Welfare Reform Means More Private Sector Involvement

Few issues have generated as much impassioned debate recently as welfare reform. While emotions run high on both sides of the issues, everyone must recognize the vital, supportive role the private sector can play in helping states meet the challenges posed by welfare reform-and in helping recipients find meaningful jobs.

For six years, I served as the head of Michigan’s Family Independence Agency (formerly the Department of Social Services), one of the largest welfare and social service agencies in the country. In 1991, the agency employed 15,000 people, had an administrative budget of over $1 billion, and served a welfare caseload of 245,000. But Governor John Engler felt that the welfare system didn’t do a good enough job of fostering a transition to self-sufficiency and that its administrative costs were too high. With his leadership and support, we began a series of reforms. By 1996, over 100,000 families had left welfare for jobs and a self-sustaining lifestyle. We also significantly reduced our administrative costs.

The Michigan experience drew national attention because it improved service and lowered costs. We created a win-win situation for low income families and the taxpayers not by denying benefits, but by helping people find jobs. We did it, not by slashing services, but by re-engineering them so as to change the culture and reduce inefficiencies.

In 1996, the country as a whole through Congress and the President, also concluded that welfare as we knew it was ripe for change. The national welfare reform legislation gave the states broad latitude to re-design their programs. It also gave the states a much stronger incentive to lower their welfare administrative costs.

Each state now must fashion its own welfare program through legislation and policy. A state can then choose to have its own government agencies operate it, have private companies do it, or have some combination of the two in a public-private partnership. No doubt, many different service models will soon evolve.

Public-private partnerships in one form or another are coming to a welfare office near you. Private charities are being asked to do more and evidence exists that they can do the job better than many agencies of government. Those charities often provide the one-on-one mentoring, the character-building, and a spiritual dimension vital to turning many lives around. But unless and until all welfare functions are turned over to the private sector, what remains of government welfare simply must be carried out in a more efficient fashion that fosters the increased self-reliance that almost everyone seeks. Here too, people outside of government can help.

The private sector is no stranger to human service functions. My company, Lockheed Martin IMS, has been serving human service agencies around the country for nearly ten years. Under contract with government, we already help people find jobs, develop computer systems, operate child support programs, and administer programs where food stamps and cash assistance benefits are distributed by magnetic stripe cards. A growing number of other companies are doing similar things.

In all my firm’s human service contacts-in 30 states, no less-our government client always determines the policies under which we operate. The specter of private companies terminating benefits to low income families for their own financial benefit is nonsense. As long as government is in the welfare business, it will establish policies for eligibility, and the level and duration of benefits. Our role in the private sector is to provide superior service within that policy framework and to do so efficiently.

Even critics of the welfare reform law recognize the need for change. In Texas, which is at the forefront of the national effort to streamline welfare administration, the state spends more than a half billion dollars annually just to determine the eligibility of applicants for welfare programs. We believe that as a private sector partner with business experience and superior technological capabilities, we can substantially improve the administrative function, cut costs, and help the state return the savings to the taxpayers or put those savings back into programs that will better prepare recipients for today’s job market.

One reason I left the public sector and accepted an offer to head Lockheed Martin’s new welfare reform initiative was the opportunity to achieve, on a national scale, the goals and objectives shared by many of my colleagues in state social service agencies. Welfare reform is not something to be feared; it holds tremendous promise for generations of families who, for one reason or another, have been unable to escape from the cycle of dependency. As we saw through our reforms in Michigan, families that secured jobs actually moved out of poverty, creating a better life for their children.

Private participation is not a panacea for the ills of welfare administration by government bureaucracies. But now that "the era of big government is over," in the president’s words, the states will boost their chances for success in welfare reform if they work creatively to include the private sector in their plans.