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Why P3 Schools are D4 Schools


How Private-Public-Partnerships Lead to
Disillusionment, Dirty Dealings and Debt

Heather-jane Robertson for CCPA/British Columbia
May 29, 2002

View the video of this speech and other CCPA Forum on Public-Private Partnerships videos here

Privatization: From Stealth to Statute

Across Canada, decisions to privatize most public sector services have been highly-visible, accompanied by rhetoric and legislation that clearly sets out governments’ intent. Recently, an Ontario minister announced that if it could be found in the yellow pages, then government had no business “competing” with the private sector in that service area. Your yellow pages will provide lots of entries under housing, day care, a host of medical services and, of course, lots of entries dealing with education, providing neo-liberals with a very long list of programs and services that they can abandon to service their ideology.

Emboldened by the reality that the public continues to elect governments bent on privatization, governments – especially newly elected governments – have no reason to be particularly cautious about revealing their intentions to privatize. Their very public support for P3 in all its forms signals their confidence that there is only weak opposition to the idea that all public policy problems can be solved by the private sector – which, as many of you will know, is the mission statement of the Fraser Institute.

While governments’ new hubris applies to some extent to public education, I think that “gradualism” may be a better description of the privatization process. Every provincial government in the country still professes its deep affection for public education, even as they undermine our schools’ ability to come close to achieving excellence and equity. Schools are being privatized not by fiat, but by stealth. When the Ontario government announces its intent to privatize Ontario Hydro, the cards are on the table. But when it decides to give hefty tuition tax credits to parents in order to encourage them to send their children to private schools, the word “privatization” never escapes their lips. Instead, they talk about parents’ rights, about choice and fairness. When they cut funding and deregulate tuition fees, sending universities into the cold embrace of corporations and kids into debts no other generation has had to carry, the P-word, let alone the P3 words, never escapes their lips. I can only conclude that governments’ realize how deeply Canadians are attached to both the concept and the reality of public education.

Because of this strategy, whatever problems the public mind associates with what is happening at school, privatization isn’t among them. Keeping the perceived problems of public education as a list of consequences, a list of disconnected issues – class size, poor teacher morale, low achievement, school violence – makes it more difficult to organize resistance that focuses on causes. What’s happening at school remains a problem without a name – or the problem gets named “underfunding.” In my opinion, underfunding is not the source of education’s problems. It is the most powerful tool at the government’s disposal to drive the system towards privatization; an outcome that is almost as invisible as it is inevitable.

Diversions and Democracy

Keeping the gradual privatization of education below the public’s radar is essential for the process to continue. From the perspective of a government that wants to stay the government, any focus on schools must be directed to other issues. The constituency concerned about public education can easily be diverted into discussions of union power, or test scores. Setting up diversions has been strategically clever, but there is another reason that there is less public outcry about the private sector’s incursion into education. This is because governments across the country – and around the world – have narrowed the idea of whose concern schools should be.

Think, for a moment, of the principles on which public education has been based. Education is public because all of us are affected by the skills, knowledge and attitudes acquired by each generation. We demonstrate this broad interest by governing schools publicly, and by funding them publicly, whether or not we have children in school at present. In theory, public education is equally accountable to all citizens.

But increasingly, the sphere of concern about school is being narrowed and privatized, with the right to have opinions and influence limited to parents of the current crop of students and to employers who claim to want to hire graduates some day. This is not merely a trend, it is part of the preparation for privatization. In systems around the world well down the privatization path, schools are governed by parent bodies, who decide on everything from hiring the principal and teachers to allocating budgets to choosing textbooks to deciding how teachers should teach. These parents are hard-working and nearly always well-intentioned, but they are accountable to no one. In other words, they are a “private” entity, exercising the powers of a corporate board of directors employing a principal as CEO. Now, I use this example not because I think that parental governance is the worst manifestation of privatization, but because almost no one thinks of it as an example of privatization. As I said, incrementalism is the rule rather than the exception in the privatization of education.

Nor do very many people think of business-education “partnerships” as an aspect of privatization. The Conference Board of Canada is not hesitant to speak up for the virtues of privatization, but when it comes to education “partnerships” its language is full of soothing references to shared values. In No More Teachers, No More Books I described a number of these partnerships, and in particular, I was interested in the ways that desperate schools were trying to transform themselves in order to snag a corporate “partner.” Many talked about adopting the language of business, about reassigning staff from teaching to the full-time chase for partners. In particular, these schools pumped up their image as technocentric temples getting kids ready for the competitive, global workforce.

