Outsourcing the Public Good

For-profit companies are taking over the government's human service jobs

| September / October 2004

Texans seeking public assistance used to find out if they qualified by talking to workers from the state. But according to a new plan, their requests for food stamps, child health insurance, and other services will be handled by a 'call center' run by a private company. For those who are inclined to think the private sector does everything better, Texas is a trailblazer, but others see reason for caution and even alarm.

'Texas is facing a $10 billion budget deficit,' Jonathan Walters reports in Governing (May 2004). 'In the view of many influential Republicans, there is only one way to deal with that number: Let the private sector in on state work to lower state costs.' Under the plan sponsored by state representative Arlene Wohlgemuth, Texas will consolidate 12 health and human services agencies into 4 and hand 2,500 jobs over to private-sector vendors in the next two years.

While cities and states have a history of contracting out jobs like corrections and sanitation, they've now entered new territory. The latest push is to privatize functions that were previously seen as key roles of government, including some internal operations, like human resources. On its Web site, the Mackinac Center, a conservative Michigan think tank, puts it this way: 'There are typically many more opportunities for privatization than local officials realize for solving problems involving government-owned assets, facility operations, services, debt structure, and other facilities and infrastructure. Identifying these involves . . . applying privatization techniques to the fullest possible range of government services and facilities.'

Faced with massive budget shortfalls, business-friendly politicians at all levels are buying the pitch. Under Governor Mark Sanford, who faces a $350 million deficit, South Carolina may outsource inmate health care. Meanwhile, under Governor Jeb Bush, Florida is tendering contracts to the private sector for child protective services, foster care, and human resources management. Still, 'most eyes right now are on Texas and its decision to privatize eligibility determination -- and whatever else it can -- as part of its health and human services overhaul,' writes Walters.



The risks are great and the critics numerous. Walters quotes Gary Anderson, executive director of the Texas Public Employees Association, who worries that the state will lose 'valuable institutional knowledge' as it hands tasks over to the private sector. The state is guilty of 'stepping over dollars to save dimes' in its shortsighted strategy, Anderson says. One concern is that the state is giving up the 'capacity to easily take work back if vendors don't pan out.'

John Davis, the South Carolina official who has been chosen to help privatize inmate health care, admits that the state takes a major risk when it farms out government jobs, because annual budgets prevent the state from locking any company into a long-term contract. 'Once you've dismantled the system, it's tough to put it back together,' he says, 'and vendors know that.'