THE BUSINESS OF WELFARE
DECEMBER 2, 1996
While other states are still drafting new plans, Wisconsin was ready to launch new welfare programs on October 1, the date new landmark welfare reform took effect. But Wisconsin, and several other states, are considering even more dramatic reforms by turning welfare programs over to private corporations. Elizabeth Brackett of WTTW reports on possible welfare privatization.
JIM LEHRER: Now privatizing welfare. Elizabeth Brackett of WTTW-Chicago reports from Milwaukee, Wisconsin.
A RealAudio version of this NewsHour segment is available.
Read an Online NewsHour backgrounder on welfare.
October 22, 1996:
In an Online NewsHour forum, Senator Rick Santroum (R-PA) answers your questions about the welfare reform bill he co-sponsored this summer.
October 1, 1996:
A team of NewsHour correspondents report on the first day this summer's welfare reforms went into effect.
May 21, 1996:
John Gard and Gwendolynne Moore, two state lawmakers from Wisconsin, and two national welfare experts debate that state's reform.
Browse the Online NewsHour's welfare coverage.
WOMAN: In order to receive your monthly grant, food stamps, medical card, or whatever it is that you're receiving, you now have to participate in the jobs program.
ELIZABETH BRACKETT: While most states are still digesting new federal welfare reform legislation, in Wisconsin, welfare clients are already being told to get a job in exchange for their benefits.
JANE JILK, Case Manager: Every job is going to build up and give you something that's going to make you more marketable for the next job opportunity.
ELIZABETH BRACKETT: In Milwaukee, job centers have been set up for welfare recipients who are required to look up listings on a computer network, work on their resumes, and go to daily workshops on how to find a job.
MAN: If you don't participate, get at least 25 percent of the hours you were assigned, you completely lose your AFDC grant, and you may even lose your food stamps down to $10.
ELIZABETH BRACKETT: And it's also meant big changes for those administering the program. Under the old system, county employees, known as Economic Support Specialists, or ESS workers, granted or denied benefits.
PAMELA BERGEN, Milwaukee County Employee: Everyone is born in Wisconsin, U.S. citizens, speak English?
ELIZABETH BRACKETT: Now welfare recipients have a second person called a case manager to deal with.
JANE JILK: The next thing that we develop is your employability plan, okay, and that's through the action plan to getting you employed.
ELIZABETH BRACKETT: Case managers like Jane Jilk help their clients find jobs. Jilk says there's a vast difference between what she does and what the county workers do.
JANE JILK: An ESS worker's job is more policy based. It's working with the numbers. They have to verify that the information that's being given is true and correct, and whether or not they fit into the income guidelines and the asset guidelines right now. I'm here to assist them in locating a job.
ELIZABETH BRACKETT: Under Wisconsin's next phase of reform, which starts next September, the two jobs will be combined into one, which means a lot of county workers like Ann Canizzaro are worried about losing their jobs.
ANN CANIZZARO, Milwaukee County Employee: I feel somewhat threatened as far as my job security goes, definitely. I think a lot of people are going to be affected.
ELIZABETH BRACKETT: And there are even bigger changes ahead. The new welfare reform law allows states to contract with private, for-profit companies to run their welfare system. The state of Wisconsin has asked companies like Lockheed, Electronic Data Systems, and Maximus, to submit bids to run the welfare programs here in Milwaukee County.
PAMELA BERGEN: And if you're eligible, would you like me to determine your eligibility for AFDC?
ELIZABETH BRACKETT: If private industry takes over Milwaukee's welfare system, government workers like Pamela Bergen might not have jobs. Bergen has worked for the county for over 16 years. She is vice president of the local union that represents the county workers.
PAMELA BERGEN: Well, we are all afraid of losing our jobs. A lot of us who work here are women. A lot of us are minorities. A lot of us are single mothers, single parents, which is the people that are most targeted at the welfare reform programs going on, and by us losing our jobs it concerns me that we might be on the other end of this in applying for assistance.
ELIZABETH BRACKETT: Other counties, which met certain criteria, like reducing the welfare rolls by 20 percent, have been given the right of first refusal to run the new welfare program, but Milwaukee, which services 60 percent of the clients in the state, did not meet all the criteria.
Privatization is not entirely new in the world of welfare. The case managers here at the Milwaukee Job Center already work for Goodwill Industries. What is new is that for the first time both nonprofit agencies and for-profit corporations can compete to run the entire system, both eligibility determination and job placement. Multi-million dollar companies like Maximus, which have run job centers in locations across the country, view welfare systems as big business in the future. The U.S. now spends $25 billion to administer $800 billion in benefits.
