As cities and states struggle to raise revenue in a sagging economy, they have increasingly turned control of public services and assets over to for-profit corporations. But these short-term efforts to close budget gaps can have a disastrous long-term impact.
In Chicago, a Morgan Stanley-backed company took control of 36,000 public parking meters with a 75-year contract -- and as a result, parking fees have exploded, meters run until 10pm, and taxpayers must reimburse the company for lost meter profits when they want to hold a parade or street fair. The plan was quickly pushed through the City Council and passed with no public input or debate.
"It was a bad deal and has tied the hands of taxpayers ever since," said Alderman Roderick Sawyer of Chicago's Sixth Ward on a conference call Tuesday.
In South Carolina, after the state outsourced its water system, the for-profit corporation failed to pay state employee payroll taxes, lost track of tens of thousands of dollars, and lost millions of gallons of water. But the private company refused to come clean about what happened and comply with the public records law's transparency requirements, despite being funded by public dollars.
"Time and again, when we have privatized public infrastructure, the promises of better, faster, cheaper have failed to be delivered," says Donald Cohen, chair of In The Public Interest, a group that has long tracked the outsourcing of public services and assets to for-profit firms. "Outsourcing [in many cases] means taxpayers have little say in how tax dollars are spent and how services are run." Cohen's group is fighting to put control of public services and assets back into the hands of taxpayers.
Taxpayer Empowerment Agenda Lays Groundwork for a Turnaround
In the Public Interest and a bipartisan group of legislators are now promoting an affirmative agenda to put taxpayers in the driver's seat and avoid future privatization disasters.
The "Taxpayer Empowerment Agenda," which can be viewed on the ITPI website, is a set of legislative proposals that Cohen says are "rooted in basic American good government values and traditions:" accountability, transparency, shared prosperity, and competition.
The proposals would require that private companies trying to take over public services open their books and meetings to the public -- just as public institutions must do -- and actually follow through on their promises, with requirements that contracts provide for taxpayer oversight and the right to cancel if a company doesn't actually provide cost savings.
ITPI would also ban contractual language guaranteeing a company's profits, such as language in private prison contracts that call for 98% occupancy. Before contracts are signed, ITPI calls for an assessment of how outsourcing would affect the community, and after the contract expires, it would promote competition by requiring competitive bidding (rather than automatic renewal) and letting public workers and their unions submit their own cost-saving plans.
Additionally, because Cohen says outsourcing often results in a "race to the bottom for the local economy," where "middle class jobs become low wage jobs," the plan would also require contractors pay workers a living wage and benefits. Without these protections, he says, the loss of decent middle class jobs with benefits will continue to accelerate.
Bipartisan Support for Putting Taxpayer Back in Charge
On a call Tuesday announcing this proactive legislative agenda, a bipartisan group of legislators expressed support for this proactive agenda.
In cities like Chicago, Alderman Sawyer says, the drop in wages from privatization has disproportionately affected African-American and Latino families. He has introduced an ordinance that reflects ITPI's priorities, including a requirement that contractors pay a living wage and that at least half of its employees live within city limits.
Former Florida State Senator Paula Dockery, a Republican, emphasized that accountability for taxpayer-funded private entities should not be a partisan issue.
"Outsourcing our most vital public services shouldn't be about left versus right," she said. "It should be about right versus wrong."