I’m late to note this, but for those who haven’t seen it, Gary Welsh at Advance Indiana posted a blog entry on July 11 that is really required reading for anyone interested in the realities versus the myths of privatizing government services. It recounts the efforts of Carl Moldthan to analyze and offer suggestions for the efficient reform of the Family and Social Services Agency to save money. Moldthan was a Republican supporter and local government consultant tasked with reducing waste at FSSA.
The short version (and, really, go read the long version) is that Mitch Roob was determined to privatize FSSA functions before any review was conducted of the best way to improve services and reduce waste. Moldthan’s suggestions fell on deaf ears, presumably because privatization was the desired end in itself, not one of many potential tools for creating better, more efficient government.
The myth is that privatization will create cheaper government. The reality, all too often, is that it simply creates a profit center for well-connected friends and well-wishers of the people making the privatization decisions.
Going back to 1984 when Goldsmith and others were looking at and pushing privatization (Reagan also was doing this at the federal level), I had a seminar with Graham Toft at Purdue on privatization. It was obvious that certain people were enamored with the idea, and they never addressed or acknowledged the potential for abuse or the shortcomings of the scheme. Dr Toft was a key player in this effort but his admonitions that things could be abused were ignored.
But these people, roob, mitch, goldsmith and others are still around pushing the idea, despite evidence that it does not lead to improved services or save money.
I am in a web of commitments right now that keep me from reading or writing as much as I’d like, so I’ve saved that Advance Indiana piece for a quieter time.
But I’ll just say Medicaid privatization was a disaster. The need for efficiency is huge at FSSA, but a morale-busting privatization boondoggle that drives experienced state employees to “get while the getting’s good” is not the way to improve administration of a complex program. Whether I vote for Mitch for anything again or not, I’ll forever have a chip on my shoulder about this debacle.
If the conclusion is that this was more for the benefit of well-connected friends than for the good of the program, that should come as no surprise; it is the American Way these days, as Gary Welsh’s major obsession (tax perks for billionaire sports franchise owners) attests.
Possibly I’m too cynical, but in some circles I suspect that the potential for abuse, resulting in the reward of the wealthy at the expense of the poor & weak is seen as more of a feature than a bug.
(And I’m aware that, as a not-starving collection attorney, I may have a beam in my eye with respect to that last comment.)
Even Democrats privatized awhile back. When Joe Kernan was Mayor of South Bend, he “privatized” the city’s Parking Garages. From their new employer, the handful of former city workers at the parking garages received a $ 2 per hour paycut plus they also lost their health insurance coverage. Progress for the city, but not for the employees.
Privatization can be good or bad, depending on its application. Many believe that private companies are typicall more efficient than government entities. However, there is certainly a significant possibility for abuse and corruption (especially in my original home of Chicago).
Paul Ogden has put together a reasonable list of what makes a project a good candidate for privatization. Essentially:
1. Competing vendors ready and able to provide the service.
2. Open bidding.
3. No long term contract.
4. Subject to public scrutiny
5. Subject to accountability
6. Company management not politically connected
Privatization is a lot like communism, I think (though on opposite ends of the spectrum); both ideas seem fantastic on paper (to the people of their respective ends of the spectrum), but their execution is often destroyed by the most basic of human instincts — greed. We have seen communism generally completely fail throughout the world because there is no way a society can be equivalent on most levels, and the greed of a select few will ensure there will be corrupt leaders at the top oppressing those below.
Privatization will rarely succeed because of the greed of those at the top in government who want things done their way only; Mitch Roob (and you know Mitch Daniels as well) had no intent on providing the best service to the FSSA and its welfare program — and now the Moldthan story is inside, concrete confirmation of all the stories that have been escaping there the last few years. Instead, the state was intent on having its way or no way at all, and now taxpayers are paying for it dearly.
I have read Paul Ogden’s treatise on privatization before, and his points are excellent; but, how often do we see the stars align and there is competitive bidding, public scrutiny, government oversight and no political connections for privatization deals? I can’t think of any times in this state where it is successful, saves taxpayer dollars, increases efficiency, and is devoid of all the negatives. Typically politicians from either party do not have the interests of the people in mind when they privatize.
