County Nears Private Bids on Welfare Reform

Los Angeles County today is expected to take a significant step toward becoming the largest jurisdiction in the nation to privatize parts of its welfare reform program.

A majority of the Board of Supervisors have stated their support for taking bids from private companies to run some of the job training and placement program for welfare recipients who are about to be cut off.

In a sign of how contentious the issue has become, the board is also poised to hire an independent consultant to help assess the bids after some supervisors complained that the welfare department tried last year to stop the privatization effort.

The union that represents most welfare office employees has objected to privatization, saying private firms should not have a say in the future of public welfare recipients.

The proposed Los Angeles contract would privatize job training and placement programs in the San Fernando Valley, which represents about 25% of the overall caseload, said Eileen Kelly, the head of GAIN, the acronym for the program.

By splitting the GAIN program between government workers and for-profit corporations, Kelly said, “it would provide for a way of measuring whether the private sector can do it better or can the public sector do it better.”

Los Angeles’ debate comes as states from Connecticut to Arizona are turning to for-profit corporations to help place welfare recipients in jobs as they hit timelines mandated under the 1996 federal welfare reform act.

“The idea is to get people into the mode of competition, that you have to perform if you want the contract again; it’s stimulating,” said Laura Kaye, a consultant with the Urban Institute in Washington, D.C.

Union Leaders Skeptical

The trend has already boosted revenues for private companies involved in the program. But public employee union leaders find the increased reliance on the private sector troubling.

“When you’re talking about getting people off the welfare rolls, that’s not a profit-driven business,” said Tanya Akel, a researcher with Service Employees International Union Local 660 in Los Angeles. Because companies are paid per welfare recipient they place in jobs, she added, “there’s an incentive to push people off the rolls too quickly.”

Privatization of Los Angeles County’s welfare program has a troubled past. In the late 1980s, the county became the first government agency in the state to use a private company for welfare reform-oriented job training. The county signed a contract with a Virginia company, Maximus Corp., which included veterans from Ronald Reagan’s administration as California governor, despite initial concerns by state officials about the arrangement.

In 1993, a new and more liberal Board of Supervisors decided not to renew Maximus’ contract, saying the company had performed poorly.

Russ Beliveau, president of government affairs for Maximus, said his company met its obligations. “We performed right on target with what they asked us to do,” he said.

But in June 1998, with welfare reform’s deadlines looming, the board decided to consider contracting out job training in the San Fernando Valley, which is represented by two supervisors favorable to testing privatization: Mike Antonovich and Zev Yaroslavsky.

Bids were sought. But the county’s welfare office said the bids from Maximus, aerospace giant Lockheed and a smaller local company were higher than the $32-million cost of keeping the work in-house.

The county staff said no contracts would be signed.

But a majority of supervisors aggressively questioned the staff’s methods. They hired a firm, Orion Consulting, which has a contract for welfare work in Ohio.

In its report, Orion found that the county’s own program was most cost effective--but only if the placement rate was high. The problem was, the report found, that the county required the private companies to achieve a placement rate that was nearly double its own. That inflated the costs of going private.

Among its recommendations, Orion said the county could decide not to revisit the privatization issue because of its complexity, or it could seek new bids.

Antonovich, in a motion to be considered by the board today, will pursue the latter option.

“What you have is an issue of credibility,” he said in an interview.

Union officials are outraged by the move. Because the first bid is a matter of public record, they said, private companies know the county’s cost and can make their bids lower. The union has pressed Yaroslavsky, normally an ally of organized labor, to change his mind on the issue.

He did not return a call for comment Monday, but previously has said he is concerned with county staff’s credibility.