On a muggy April afternoon, Charles Kendricks, a longtime employee with The University of Tennessee Health Science Center, joined coworkers and and members of United Campus Workers outside the administration building to deliver a pointed message to a high-level state official rumored to be inside.
Terry Cowles, director for the state’s Office of Customer Focused Government (OCFG), was to meet with UTHSC officials to discuss the merits of outsourcing university jobs to Jones Lang La Salle, a Chicago-based commercial real estate management company.
“If you’re going to outsource someone, you should give us the opportunity for input,” said Kendricks, who works as a specialized carpenter.
If the outsourcing contract is executed fully, every maintenance, grounds, and custodial worker at a state-run institution could find themselves an employee of the private sector overnight, if they find themselves employed at all. Campus workers like Kendricks will be the largest segment of an estimated 10,000 workers affected.
Republican Gov. Bill Haslam, who was once the richest elected official in the country, maintains that privatizing thousands of state jobs would save taxpayers millions each year.
But according to In the Public Interest, a research and policy center that focuses on privatization and contracting, the cost savings often come through shrinking employees’ wages and benefits. “When contractors degrade jobs, taxpayers make up the difference through food assistance, emergency healthcare, and other public support programs,” wrote researchers in their 2016 report, “How Privatization Increases Inequality.”
“This outsourcing dynamic disproportionately impacts women and African Americans, both of whom are employed by the public sector at high rates,” the report says.
“Governments rarely look at questions beyond whether there is projected cost savings associated with a proposed privatization effort,” it says. “Governments should conduct a social and economic impact analysis before outsourcing.”
Haslam’s administration hasn’t done this sort of an analysis. Kendricks, a veteran who almost had his job outsourced before as a federal employee, is most troubled by the contract’s unknowns.
“We don’t know what impact this is going to going to have on minority workers, on single mothers, on veterans. He (Haslam) just decided to put this in place and came up with a figure. We didn’t get a fair shake.”
Privatization — a rare bipartisan opposition
The figure Haslam and the OCFG stand by is $35 million in annual savings per year, should all higher education institutions agree to the contract.
That number was backed up by an independent analysis by Kraft CPA PLLC, though state Democrats were quick to question the audit’s validity, noting that Kraft officials have served on Haslam’s direct payroll as campaign workers.
But, beyond the promised savings from outsourcing campus workers, no information has been released about the potential impact in smaller districts that have a state park or prison as a reliable employer in a remote area.
That doesn’t sit well with some state workers in rural areas, or with Randy Stamps, the president of the association that advocates for workers employed by state parks, prisons, and other state-run facilities.
LIke UCW, Tennessee State Employees Association has also been watching the outsourcing plans developing since 2015. In January, the state issued a request for proposals for five private companies to tour and assess the possibility of running Fall Creek Falls.
The proposal indicates that the state is willing to spend $22.1 million for a company to run The Inn at Fall Creek Falls with a contract expiration date of 2029.
“It’s alarming, the pace of public outsourcing taking place in Tennessee,” said Stamps, a former state representative from Sumner County. “Not only do we (the state employees association) have the right to protect state employees, but we have the right to be involved in major state decisions that affect state workers.”
On April 21, two days after the UTHSC protest, a bipartisan group of 41 state legislators sent a letter to Terry Cowles, asking to delay the outsourcing plan.
“Our reservations include the potential impact to state employees, the scope of ‘vested outsourcing’ to state services, and allowing enough time to address concerns from the General Assembly,” the letter read.
That same day, the state pulled the trigger on the contract, three days earlier than it was to be presented, and seven days before the deadline for signing, according to the state’s own timeline.
Twenty-four more legislators added their signatures to the letter.
David Roberson, a state Department of General Services spokesperson, brushed off questions about why the contract was signed days early.
“I’m not sure that’s a tremendous difference, between late Friday afternoon and 9:00 a.m. on a Monday morning,” Roberson said. “ Are you telling me that’s a bad thing?”
The UCW and the TSEA contend it is a bad thing. They say the early signing is proof that the administration is being secretive to avoid oversight and constituents’ input.
“This government likes to run this state like it’s a private enterprise. It’s not an enterprise, it’s about delivering state services,” said Stamps. “It’s supposed to be done cooperatively between the legislative branch and the executive branch, but right now, the executive branch is running the state like it’s Tennessee Inc.”
Tennessee Trendsetting
It shouldn’t be too surprising that Tennessee is pioneering the first outsourcing plan of its kind at a state level. Tennessee-based Corrections Corporation of America, now CoreCivic, managed the first privatized prison, a juvenile detention center, in Memphis in 1984.
Jones Lang La Salle made their Tennessee debut in 2011, with a relatively small contract to manage state real estate contracts. By 2013, they were managing 10 percent of state-owned facilities through a multi-year contract meant to save the state $50 million over five years.
Outsourcing public jobs to the private sector is not new, but there’s little proof that it saves taxpayers money more than it costs them.
A 2011 study by the Project on Government Oversight found that the federal government has no system to track how much money is saved or wasted from outsourcing versus retaining services. But it did find that out of 35 occupation classifications reviewed, federal employee compensation was less expensive than contractor prices.
According to the study, “the government pays billions more annually in taxpayer dollars to hire contractors than it would to hire federal employees to perform comparable services.”
Haslam’s administration has repeatedly insisted that outsourced workers receive wages and benefits of “similar essential value,” though state officials have not explained what that means. They’re also quick to reiterate that universities and facilities will have the option not to “opt in” to the contract.
The OCFG spokesperson, Michelle Martin, said that while they understand concerns from Tennesseans, contractors “weren’t even allowed to bid unless they couldn’t offer similar pay and benefits.”
“This is really about what makes the most sense for them as an institution,” said Martin. “If they find that the proposed contract doesn’t suit them, then they are under no obligation to opt in.”
So far, Memphis colleges are mostly quiet, giving no indication of opting in or out. Only University of Tennessee Health Science Center, through its parent University of Tennessee system, has indicated it will spend time exploring the matter school by school.
That’s little comfort to workers like Kendricks.
“It takes thousands to put Haslam in office, and with a stroke of a pen, he can take out thousands of jobs,” he said.
By May 5, two weeks after the outsourcing contract was signed, Jones Lang La Salle’s stock price hit a 12-month high at $125.5 per share, up 12 percent from signing day, April 21.