Sunshine laws and the privatization of government

AP Photo by Ted S. Warren

Greg Frus, a contract airplane mechanic with L-3 Vertex, is working at a National Guard aircraft maintenance facility at Joint Base Lewis-McChord in Wash. Frus is one of millions of private contractors employed by the federal government.

In the past three years, governors in several states have created or pushed for public-private partnership agencies to promote job creation in their states. But the move toward privatizing traditional government functions is not new.

Since 1999, the federal government has consistently employed about 2 million people. “But the number of private contractors has ballooned, from 4.4 million to 7.6 million in 2005 (these numbers turn out to be surprisingly difficult to pin down, since records on contractors are fairly unreliable),” according to a September 2011 Washington Post article by Brad Plumer. In 2010, Plumer found, the federal government spent $320 billion on those contracts.

Although Plumer recently said the outsourcing has not affected his ability to report effectively on energy and environmental issues, it raises larger concerns for journalists in the realm of access to government documents.

A trend toward privatization in government, defined simply as a shift of activities or functions from the state to the private sector, has raised questions of the wisdom of outsourcing government work, the impact of doing so on the national economy, and the impact such shifts have on various sectors of society. While the debates over the merits of privatization continue, the movement toward greater reliance on the private sector raises additional problems in the realm of government accountability.

By the 1960s and 1970s, every state and the federal government had passed open records and meetings laws designed to shine light on the workings of government. These laws guarantee access to certain government documents and meetings, and apply to varying degrees any time the government acts.

In the face of privatization, though, questions remain as to what extent these openness laws extend to private entities doing governmental work.

Private companies are not subject to public records laws. That limitation is in keeping with the laws’ purpose of promoting open government and better civic understanding. In fact, applying public records law to private entities as a blanket rule would raise privacy and intellectual property concerns, among other issues. But when the line between government entity and private entity starts to blur, questions about the need for openness start to arise.

Among the justifications for outsourcing government work to private contractors is the theory that government should be smaller — that the government should do fewer things. But if private companies take over government work, then tax dollars move into the private sector without a check on how they are spent. If private entities are never subject to public records laws, the government can circumvent those laws (and with them, the goals of transparency and accountability) by turning government work over to private companies. Regardless of the merits of the privatization movement, its increased use promises to make access questions even more important.

At least one court has specifically said as much. “To ensure that citizens of this state receive high quality public services at low costs, with due regard for the taxpayers of this state, and the service recipients, the legislature finds it necessary to ensure that access to public information guaranteed by the access to public records act is not in any way hindered by the fact that public services are provided by private contractors,” the Rhode Island Supreme Court wrote in Downey v. Carcieri.

AP Photo by Nomaan Merchant

Police officers demonstrate virtual reality simulation technology created by defense contractor Raytheon in Plano, Texas. Raytheon is marketing the technology to local law enforcement.

State analyses of the public/private records distinction

Only 10 states have judicial rulings addressing the question of when documents created by private entities may be deemed public for Sunshine Law purposes, and each of those states uses a different test to draw that line.

California, North Carolina, and New York have the most restrictive tests for determining when documents are public. California courts created a three-part test in San Gabriel Tribune v. Superior Court of Los Angeles County: (1) whether the government has a contractual relationship with the company; (2) whether the government delegated its duties but still retained the power and duty to monitor the performance of the work; and (3) whether the company is providing services to residents by way of a contract with the government. San Gabriel involved a long-term contract between the city and a waste removal company. The city approved a company-requested rate increase, and a newspaper requested the financial data the company had submitted to the city to justify the increase. The California appeals court ordered the city to release the documents and refused to uphold contractual agreements in which the government promises a private company that it will not release documents related to its deal. In theory, though, given the wording of the California test, the government could avoid public records law by abdicating its responsibility to oversee the project it hires any private entity to undertake.

