Could it be mere coincidence that the word privatize sounds a lot like privateer?
Remember the clamor to privatize Social Security? Advocates wanted Americans to be allowed to control their own retirement money by investing it in the stock market. To many, it seemed like a good idea at the time.
Fortunately, calmer heads prevailed and all the privatization rhetoric quieted, its disappearance pretty much coinciding with the collapse of several Wall Street investment banking firms and the subsequent trillion-dollar congressional bailout. Millions of Americans saw their 401k funds evaporate. Suddenly, social security privatization didn’t seem like such a hot idea.
Despite that, Gov. Bobby Jindal espouses what he considers a panacea to the state’s fiscal woes: privatization. Even if state property must be sold and the fate of thousands of state workers, along with their retirement and health benefits, are thrown into jeopardy, privatize. In that regard, he is in lock-step with Republican governors all over the U.S.
The answer to every fiscal ill that beleaguers the state is privatization, according to Jindal. Sometimes privatization can even extend into the already private sector, especially if state help for private enterprise through Jindal’s economic development air program happens to benefit campaign contributors.
LaShip, owned by Gary Chouest, was the direct beneficiary of Jindal’s $10 million investment in state funds for expansions to the Port of Terrebonne in 2008. Chouest, his businesses, which also include Chouest Offshore and C-Logistics, and his family members made a minimum of 18 campaign contributions to Jindal totaling $85,000. The funds came from a $1.1 billion state surplus. Ironic, given that the state today is faced with a $1.6 billion deficit.
Then, of course, there is the infamous chicken plant in Union Parish.
When Pilgrim’s Pride decided to close its plant in Farmerville, Jindal scurried to find a buyer for Pilgrim founder Lonnie “Bo” Pilgrim. California-based Foster Farms eventually purchased the plant after the state put up $50 million. Lonnie Pilgrim and Foster Farms both contributed generously to Jindal’s campaign.
Anyone who has followed Jindal should not be surprised. More than 200 key Jindal appointees combined to contribute more than $784,000 to his campaign.
Coincidence, says Jindal Press Secretary Kyle Plotkin who added that those contributors supported Jindal’s plans for reforming Louisiana and for improving the state’s image.
Nor does Jindal consider his repeal of the Stelly Plan in 2008 to be detrimental to the state’s financial well-being even though experts said the action would create a $350 million revenue loss in the first year, 2009. The Stelly Plan was approved by a majority of Louisiana voters but Jindal repealed it, saying his action would save single income tax filers as much as $500 a year and joint filers $1,000. That sounded great until one peeled back the layers and found that the $500 savings would be realized only by single filers making as much as $90,000 a year and to save $1,000, joint filers would have to make more than $150,000 per year.
Louisiana’s median household income was $43,635 in 2010.
It was little more than a year ago, in January 2010, that then-Commissioner of Administration Angelé Davis released the highlights of the administration’s “streamlining measures implementation plan.” Among those highlights were a 10 percent reduction in the numbers of cars in the state’s automobile fleet, sale of unneeded state property, better contractor oversight, and the establishment of a “Privatization and Outsourcing Unit” within the Division of Administration (DOA) “to serve as a resource for all departments and agencies for identifying and implementing appropriate privatization and outsourcing initiatives.”
To that end, the report said a Request for Proposals (RFP) had already been issued by the Office of Risk Management (ORM) “to evaluate the potential cost savings and/or service improvements with outsourcing the claims management and loss prevention services for all lines of coverage to a private company.”
The privatization of ORM was, in fact, accomplished when Mandeville-based F.A. Richard and Associates (FARA) was awarded the contract to take over operations of the agency, beginning with its Workers Compensation unit. The phased-in takeover is scheduled to be complete in 2013 at a cost of $68 million under terms of FARA’s contract with the state.
Proposals were taken on the privatization of at least one other agency but none of the proposals were attractive enough to gain administration approval.
No matter. Even without waiting to see if the privatization of ORM proves to be a wise move, Jindal is plunging ahead in his efforts to privatize other agencies, including state prison facilities, the Office of Group Benefits (OGB), and, if you watch what’s been going on with charter schools, public education.
As was the case of ORM, the privatization of any state agency would require the concurrence of the State Legislature. With recent party switches by several legislatures, Jindal now enjoys a Republican majority in both the House and Senate.
