Privatization of Welfare Services: A Review of the Literature. TANF Services


Contracting for services related to public assistance was not uncommon even before welfare reform. Some AFDC agencies contracted with employment and training service providers for the operation of all or part of their JOBS programs. However, as discussed in Chapter I, PRWORA has facilitated the growth of contracting out by fundamentally changing the mission of the welfare system, by giving states substantial leeway in formulating programs, and by increasing incentives for placing welfare recipients in jobs. The law also has encouraged outsourcing by lifting restrictions that had placed eligibility determination off-limits for privatization (GAO 1997b; Sanger 2001).

To examine the privatization of TANF services, it is useful to divide them into four categories:

  1. Case Management. This can include intake and diversion activities, TANF eligibility and benefit determination, the development of the individual responsibility plan, assessment of the need for services, case monitoring and tracking, and sanctions for noncompliance with TANF requirements.
  2. Employment Services. These include services to link TANF recipients with employment, such as job search and placement assistance, as well as more specialized employment programs, such as work experience, education, training, supported work, and job retention and advancement services.
  3. Support Services. These include child care, transportation, mentoring, and other assistance for TANF recipients who are working.
  4. Specialized Services. These include services such as mental health and substance abuse treatment, as well as initiatives to prevent teen pregnancy and programs to promote family formation.

Although the forthcoming GAO report will provide the first detailed national picture of the extent to which these services are contracted out, we do know that each of these service types is contracted out by some TANF agencies. The literature suggests, however, that contracting out case management, especially eligibility determination, is much less prevalent than contracting out other services.

At least three states--Wisconsin, Arizona, and Florida--have contracted out the administration of all aspects of TANF, including TANF eligibility determination, in some locations:

  • Wisconsin. In 1997, Wisconsin put out a request for proposals to operate its TANF program, W-2, in 12 counties that had either chosen not to run W-2 or had not met state performance standards. The contracts were awarded to both for-profit and nonprofit agencies.
  • Arizona. Arizona operates a demonstration project, Arizona Works, under which TANF services, including eligibility determination, are privatized in Eastern Maricopa County. (1) In January 1999, a four-year contract was awarded to MAXIMUS, Inc., to administer the TANF program in the demonstration site, while the Arizona Department of Economic Security administers the food stamp and Medicaid cases. (2)
  • Florida. In 1997, the Palm Beach County Workforce Development Board contracted with Affiliated Computer Services, Inc. to provide TANF services. Since 2000, the contract has included all TANF services, including eligibility determination.

Other TANF agencies, however, contract out only a subset of their case management functions. For example, some agencies contract out assessments, the development of self-sufficiency plans, and case monitoring but maintain direct responsibility for eligibility determination and sanctioning for noncompliance. These include agencies in San Diego, California; Jacksonville, Florida; Aiea, Hawaii; and the District of Columbia. In many cases, contractors provide job search assistance, job placement assistance, and retention services as well as case management (Pavetti et al. 2000). Some TANF agencies maintain separate contracting arrangements for each of these functions, however. The city of New London, Connecticut, for example, contracts with one organization for assessment and the development of a self-sufficiency plan and with another organization for other aspects of case management.

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