Forwarded message: > Date: Wed, 29 Jan 1997 21:47:43 -0800 (PST) > From: Michael Eisenscher <[EMAIL PROTECTED]> > Subject: California to privatize welfare? > To: Recipients of conference <[EMAIL PROTECTED]> > > >Los Angeles Times Monday, January 27, 1997 > >PRIVATIZATION EMERGES AS NEW WELFARE > >OPTION > > By Dave Lesher, Times Staff Writer > > > >SACRAMENTO--Gov. Pete Wilson, in the fine print of a welfare reform plan > >he issued earlier this month, quietly opened the door to a striking new > idea of > >hiring private corporations to run public assistance programs. > > > >The proposal has scarcely been noticed in the Capitol, where lawmakers are > >still focused on questions such as how much care the state should provide-- > >and to whom. > > > >But elsewhere, California is being closely watched by a fledgling industry > >of > >conglomerates, major charities and venture capitalists that are banking on > >welfare reform to become a multibillion-dollar enterprise nationwide. > > > >"We are positioning ourselves to do everything we can in California," said > >Robert Stauffer, a vice president in the human services division of > >Electronic > >Data Systems Corp. in Dallas. "We want to be involved." > > > >The governor's privatization idea stems from his attempt--encouraged by the > >counties --to provide local government with substantial discretion over > >how > >they will meet strict schedules for moving hundreds of thousands of welfare > >recipients into the work force. > > > >Wilson would like the state to set the rules--such as standards of care and > >caseload reduction goals--then get out of the way and allow counties to > >design > >their programs. > > > >The governor's plan would allow counties to "enter into performance-based > >contracts with nonprofit or for-profit" companies to operate nearly all or > parts > >of their welfare programs. > > > >"The governor has said many times that government alone is not the > >solution," > >said Lisa Kalustian, deputy press secretary to the governor. > > > >The idea is welcomed by county officials. "They should be allowed to > >contract > >out as much as they deem appropriate," said Frank Mecca, lobbyist for the > >County Welfare Directors Assn. of California. > > > >But privatization of any government function has been hotly contested in > >Sacramento. And officials expect that welfare will be even more complex > >since > >there are huge consequences for thousands of poor families. For government > >officials who are intimidated or confused by welfare reform, the idea might > >offer relief. But labor unions, fearing the loss of jobs, are planning to > oppose > >the idea. And community advocates say they are concerned about the ethics > >of > >injecting profits into the government's traditional role as caretaker of > the poor. > > > >"I still have trouble with the whole concept of making a profit on the > backs of > >the poor," said Anne Arnesan, director of the Council on Children and > >Families > >in Wisconsin. > > > >Private contractors already have been used in many California welfare > >offices > >for limited assignments, such as bookkeeping, delinquent child support > >collection, computerized record keeping or work training. But the > >governor's > >proposal is potentially far more sweeping. > > > >Wisconsin is implementing a plan that is similar to Wilson's proposal. > There, in > >one county, state authorities are studying proposals from companies about > >how > >they would run the welfare program. > > > >When the contract is awarded, welfare applicants in Milwaukee County will > >be > >screened, trained and placed in jobs by the employees of a private company-- > >some of whom may be former welfare recipients themselves. > > > >Texas is also poised to offer at least a $500-million contract that could > transfer > >the majority of care for its 690,000 welfare recipients to private control. > > > >Already, in both states, the opportunities have sparked intense competition > >among a range of small to giant corporations--both profit-making and > >nonprofit > >ones. > > > >In Texas, the major bidders include two consortia. One represents Lockheed > >Martin Corp., IBM and the Texas Workforce Commission. Another is > >composed of Electronic Data Systems Corp., Unisys Corp. and the state > >Department of Human Services. A third major bidder is the giant accounting > >firm of Arthur Anderson & Co. > > > >In Wisconsin, the bidding has attracted major charities, including United > >Way > >and Goodwill Industries. > > > >Since the contracts being awarded are unprecedented, industry officials > >said, > >the potential for profit is still speculative. Privately, though, officials > said most > >companies expect a profit of at least 3% to 4% of the contract value. In > >Wisconsin, the maximum profit is being written into the contracts. > > > >The strongest attraction, however, is the potential for billions of dollars > in new > >business. And the gold rush already has begun. Maximus Corp. in McLean, > >Va., has worked exclusively as a private contractor in welfare offices > >nationwide for more than 20 years. But in the last year, the company has > >doubled in size, going from a $50-million operation in 1995 to $105 million > >in > >1996. It expects to do the same this year. > > > >Welfare reform "is, as yet, an undetermined revenue pool," said Kevin > >Gedding, a Maximus spokesman. "But there are billions of dollars in > >potential > >project work that need to be done in the next four to five years." > > > >The intensity of the competition is reflected in some of the buyers-market > >contract proposals. > > > >Maximus told officials in Wisconsin that it can run the welfare office at a > 10% > >to 40% savings and guarantee a significant caseload reduction. It promised > >to > >pay a year of welfare benefits to each extra recipient if it fails to reach > the > >goal. > > > >Maximus, like other companies, has also sought openings to government by > >hiring some of the top talents in public welfare offices. Just more than a > year > >ago, it recruited Larry Townsend from Riverside County after he became > >something of a celebrity in national welfare reform circles for his work in > >creating a widely acclaimed jobs program. > > > >"This will be one of the greatest challenges ever given to local > >government," > >said Townsend. "We have something really interesting to offer in > >California." > > > >Electronic Data Systems also has been working with welfare offices for > >nearly > >35 years, starting when Ross Perot founded the company in 1962 with a > >contract to manage the Texas Medicaid program. EDS, no longer headed by > >Perot, has held contracts in California for more than 20 years and is now > >running the state's Medicaid billing. > > > >"We are bringing in the best of the public sector and the private sector," > >Stauffer said. "We bring ideas from the commercial world as well as things > >done well in other countries or other states." > > > >Despite the opportunities, California officials predict that extensive > >privatization will be a difficult sell here. > > > >For one thing, new legislation is required to clear the way for the > >extensive > >privatization that Wilson's proposal would allow. Similar legislation has > >already been rejected by lawmakers for the last two years. > > > >"In the past, we have had a very cautious eye toward privatization," said > >Pat > >Leary, analyst with the Democrat-controlled Senate Budget Committee. "But > >with as many new members as we have, I have no idea how it will do." > > > >Mecca predicts that there could be a wide range of interest from counties. > >So > >far, he said, the county experience with private contractors in welfare has > been > >generally favorable. But it has not always proved to be better than > >government. > > > >Orange County, for example, has split its territory in half so the > >government > >welfare staff could compete with Maximus to see which operation could move > >more people into the work force. Both sides have exceeded their job > >placement goals. But in the fiscal year that ended in June, county workers > >won > >the competition. They found jobs for 3,679 welfare recipients compared to > >2,473 for Maximus. So far in this fiscal year, officials say, the two > groups are > >running about even. > > > >"Part of that is no doubt due to a learning curve as Maximus came up to > >speed," said Jerry Dunn, who oversees the county's work placement program. > > > >Maximus also was hired in Los Angeles County to operate a work training > >program. Its contract was dropped in 1993, when the county's interest in > >privatization cooled and critics questioned the amount of savings > >generated. > >Maximus left with a letter of commendation from the county welfare office. > > > >Today, Los Angeles officials are uncertain about their future privatization > >plans. > > > >"In general, the county favors programmatic flexibility," said Phil Ansell, > >welfare reform strategist for the county social services department. "The > >question of how the county would utilize that flexibility is a downstream > >decision." --
