UPDATE: 15 States Now Moving to Curb Reckless Outsourcing of Public Services
By Mel Fabrikant Wednesday, February 26, 2014, 04:36 PM EST
Lawmakers in Iowa, Kansas and Oregon join movement to improve transparency and accountability, keep taxpayer in control of their services
Lawmakers in three more states have moved to curb predatory outsourcing. Legislators in Iowa, Kansas and Oregon have proposed legislation that would help keep taxpayers in charge of their services by increasing transparency and accountability standards in outsourcing contracts. Including Iowa, Kansas and Oregon, fifteen states have now introduced legislation.
“There is clear momentum building toward a pro-taxpayer approach to outsourcing public services,” said Donald Cohen Executive Director of In the Public Interest Action Fund. “These lawmakers are helping taxpayers regain control of their schools, roads and prisons. They are responding to constituent demands for transparency and accountability and they should be commended for it.”
In Iowa, Senator Jeff Danielson’s Senate Study Bill 3174 would give Iowa taxpayers more power to cancel contracts if for-profit corporations fail to meet performance standards. It would also require companies that are paid with tax dollars to provide a public service to maintain open records just as public agencies do.
In Kansas HB 2723, the Taxpayer Empowerment, Accountability and Transparency in State Contracting Act, has been introduced. The proposal would require a demonstrated cost savings of 10 percent before a service can be privatized, and ban contractors from receiving pay for services not rendered. The bill would also require a comprehensive impact assessment before outsourcing public services, promote competition by ending automatic contract renewals, and prohibit contract language that shields corporations from the risks of the free market by putting taxpayers on the hook for guaranteeing corporate profits.
In Oregon, Senator Mitch Greenlick and Representatives Nancy Nathanson and Paul Holvey have introduced HB 4122 in to protect Beaver State taxpayers with respect to IT contracts. The bill is particularly poignant after the state’s disastrous experience with outsourcing development of its health care website to Oracle. HB 4122 has already cleared the Oregon House of Representatives.
In all, 15 states have now moved to curb reckless outsourcing, including Iowa, Kansas, Louisiana, Maryland, New Jersey, New Mexico, Oregon, Tennessee, Washington, California, Georgia, Oklahoma, Nebraska, Vermont and West Virginia. The trend comes amid increased nationwide scrutiny of outsourcing deals, many of which have had disastrous unintended consequences for taxpayers. For example, in 2009 Chicago signed a 75-year contract with a consortium of companies backed by Wall Street giant Morgan Stanley for the operation of the city’s 36,000 parking meters. Though Chicago got $1.2 billion in the deal, Chicago drivers will pay the private companies at least $11.6 billion to park at meters over the life of the contract. Meanwhile, upon signing the contract, the company dramatically increased parking rates to $7 for two hours of parking in some parts of the city, and extended paid parking to seven days a week. Downtown businesses blamed the price increases for a decrease in economic activity. Residents complained that parking downtown was cost prohibitive. And taxpayers must reimburse the company whenever the city needs to temporarily close its streets, even for community parades and street fairs.
Across the country, cash strapped state and local governments have handed over control of critical public services and assets to private entities that often operate them slower, costlier and worse. Too often, these “deals” leave behind only broken promises and undermine transparency, accountability, shared prosperity and competition. ITPI documented several of these broken promises in its recent report, “Out of Control: The Coast to Coast Failures of Outsourcing Public Services to For-Profit Corporations.”