Privatization of Welfare Services: A Review of the Literature. Growth in Performance-Based Management Techniques


Related to the increased skepticism about the performance of government, policymakers, practitioners, and scholars increasingly have advocated applying performance-based management and accountability techniques, used successfully in the private sector, to the public sector. On the federal level, legislation such as the Government Performance and Results Act of 1993 and the Government Management and Results Act of 1994, as well as the National Performance Review's "reinventing government" initiative of the mid-1990s, reflected the growing interest in using performance-based measurement and bringing entrepreneurial approaches into public-sector service delivery (Osborne and Gaebler 1992; National Performance Review 1994). The goal of federal deficit reduction and general cost cutting gave particular impetus to these efforts to find new ways to make government more efficient. These "re-engineering" efforts took hold in many states and localities as well. Privatization was seen as one way to bring performance-based management to the public sector.


1.  Some policymakers and scholars emphasize the extent of competition rather than whether the public or private sector provides the service. In an effort to increase competition and still include the public sector, a number of states and localities are requiring public-sector organizations to compete with each other and/or with private organizations.

2.  Through its "charitable choice" provision, PRWORA expanded states' ability to contract with faith-based organizations, allowing these organizations to provide TANF-funded services without requiring that they remove religious symbols from their facilities or religious content from their services (Title I, Section 104). The privatization literature thus far has not focused on this as a significant reason for increased contracting out.

3.  A federal "caseload reduction credit" in PRWORA mandated that a state's participation requirements be dropped by a percentage point for every percentage point drop in caseloads after 1995, as long as the decline was not due to state policy changes (U.S. House of Representatives 2000). Due to the sharp, and unexpected, caseload decline experienced by many states, this credit eased the work mandates during the first five years following passage of PRWORA.

4.  However, the federal government uses measures of state success in meeting the TANF goals to allocate its high-performance bonuses and bonuses for reductions in out-of-wedlock births.

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