Contractual welfare: non-accountability and diminished democracy in local government contracts for welfare-to-work services.

• Author: Bezdek, Barbara L.

INTRODUCTION

The Welfare State of the mid-twentieth century has been supplanted by the rise of the Contractual State, miring welfare reform in the United States in this worldwide reinvention of government. Moving people from welfare to work became a primary goal of federal welfare policy with the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (the "Act"), (1) and the Temporary Assistance for Needy Families ("TANF") program it created. (2) The Act restructured welfare administration by replacing the prior entitlement-based program with fixed block grants to the states, thereby devolving significant control over welfare policy from the federal to the state level. This new structure also expressly permits states to devolve welfare policy and operations further still, to the county and city levels, and even to private vendors. (3)

As the "devolution revolution" manifests itself in the administration of welfare benefits, new issues of accountability--and indeed, democracy--arise. Accountability problems multiply because familiar rules of administrative law do not clearly constrain the new regime of the Contractual State. Moreover, devolution insulates agency decisions from public input and judicial review, masking whether welfare reform generally promotes permanent employment for recipients.

The erosion of administrative law structures diminishes democracy in three respects. First, the rules of the new contractual regime are not generated by processes that require or invite public participation, even those analogous to the imperfect models of administrative rulemaking. Second, the new contractual regime lacks the transparency we have come to expect of rule-bound welfare administration. (4) The Contractual Welfare State's core features--its actors, powers, points of influence and access, and opportunities for remedy--are downright opaque to the very citizens in whose name welfare purports to be reformed. Third, there is no effective method, and scant tools, by which citizens can obtain needed information to judge the efficacy of the new system. The opacity of the new regime compounds this information need because it disperses the sources and accountability for collecting and dispensing relevant information. For example, local governments need not produce information in a manner that institutionalizes or supports the public's evaluation of the operations and outcomes of Contractual Welfare. (5)

Part I of this article probes the deficits of Contractual Welfare and canvasses potential solutions. Part II includes a case study of Baltimore's own implementation--under a strong "work first" philosophy, and in substantial reliance upon public and private vendors for the delivery of work-related services--of the TANF program. (6) Part III offers some direction as to where this process can and should go from here. (7)

The case study illustrates key features of the nation's massive shift from public to private provision of social services, long the province of government. (8) This rapid and remarkable change has been accompanied by dramatic declines in welfare caseloads, a national average of forty-two percent between 1993 and 1998. (9) These declines most likely reflect multiple factors such as the booming economy, increases in the minimum wage, and certain structural changes within the system. (10) Presumably, decreased benefits and state work requirements have influenced this decline as well. (11) The government's ongoing use of private contracts in this rapid change, however, raises troubling issues of accountability and efficacy.

Whether welfare agencies and their contractors are in fact aiding TANF recipients to find employment, on penalty of sanctions and the deepening poverty of their children, is a question of great public concern. Only an accounting from public officials can reveal whether families who leave the welfare rolls are swimming along in the swirling new economy, or are sinking out of sight into unemployment and child-risking poverty. The new structure of welfare makes this accounting all the more elusive.

The Act of 1996 replaced the old AFDC program with TANF, abolishing entitlement to assistance by any individual or family under any state program so funded. (12) Under the Act, states must require all parents or caretakers receiving assistance to work, "once the State determines the parent or caretaker is ready to engage in work, or once the parent or caretaker has received assistance under the program for 24 months (whether or not consecutive), whichever is earlier." (13) Federal TANF monies may not be used to provide cash assistance to a family that "includes an adult who has received assistance ... for 60 months," (14) and a state's federal grant will be reduced if the state fails to meet the mandatory work "participation rates" set in the Act. (15) The exceptions to the work requirements are few, albeit significant. For example, single parents with infants under the age of twelve months may be excused from mandatory work, (16) as may single custodial parents caring for a child who is not yet six years of age, and who can demonstrate the inability to obtain needed child care. (17) Countable work activities for the state include actual employment, of course, but also a variety of activities ostensibly related to work, but not necessarily leading to sustainable employment or clearly calculated to do so. (18)

The risk that agencies may direct TANF recipients into activities that satisfy the state's federal obligations--but do not aid parents in finding permanent employment that supports their families--makes it imperative to examine the actual policies, practices, and objectives of the state as it spends not only the federal block grant, but also the recipients' lifetime welfare limit. This article analyzes two related problems posed by government's use of contracts for purchasing welfare-to-work services. The first is an accountability problem: the duty of public officials and managers to explain or justify their actions, and to provide a remedy to those members of the public who suffer loss or injustice. The second is a problem of administrative efficacy: the issue of maximizing performance through these new institutional arrangements.

Citizens and policymakers are in uncharted waters. The New Federalism devolves many changed and complex obligations to state and local governments, giving rise to a New Localism. Furthermore, today's New Economy has forced this nation to revamp its vision of human capital by raising the quality of American education and workforce development--all symbolized by a New Workforce-Investment enthusiasm at the federal level. (19)

The roles and responsibilities of the welfare bureaucracy have changed rapidly and dramatically. Local agencies, which for decades provided and withheld cash assistance, now are expected to move welfare recipients to work. Within this sea change at the agency level, caseworkers' roles and responsibilities have changed as well. Now it is up to the welfare intake worker to assess a TANF applicant's needs, skills, and interests, and to match each client to a range of services identified by agency administrators to move recipients off the welfare rolls and into the workforce.

Shaping the context of the caseworkers' shifting responsibilities is the juggernaut of privatization. To comply with TANF, many states are privatizing by contracting out services that have long been the province of government, or by purchasing a patchwork of services beyond their training and experience. The usual rationale for privatization is to bring to government the presumed efficiencies and innovations of the marketplace, including management by performance outcomes and profitability. (20)

It is not obvious which new mechanisms will permit citizens to hold state and local governments accountable in their performance of these new roles and responsibilities. Under the former AFDC system, welfare administrators could be held accountable for their policies, in part, through notice and comment rulemaking. (21) Moreover, judicial review afforded a measure of substantive review of agency policies, reinforcing the principle of public participation inherent in notice and comment rulemaking. (22)

Regulatory procedures under a due process model require first naming an action as harmful, blaming the responsible agent, and then claiming redress. (23) In the contractual system, however, agencies feel freer to make fewer rules that are subject to the devices of oversight. Without the specification of injury and designation of blame-bearers, individual hearings are less effective means for naming, blaming, or claiming for injuries resulting from, and embodied in, a web of poorly designed or implemented contracted services. Indeed, much of what the new model of welfare-to-work staff does is to assign welfare clients to job readiness or work-training vendors. The staff person either dispenses or withholds advice, encouragement, or understanding of clients' particular needs for childcare, transportation, or care for disabled family members at home. Furthermore, many actions taken by welfare workers are not treated as "determinations" subject to review, nor are unfair decisions captured as the denial of "benefits" that can be vindicated in the hearing process.

New forms of governmental accountability are required. These measures should include invigorated forms of public input and oversight--an upgraded toolkit of citizen action, if you will--in order to hold government to higher levels of performance for its articulated policy objectives. Also ripe for review is the premise for double-devolution by states to local governments for welfare-to-work services under TANF. I argue for state limits on local control of welfare-to-work services comparable to those retained for workforce and economic development.

1. CONTRACTUAL WELFARE

   1. Privatization's Premises

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