Cozy Ties

In the battle to privatize welfare services in Texas, corporate bidders have enlisted some inside help

Mike McKinney was fed up. For eight months, McKinney, the head of the Texas Health and Human Services Commission, and other state officials had been awaiting the Clinton administration's ruling on a controversial Texas plan to privatize welfare. But still there was no sign of approval out of Washington. Governor George W. Bush -- and the corporations that stand to profit handsomely from privatization -- were itching for the state to begin the contracting out of some $2 billion worth of welfare programs.

By late February of this year, their patience was wearing thin, so McKinney fired off a letter declaring that "due to the delay in federal action" Texas would begin soliciting corporate plans for the vast privatization undertaking -- with or without federal approval. In response, the U.S. Department of Health and Human Services warned McKinney that "should the state proceed with its plans to release [the privatization bid offering] without our approval, it would be doing so at its own risk ... putting in question federal financial participation."

In May, nearly a year after Texas first requested federal approval to contract out a complex web of welfare services, the Clinton administration finally said the state's proposal went too far -- rejecting what McKinney has called "a model for the rest of the nation."

Indeed, the plan had captured national attention for being at -- or perhaps just beyond -- the cutting edge of President Clinton's sweeping call for the "end of welfare as we know it." Clinton's 1996 reforms enable states to hire businesses to run some welfare-administration programs, but Texas was the first to attempt privatization on a state-wide basis.

There is a great deal of money and power at stake in the Texas gambit, which has resulted in a struggle pitting state employees, anti-poverty advocates and some Democratic legislators against the Bush administration and the corporations waiting in the wings to operate welfare services. In what would be the nation's most lucrative and expansive welfare privatization, Texas intended to put up for bid a multiyear contract worth some $2 billion. On the block was the Texas Integrated Enrollment Service, or TIES, a statewide system that would dramatically restructure the way that eligibility is determined for nearly a dozen welfare-related programs.

The system would coordinate and computerize eligibility reviews in "one-stop shopping" centers where people could apply for several benefits at once. Critics of the plan claimed it was a model for mass layoffs of public employees and neglect of welfare recipients. Handing welfare over to private, for-profit firms, they argued, was counter to the whole idea of public assistance, and they warned that corporations would turn away welfare recipients in order to turn a profit. Proponents depicted a win/win scenario, insisting they could serve people more efficiently and cheaply than state government.

Several powerhouse corporations en-tered the bidding fray for the $500 million-a-year TIES contract: Lockheed Martin Information Management System (a subsidiary of the $30 billion defense department contractor), Electronic Data Systems (Ross Perot's old firm), IBM and Arthur Andersen Consulting.

In its jockeying for the inside track, Lockheed Martin IMS lured onetime aides to high-ranking state officials onto its lobbying team -- prompting a storm of protest and an investigation by the Travis County Attorney into possible violations of the state's Revolving Door Act.

According to Mack Martinez of the County Attorney's Office, the investigation is ongoing and hinges on how closely any former state employees were connected to the programs on which they are now lobbying. Texas's revolving-door law, Martinez muses, "is not as tight as we'd like it to be."

The 1991 law requires state agency officials and executives to wait two years before lobbying or otherwise influencing issues they worked on while in office. According to the statute, those officials "may not represent any person or receive compensation for services rendered on behalf of any person regarding a particular matter in which the former officer or employee participated during the period of state service or employment."

Legal or not, state Representative John Hirschi, a Wichita Falls Democrat and critic of the privatization move, found the hasty exodus from the public sector to private concerns seeking state business to be disturbing. "These high-ranking officials would be of great value to these companies," said Hirschi. "I just don't know about the propriety of this situation, where officials are trying to leapfrog from a destructing state agency into profitable firms."

Relations between the government officials overseeing the TIES contract and the corporations vying for it are incestuous, to say the least. Several of the well-connected lobbyists retained by corporate bidders once worked as top aides to the politicians who sit on the Texas Council on Competitive Government -- a powerful six-person agency that will make pivotal decisions about who wins the TIES contract.

The CCG, created by the Legislature in 1993, includes Governor George W. Bush, Lieutenant Governor Bob Bullock, Comptroller John Sharp, House Speaker Pete Laney, General Services Commission Chairman Alphonso Jackson and Texas Workforce Commission member David Perdue. The council's mandate and scope are far-reaching. Its chief purpose is to study and propose government cost-cutting through competitive bidding and privatization. To this end, the council can require any state agency to enter a bidding competition with "private commercial sources." It can also "prescribe ... the specifications and conditions of purchase procedures that must be followed ... to provide a service," according to the Texas Government Code. Perhaps most important, the council has power to award state contracts to the public or private bidder who "presents the best and most reasonable bid, which is not necessarily the lowest bid."

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