From the Winter 2011 issue of The News Media & The Law, page 21.
New Ohio Gov. John Kasich touted transparency during his campaign, telling The Cincinnati Enquirer that his “bias is toward openness.”
However, just weeks after he was elected, Kasich’s office chose to solicit resumes for government positions through a private Web portal — FixOhioNow.com — and has refused to make the names and resumes of applicants public. His office claims that the website is privately funded and therefore the resumes are not subject to the state’s public records law. This compelled The Enquirer to publish a scathing editorial in late November calling the practice “uncommon nonsense,” and the reasoning for nondisclosure a “crock.”
Unfortunately, actions to privatize and circumvent public records laws have occurred for years. State and local governments across the country rely heavily on private contractors to perform functions that traditionally are the responsibility of the government. Privatization puts government transparency at risk because hired contractors rely on their private status to deny the public access to their records. While privatization may be a legitimate response to increased budget crunches in the current economy — some say shopping out responsibilities is more efficient — transparency advocates say the threat to open government initiatives is real.
Outside of Ohio, many states have recently made headlines for their privatization efforts and practices: Utah considered having the state’s public parks managed by a private company and Connecticut was paying private inspectors to maintain the state’s bridges. New Florida Gov. Rick Scott proposed privatizing much of the state’s services in an effort to reduce the state’s budget and many state prison systems across the country are privately managed.
Privatization of traditional government functions has been the subject of records requests litigation for years and gaining access to records kept by the private entities has led to the adoption of a nearly universal analysis: Private contractors routinely argue that the records kept in the performance of their duties are not subject to open records laws. But, state courts have often held that these private entities cannot necessarily escape open records laws, and look to the relationship between the entity, the state, and the responsibilities that were contracted.
Courts have repeatedly held that private entities are subject to open records laws when they perform duties normally under the purview of the government, to the extent that they perform these duties as a quasi-governmental body.
In March 2010, the Tennessee Court of Appeals followed a 2002 state precedent that when acting as the “functional equivalent of a state agency,” private entities are subject to the state’s open records law.
Alex Friedmann, an editor at Prison Legal News, a prisoner rights advocacy publication, filed an information request for records under the Tennessee Public Records Act from Corrections Corporation of America relating to the company’s management of a state prison. As a private, for-profit corporation, CCA argued that it should not be subject to state open records laws and it was not the functional equivalent of a state agency. The court disagreed in Friedmann v. Corrections Corporation of America.
The test, the court held, is “whether and to what extent the entity performs a governmental or public function.” Because operating a state prison is a task traditionally performed by the government, the court held that CCA’s “public functions outweigh its private identity for purposes of the Public Records Act.”
The court stressed that only when a private entity “assumes responsibility for providing public functions to such an extent that it becomes the functional equivalent of a governmental agency” does it become subject to open records laws.
Other states have also used the functional equivalent test. Connecticut used the test in Connecticut Humane Society v. Freedom of Information Commission in 1991 to hold that the Humane Society was not a public entity. The Humane Society received some public funding, but the court also looked at other factors, including whether the private group performed a public function, whether it was created by the government, and the level of government involvement and control. Because the Humane Society only received money and the other factors were not present, the court held that it was not the functional equivalent of a state agency.
In 1983, Maryland used an analysis similar to the functional equivalent test to find that a nonprofit insurance guaranty association was subject to public records laws in A.S. Abell Publishing Co. v. Mezzanote. In its analysis, the state Court of Appeals considered, among other factors, the public purpose of the entity and the degree of governmental control.
The Colorado Court of Appeals found in the 2000 case Denver Post Corp. v. Stapleton Development Corp. that a private nonprofit corporation that was redeveloping a former airport through the Denver Urban Renewal Authority was a “political subdivision” for the purposes of the Colorado Open Records Act. The court was persuaded by the public nature of the project undertaken by the private entity, and because the project was regarding publicly owned land and because the city had significant control over the nonprofit’s board of directors.
Other states have similarly extended the scope of their open records laws to include private entities under certain circumstances, including Kansas, Florida, North Carolina and Oregon, which also follow a functional-equivalent analysis. The law in Kentucky goes even further in that it specifically opens private entities to records requests if they receive at least 25 percent of their funds from the state, while other states require that at least 50 percent of funds be from public sources in order to be subjected to records requests.
On the state level, the functional equivalent doctrine appears to be the dominant test, with the analysis focusing on when a private contractor or a private entity crosses the line from a mere association with the government or gaining some financial support from the government into becoming a part of the government in regards to open records laws.