Many schools reported that without their “partnership” with business, they couldn’t survive. But think about it. My dictionary defines “partnership” as the state of having common goals; when you are partners, you either both prosper or both fail. Funny, I’ve never met a corporation that thought it might go under without its association with schools. Or here’s another way to look at it. When one person can’t survive without another and tries to transform himself or herself to keep that person around, we call it a dysfunctional relationship. In biology, when one organism can’t survive without its host, it is called a parasite – not a partner.

Now, I’m not calling schools parasites, but I am calling them desperate. For more than 10 years, I’ve argued that disparaging the quality of schools, and undermining and underfunding them to the point that they can’t accomplish their own goals, are essential strategies that prepare the public for privatization. If you’re going to take something away from the public, people have to become convinced that they won’t be losing anything of much value. They must become sufficiently dissatisfied that they will consider, in politician-speak, “alternatives.” The parallels to Medicare’s privatization are obvious, of course. Criticize and mismanage any public institution sufficiently, and suddenly “two-tier” doesn’t sound so bad.

There are many other manifestations of privatization in education that I can only touch on briefly. Outsourcing student and teacher evaluation to testing companies is a big money-maker for the private sector, and conveniently results in the tested subjects gaining new priority in the curriculum, squeezing out subjects that come closer to creating the truly educated person than does the mastery of differential equations. Sponsored curriculum materials are becoming more prevalent, as every major corporation develops an education marketing department. These materials push products on kids, of course, but they also push an ideology that is relentlessly positive about materialism and the role of the private sector.

I’ve just finished an article that tracks how the Canadian Securities Commission, with the help of the Ontario government, has managed to insert a unit on investing in the stock exchange in three high school subjects. Not only are these materials blatantly pro-market, spreading the propaganda that the poor have just as much invested in the stock market as the rich, they explain that everyone needs to invest early, because in the future, people will be privately responsible for their own pensions, health care and education. A smooth piece of neoliberal propaganda, wouldn’t you agree?

It is important to remember that when it comes to corporate interest in the classroom, building mind-share is just as important a goal as building market-share. Most of you will be familiar with the Fraser Institute’s initiatives when it comes to education, and occasionally the Fraser is even honest about its motives. In 1999, the Fraser’s Michael Walker told the Ottawa Citizen, “Because every generation of children are [sic] born intellectual and social barbarians. Every new generation of children has got to be schooled in the economic way of thinking. So, in that sense, our task never ends.”

By the way, I haven’t run into anyone else who has reacted with horror to the “Investing in Your Future” curriculum. It is amazing to what we can become accustomed. In 1996, I recall that the appearance of a school bus in Manitoba that had advertising on the outside of it became the subject of national attention – I did phone-in shows across the country, including As It Happens. Now we take corporate logos in our schools for granted in the same way that we once took books in the library for granted. Incremental privatization.

I wish I had time to talk about other kinds of privatization, about the franchising of for-profit schools, about the diminishment of the profession that is essential to grooming the sector for private takeover. For talking about how the market, applied to education, benefits the same people who always benefit from the market – those who have the most to spend. But time is short.

P3’s and SUV’s

Now, specifically, finally, to P3 schools. The logic – and I’m taking a lot of liberties with this term – the logic of P3 schools is that they are financed and built by the private sector, which reduces the short-term call on public treasuries. School boards and/ or the province then “lease” the public use of the privately-owned school building for a specified period, from 20 to 35 years, and agree to buy the building and property from the owners outright at the end of the lease period. P3 schools are also called “lease-back” schools, a term apparently seen by P3 advocates as less sinister, and more familiar to people who may, for example, lease their SUV’s, even though most financial planners will tell you that no matter how good the lease, you’re probably better off to buy your vehicle in the first place.

So, let’s imagine that you have a modest vehicle, but it needs repairs. You’re short of cash, so you go to the bank to take out a small loan in order to get it fixed. The bank manager says, sorry, if you want a car that works, these are the rules. You may not repair, you may not buy, you may only lease. You cannot lease a small sedan, it has to be a brand new SUV. Don’t worry, says the bank manager, in the long run it will be cheaper, and you’ll really like that SUV feeling. Vroom vroom.

So you sign on the dotted line, although you’ll only be told the amount of the payments later. Then you discover that the lease only allows you to use the vehicle certain hours of certain days of certain months, and lets somebody else drive it the rest of the time, even though you are still paying the full amount of the lease, and you’re paying for the gas. Then you discover that the lease requires you to pick up hitchhikers whether you like them or not. The wheels fall off your brand new SUV just as you leave the dealership, and the transmission seizes, but the fine print says that the dealer has absolutely no responsibility for shoddy manufacturing or repairs. When you do the math, you find out that you will be paying 90 per cent of the cost of a brand new SUV through leasing fees, but at the end of the lease, you will still be required to buy it all over again. Your neighbour needs a new car, and realizes what a terrible deal you got. But when she goes to the dealership, ready to pay the full purchase price up front, she discovers that the government had passed legislation making it impossible to acquire a car except through leasing. Strangely, the price of leases has gone up dramatically, and SUV dealers are looking very, very happy.

