Tuesday, June 28, 2011

If facts don't support privatization, make different facts?

Editors of the Sun-News in Myrtle Beach took up the issue of school bus privatization this weekend and found, strangely enough, a disconnect between facts and political ideology. Consider this humorous opening:

When his own agency released a report showing that a pilot program to turn school bus operations over to a private company was an expensive, unmitigated disaster, privatization cheerleader and Education Superintendent Mick Zais attributed the problems to a bad contract and a bad bidding process and a company that wasn't qualified for the job.

That's funny.

In digging deeper, the editors found that Zais's excuses may have merit in this case:

The fact that the state spent far more to have the private company keep school buses operating than it paid to do it in-house ($9,578 per bus vs. $8,097) was actually the smallest problem identified in the review of the first three years of a pilot program in Mount Pleasant. The big problem was the inability of the company to do the main thing that S.C. taxpayers were paying it to do: get kids to school on time.

The State Education Department negotiated a contract with General Diesel of Charleston after the company submitted the low bid to open a new bus maintenance shop and maintain 78 regular-route buses and 10 spares. The terms were quite generous: The company had six months to evaluate the buses and bring them up to whatever standard it desired, at state cost; after that, it would be required to maintain them, at a fixed rate per bus.

But according to the report prepared for the Education Department by TransPar Group, which provides consulting services and operates school bus systems in five states, "the six-month conversion period was not utilized to bring the buses up to their 'standard.'" And while things worked OK through most of the first school year, "Major problems began to surface" toward the end of that year, when two buses experienced drivetrain failure. Rather than repairing them over the summer, General Diesel ignored them.

But they also found instability in his general argument for privatization.

These problems specific to General Diesel drove up the costs, while driving down the quality. But the report also cited other reasons for high costs that are more general to privatization: The company had to pay workers much more than the state did, and it had to pay for "certain costs that might not be borne" by state shops. "This includes property ownership, taxes, and commercial business insurance. Additionally, General Diesel is trying to make a profit and also has a cost of capital relating to its investment in receivables, property, and inventories."

Given all this, the report said, it will always cost more for the company to do the work "unless General Diesel performs maintenance much more efficiently than the SCDE, thus expending less labor to achieve the same result." That, of course, is the key to privatization. And it is not a given.

And that's the point that pragmatists keep coming back to: Privatization saves money - except when it doesn't. Privatization provides better service - except when it doesn't. Privatization, in short, works just fine - except when it doesn't.

What's essential is to explore the benefits and drawbacks in each case, to do that without preconceived notions, and to make decisions based on the actual results, rather than ideology. Of course, the same could be said about most decisions that politicians are called on to make.

Astute observations, all.

On the same day that the Sun-News editors were drawing their conclusions on the editorial page, they published news that "[e]ight bus-contracting companies say it is possible to privatize the state-operated school bus system in a way that will cost the state no more money and also secure new school buses."

When businessmen come promising more goods and services at less expense, I lock the doors and hide my checkbook.

And what a surprise: "At Gov. Nikki Haley's request, companies from around the nation submitted recommendations this month on how to privatize the state-owned bus system."

Not surprisingly, some of the transportation administrators from counties in the Grand Strand didn't want to comment. Who can blame them? Working people with families don't want the wrath of Her Excellency visited upon them.

But a spokeswoman for Horry County Schools did answer questions and raised some salient concerns:

Teal Britton, spokeswoman for Horry County Schools, said the state, not the district, has records concerning state-owned buses, so any savings estimate would have to come from the state. She said if the system is privatized, though, the question would be whether the state would negotiate contracts for the districts, or if the district would be given an allocation to negotiate its own bus contract.

"It seems with the mass size [of the state], you would experience more buying power," Britton said. Otherwise, 85 school districts would be negotiating contracts separately.

Britton said that a few years ago, a company wanted to contract with the state to place advertisements in school buses as a means to generate revenue for school routes. While that idea was not advanced, she said it went against some school district policies in terms of solicitations because children are a captive audience in what the district considers a mobile classroom.