New York has an even more difficult test to meet, which comes from Justice v. King and requires judges to balance six factors, all of which give a narrow reading to the concept of public work: whether the agency (1) is required to disclose its annual budget; (2) maintains offices in a public building; (3) is subject to a governmental entity’s authority over hiring or firing personnel; (4) has a board comprised primarily of governmental officials; (5) was created by government agency; or (6) describes itself as an agent of a governmental agency. Justice involved an organization that contracted with the state to provide halfway house services to recently released parolees. The group worked closely with New York’s Division of Parole, enforcing the agency’s rules and performing functions the DOP would normally perform. The private entity in Justice had about as close a connection to the state as possible, yet it was not considered to be public for the purposes of Sunshine Laws. Given that conclusion by the New York courts, very few, if any, private contractors will ever fall subject to public records law under New York’s test.

Like New York, North Carolina assumes a contractor must qualify as an agency of the state government or its subdivisions before it may be subject to public records law. If the entity passes that first test, courts must examine whether its records are “public records” that were “made or received pursuant to law or ordinance in connection with the transaction of public business,” according to a court decision in Durham Herald Co. v. North Carolina Low-Level Radioactive Waste Management Authority. The Durham Herald case involved a records request for documents from the North Carolina Low-Level Radioactive Waste Management Authority. Although it admitted that the agency itself was subject to public records law, the Authority argued that documents it had received from private subcontractors were not public records. The court held that under North Carolina law, which did not specify at what point records turned over to public entities became public, the subcontractor records did not become public records immediately upon being turned over to the Authority. Therefore, the court held for the Authority in concluding records that qualify under the first two elements of the test only become subject to public records law when the contractor turns them over to the government, not when they are created.

Several other states that have addressed this issue of private/public distinction in the records context have each crafted their own tests, but manage to offer the public much broader access. Oregon, for example, has the simplest test (from Marks v. McKenzie High School Fact-Finding Team) of any state and would likely provide the most access. Records in that state are public any time a private entity is performing duties at the request of a governmental body.

Wisconsin, under Wiredata, Inc. v. Village of Sussex, requires the government to disclose “any record produced or collected under a contract entered into by the [government] with a person other than [the government] to the same extent as if the record were maintained by the [government].”

Pennsylvania, applying only a slightly more complicated test from SWB Yankees LLC v. Wintermantel, asks (1) whether the contractor performs a governmental function on behalf of a government agency and (2) whether the records relate directly to the contractor’s performance of that function.

Rhode Island and Texas, unlike the other states, each include elements in their tests that speak to how much money the state is paying to the contractor. Rhode Island’s three-part test, from Downey, asks (1) whether the non-governmental entity has agreed to provide services; (2) whether those services are worth more than $100,000; and (3) whether the services are substantially similar to and in lieu of services previously provided by the government.

Texas, under the framework from Greater Houston Partnership v. Abbott, presumes any entity receiving public funds is treated as a governmental body if the relationship indicates a common purpose or objective and creates an agency-like relationship, or if the relationship requires the private entity to provide services typically provided by government. The exception to the presumption, though, is when the relationship with the government imposes a specific and definite obligation to provide a measurable amount of service for a set amount of money — in other words, when there is a normal arms-length contract.

Interestingly, under Wiredata, Inc., Wisconsin also specifies that only the government may be held liable for failure to make public records available. This precludes monetary recovery from private companies, but still ensures accountability to the public.

Ohio and Tennessee both apply what they call the Functional Equivalency Test to determine when a private contractor is subject to public records law. Tennessee expresses its test as one holistic question from Friedmann v. Corrections Corporation of America: Is the relationship with the government so extensive that the private entity serves as the functional equivalent of a governmental agency?

Ohio, by contrast, breaks the test into three components that mirror the intent of the Tennessee test, and a fourth that acts as a final check on the government. The Ohio Supreme Court developed the test in State ex rel. Oriana House, Inc. v. Montgomery.

Ohio’s test asks (1) whether the private entity performs a government function, (2) what the extent of the state funding for the private entity is, (3) the extent of government involvement with or regulation of the contractor’s operations, and (4) whether the private contractor was created by the government, or was used specifically to avoid the requirements of public records laws. Courts in Ohio are to evaluate all of the factors, so even absent bad intent on the part of the government, the courts may find the records to be subject to Sunshine Laws.

Moving forward

It will be very important moving forward, as all levels of government continue to turn to private entities to perform government services, for journalists to be mindful of how their states treat records created under these public-private partnerships.

There is some guidance in the 10 states where courts have addressed the issue, but some of those tests are still somewhat ambiguous and all will require further case-by-case interpretation.