Well, substitute Nova Scotia’s P3 schools for SUV’s, and you have the story of that province’s experiment with the compulsory privatization of school construction. The most extensive Canadian experiment with P3 schools – 30-odd schools – has been carried out in Nova Scotia, although New Brunswick, Prince Edward Island and Alberta have also dabbled in P3 or “leaseback” schools, and they are common in the United States. Despite their well-documented reputation as one of the shoddiest and wasteful examples of government-driven privatization, I agree with you, that there is every likelihood that the B.C. government is plotting to “P3” on your public education system.

So in fighting to avoid this awful and expensive possibility, you have an advantage that Nova Scotian’s didn’t enjoy. You have their P3 history, beginning in 1994, a story that documents what happens when a province buys into P3 schools in a big way. The P3 “experiment” in Nova Scotia crashed and burned by 2000, but their harmful legacy, for kids and communities, as well as for the provincial budget, will continue for decades to come.

Learning from History

It is particularly useful to evaluate the kind of resistance Nova Scotia’s P3 opponents used, and to think about what would be most effective, strategically, in British Columbia. Reading the situation from some distance, it appears that the Nova Scotia government’s scheme failed not so much because the public considered P3 schools to be a bad idea per se, but because it became known that there was some Enronesque accounting going on. Nova Scotia’s provincial auditor testified that in his opinion, the motive behind the government’s P3 school initiatives was entirely political; the government wanted the cost of building new schools taken off the province’s books in order to reduce the appearance of the size of the provincial deficit.

Added to that were other improprieties that some called scandals: Decisions about where to build new schools turned on who owned the land, not where the school should be situated to best serve its community. Land flips between developers were common, and some high-profile government supporters were implicated in them. It took a while, but for many Nova Scotians, the penny finally dropped when they figured out that by the time the public had paid the schools’ corporate owners the lease costs over 20 years, and then still had to buy back the schools, the deal could be considered a partnership only in the way that you’re a “partner” with your bank if you had paid off your house mortgage in full after twenty years, and then had to buy it from the bank all over again.

It took quite a while for the public to become familiar with the fine print in the lease agreements – hardly surprising, since in the case of the first P3 school, it was built and operating before the terms of the lease were agreed to, let alone made public. At that point, the owners of the school could pretty well set the terms. That’s sort of like buying a dishwasher and having it installed then Leon’s drops in to tell you how much it will cost. In Nova Scotia, the private owners were a consortium of investors, land developers and public pension fund managers, who argued that the exact terms of the leases shouldn’t be disclosed because the details were “proprietary corporate information.”

But the political pressure placed on the government ended up forcing disclosure of the lease terms, which – no surprise here – were incredibly advantageous to the schools’ private owners. The public was responsible for each school’s operating costs, the cost of ongoing capital improvements and repairs, technology upgrading costs - and you can be sure that these schools were wired to the limits, making techno-providers very happy. In other words, the public bore all the risks for unforeseen expenses that could well escalate, while the private owners were guaranteed that they would recover 89 per cent of their costs through leasing charges, and still own the building and the land when the lease was up – which the province was obliged to buy whether it needed the school or not. The ownership of the school was to remain in private hands throughout the period of the lease, and, of course, ownership has its privileges.

Not only were P3 developers assured a terrific deal on the repayment terms, the private pot was further sweetened by exempting the owners and the builders from any legal or financial liability for shoddy school construction, or even faulty wiring or plumbing. What a deal! The differential in P3 benefits is so scandalous that it has critics even in some pretty conservative circles: “While public private partnerships are often said to promise ‘the best of both worlds’, for taxpayers they have come to mean public risk for private profit.” (Andrew Coyne, The Globe and Mail, May 24, 1995)

Of course, from the private sector’s perspective, the more risk that can be transferred to the public, and the less risk that has to be borne by corporations, the better any deal meets the P3 standard. This may explain why the Canadian Council for Public-Private Partnerships – the outfit sponsoring the “other” conference - awarded the first Halifax P3 school first prize in its P3 “infrastructure” category in 1998. By 2001, students and staff in that school were still drinking bottled water, 12 months after arsenic was found in the school’s well water. A water filtration system had been installed to fix the problem, but it wasn’t being used while the school board and the corporate owner of the school argued over whose responsibility it was to provide students with clean water. Imagine.

