After years of welfare
reform there is evidence that privatization has been successful, not for the
people who were supposed to be moved out of poverty, but for corporate
profiteers.
By Melvin J. Howard
An unintended consequence of welfare “reform”
has been the transformation of the nonprofit sector particularly the
better-funded national organizations from community assets to market-based
competitors. The traditional distinction between nonprofits investing in people
and communities, and for-profit entities that make money for their owners, is
becoming blurred. In some areas, for-profits and nonprofits are now in direct
competition; in others, they are creating partnerships to secure government
contracts. In the Harvard
Business Review, William P. Ryan, a Cambridge, Massachusetts-based
consultant to foundations and nonprofit organizations, looks at the changing
landscape for nonprofits forged by government willingness to contract with
for-profit corporations to administer government services. Ryan points out: “By
playing in the new marketplace, nonprofits will be forced to reconfigure their
operations and organizations in ways that could compromise their missions. The
danger,” writes Ryan, “is that in their struggle to become more viable
competitors in the short term, nonprofit organizations will be forced to
compromise the very assets that made them so vital to society in the first
place.”
One of the most
insidious consequences of the San Francisco County’s welfare-to-work program is
that local nonprofits and private businesses are able to “steal jobs from
low-wage workers, for whom these jobs no longer exist.” This short sighted
pitting of low-wage workers against welfare workers threatens to create a new
group of unemployed workers, who may find themselves applying for welfare
benefits.
To compete in the
marketplace, nonprofits are adapting to its new realities in a myriad of ways,
“from subcontracting to partnership to outright conversion to for-profit
status,” writes Ryan. He points to the YWCA of Greater Milwaukee, which
although “large and sophisticated by any nonprofit standard…could not go it
alone.” In order to deal with the “demand of a comprehensive, $40 million
welfare-to-work contract, it created a for-profit limited liability corporation
[called YW Works], with two for-profit partners.”
In addition to
unleashing predatory corporate forces, and the ongoing transformation of
nonprofit organizations into high stakes competitors for government contracts,
the Personal Responsibility and Work Reconciliation Act of 1996 contains the
first enactment of a concept known as “charitable choice.” Far from expanding
anyone’s choices, “charitable choice” mandates that state and local governments
include religious organizations in their pool of bidders for service-delivery
contracts.
On the face of it,
this is nothing new. As Cathlin Siobhan Baker, Co-Director of the Employment
Project, explains, for years religious organizations have received government
funding for emergency food programs, child care, youth programs, and the like.
However, they were expressly prohibited from religious proselytizing. Now, Baker writes:
“Gone are the prohibitions regarding government funding of pervasively
sectarian organizations. Churches and other religious congregations that
provide welfare services on behalf of the government can display religious
symbols, use religious language, and use religious criteria in hiring and
firing employees.”
President George W.
Bush has been a big-time supporter of charitable choice and faith-based
initiatives. If his faith-based initiative, announced to great fanfare in late
January, ever gets back on track, it will allow for a bunch of social services
to come under the control of faith-based organizations. During the
presidential campaign, Bush repeatedly called for “armies of compassion”
fielded by “faith-based organizations, charities and community groups” to help
aid America’s poor and needy. In a USA Today opinion piece he
laid out his plan for taking “the next bold step in welfare reform,” proposing
$80 billion over 10 years in tax incentives to “help our nation’s most heroic
armies of compassion.” He also proposed a federal initiative to “support
community and faith-based groups that fortify marriage and champion the role of
fathers.”
Welfare
is no longer a question of poverty or the economic inequities in our society.
Charitable choice frames the debate within such time-honored moral hodgepodge
as the proverbial “epidemic of out-of-wedlock births,” or the “lack of personal
responsibility”—behaviors that conservatives claim, contribute to the general
moral breakdown of our society.
Since 1996, responsibility
for welfare services has shifted from the federal government to the states and
the states have contracted many services out to for-profit corporations and
non-profit organizations. Under President Bush’s faith-based initiative,
religious organizations have become a major player in the service provider mix.
However, in addition to the bevy of objections raised by liberals and
conservatives that have stalled the implementation of Bush’s faith-based plan,
many people of faith do not believe that they can shoulder such a burden.
In Religion-Sponsored
Social Service Providers: The Not-So-Independent Sector, independent
researchers Jim Castelli and John McCarthy of Pennsylvania State University,
conclude that it is mistaken to believe that faith communities can take on the
burden of expanding their provision of social services as a substitute for
government efforts. “Not only is there no infrastructure at the national,
state, or local levels to administer programs and large amounts of funding, but
such expansion would require faith communities to wholly change their funding
priorities in order to build their capacity.”
Privatization as the
engine powering welfare reform was supposed to replace federal and state
bureaucracies with streamlined, cost-effective corporate service providers.
Privatizers believed that private companies would administer welfare
regulations more stringently and accurately, deliver services more efficiently,
and focus on only those who really deserved benefits. Saving the taxpayers money
was another appealing promise. Companies competing for contracts assured states
that they would dramatically reduce the welfare rolls.
Has the privatization
of welfare delivered on its promises? Have private companies and enterprising
nonprofits transformed the old welfare system with the outcome of long-term
employment with decent pay for former welfare recipients? Max Sawicky,
economist at the Washington, DC-based Economic Policy Institute, is troubled by
the fact that the so-called “success [of welfare privatization] was announced
before the results are in.”
In a 1997 speech,
Lawrence W. Reed, President of the conservative Midland, Michigan-based
Mackinac Center for Public Policy, touted privatization as the wave of the
future: “The superiority of [privatization]…is now approaching the status of
undisputed, conventional wisdom: the private sector exacts a toll from the
inefficient for their poor performance, compels the service provider or asset
owner to concern himself with the wishes of customers, and spurs a dynamic,
never-ending pursuit of excellence - all without any of the political baggage
that haunts the public sector as elements of its very nature.”
·
While welfare
privatization has delivered drastic reductions in caseloads and welfare rolls,
it has not moved recipients from the “underclass” to the working class.
Privatization is not efficiently delivering job training and support services
to those who need them.
·
The financial bonuses
privatizers receive for reducing caseloads create an incentive to terminate
clients’ benefits, not to assist them in climbing out of poverty.
· As in the case of
Curtis and Associates, staff working for private companies often have neither
the credentials nor the training to handle their caseloads. Consequently,
clients do not receive services they need, and to which they are entitled, such
as childcare, transportation subsidies and medical care.
·
As Wisconsin, New
York, and Texas have learned to their chagrin, companies like Maximus and
Lockheed Martin blithely spend public money from other jurisdictions to wine,
dine, and pay off decision-makers in the pursuit of new contracts.
·
The states and local
governments that contract with corporations for welfare services have not
instituted any form of systematic oversight. Because information
about large private contractors is not centralized, it is not unusual for a
company in hot water one place to pick up new contracts at the same time in
another state—or in another county in the same state. Ultimately, for-profit
corporations are accountable to their shareholders, not to the communities they
are hired to serve.
Spurred by revelations
of Maximus’s questionable activities, Milwaukee-area Democratic Congress-
people Jerry Kleczka and Tom Barrett, are hoping the federal General Accounting
Office will fully investigate the practices of private companies hired to
manage welfare services. As we move closer to welfare reauthorization, the GAO
needs to vigorously take on the Congresspeople’s request. In the meantime,
corporations will continue prospecting for gold among the poor.
