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Texas Move to Privatize State Welfare Programs Draws Fire

On Welfare Reform's Cusp

Texas prides itself on being big and bold, and its fast-track plans to privatize welfare match that reputation. Nowhere in the country have officials moved so ambitiously to turn the administration of welfare over to profitmaking firms.

Cities and counties across the US have already begun to shrink welfare rolls and find more efficient ways to help the needy by turning to corporate America. Nationwide, welfare management contracts worth $28 billion are up for bids. But Texas is blazing a much broader trail - privatizing nearly $2 billion worth of welfare and job-training programs statewide.

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Yet the road has been rocky. Beset by federal agencies concerned that private companies may neglect recipients, as well as by growing ethics concerns locally, the momentum behind Texas's attempt to outsource welfare has been checked.

Currently on the auction block is a $500 million program called the Texas Integrated Enrollment System (TIES), which determines who is eligible for numerous welfare programs. Corporate bidders for TIES include Lockheed Martin Information Management Systems (a computer and human services subsidiary of the $30 billion missile manufacturer), Electronic Data Systems, and IBM. Each claims that by running TIES more "efficiently and creatively" they can make a profit while saving Texas 10 to 40 percent. They also aim to reduce welfare rolls by getting recipients jobs.

But opponents, including unions and advocates for the poor, predict that turning public social programs over to profit-minded businesses will result in mass layoffs of state employees and fewer services for the poor.

"There is some concern that these for-profit companies would tend to skim those that are most easily employable, and would be less interested in taking care of special needs clients, who we worry would fall through the cracks," says Texas state Rep. John Hirschi (D).

Charles Stuart, a spokesman for the Texas Health and Human Services Commission, bristles at such assertions. "There is absolutely no financial incentive" for corporations to reduce benefits or deny recipients, he says. But he does acknowledge that "efficiency" innovations will involve layoffs among state-employed workers: "The majority of the savings are in personnel."

Texas officials and corporations are eager to begin the contracting. But the state's list of programs to be privatized has been delayed for several months by the US Department of Health and Human Services. "There are still some outstanding issues that have not been resolved," says the agency's Richard Konkolewski.

Another snag has also slowed Texas's privatization push: ethics. Six former high-ranking Texas officials who are now working for corporations bidding on state contracts are under investigation for possible criminal ethics violations. Charges of conflict of interest abound as public agencies and private firms mingle in odd new partnerships to redesign welfare.

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In its drive for contracts, Lockheed has hired influential Texas officials who, critics charge, helped engineer welfare privatization while in public office. The Travis County Attorney's Office is now investigating whether some of these officials are violating the state's revolving-door law by lobbying their former public agencies.

Among these is Lockheed lobbyist Dan Shelley, a former chief lobbyist for Gov. George W. Bush. The Texas State Employees Union says that, as a Bush lobbyist, Mr. Shelley shepherded welfare privatization incentives in a bill passed by the Texas legislature in 1995. The measure promotes privatization through competitive bidding.

"We find that very dubious, that the agencies themselves would be hooking up with the corporations that are trying to get these contracts," says Lynn McCray, organizing coordinator for the Texas State Employees Union.

Lockheed IMS communications director Ron Jury rejects the conflict-of-interest charges, saying, "Our employees did absolutely nothing improper. Our company maintains the highest ethical standards and follows the ethical requirements of any state we do business in."

A call to Shelley brought this response from Lockheed consultant Bill Miller: "Welfare reform, of course, is privatization. That was part of the governor's initiative. As his legislative director, of course, it was [Shelley's] responsibility to get the bill passed."

According to Mack Martinez of the Travis County Attorney's Office, the investigation is ongoing and hinges on how closely the officials were connected to the programs they are now lobbying. But, he says, Texas's revolving-door law "is not as tight as we'd like it to be."

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