Much like communism, privatization will never really work. My father, who is a fiscal conservative working in the government (but a practical one I think) always says, regarding privatization of government functions, that private companies have no intent on helping taxpayers — they are in it for profit alone. I mean, really, does IBM actually care about the welfare of poor Hoosiers and Indiana taxpayers?
Government has always outsourced work to contractors. Buying government vehicles from a commercial manufacturer is a form of privatization — the government could make its own vehicles. The government could (and sometimes does) pave roads instead of hiring a contractor to do it. The choice of whether to do the task or contract it out should be pragmatic. The goal should be to deliver the product or service at the requisite quality, quantity and reliability for the lowest price. When it becomes an ideology driven process expect bad things to happen.
Thanks, Doug. Carl’s observations based upon his study of the county welfare offices and various operations of the FSSA were far superior to the KPMG study Roob had prepared by an old friend of his shortly after he took over the agency. I remember when Roob was working for Goldsmith’s campaign when he ran for governor. He had his sights set on privatization at FSSA way back then. He made it known to anyone listening that Goldsmith was going to put him in charge of FSSA. He and Goldsmith both wound up working as high-paid executives for the very company, ACS, that got a lucrative role in the privatization deal after Goldsmith’s failed gubernatorial bid. Flash forwared 8 years and Roob gets a key role in Daniels campaign and is put in charge of the agency to deliver a big contract to his former employer after Daniels becomes governor.
Affiliated Computer Services, has created many of the core issues.
They lack ethical standards of responsibility and accountability
which derives from the top corporate management and oozes down to middle and
lower management. Their management staffs are deficient and uncommitted in
identifying the fundamental problems. Politics is dominant in upper and middle
management, and middle mangers make arbitrary decisions and usually do not
suffer the consequences. Nor are they held responsible for the mess. In other
words, the exploitation and castigation of those working any position other some
form of management will continue. The operative assumption should be that
someone, somewhere, has a better idea; and the operative compulsion is to find
out who has that better idea, learn it, and put it into action to find
initiatives to improve client services, total claim results, operational
efficiency, and staff retention. An effective organizational structure that
would ease working relationships among the various entities and have a
set order and control that would enable monitoring of all processes. Using a
divisional structure indisputably is not working. A matrix type program would be
evidently a more considerable approach.
Our Brothers and our Sisters so desperately are in need of services. They are
being denied their right of benefits in a fallible process. Their subsistence
is being raped by corporate greed; our people waiting four months for food and our
people waiting six months for health coverage. This company has fabricated their
reports while those in my church congregation suffers and our neighbors and our
children suffer. It’s as bad as the man that began approaching a widow in the
congregation for money. Indubitably GROSS NEGLIGENCE.
Their greed and self absorbed agendas try to persuade others to deny reality so
their power-seeking missions can continue unobstructed. The corporate managers
in Indianapolis, manipulate the truth, and capitalize on anything that suits
their purpose, even if it stands to destroy other aspects of life; human life.
They are power-hungry people distorting the truth by making it seem they have
more power by falsifying reports and lying to justify the of the emotional fear
as a weapon with which to overpower. Do not be deluded by the rhetoric of their
forked tongues.
I deeply appreciate the release of this interview and the subsequent letters Mr. Moldthan sent to the leadership. I just retired from employment with the modernization after two years, after retiring from the state after more than 30 years. Mr. Moldthan ‘s research was polite and thorough and when he left, we heard nothing more about it. Now we know why. “Modernization” is crippled on several fronts and I will be working as a former insider/eligibility worker to put the system back again. The hatefulness by the Governor and Roob was apparent immediately for eligibility staff and generally poisoned the input by staff that would have affirmed the core of Mr. Moldthan’s recommendations. As a veteran eligibility worker who is proud of the work done for the people, I thank Mr. Moldthan and Advance Indiana for this article. It will be the beginning point for several “insider” articles I plan to do.
Thanks Fred. If you think of it, I would appreciate a heads up when you do those articles.