Privatization lessons learned

EDITORIAL BOARD

December 29, 2006
Austin American-Statesman

Privatizing state social services was supposed to save Texas taxpayers money, streamline a cumbersome bureaucracy and speed up the delivery of assistance to the state's neediest residents. Hundreds of state employees — who earned decent salaries and benefits — would be replaced by hundreds of lower-paid workers in call centers. Applicants for welfare, Medicaid and food stamps would simply pick up the telephone, go online or fax in documents. Call center employees would promptly screen and determine whether applicants were eligible for social services, relieving state workers of that complex, costly and timely job.

The state put up $899 million for the high profile venture with Accenture. But the model that the Legislature promoted and the Texas Health and Human Services Agency set up flopped.

Texas Health and Human Services Commissioner Albert Hawkins pulled the plug on the much-ballyhooed pilot project the agency rolled out in Travis and Hays counties. He was right to do that. Now the state human services agency is revising its strategy to go private, hiring hundreds of permanent state employees to pick up the slack and scaling back its initiative to privatize public assistance enrollment.

Accenture's errors were costly. Many families were wrongly denied social services or lost eligibility for services because Accenture workers made policy decisions they lacked training and experience to make.

Recognizing the privatization experiment was not working, Hawkins slashed the contract with Accenture by $356 million and ended some of its functions two years early — in 2008 instead of 2010.

The commissioner made 900 temporary employees permanent hires and scrapped plans to cut 2,900 state jobs. Instead, 700 positions will be eliminated.

Hawkins also stopped Accenture from screening applicants following the Central Texas pilot flop. Accenture will be relegated to collecting and entering data regarding applicants, a back office function. State employees will do the more complex jobs of determining eligibility. The state will recoup $30 million from Accenture in service credits and discounts.

"We didn't draw the line between vendor work and state work in the right place," Hawkins said. "As we rebalance the roles between the state and the vendor, we will be drawing the line in a different place."

Hawkins has taken some very public hard knocks in what he calls the rebalancing of the roles for the state and the private vendor. It's rare, but refreshing, to hear a public official openly acknowledge such an expensive and embarrassing blunder.

The state's antiquated system will be replaced over the next 18 months with a modern computer system, called TIERS, as the kinks are worked out. When the system is fully functional, needy Texans will have a variety of ways to apply for social services — online, by phone or in person. The modernized system is up and running in Williamson County.

The commissioner now wants to apply the lesson learned from Accenture in other areas where the Legislature has mandated privatization, specifically the state foster care system. He told us that the Legislature has an opportunity to reexamine the foster care mandate when it convenes Jan. 9.

"These are a very fragile, vulnerable group of kids and there needs to be careful deliberation about what is delivered through contract and what is delivered through state services," Hawkins said.

The Accenture experience has taught us important lessons that legislators should take to heart.

State employees are indeed better suited for administrative functions. Another is that privatization is no guarantee that taxpayers are going to save money.