The analysis tends to fall on the line of not just financial support, but how much control the government has over the project, whether the functions and duties of the private contractor are ones that normally would be carried out by the government, whether the authority given to the private actor is statutorily granted, et cetera.
No one factor is considered more determinative than others, rather, the courts will look at the overall situation.
Federal courts have not adopted the functional equivalent analysis. When it declined to extend agency status to Conrail in 1984’s Railway Labor Executives’ Association v. Consolidated Rail Corp., the U.S. District Court in Washington, D.C., alluded to the functional equivalent test by recognizing that freight and commuter rail services are a traditionally private industry and, as such, the corporation “shall not be deemed an agency or instrumentality of the Federal Government.”
A few years prior to the Consolidated Rail Corp. decision, the U.S. Supreme Court took a more control-based stance when it defined “agency records” under the Freedom of Information Act as only those records in the custody and control of an agency. In Forsham v. Harris, the court held that even if an agency has a right to possess the private contractor’s records, that’s not enough to deem them subject to FOIA. It’s not entirely clear if an agency could have enough control over a record in the possession of a private contractor to satisfy this test.
Despite what appears to be universally positive caselaw when courts are confronted with privately contracted government work, open government advocates continue to be wary of the continued and increased practice of privatizing public services.
Thomas Scheffey, a member and of the Connecticut Council on Freedom of Information, highlighted his state’s continued practice of using private contractors to redevelop state land. The contractors “get the benefits of government rights like eminent domain but they try to escape accountability,” Scheffey said.
The fight makes it difficult for the public to get information about where their money is going, Scheffey said. It’s a big problem that is not going away, with it affecting everything from development authorities to the state university system, he added.
In his book “Piercing the Veil of Secrecy: Lessons in the Fight for Freedom of Information,” author Mitchell Pearlman raised a bigger issue regarding privatization: the elimination of some information entirely from the public sphere due to the use of private contractors. Information on the individuals in charge, and the exact details of the income and expenses of private contractors are not clearly open, whereas the public would be entitled to that information from a state agency.
“When government cedes its responsibilities to private individuals or enterprises, it also may be ceding the right to public accountability over important projects that historically have been subject to such accountability through the political process,” Pearlman, the retired executive director of the Connecticut Freedom of Information Commission, argued in his book.
While some information would be public through records requests under the functional equivalent test, Pearlman appears skeptical that the entire swath of information that one could get from an agency would be available from a private contractor, even if it was considered the functional equivalent of a state agency.
Dennis Hetzel, executive director of the Ohio Newspaper Association, feels the move to privatization comes from a genuine desire to make government more efficient and less costly. However, based on his experiences over the years in Pennsylvania, Kentucky and Ohio, he said this drive toward privatization often leaves transparency “lost in the shuffle.”
“It’s hard to fault government for looking to be more efficient, but it’s very easy to lose sight of the need for transparency and openness,” he said.
Hetzel is currently focused on a bill in the Ohio Legislature that proposes to privatize some of the economic functions of the government. The current bill is just a placeholder, but the association is keeping a close eye on what is coming to replace it. “The devil is in the details,” Hetzel said.
The desire to save money is especially important in current economic times, with many states operating under record deficits, Hetzel said.
However, “the odds are that by being transparent in the long run, more money will be saved,” he said.
Linda Petersen, the president of the Utah Foundation for Open Government, said the biggest problem with privatization is that private contractors do not believe they have the same responsibilities toward transparency as the government and they are not educated otherwise when they are granted contracts.
“The laws don’t specifically address the issue of transparency,” Petersen said. “Laws pass on the function, but don’t educate or even address the additional responsibilities that come along with it.”
When private entities think the open-records and open-meeting laws do not apply to them, the public can get frustrated because they get denied access and suits cannot always remedy the fault, especially when public meetings are concerned, Petersen said. “When the public tries to go after a record or attend a meeting, they’re stonewalled by the contractors.”
Open government organizations like those in Utah, Ohio, and Connecticut work to keep the public informed and inform the legislature of the impact bills could and will have on transparency. Hetzel, Petersen and Sheffey said that looking at the details of the bills proposed is paramount because the impact on transparency is not always obvious.
With the current legislative year just underway, it’s too soon to tell if the trend will continue.
Therefore, advocates are taking a wait-and-see approach to what is coming. But with continued economic uncertainty and the increasing trend toward privatization, Petersen, Hetzel and Scheffey are prepared for another year where the government moves more of its traditional duties into the private sector.