Hidden Costs

Despite very dark clouds over Nova Scotia’s P3 schools, New Brunswick decided to jump on the bandwagon. That province’s first lease-back P3 school will cost the public $400,000 more than if it had been a 1-P school, according to that province’s Auditor. Certainly, such above-the-line costs should be enough to discourage considering P3 schools economically defensible. But not all costs to the public can be captured by accountants.

In addition to picking up all the unforeseen financial risks associated with these schools, the public bears many hidden P3 costs. Every P3 school means a decline in tax revenue, since corporations owning/building schools are entitled to a federal tax break called the Capital Cost Allowance, which allows the builders to write off up to 100 per cent of the cost of the facility. In other words, citizens pay twice – the inflated costs of the lease, and in increased taxes to make up for the lost corporate tax revenue. And the owners of P3 schools have successfully downloaded any municipal taxes levied on school property to the school board.

A second hidden cost is buried in staffing. Additional Ministry and board staff must be hired to “manage” P3 initiatives, to sift through new corporate proposals and requests for schools – and certainly, the number of requests will grow wherever P3 is promoted. In part, the public demand for new schools is intense because governments everywhere have short-changed adequate school maintenance and improvements to school buildings. After years of refusing to repair dilapidated schools in Cape Breton, for example, it wasn’t hard for investors to whip up local demand for “new” schools, although renovations would have been much more cost-effective.

P3 schools also tend to be much more elaborate, probably unnecessarily elaborate, than publicly-built and financed schools. After all, corporations have everything to gain from community passions for mega-schools with all the bells and whistles. And I do mean bells and whistles. Horton school, a Nova Scotia P3, has an orchard, an amphitheatre, two soccer fields, air conditioning, and two sets of shades for the windows. Meanwhile, in nearby Kentville, the community held a bake sale to buy drapes for the bare windows of their hot and leaking school. This is two tier education that is absurd in its proportions. Families began to move from Kentville to be within the new school’s enrollment area, further destabilizing the struggling community and economy of Kentville. By the way, I understand that the inter-school violence that plagued Cape Breton, although it was portrayed by the media as racism among youth, had much more to do with what were really class divisions between the kids at the “rich” school and kids at the “poor” school, and yes, these schools had become, in effect, the “white” school and the “black” school.

But all these unanticipated effects were below the public’s radar, at least at first, when communities across Nova Scotia bought into the P3 hype and began lobbying for their own P3 schools.

And, if you’re going to get something for nothing, it might as well be big, right? Developers persuaded communities that bigger is better. Well, when it comes to schools, we know that bigger is more expensive, and that the education research favours small schools, especially for students at educational or social risk. But the big money is in superschools, just like it is in superjails.

Communities also discovered that corporations, not local preferences, would determine where new schools would be built, usually on land that was already owned by a member of the owner’s consortium. Corporations also favoured building new schools in upper-income subdivisions were land costs were lower, rather than in urban cores that often needed schools much more acutely. As a result, students are being bussed – at public expense, of course, while perfectly good schools that could have been renovated and enriched stand empty, no longer the centres of community life.

A third hidden cost is wired right into the schools. Playing on the public’s well-manipulated fascination with technology, everything in Nova Scotia’s P3 schools is wired, right down to the coke machines. Not only can these distortions undermine high-quality education, they add unnecessarily to the “hard” costs of schools, robbing education budgets of the money they need for staff and student services that aren’t as marketable. But because the leases make school boards responsible for technology maintenance and upgrades – which every savvy technology co-ordinator is a much greater expense than the hardware – schools are on the hook for these costs, as well as the costs of “training’ teachers to use questionable technology for even more questionable education purposes.

Public Schools and Private Profit

The presence of so much technology not only makes P3 schools look sexy and superficially better than P1 schools, it guarantees a continuous revenue stream for the owners in addition to the lease revenue. Ownership has its privileges. P3 owners made sure that their leases stipulated that they have the right to use the schools they own after hours, on weekends and during summers for their own purposes. These “purposes” have included using the technology-enhanced schools to run private training courses that hand out instant credentials in various aspects of technology.

After hours access to the school for community groups has been severely restricted or made impossibly expensive. In the Evergreen P3 school in New Brunswick, the school’s corporate owner has exclusive rights to use all the school’s technology after 3pm, when it runs for-profit remedial and enrichment programs for kids, and exclusive use of the entire building after 6 pm to run programs for adults. (By the way, that school community’s right to after-hours use of the building is limited to one night – the same night – per week, so all parent-teacher meetings, school council meetings, band rehearsals, play performances – everything – must be scheduled on the same night) Remember, it is the public that has to pay for equipment maintenance, pay for wear and tear on the building, and so forth, even when these escalating costs result from activities taking place during hours when the public is not allowed to use the building.

