privatization

How Can We Tell If Vouchers "Work"?

Brookings recently released an evaluation of New York City’s voucher program, called the School Choice Scholarship Foundation Program (SCSF), which was implemented in the late 1990s. Voucher offers were randomized, and the authors looked at the impact of being offered/accepting them on a very important medium-term outcome – college enrollment (they were also able to follow an unusually high proportion of the original voucher recipients to check this outcome).

The short version of the story is that, overall, the vouchers didn’t have any statistically discernible impact on college enrollment. But, as is often the case, there was some underlying variation in the results, including positive estimated impacts among African-American students, which certainly merit discussion.*

Unfortunately, such nuance was not always evident in the coverage of and reaction to the report, with some voucher supporters (strangely, given the results) exclaiming that the program was an unqualified success, and some opponents questioning the affiliations of the researchers. For my part, I’d like to make a quick, not-particularly-original point about voucher studies in general: Even the best of them don’t necessarily tell us much about whether “vouchers work."

Public Servants Versus Private Contractors ... Again

Has the battle over public sector compensation turned a decisive corner? Have much-maligned government workers won an evidence-based victory?

Reasonable people might think so, thanks in part to a study by the Project on Government Oversight (POGO), a nonpartisan group that keeps close tabs on government operations. According to the findings of the POGO report – findings that they call "shocking" – the "federal government approves service contract billing rates … that pay contractors 1.83 times more than the government pays federal employees in total compensation, and more than 2 times the total compensation paid in the private sector for comparable services."

More specifically, federal government employees cost less than private contractors in 33 of the 35 occupational classifications reviewed – and non-federal private sector worker compensation was lower than contractor billing rates in all of the reviewed classifications. In one case, contractor bill rates were nearly "5 times more" than the full compensation rates paid to comparable federal workers.

Privatization's Dark Side

Privatization advocates argue that private sector workers deliver comparable services more cheaply than their public sector counterparts. The truth is that sometimes they can, but very often they can’t. And, as documented by a recently-released General Accountability Office (GAO) study on federal outsourcing, the savings can sometimes come at a very high price, including employees’ lives.

The GAO reports that contractors have been awarded billions of dollars in federal contracts, despite having histories of federal safety, health and labor law violations. Some of violations have been extensive and serious. One food supplier was cited more than 100 times for health and safety infractions, including one instance in which a worker was "asphyxiated after falling into a pit containing poultry debris." This same employer was later ordered by a federal court to "properly compensate" more than 3,000 workers.

Another contractor violated fair labor laws when it "coerced employees" and in another incident refused to rehire a worker due to "prior union involvement." This federal contractor has been ordered to pay $4.4 million in back wages to 2,100 employees since FY 2005. It also agreed to pay nearly $300,000 in back wages to African-American workers after a discrimination suit.

The list goes on and on. GAO auditors found that half of the 50 largest fines levied by the Labor Department between fiscal 2005 and 2009 were aimed at 20 federal contractors. The DOL’s Wage and Hour Division which oversees federal minimum wage, overtime pay, and child labor requirements, assessed these contractors for more than $80 million in back wages. Despite these problems, in fiscal 2009, the government awarded these 20 worst companies more than $9 billion in contracts. None lost their right to bid for federal contracts, even temporarily.

Lazy Librarians And Other Privatizing Tales

Where’s Laura Bush when we need her? While the country’s most renowned ex-librarian is enjoying retirement in Texas, there’s a company abroad in the land quietly privatizing public libraries and trashing librarians while they’re at it.

In a recent New York Times article, we learned that public libraries, a sacred, respected public institution if ever there was one, have joined police and social service agencies in the outsourcing gunsights. The article cites Santa Clarita, California, where city officials have voted to turn their financially healthy public library over to Library Systems & Services, LLC (LSSI). LSSI is a national library outsourcing firm, which is now the fifth largest library system in the country, having privatized public library systems in California, Oregon, Tennessee and Texas.

Why privatize a healthy system? Well, in the article, the Santa Clarita political leaders say it’s to "ensure the libraries’ long-term survival in a state with increasingly shaky finances." And how will LSSI do that? Frank J. Pezzanite, LSSI CEO has "pledged to save $1 million a year in Santa Clarita, mainly by cutting overhead and replacing unionized employees."

Selling The State

In a recent post, we discussed the explosive growth in privatization of public services, including one town that recently privatized everything and everybody. Along similar lines, this week, the Wall Street Journal published a story about desperate state and local governments, squeezed by declining revenues, selling or leasing public property to private interests. The reporter notes:

Cities and states across the nation are selling and leasing everything from airports to zoos—a fire sale that could help plug budget holes now but worsen their financial woes over the long run.

The notion that we should cede public services to the private sector has assumed the status of quasi-religious dogma in recent years. There was a brief time during the earlier, more dire days of the current recession during which many began to question this market fundamentalism. Such dissent continues in some circles today. But you wouldn’t know it looking at actual policy.

Things may even be getting worse. Cash-strapped governments have stepped up efforts in a new area: privatization of public assets.

"Outsource Everybody?"

The New York Times apparently thinks that outsourcing all city services in times of financial stress is such a great innovation that it merits page one treatment. The case in point: Maywood, Calif., where city officials last month fired every city employee and outsourced their work. According to the Times, many Maywood residents seem delighted, hence the headline: "A City Outsources Everything. Sky Doesn’t Fall."

The article describes Maywood as city that was abysmally managed for so long - its police department was especially singled out as a source of financial, legal, and political problems - that city officials claimed it faced bankruptcy unless drastic measures were taken. After reading the article, the first solution that came to my mind was to fire the city council that was responsible for the mess. But, of course, council members did not choose to fire themselves. Instead, after Maywood lost its liability insurance on June 30, city officials abruptly fired all city employees.