current privatization debates in the education, prison and mental health sectors -- and what states are doing to increase accountability for contractors.

The new American Recovery and Reinvestment Act contains significant funding for the states, but it also has tight new transparency rules requiring states to track how all federal funds are being spent and the number of jobs created.  These provisions aren't just ethically desirable, they are extremely practical fiscal measures for combating the recession and growing the economy.  Strict transparency can save states millions in unnecessary expenditures and increase the quality of work they receive from private contractors, while simultaneously ensuring that contractors create quality, decent-paying jobs to help turn the economy around.

The unfortunate reality is that most states are not collecting the necessary information to meet the standards required by the Recovery Act. This Dispatch is designed to summarize what states need to do.