San Diego County frequently touts its decisions to outsource several major pieces of its welfare program over the last decade.
By paying private contractors to get jobs and education programs set up for welfare recipients, the county doesn’t have as many government workers, a switch designed to save the county in overhead, payroll and benefits costs.
“It’s real motivation,” said Diana Francis, director of operations for Maximus, one of the biggest companies doing this kind of business with the county. “So if you don’t do the work you don’t get paid.”
But the county recently removed that style of motivation from the contracts, which total about $8.4 million every year, altering an important accountability tool in the government’s efforts to both outsource and move residents off of welfare.
Contractors’ payments used to be contingent on certain benchmarks, such as placing a percentage of welfare recipients in jobs or training programs.
Now, the contractors get paid just for keeping their doors open and processing clients, even if they place fewer people in jobs. The old targets are now just ways the county can evaluate the contractors, not conditions for payment — and the targets themselves have been lowered.
The county says a contractor could still get in trouble, and ultimately lose the contract, if the targets go unmet for too long. But the recession has made the former goals impossible to reach, county officials say.
Before December, contractors had to get two out of every five of their welfare recipients placed in jobs. If they had fewer employed, the county wouldn’t pay them the full amount of their contract that month.
Contractors also had to have half of welfare recipients either working or involved in activities like language classes or job training for at least 32 hours per week. If that participation rate was less than half the county would pay the contractor proportionally less.
But contractors — ranging from giant private sector companies to small local nonprofits — couldn’t keep up with the flood of welfare recipients coming through their doors nor the record unemployment rates killing the local job market.
The contractors had been taking a financial hit, month after month. They weren’t meeting the county’s performance benchmarks, but they still had a lot of work to process and floods of people coming through the doors. So they asked the county to renegotiate the performance measures. County contracting policy allows for this kind of revision if the previous terms become too burdensome.
The county heard from one contractor who had to borrow money in order to keep operating — it was $100,000 in the hole on an $800,000 contract.
“It’s really hard to find people jobs right now,” said Belle Hincon, employment case manager for the Alliance for African Assistance, a nonprofit that contracts with the county to provide some welfare-to-work services for a few hundred refugees in the county’s central region.
So the county’s switch means that the contractors can keep running these programs for the county. The county isn’t spending any more than the initial contract amount agreed upon.
The CalWORKs program has been admired by government officials here for a couple of reasons. One, it transformed the way welfare works, requiring most recipients to get a job or complete vocational training in order to keep their monthly checks coming. Two, it was a key arena for the county to experiment with outsourcing.
But many of the things that made the program successful are now being undercut, by the recession and by slashed budgets in Sacramento. Similar changes are being made around the state as counties grapple with dwindling funds.
The program’s been a favored talking point for county officials. They say it reduced the number of people receiving public benefits while also requiring most recipients to get a job, any job. And it did much of it through money-saving private contracts.
But the county now walks a fine line. If it refused to be flexible on its standards, it could force the contractors out of business. Then, not only would fewer people be employed or participating in the program’s required activities, but the county would have to find a new contractor or roll the responsibility for improvement back under its own roof.
Supervisor Ron Roberts doesn’t like that the county’s contractors are unable to meet the standards, said Tim McClain, Roberts’ spokesman.
“But there’s also a reality of what we’re seeing happen in the economy,” McClain said. “If it came back to the county I don’t know that the county would have any more success in placing these people.”
Contractors are still struggling to live up to their end of the bargain on two key performance targets.
Even after the county lowered the employment target, just two of the six regions surpassed its new standard of 30 percent — down from 40 percent — in December and January.
And only one out of six met the revised participation standard in December and January.
Dale Fleming, a top county Health and Human Services Agency official, said contractors aren’t falling as short of the goals as they once were.
But in some cases, that’s because the goals have been lowered.
For example, in September, the south region run by contractor Maximus had 26 percent of its CalWORKs recipients placed in jobs.
In February, the percentage of recipients in jobs had dropped to 20 percent.
But because the contractors are now asked to shoot for 30 percent employment, rather than the former 40 percent, the county considers the contractor to be performing better in February than it was in September, Fleming said.
Maximus was achieving about 64 percent of the old goal in September, but reached about 68 percent of its new goal in February – even though the actual employment rate dropped, according to the county.
San Diego County Taxpayers Association President Lani Lutar discussed the change in contracts with Fleming, and said she’s confident the county is monitoring the contracts despite the change in the way they’re paid.
“It’s inaccurate to say that there’s complete elimination of accountability,” she said.
But she said when the economy recovers, the county should consider changing the contracts back to the pay-for-performance model.
Frank Mecca, executive director of the statewide County Welfare Directors Association, said counties are trying to just get through the recession and budget cuts.
“It’s a very confused, complicated time for counties who are trying to figure out how to manage in uncharted waters,” Mecca said. “And the same goes for our nonprofit and private partners. We’re all sharing in the obligation to try to make the best that we can out of this situation.”