January 2003

Under President Bush's proposals for massive privatization of federal jobs, corporations are the big winners—while consumers, taxpayers and workers pay the price.

By Jane Birnbaum

	Targeted: The Bush administration's privatization proposal is a "weapon of mass destruction aimed at federal employees," says AFGE President Bobby Harnage Sr.

Immediately following the 2002 elections, the Bush administration announced plans to privatize as many as 850,000 jobs currently held by federal government employees—approximately 46 percent of the current federal workforce—over the next few years. To keep their jobs as government employees, the workers will be forced to compete against contractors under rules the administration wants to rewrite that will favor corporate interests, according to AFGE, which represents 600,000 federal workers. But many federal workers could see their jobs simply vanish into the private sector, with no opportunity to bid on them.

Now Bush wants to turn the federal government into a bonanza for corporations that will profit at the expense of consumers and working families. And his move signals state and municipal leaders that contracting for services is the magic bullet for their budget woes, perpetuating privatization’s myths while ignoring the realities.

No proof that privatization saves money: “There’s a myth contracting saves money, but no one can show you how because it’s rarely looked at critically,” says Elliot Sclar, Columbia University professor of urban planning and public affairs. His four-year studies of privatization efforts (vehicle maintenance) in Albany, N.Y., and in the state of Massachusetts (highway maintenance) showed Albany overspent by at least 20 percent and Massachusetts as much as 27.5 percent—and neither demonstrated improved service quality.

“Privatization is a mixed bag at best and at worst a loss of money and services,” Sclar says. “But it’s a myth that has legs because it’s part of an ideological attack on government.”

Privatization is a budget shell game: About 1.85 million Americans currently work on the federal payroll and another 4 million work for businesses with federal contracts, estimates federal workforce specialist Paul Light of the Brookings Institution, a nonprofit research group. With the federal government now hiring thousands for security-related positions, its direct payroll will soon pass two million workers unless more jobs are contracted out, says Light. “When Bush is running for re-election in 2004, he doesn’t want to be portrayed as having increased the federal payroll,” he explains. “The politics of this proposal is hiding jobs, moving them to the private sector where, from the Republican viewpoint, it’s preferable for them to be— if they have to exist at all.”

When privatization fails, American citizens pay the price: In Washington, D.C., for example, the privatization of D.C. General Hospital first led to slashing services for the district’s poor and uninsured—and because the contractor went bankrupt, low-income residents must travel across town for critical care. In Kentucky, a recent state audit of publicly traded, for-profit ResCare, a company that serves the state’s developmentally disabled, found that after ResCare’s contract began in 1997, seven of 12 investigated deaths occurred in ResCare settings, two of its employees failed to provide needed medical attention and ResCare received $8 million in improper Medicaid payments.

For-profit Edison Schools, which opened its first school in 1995 and today manages 150 public schools nationwide, promises to deliver higher student achievement at lower cost. But so far, school districts have terminated Edison contracts for management at 40 schools. “Dallas Superintendent of Schools Mike Moses terminated his district’s contract with Edison after studies showed that students in Edison schools were not doing as well as students at district-run schools, and cost more per-pupil, to boot,” says Nancy Van Meter, director of AFT’s center on privatization.

	Candlelight vigil: CWA members protest the privatization of the New Jersey DMV in the mid-1990s—a failed effort now being reversed by Gov. McGreevey (D).

In New Jersey, Gov. James McGreevey (D) in late November announced plans to end privatization of the state’s Department of Motor Vehicles (DMV) initiated in 1995 by former Gov. Christie Whitman (R). McGreevey cited poor consumer service, fraud and lax security—one of the Washington, D.C.-area sniper suspects registered a car in New Jersey without insurance, and several Sept. 11, 2001, hijackers obtained fraudulent New Jersey drivers’ licenses. Under privatization, the number of Communications Workers of America Local 1037 members working at the DMV dropped from 350 to 60—and they waged a long campaign to expose its failures.

“New Jersey’s DMV is a total repudiation of privatization’s false promises,” says CWA Local 1037 President Hetty Rosenstein.

On the federal level, one of Congress’s first post-Sept. 11 actions was to guarantee the safety of the skies by transfering low-paid contract workers who inspect luggage into the federal workforce, where they earn a living wage. “It’s ironic,” says AFGE privatization policy analyst Brendan Danaher. “Clearly, contractors couldn’t guarantee public safety and make a profit. But rather than applying that lesson today, the Bush administration is rushing to privatize nearly a million government jobs.”

Under privatization, contractors are not held accountable: U.S. Comptroller General David Walker recently told Government Executive magazine he was “not confident that [federal] agencies have the ability to effectively manage cost, quality and performance in contracts.” Walker added that many of these departments appear on the congressional General Accounting Office’s (GAO’s) list of high-risk management problems because of such contracting failures.

A December report from the Defense Department’s inspector general found that a material distribution services company with a $44 million federal contract did not deliver its work on time, did not perform acceptably and did not supply a quarter of its required quality assurance reports. Says Dan Guttman, a government contracting specialist and fellow at the Johns Hopkins University Center for the Study of American Government: “Even as the evidence mounts that there are critical federal programs and agencies unable to account for their contractor workforces, the Bush administration is speeding up contracting rather than stopping and fixing the problems.”

Privatization targets low-paid government employees—and more: Many federal jobs on the Bush administration’s hit list are custodial and administrative, and those workers are likely to suffer big cuts in pay and benefits. According to an Economic Policy Institute (EPI) study, more than one in 10 employees of federal contractors earned less than the approximately $17,000 annually necessary to keep a family of four above the poverty line in 2000. But in considering the kinds of jobs available for contracting—those not “inherently governmental,” according to federal law—the Bush administration has greatly widened the field. For instance, jobs slated for contracting include correctional officers, environmental inspectors and employees of the National Imagery and Mapping Agency, which conducts research for U.S. intelligence operations.

		From America@work, January 2003.

Privatized agencies serve the corporate bottom line, not the public good: Under the Bush plan, front-line workers—those who respond to questions at the Social Security Administration or the Internal Revenue Service, for instance—are targeted for contracting. “These are critical people, because they’re service gatekeepers,” says Brookings workforce specialist Light.

And citizens lose basic legal protections when government contracts work. “Over 200 years we have built up a body of law, starting with the Constitution, that limits the authority of government employees and protects us against abuse by them,” says Guttman. “But the Constitution and federal ethics rules that apply to government employees do not apply to contractors—even where they engage in conduct that would violate citizens’ rights if a government worker did the same thing. That was the case, for example, when airport baggage inspectors were employees of private businesses.

“After Sept. 11, we gave a great deal of trust to the federal government, because we want to be protected from terrorism, and we can give it that trust because the Constitution protects us against government abuse. But plenty of contractors are getting work from the Defense Department’s ‘total information awareness’ information-gathering program and will soon be getting information-gathering work from the new Homeland Security Department. What happens when government gives information- gathering work to people not subject to the limitations we expect of government conduct and citizens lack the Constitution’s protections? We don’t know, but may soon find out.”