"While that idea did not pan out, I don't know what control we would have or not have in a privately purchased system," Britton said.

Want your first grader's school bus to carry advertisements for Axe body spray? Skechers shoes? Nike? The latest Justin Bieber action figure?

And who didn't see this coming:

So far, the most detailed recommendation submitted came from Student Transportation of America, North America's third-largest school bus contractor, and it addresses the issue of control. In his company's recommendation, chief executive Denis Gallagher, who contributed to Haley's campaign and recently moved to Daniel Island...

A contributor to Governor Nikki Haley's campaign has the head start in getting a state contract to privatize our children's school buses.

Is there some other board that Darla Moore can be booted from, to make room for Denis Gallagher?

And what, pray, is the advice that Gallagher delivers to Her Excellency, based upon his expertise?

Gallagher blames that on what he says is a bloated bureaucracy, including bus supervisors, administrators and maintenance workers.

Gallagher also says the state could get new buses, replacing the nation's oldest school bus fleet, and get out of the bus maintenance business without spending more.

Apparently, this private bus contractor, run by a Haley campaign contributor, knows a way to get our children to school on brand-new buses, without drivers or mechanics, for less cost that we currently spend, and make a profit on top of it.

Gallagher's plan includes taking over all of the state's current bus mechanics and drivers, who would no longer be state employees and get state health care or retirement benefits.

School districts could decide to operate the buses themselves. But school districts that privatized would get more state aid to replace formerly state-provided buses, fuel and maintenance. However, state aid would be frozen with no future increases. "Overall, state costs would remain the same or less, and not increase for future years," recommends Student Transportation.

Wasn't Gallagher the magician who pulled rabbits out of watermelons, then spattered the watermelons with big wooden hammers?

I see big wooden hammers in our future.

The paper spoke to Zeke Stokes, who worked for former Superintendent Jim Rex, about the magic bus plan.

Stokes said poor districts likely would be unable to kick in enough additional money in the future to keep their bus systems up to snuff. "They couldn't afford it."

Stokes also questioned whether any private contractor would be willing to serve rural parts of the state. "There's not going to be a profit motive for a private company to service Allendale, Jasper, Dillon, where there are 5 miles between each house," he added.

But the bus company doesn't suggest starting his program in a poor, rural district. For folks living in Greenvile and Spartanburg counties, the Sun-News has an announcement: You're going to be the guinea pigs.

A gradual phase-in starting with a pilot project in a highly-populated, urban area, such as the Greenville-Spartanburg area.

I wonder how the eight superintendents of Greenville and Spartanburg feel about being used as the test market for a costly and chaotic new program, run by a Haley campaign contributor?

What do you say, Spartanburg Herald-Journal?

While you ponder it, consider this item published last January by the Augusta Chronicle under the headline "Contracting SC bus operations could be costly":

For months on the campaign trail, Nikki Haley touted privatizing South Carolina's school bus fleet as one possibility for saving money. But some experts say the switch could end up costing more and invite something the Republican governor says she wants to keep out: unions.

Privatizing the school bus fleet is an idea that was idled after scrutiny by a legislative study committee in 2004-2005 under then-Gov. Mark Sanford. Haley revived the idea last year as an example of how she would trim the budget as the state confronts an $830 million budget shortfall. She now pushes it as about something more - and she has the ear of new state schools chief Mick Zais.

Back then, the Associated Press took the time to ask Greenville County if it wanted a privatized bus system:

The state's largest school district, Greenville County, considered outsourcing but decided against it determining it would cost more in the end, said spokeswoman Susan Clarke.

But Charleston County had done it. Why? And did it save money?

Charleston County privatized because of difficulty in hiring and keeping bus drivers, mainly over low pay. Drivers earn more now, but savings come from not paying for drivers' health care and retirement benefits, or for lawsuit liability, McClure said.

