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Peddling Welfare-Privatization Boondoggles

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This study looks at four state programs to privatize human services. In 1996 Texas awarded a contract to develop a fingerprinting system that would prevent Texans from fraudulently helping themselves to duplicate social service benefits. In another scheme two years later Texas launched a pilot project to use private HMO contractors to oversee certain health care services for Medicaid recipients. Texas then launched the mother of all welfare-privatization plans in 2001, paying a contractor to design the Texas Integrated Eligibility Redesign System (TIERS). This massive system was supposed to streamline the state’s handling of enrollment and benefits for a slew of social service programs. HHSC in 2004 also outsourced its own employee administration functions to a private contractor. State officials, contractors and lobbyists sold all four of these privatization projects as ways to deliver welfare services more efficiently and to save mountains of public funds. Taken together, they have done just the opposite. They have burned through hundreds of millions of tax dollars with little to show except for the enrichment of contractors and lobbyists.

Over the past decade, 13 contractors for these four privatization projects have paid 102 Texas lobbyists up to $11.3 million. Yet the top 41 social service privatization lobbyists accounted for 70 percent of these lobby contracts and 87 percent of the resulting revenue. Many of these top lobbyists are discussed below. These hefty lobby expenditures were a relatively modest price to pay to land $2.1 billion in state contracts. Even the House Appropriations chair recently acknowledged that the special-interest lobby writes much—if not most—of Texas’ laws. This report identifies some of the highest paid peddlers of social service privatization schemes run amok. Next time these individuals come peddling ways to save the state money, the state might save much more by exercising a bit of skepticism.