Kausfiles Special

NYT Reader Alert!

If kausfiles’ sources are good, this weekend’s New York Times will feature a piece on the welfare-to-work program of New York City mayor Rudolph Giuliani. Specifically, reporter Nina Bernstein (who is, it’s fair to say, hostile to Giuliani’s efforts) will probably trash the city’s decision to employ for-profit corporations, as well as nonprofits, to place welfare recipients in jobs.

Things to keep in mind when reading Bernstein’s piece:

  1. Giuliani’s welfare commissioner, Jason Turner, designed the successful Wisconsin welfare-reform effort, which has virtually eliminated welfare and replaced it with a variety of community-service jobs (plus day care, plus health care). The great question is whether Turner can, in New York City’s bureaucratic, Machiavellian, liberal, and litigious culture, do what he did in Wisconsin.
  2. Giuliani and Turner want to reform the city’s sprawling system of “employment services” contracts to meet a fairly ambitious goal of finding 100,000 jobs this year (mainly for welfare recipients and potential recipients who show up at the city’s welfare offices, which it is renaming “job centers”). The city has been paying dozens and dozens of “community based” nonprofit organizations to place recipients in jobs. Giuliani plans to make two big, sensible-sounding changes: a) reduce the number of contractors the city has to deal with from about 80 to 17, because it’s difficult for the government to keep tabs on so many different organizations; and b) pay only for actual results–e.g., for getting people jobs they keep, not for simply enrolling them in training programs that may or may not succeed in getting them jobs.
  3. Of the contracts Turner’s agency has negotiated, most are with nonprofit groups, but four are with for-profit organizations, such as the well-publicized America Works. The largest contract is with Maximus, one of the big national, for-profit firms that has entered the welfare-to-work business.
  4. It’s understandable that the dozens of nonprofit contractors who have lost their regular contracts (and now have to scramble for subcontracts to keep their flow of funds) will be unhappy with this new arrangement and will want to feed reporters nasty information about the firms that won the contracts, in particular the for-profit firms.
  5. The big fear in using for-profits to administer welfare programs is that they’ll cut poor people off just to save money. But these are contracts to get people jobs, not sign people up for benefits, so the argument doesn’t really apply. The for-profits will get paid only if they produce results, and they’ll be competing against nonprofits.
  6. The contracts appear to have been the product of a long, competitive vetting process. City Comptroller Alan Hevesi (who has mayoral ambitions) has publicly objected to them, claiming Giuliani should have used a competitive “sealed proposal” procedure, instead of a less formal “negotiated acquisition” procedure. I’ve read Hevesi’s objections; they seem almost totally bogus. Hevesi has one big sound-bite-sized point: The city agreed to pay Maximus and one other contractor (nonprofit Goodwill Industries) more than they originally bid. But under their original bids, they would have been paid for simply enrolling people in training programs or getting them jobs they then quit the next day. Now Maximus and Goodwill will get their full payment only if they get people jobs they keep for six months. The greater payment is for a harder-to-achieve result (and it’s less than the firms wanted).
  7. It’s true Maximus is subcontracting with a former Giuliani administration official, Richard Schwartz. So what? Maximus and the other contractors get paid, remember, only when they get people jobs. Schwartz will have to produce those results for Maximus to make money.

Note to Bernstein: You might ask your New York Times colleague Jason DeParle, who is no right-winger and has reported extensively on welfare reform in Milwaukee, about Maximus. I think (I haven’t talked to him) you’ll learn that they are OK–the second best out of five Milwaukee welfare-to-work contractors. You can read DeParle’s recent story about a Maximus caseworker here.