Ripoff Privatizations-- And Why They Keep Happening

Want to make a deal? Privatization is in the air and the multinational profiteers are circling. And the action is bipartisan and involves big money:

  • The District of Columbia, Illinois and Indiana have all announced that they are looking to hand over their state lotteries to private firms for billions of dollars.
  • Last year, Indiana got $3.8 billion from an Australian-led consortium for a 75-year tollway lease on the same day Virginia signed over its Pocahontas Parkway as a 99-year lease to a private company and Texas approved a $1.3 billion bid by a consortium led by Cintra to build and operate a 40-mile toll road out of Austin.
  • Indiana is also planning to contract out management of part of the state's social services system in a $1.16 billion contract.

Why do these deals keep happening, despite the contractor scandals in the headlines?

  • At the federal level, privatization in the defense department has bred billions of dollars in corruption by contractors like Halliburton, while the cleanup after Hurricaine Katrina has been crippled by profiteering and malfeasance by private contractors hired in the wake of the disaster.
  • And at the state level, just last week, Gov. Charlie Crist ordered the Florida Department of Law Enforcement to investigate two companies running private prisons for the state after audits found the state was paying for vacant jobs and other questionable expenses.
  • And Texas had to largely dump its social services privatization deal with Bermuda-based Accenture after the firm ran-up a massive $100 million budget overrun with an automated system that suffered massive technical failure.
Research Shows...No gain from Privatization: If you think these are anecdotal headlines, broader research has found no net financial advantage for states from handing over work previously done by public servants to profit-seeking contractors.

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