Privatization has already been tried once with less than satisfactory results.
OGB, beginning on July 1, 2003 offered state employees the option of selecting a Managed Care Option (MCO) administered by FARA, the same firm that is in the process of taking over ORM. A state audit later revealed that FARA was paid $8.6 million more than its $20 million limit, a 43 percent cost overrun.
OGB has since terminated its contract with FARA.
State Sen. Butch Gautreaux (D-Morgan City) has gone on record as opposing the privatization of OGB.
“I am very concerned about the governor’s efforts to sell off OGB,” Gautreaux said in an email. “I sit on the (OGB) board and attend the meetings. We’ve developed a reserve of over $500 million and again the governor is looking at raiding those funds for short term and recurring expenses. This will be a catastrophic move,” he said.
The privatization of state prisons also is also a matter of concern.
DOA recently published a request for information on the privatization of state correctional facilities in Allen and Winn parishes. Both facilities, while state-owned, are presently managed by private firms from Nashville, TN., and Boca Raton, FL.
Figures obtained from DOA show that it presently costs the state about $17.5 million per year to pay the two firms to operate the facilities in Allen and Winn. Avoyelles Correctional Center, which was built from the same architectural plans as those in Winn and Allen and which is state-operated, presently costs about $26 million per year.
The obvious questions then become how can a private company in business to make a profit do so without charging a higher per diem and how can the private companies operate Winn and Allen at one-third less cost than the state spends to run Avoyelles?
Simply put, the private firms pay their employees much less than the state pays its corrections officers. That alone is a major cause for concern among employees of facilities run by the state that might be privatized sometime down the road.
Private firms also offer less in the way of rehabilitation and educational programs. Basically, they operate on the concept of lock and feed. Moreover, because the prisoners will still be the state’s responsibility, the state would continue to bear the cost of prisoners’ medical care. Tough-on-crime types might question the need of rehabilitation and educational programs, being of the “lock-‘em-up-and-throw-away-the-key mindset but medical care can’t be denied.
That might be good for the hard-liners but that philosophy wouldn’t seem to do much to discourage repeat offenders and that flies in the face of Jindal’s highly-touted press release a couple of weeks ago when he boasted that the state’s recidivism rate for first- and second-year prisoners dropped by 33 percent under his administration. It’s the moral equivalent of Jindal’s having his cake and eating it, too.
Privatization necessarily goes against the grain of his stated objective of assimilating prisoners back into society through education and occupational training. He can’t privatize and expect lower recidivism rates, too.
Projecting the current rate of $31.51 per-day per-prisoner now paid parish sheriffs to house state prisoners over the 20-year contract sought by the Department of Public Safety and Corrections, the state would pay a private firm upwards of $700 million. Jindal appears ready to trade that obligation for $66 million in up-front cash sought from the sale of the Allen and Winn facilities.
That $700 million is roughly the same amount the state would pay if it continued to pay the two private firms to operate the facilities. But at least the state would still own the facilities.
But there remains one other factor to toss into the equation that no one has talked about.
While the state is paying $31.51 per day to house its prisoners in the local jails, the federal government is paying upwards of $50 per day to house illegal immigrants.
Given the choice of earning an extra $18.49 per day, a 58.7 percent bump, a lot of sheriffs will opt for the economic consideration of tossing out the state prisoners in favor of dealing with the feds. Where would that leave the state if it has no facilities of its own?
There’s no reason to think that a private firm, once it purchases the state facilities, would not do the same thing when its contract with the state comes up for renewal and the state would have no choice but to acquiesce.
Jindal has also mentioned the possibility of selling several state buildings—buildings that, ironically, were constructed less than a decade ago in an effort to get state offices out of paying rent on privately-owned office space—and of drawing on future State Lottery proceeds.
That would put the state in the position of paying for the buildings twice—all for the sake of obtaining one-time revenue for recurring expenses, according to House Appropriations Committee Chairman Jim Fannin (D-Jonesboro). “We would still have to pay off the mortgage on the buildings while we paid rent to the new owners,” he said.
Privatization has become Jindal’s addiction and he is acting like a desperate street junkie willing to do just about anything to get a quick fix.
And as with the case of all addicts, that can be a dead-end street.
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