New Resistance to Privatizing Social Services

Thursday, December 14, 2006

Growing Economy

IN: New Resistance to Privatizing Social Services

With a change in party control of Indiana's legislature, one shift may be new resistance to Indiana Gov. Mitch Daniel's pell-mell movement to privatize all public services.

"Our caucus basically does not support privatization," said Speaker-elect Patrick Bauer. "We don't support making profit out of poor people or mentally ill people," referring to the new proposal to give a $1 billion, 10-year control to a consortium to take over welfare-eligibility processing. This follows a slew of recent privatization initiatives in the state:

  • Outsourcing the Department of Corrections' food services
  • Giving a 75-year lease of the Indiana Toll Road to an Australian-Spanish consortium
  • Beginning the privatization of state developmental centers

These have been matched by unsuccessful attempts to privatize state park inns and other proposals that are on the drawing board.

Despite the magnitude of change involved in privatizing social services in the state, the Governor scheduled just one hearing at 9am last Friday-- which didn't stop community members such as Cornell Burris from the NAACP from denouncing the corporate contracting out as a "sham" that was excluding community input.

As we noted earlier this year, one problem with these kinds of privatization deals are the incestuous deals that threaten to corrupt politics. For example, the consortium, Affiliated Computer Systems, vying to run these social services is the former employer of Indiana's Family and Social Services Administration, Secretary Mitchell Roob, just par for the course for a scandal-plagued company that had to oust its CEO and CFO last week over improprieties surrounding its stock option plans.

Instead of such rushed privatization, states should enact rules that require careful evaluation of the costs of contracting out and whether in-house alternatives are more cost-effective. Hopefully, Indiana will be moving in that direction with its new legislative leadership.

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Strengthening Communities

What States Can Do for Darfur

Since the Bush administration first recognized the genocide in Darfur, over 250,000 men, women, and children have died. This number does not count the countless women and children that have been raped or attacked as a result of the Sudanese government's campaign to kill and drive out Darfur's ethnic African populations. The violence and genocide is now spilling over into Chad and the Central African Republic. Yet, even with such horrifying statistics, the situation deteriorates day by day.

But why are we talking about this here? What can states do about an international problem? The answer is: a lot. And several states have already taken the lead. Already, California, Oregon, Illinois, New Jersey, Connecticut and Maine have passed legislation requiring the removal of invested money, otherwise known as divestment, from companies that are directly or indirectly helping the Sudanese government perpetuate genocide.

Divestment puts economic pressures on companies doing business in Sudan causing them to rethink their investment. The withdrawal of investment then places severe economic pressure on the Sudanese government. Similar measures proved to be very effective in contributing to the end the apartheid regime in South Africa. As divestment has severe economic consequences, particular attention must be given to ensuring that the citizens of Sudan are not made to endure any more suffering. Targeted Divestment makes sure to tailor the withdrawal of investment, or divestment, to maximize pressure on the government while minimizing the harm and impact to citizens. PetroChina, Siemens, and Shanghai Petrochemical are just a few of the 148 public traded companies that do business in the Sudan.

States have boldly taken the lead in putting pressure on the Sudanese government. California's AB 2941 prohibits the Public Employee's Retirement System and the California State Teachers' Retirement System from investing public employee retirement funds in companies with active business operations in Sudan. Illinois' statute targets all companies with ties to Sudan and mandates divestment on all of the states investment vehicles. In addition to divesting all pension funds, State Treasurer Lemoine ordered the sale of all direct holdings in Schlumberger, Ltd. stock held by Maine's $24 million State Held Trusts. New Jersey sold $2.6 billion worth of investments.

Joining the divestment movement, Colorado, Indiana, Iowa, Kansas, Maryland, Massachusetts, Michigan, Nebraska, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, Texas, Vermont, Virginia and Washington are considering some form of divestment legislation for early next year. And action is not just in the state houses. Campuses across the country are calling for university investment officers and state pension fund trustees to divest from Sudan. The entire University of California system, in addition to Stanford, Harvard, Brown and over 20 other campuses, have divested from Sudan.

President Bush continually states his concern and dismay at the genocide in Sudan, yet there is no Federal divestment policy. As the dispatch has continually noted, it is up to the states to take the lead. There is something that can be done at the state level. And it must be done now.

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Valuing Families

Keeping Children in State After Graduation

Commission members in Wisconsin are floating an idea that is almost groundbreaking in its simplicity: a free college education for the state's students in exchange for a commitment to remain in state for a set period of time. If the student ends up reneging on the deal, they pay the cost of their education.