RUSS BELLIVEAU, Maximus, Inc.: We not only get the reward that you get as a company that has financial success. We get the reward of seeing people improving their lives.
ELIZABETH BRACKETT: Russ Belliveau, the president of Maximus's government operations, says it makes sense for private industry to pursue part of those billions. Belliveau says it's going to be a huge market.
RUSS BELLIVEAU: Certainly we're talking in excess of $20 billion. If a state is given $100 million, they might set up a contract with a private company to take that $100 million and drop it down to $98 million and say if you can do the program for $98 million, you can make profit on anything you do less than $98 million. Companies would be properly incentived, and the state would assure its savings.
ELIZABETH BRACKETT: But Cliff O'Connor, who's in charge of Milwaukee's programs, worries that private companies will be more concerned about the bottom line than about the clients.
CLIFF O'CONNOR, Milwaukee Human Services: When you really get out and meet some of our clients, you recognize that they're made up of very different groups of people, and some of them are learning disabled, some of them are border-line mentally ill, some of them have very dysfunctional personalities, but if a for-profit corporation has to deal with someone who they're going to lose money on, there's an incentive, especially in a non-entitlement system, to simply not provide services, sanction that person out, and as a private corporation, I'm not responsible for what happens to their children.
ELIZABETH BRACKETT: Belliveau says that won't happen because the companies will be held accountable by the state for their performance.
RUSS BELLIVEAU: I think it would be unconscionable for anybody, including Wisconsin, to put out a contract to a private company without quality standards that require that the private company service the clients in the way that the state or county is required to service the clients, which would mean that companies couldn't cream, they couldn't go after the--most likely the work and sanction the ones who are not likely to work.
ELIZABETH BRACKETT: But Wisconsin State Senator Gwen Moore, who makes regular visits to homeless shelters, wonders if the companies will be rewarded for pushing people off the rolls, regardless of the consequences. She claims that people who have been denied benefits are already showing up at some Milwaukee shelters.
GWEN MOORE, Wisconsin Legislator: And I think that the companies plan to provide accountability, but the standards by which they're going to be measured is whether or not you've gotten people off the rolls. You know, if you've gone on to get a $12-an-hour job welding, or forklifting, that's going to be regarded as a success, and if you've become homeless, and you're not on the welfare rolls, you're also going to be counted as a success.
JEAN ROGERS, Wisconsin Workforce: Shouldn't we say many of these cases received a May AFDC grant?
ELIZABETH BRACKETT: Jean Rogers, who heads the state's welfare reform programs, says that the state doesn't intend to track what happens to people once their off the rolls. So there won't be anything built into the system to find out what happens to people that are sanctioned?
JEAN ROGERS: Well, when you think about it, how would you do that? I mean, there's--that would involve a very intrusive, investigative process into people's homes. And I don't think we ever want to get to that point.
ELIZABETH BRACKETT: The push for privatization is not limited to Wisconsin. In Texas, defense contractor Lockheed Martin, along with IBM, plans to submit a bid in hopes of snaring the contract for the entire state system, a contract worth 2 to 3 billion dollars. Electronic Data Systems, along with Unisys, and Andersen Consulting, are also submitting bids. Although most people think of Lockheed Martin as a company that builds fighter planes--
SPOKESPERSON: You don't have to go the whole two years. Most people it's going to--go the first year, get their training, and find a job as soon as possible.
ELIZABETH BRACKETT: For the last 10 years, they've been running social service programs for the state and county governments. Lockheed has also hired former welfare administrators from around the country like Gerald Miller, architect for much of the welfare reform legislation in Michigan.
GERALD MILLER, VP, Lockheed, IMS: On the technology side, this is a company who has tremendous resources to provide technical solutions, technological innovations to delivering services in the private--in the public sector.
ELIZABETH BRACKETT: Miller also thinks that private industry is more accountable, not less, than government has been.
GERALD MILLER: We will be accountable and more accountable, and if we don't perform, there's a cost to us in not performing. That doesn't occur in the public sector. If the public sector doesn't perform, what happens to them? Nothing.
ELIZABETH BRACKETT: Jean Rogers says that Wisconsin will not put all its eggs into one corporate basket. For example, Milwaukee will be divided into six different regions. That way, there will be healthy competition, competition among providers that didn't exist when one big county agency ran the system.
JEAN ROGERS: When you have one massive organization doing it all, with no comparative group to say, gee, their best practice is producing this kind of a result, wouldn't you think this would be a good idea for you to do too, there was no incentive to do that. I'm excited about what the potential is for developing many more creative ways of helping people.
ELIZABETH BRACKETT: County workers in Milwaukee won't know for some time if they have jobs or not. Milwaukee announces the winning companies in January.