Officials there say they don't know whether they ultimately save or spend more. But a 2005 report by the privatization study committee said Charleston County was then spending nearly $8 million on transportation, compared to less than $4 million before outsourcing. Part of the added cost is paying for someone else to handle payroll and other tasks once handled in-house.

So Charleston privatized its bus system because they couldn't keep drivers on the payroll for such low wages; today's privatized drivers in Charleston earn more in wages but get no health care or retirement benefits. When they get old or sick, they'll go to the emergency room, and insurance premiums for everyone else in the region will increase. That certainly seems fair.

One potential outcome of privatizing the bus system statewide is a sharp increase in unionization:

Several years ago, bus drivers in both districts opted to join the Teamsters union. State law doesn't allow government workers to unionize but drivers for a private company can.

"We upped their wages. Turnover's not nearly as great now," said L.D. Fletcher, president of Teamsters local 509. "When you have turnover, you have chaos. Kids might be late."

While drivers in neither district have struck, the threat loomed in Beaufort County in 2007 during contract talks.

Under their contracts, drivers earn between $10.50 and $19.25 per hour in Beaufort County, and $12 to $19 in Charleston County. Statewide, wages vary, based on competition and what districts can afford. In some rural districts, pay averages $9 an hour.

Fletcher expects drivers in more districts will unionize under privatization. Drivers are already calling him, he said.

Did you see that? Drivers are already calling to ask about unionizing.

The AP story noted that Haley's predecessor tried the same thing, over in Mount Pleasant.

In response to Sanford's push, the state launched a pilot program in 2008 at a school bus shop in Mount Pleasant. The winning contractor underestimated the cost of maintaining the area's buses, and the state had to renegotiate the contract last year to keep the company from going under, Don Tudor, state's transportation director, said last month.

The state spent about $780,000 on the 90 buses last fiscal year, or about $200,000 more then the state would've spent in-house, he said. He noted the company's mechanics earn nearly double the hourly rate of state workers.

So privatizing cost more than anyone projected. Sound familiar?

And the AP story turned up one more fact:

Denis Gallagher, CEO of New Jersey-based Student Transportation, said South Carolina stands to benefit by letting private contractors provide newer, safer buses the state lacks capital to purchase.

His is the nation's third-largest student busing company and set up an office in the state last year and has been meeting with Haley.

As far back as January, Gallagher was nursing his investment in the Haley campaign by meeting with Her Excellency and sharing the expertise of his New Jersey-based company.

Yet one more out-of-state business interest profiting from South Carolina's education budget.

I predict we're going to enjoy this bus privatization scheme thoroughly. We should, as we'll be the ones paying dearly for it.



  2. Privatizing the school bus fleet will accomplish a number of things.

    1) The Governor will be able to keep a campaign promise.
    2) The Governor will be able to reward her campaign contributors.
    3) The Governor will be able to cut 465 employees out of the Dept. of Education and take credit for reducing the size of government.

    So far so good????

    Here's the rest of the story.

    1) The contractor will no hire all the current employees forcing many onto the unemployment role at the TAXPAYERS expense.
    2) The buses will be SOLD so we can get those NEW buses the contractor is offering. Once the bridge is burned there is no going back.
    3) The 30% profit that "for profit" contractors need to make it worthwhile will come from the employees benefit package....there will not be one....a dollar more per hour but no benefits.
    4) The costs of contracts will rise each year.
    5) The state will pay a fixed amount for student transportation to each district....it will never increase.
    6) All increased costs of student transportation will be paid by the districts.
    7) If a district should fail to follow every line of the contract, the contractor will take the district to court further driving up district costs.

    But all of this is OK.....do you know why?

    Because school districts can raise taxes every year to pay for it...no matter how much it costs.

    Ask the people of Charleston County. Cost before bus routes and drivers were privatized: 4 million dollars per year. After privatization: 8 million dollars per year.


    Have you contacted your legislator yet?