In most of the world, the fact that a free higher education is groundbreaking would seem almost laughable, but in the United States this kind of deal seems well-suited to both students fed up with double-digit tuition increases and states fed up with subsidizing educations only to watch students leave -- sometimes for financial reasons tied to student debt.

During this decade, as many as 2 million Americans will opt-out of higher education due to fear of student debt. Finding innovative ways to address both the reality and the perception of out-of-control education costs is a critical challenge for state policymakers.

The architects of the Wisconsin plan cite a similar policy in Ireland as the basis for both their idea and their optimism. Free higher education, they say, jump-started Ireland's economy by providing a critical mix of several elements:

  • A captive, predictable educated work force that could be used to sell the state
  • A larger tax base to make the plan pay for itself over time
  • A greater density of highly educated individuals, which has served as a critical piece in developing the "new economy."

Critics contend that the results are not guaranteed and that the plan is pricy. But both the Counties Association and students are raving about the proposal -- including one student who admittedly currently plans to leave Wisconsin but says she would stay if it meant a free education.

A ballot measure is moving in Maine that has a similar goal. Opportunity Maine would provide tax credits to cover the full expense of paying off student loans for those who choose to take them out. While the same in principle, Opportunity Maine is not framed quite the same as the Wisconsin proposal, which may explain why media coverage fails to describe it as either "groundbreaking" or "extreme."

The Brookings Institution proposed a third way to structure such a program in order to address the twin problems of college affordability and states losing their "investments" through post-graduation migration: Decrease the cost of education for all students through state-funded loans that are forgiven wholly or partially for students who remain in state. This solution extends the program to out-of-state students interested in moving to a state.

The bottom line, though, as backers of all of these proposals understand, is that the cost of education has skyrocketed. Piecemeal reforms are no longer a solution. And there is a way to combine higher education affordability with graduate retention in a way that benefits students and the local economy.

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Research Roundup

Job Pirates of the Suburbs, Poverty, Challenges Facing Young Families, and Education Post-Katrina

What's sadder than cities subsidizing rich corporations with fat tax breaks? How about suburbs paying to move jobs around the same metro area, as Good Jobs First documents in a new study on "job piracy" in the Twin Cities Metro Area, a trend that wastes taxpayer money and deepens economic inequality. A parallel study by Brookings on Michigan found that economic subsidies were encouraging sprawl and wealthier communities at the expense of existing central cities.

The Brookings Institution finds that for the first time, there are more poor residents in suburbs than in central cities -- one reason it is critical that we create greater integration of our metro regions to assure physical access to jobs for everyone.

In a series of reports, Demos has highlighted how shifts in the US economy are making it nearly impossible for young people to sustain families, build careers or grow assets in the same manner as previous generations.

The vast majority of the 200,000 Louisiana students displaced by Hurricanes Katrina and Rita missed weeks or more of school -- and may never return to their original schools with the result being long-term academic problems, according to a new RAND study.

IN: New Resistance to Privatizing Social Services

AFSCME, Power Tools for Fighting Privatization

AFSCME, Government for Sale: An Examination of the Contracting Out of State and Local Government Services

Progressive States Network, "Ending "Pay to Play" on Government Contracts"

What States Can Do for Darfur

Sudan Divestment Task Force

Genocide Intervention Network, Divestment

Save Darfur

Student Anti-Genocide Campaign,

Keeping Children in State After Graduation

Opportunity Maine

Milwaukee Journal-Sentinel, "Free Tuition for Vow to Stay?",

Brookings Institution, "Funding Restrictions at Public Universities: Effects and Policy Implications"

Eye on the Right

If Indiana legislators need a good reason to not privatize their social services, they need look no further than Texas, where the privatization was handled in a way that was corrupt from day one and that, in the words of Republican Comptroller Carole Keeton Strayhorn, was a "perfect storm of wasted tax dollars, reduced access to services for our most vulnerable Texans, and profiteering at the expense of our Texas taxpayers."

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The Stateside Dispatch is written and edited by:

Nathan Newman, Policy Director
Mijin Cha, Policy Specialist
Adam Thompson, Policy Specialist
Matt Singer, Communications Director


Please shoot me an email at if you have feedback, tips, suggestions, criticisms, or nominations for any of our sidebar features.

Matt Singer
Editor, Stateside Dispatch


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