Privatization in practice: human services.

PROFESSOR DILLER: I just want to give a brief introduction of our panelists.

To my immediate left is Anna Burger, who is with SEIU, the Service Employees International Union, which is the largest union representing human services employees.

To her left is Jackie Boggess, who is an advocate in Wisconsin. She is a Senior Policy Analyst with the Center on Fathers, Families, and Public Policy, and she represents and advocates on behalf of clients who deal with privatized human services.

To her left is Liz Krueger. Liz, who is known to many of you as our almost-state senator from the Upper East Side, is actually here as the former Associate Director of the Community Food Resource Center, an organization that coordinates the provision of emergency food services in New York City. Liz was one of the first people to flag issues in the MAXIMUS contract with the City of New York and bring the issues to public attention and debate. (1)

To Liz's left, as you met earlier today, is David Mastran, who is the CEO and founder of MAXIMUS, which is the largest firm that provides outsourced human services in the country.

Finally, there is David Riemer, who is the Director of Administration for the City of Milwaukee. David, in the early 1990s, proposed in an article in Focus magazine, which is the journal of the Institute for Research on Poverty, the adoption of an entrepreneurial model of welfare administration, which first started the thinking about privatizing and outsourcing the administration of human services programs around the country. (2)

I will turn it over to Ms. Burger.

MS. BURGER: Thank you. I first want to thank everyone for inviting me here to present the views of the 1.5 million members of SEIU.

Service Employees International Union is the largest health-care union in North America. (3) We are the second-largest public employee union in North America. (4) We are the largest union of building service workers. (5) So we see this issue from many different perspectives.

Privatization is something that I know a little bit about personally. I was a state social worker for the Commonwealth of Pennsylvania, and then the president of that local. I spent twenty years fighting privatization--as I saw it, fighting ill-advised schemes to contract-out human services. I did so, and I continue to do so now, with a great passion, because I believe, and I believe evidence supports, that contracting out is bad for taxpayers, bad for service recipients, and bad for the workers who spend their lives trying to deliver services.

One of the themes of this conference is that contracting out often comes at the expense of public accountability, and I certainly agree. But I also want to make it very clear that contracting out comes at the expense of workers and the people they serve, because contracting out is one of those "double whammies" of evil. It acts to erode employment standards as well as performance standards.

When it comes to public service and human service, the goals of our members and of our unions are the same as those of the public at large. We all want high standards. We want workers to have the tools and the training required to do a good job. The public wants, and we want, to protect fairness and equal treatment in public programs, to protect people's privacy, and to hold those responsible accountable. Most of all, Americans want public services that they can count on, and we want to provide that.

Workers cannot do that unless they are qualified, well-trained, highly motivated, and fairly compensated. In the public sector, we get those things because we bargain for and demand them through our unions. In the public sector, as people have said, more than forty percent of us are organized. (6)

In the private sector, I believe it is hard to accomplish those things. It is hard to attract and retain competent workers, because less than ten percent of the private sector is unionized. (7)

To give you a concrete example of what the difference means, in 1999, the average hourly wage for a unionized employee was $18.43 an hour. (8) The average wage for a nonunion private-sector worker was $14.30 an hour, and the vast majority of those workers had little or no health insurance and virtually no pension benefits. (9) For social workers, the comparison was $19.31 an hour to $15.32 an hour. (10)

So we must ask: What happens to public sector workers who follow their jobs after they have been contracted-out? Well, one study of privatization in Chicago showed the impact to be dramatic. (11) Workers who moved from their public employment to private contractors saw their wages drop so dramatically that all of a sudden they began to qualify for food stamps, school lunch programs for their kids, energy assistance programs, and other means tested programs. (12)

Some would say--and the Chicago experience might argue--that money was saved by contracting out those services. But one thing is not debatable: this practice created new costs that were shifted to the county, to the state, and to the federal government.

That raises an accountability issue that must be of interest to this conference. It also changes some of the calculations of the alleged cost savings to taxpayers. Equally important is that the practice of contracting out to lower-paying jobs is objectionable for ethical reasons.

In reality today, there is rising support of living-wage laws across this country because people believe that workers deserve a living wage. (13) People do not believe that we should be saving money by contracting out to poverty-wage employers. They think it is wrong public policy, and it is just plain wrong.

We also believe that it is objectionable on practical grounds because lower wages and less benefits attract fewer and fewer workers. The current nursing shortage is an example of this. (14)

Now, in the area of social services, we believe that the stakes are especially high because of the nature of the population receiving the services. Our union represents many workers who provide services to children, needy families, the elderly, and the disabled.

We have witnessed the impact of contracting out not in the abstract, but in the front lines. In recent years, many key social service areas have been heavily contracted out to profit-making companies, including services to the mentally ill and the developmentally disabled. We think there is an overwhelming consensus that the quality of care has declined--that consumers are receiving worse care than before. There are horror stories appearing daily in the newspapers about poor service delivery, fraud, corruption, waste, financial mismanagement, and neglect and abuse of our clients by private contractors. (15)

What is particularly alarming to me is the recent emphasis on block grants in key federal programs and the devolution of services to lower levels of

government. This increases contracting out in the very areas that need the most protection.

There are examples every day in the newspapers. Coming down here today, I was reading The Washington Post. There is a scandal right now going on in Washington, D.C. with Lockheed Martin. (16) It just happens to be the case of the day.

I would say also that the new Bush Administration appears likely to support this trend, which is concerning to us, but they also are going to expand, as we heard earlier, charitable choice. We believe that the expansion into faith-based initiatives is dangerous.

We also know that the overwhelming majority of the public disagrees with faith-based services as well. Studies have shown that the public feels that having religious organizations provide publicly funded programs leads to discrimination based on faith. (17) They are concerned about discrimination both in hiring and in the provision of services.

Our research tells us that the public wants government to be extremely careful, to protect public accountability, and it wants to make sure that when contracting out is done, that we make sure that they are protected, and that their privacy is protected. (18)

I think that Kerry Korpi from AFSME made a strong point: (19) even when you have good managers, often they cannot provide good services, so why do many believe those managers would do a better job when they are monitoring private contracts? The reality is they do not do a better job when they are monitoring private contracts.

The International Accounting Management Association has been tracking contracting out of government services since 1982. (20) Its survey of public managers found that sixty percent of public managers in charge of privatized contracts admit that they exercised no oversight at all of the outsource contracts. (21)

Today I do not want to talk only about all the evils of contracted services and contracting out, though I think that they are many. I want to spend a few minutes talking about the solutions.

We believe that there are solutions. SEIU has drafted the Public Service Accountability Act, (22) or "PSAA," and there are brochures about it here that you can take when you leave. (23)

The Public Service Accountability Act is designed to protect taxpayers and the users of public services by creating an objective way to evaluate proposals for service delivery. (24) This proposed legislation has seven main components.

First, it safeguards taxpayers' dollars by demanding a detailed cost analysis of all costs associated with contracting out. (25) It also requires a minimum savings of at least ten percent in all privatized contracts. (26)

Second, it protects privacy. It prohibits contractors from selling private information, such as social security numbers, income information, and home addresses. (27)

Third, it weeds out unqualified companies. Under the PSAA, prospective contractors are required to divulge their employees' experience and training; to divulge complaints filed against them for violations of federal, state, or local laws. They also have to divulge the...