In P3 schools, the private sector has prime real estate and prime visibility. Any number of private businesses are run out of these schools, many of them during school hours. Various corporations call P3 schools “home”, from McDonald’s to Tim Horton’s to for-profit daycare and private education companies. Although, to my knowledge, none of the Nova Scotia developers was quite as creative as they have been in Edmonton, where that province’s first P3 school is attached to – is actually part of – an IGA grocery store.

But the profit in P3 doesn’t just come from boosting revenue, it also comes from cutting costs. Particularly since the owners aren’t responsible for paying for any repairs or improvements after the lease arrangement begins, or even for the consequences of shoddy workmanship, builders have a huge incentive to hire cheaper labour and use lower-quality materials in construction. They can out-source design and labour, robbing communities of the jobs that new school construction often provides. Nor is maintaining good will written into the contracts. Owners have been particularly careful about limiting their responsibilities – and thus their costs – to the letter of the law. In one New Brunswick P3 school, the corporation building the school even refused to unload the new furniture when it was delivered – it wasn’t in the terms of their deal. Parents had to provide the labour themselves.

The P3 Legacy; The GATS Future

In June, 2000, the Nova Scotia government bowed to intense public and political pressure and scrapped all future P3 school construction – but by then more than 30 P3 schools had already been built, and the public will be on the hook for these schools for decades to come. It is projected that these schools will cost taxpayers $32 million more than if they had been built in the traditional manner – and, of course, it is important to remember that many of these schools were not needed in the first place, nor did they need to resemble Bill Gates’ High. But for Nova Scotians, hindsight will be of limited value, since they are committed for as long as 35 years to leases that they are unable to renegotiate. As with most kinds of privatization of public services, there is no going back.

But there is another consequence of experimenting with P3’s. Several authoritative analyses of the proposed GATS agreement – published by CCPA and read around the world, I might add – make the case that the only government services truly exempted from the application of GATS rules would be those services provided exclusively by the public sector for public benefit. Even without P3 schools, we can see that education increasingly fails to meet this criterion as the private sector nibbles at its edges – or gnaws away at its heart, depending on your point of view.

The federal government and other friends of privatization and liberalized trade in services claim that public education, as a sector, is still sufficiently public that it would be shielded from the reach of GATS. Even if this is the case at present, as I see it, the escalation of the private sector’s role in education represented by P3’s could well tip the balance. This would mean that at some future date, if a province or school board were to change its mind about P3 schools after experimenting with them, such a reversal could be subject to a trade challenge because it would, in effect, deprive corporations of potential earnings. At present, should an American corporation decide to bid on a P3 opportunity, it would have to be treated exactly as a Canadian corporation or be entitled to demand compensation. Of course, even if a Canadian consortium owns the school at the time that the contract is signed, it can sell it’s school to an American or transnational corporation if it so chooses – and there isn’t a thing we can do about it.

Public schools are public for a reason. They exist to serve the public good. Corporations have lead the charge to convince Canadians that they are overtaxed, and that their inefficient, ineffective education systems are in large part to blame. Their successful propaganda is largely responsible for the crisis in public education. Now, suddenly, corporations are enthusiastic about building new schools, about “investing” in our youth. It is almost impossible to believe that the public will not see the wolf underneath the sheep’s clothing. Corporations get interested in schools when they see them as a way to save money, or to make money. This is what motivates the private sector, and I see no reason to blame wolves for acting like wolves. I’m more inclined to blame us for acting like sheep, so easily convinced that private purposes and public purposes are identical.

And short-sighted sheep at that. The other night, I was sitting around with a group of Ottawa lefties and we were speculating on what our new Premier Eves will do next. I said that I thought we ought to be paying more attention to Ontario’s “superbuild” fund, a low-profile but high-budget stash of cash that is there to underwrite a whole host of P3 initiatives. There were 14 people in this group, every one a political activist and only one person among them had heard of a “P3” anything.

But you have, and you’re in an excellent position to spread the word. In particular, I’d like to give credit to CUPE, which has published the best and most comprehensive reports on P3 schools, and to the Nova Scotia Teachers’ Union, which has some great tactical advice to share. I’ve attached their “Principles for P3 Schools” to these notes, and I encourage you to memorize them in the event that your province goes ahead with its P3 plots.

But better yet, work together to see that it never happens.

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