Indiana gives up privatization effort – watch out California!

Affiliated Computer Systems fails in Indiana

David Parrish looks through his file of correspondence with the Indiana Division of Family Resources about his Medicaid and food-stamps benefits in late July. The former security officer’s doctor has verified he can’t work. (WSJ)

In 2006 amidst much ballyhoo about the efficiencies and expertise of the private sector, Indiana Governor Mitch Daniels led the state into an era of privatization. The most publicized such effort was a $1 billion contract negotiated with a joint venture of IBM and 10 other companies, including Dallas-based Affiliated Computer Systems (ACS) to operate the eligibility function for welfare programs. The press noted at that time that Mitch Roob, then in Daniels’ administration, formerly worked for ACS.

Today (October 16, 2009) the Indianapolis Star newspaper reported that Governor Daniels is abandoning the effort, calling it “an endeavor that just did not work.” The article describes the privatized system as making too many errors and keeping people seeking benefits waiting too long. A nice way of saying the promised efficiencies proved to be a myth, in spite of the boastful claims of those who see privatization as the Holy Grail for government services.

The article points out that critics of this effort said the lesson could have been learned long ago. Just look at Texas, which tried a similar privatization effort and abandoned it in 2007, they point out.

According to the article, some elements of the new system will be retained. But Daniels says “it wasn’t resources, it wasn’t effort, it was a flawed concept that simply did not work out in practice.” So, here we have an experiment with taxpayer dollars that impacted hundreds of thousands of applicants for public assistance that is now characterized by its former champion as “a flawed concept.”

Should Californians be concerned? You bet. The same corporate lobbyists and special interests that were at work in Texas and Indiana to offer lucrative contracts to the private sector to perform this work have been at work in Sacramento. The Legislature and Governor received tremendous pressure to privatize this work in California during the last budget cycle. They did not take the bait entirely, instead deciding to do a study on the feasibility of moving ahead with privatization.

Hopefully the experience in Texas and Indiana will be taken into account in that study. But, watch out for sweetheart deals to companies that pay for “conferences” in faraway places for our legislators, offer them “speaking fees” and make campaign contributions to candidates for state office. The smell of money is in the air.


About Over But Not Out

A retired Orange County employee, and moderate Republican. The editor seriously does not know OBNO's identity as did not the former editor, but his point of view is obviously interesting and valued.