American Legislative Exchange Council

PFAW Report: Predatory Privatization Puts Citizens and Communities at Risk

 Washington, DC -- State and local budget crises and the election of anti-government ideologues have left taxpayers and communities increasingly vulnerable to predatory “privatization” of government services and public infrastructure. “Desperate government is our best customer,” says one finance company executive specializing in the privatization of public infrastructure. A new report from People For the American Way documents that the push to privatize public services and assets often reduces the quality of services, burdens taxpayers and threatens democratic government.

A copy of the full report, Predatory Privatization: Exploiting Financial Hardship, Enriching the One Percent, Undermining Democracy [pdf] is available here: http://site.pfaw.org/pdf/Predatory-Privatization.pdf

“The combination of budget deficits, anti-tax ideology, and financial predators can be deadly to the interests of citizens and communities,” said People For the American Way President Michael Keegan. “Right-wing anti-government and anti-union ideologues are exploiting tough economic times and taking advantage of desperate public officials. The public picks up the tab but gives up control and accountability. The public good should never be on the auction block. If citizens are not vigilant, they will end up paying a terrible long-term price for deals to plug short-term budget holes. ”

Among the examples examined in Predatory Privatization:

  • In 2009, the city of Chicago sold revenues from the city’s parking meters to a group of companies led by Wall Street giant Morgan Stanley. Investors got the right to control parking meter revenues for 75 years. Not only did the city give up revenue, but it actually has to pay the private company whenever a street is closed for repairs or for a street fair; the company claims city taxpayers already owe it almost $50 million.
  • Republican officials are pushing to privatize more prison operations, even though private prisons often end up costing taxpayers more. The multi-billion-dollar private prison industry has an incentive to increase the numbers of prisoners incarcerated and to keep people locked up as long as possible – and spends millions to lobby state legislators.
  • Investors are lining up – and lobbying legislators – to get their hands on the billions of dollars spent on public education. Many schools are being privatized despite very mixed results. Many investors rake in millions even though many students in these private schools do much worse than their traditional counterparts.
  • Indiana turned over its toll road to foreign firms for 75 years. Fine print in the contract has required taxpayers to reimburse investors when Indiana waived tolls for safety reasons during a flood. The contract allows the company to raise tolls every year; they doubled during the first five years of the 75-year contract.


The report also gives individuals advice on how to protect the public interest by responding strategically to privatization schemes, including a set of crucial questions that public officials should be forced to answer before voting on any proposal.

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PFAW Foundation
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