States Expand Privatization of Social Services

During the 1990s, a quiet revolution occurred in the way social services are provided by state governments, and it continues into the new century. Across the United States, state government agencies are increasing their privatization of social services.

It has been generally assumed that social services are more difficult to privatize than other government functions, because defining and measuring performance is more challenging. Picking up garbage is easier to oversee and monitor than ensuring foster children are properly placed. But survey results and real-world experience demonstrate that innovative state officials are overcoming those challenges.

Contracting for Expertise

A 1997 Council of State Governments survey found that social service agencies were the state departments most likely to report increasing their use of privatization over time. More than 85 percent of the responding agencies reported they had increased privatization in the five years prior to the survey. Seventy-five percent of respondents indicated they planned to increase privatization in the next five years.

Child care is contracted out most often, with 15 states reporting privatized service delivery. Consultants, specialists, and independent living support services are privatized by 14 states, while food stamp issuance, domestic violence programs, emergency shelters, and refugee services are contracted by 12 states.

According to the survey, more than half (53 percent) of the state agencies privatized more than 15 percent of their functions. Among the states that privatized the most social services programs are Arkansas, Florida, Hawaii, Kentucky, Michigan, and Utah.

The force driving the trend towards more privatization is the lack of agency personnel and expertise. Over 57 percent of responding officials cited this as the major reason for increased use of privatization. Cost savings have been less of a factor because savings from privatized social services were relatively modest. Most officials (76 percent) who estimated cost savings said they saved less than 5 percent, and none reported savings of more than 15 percent. However, a majority of respondents reported they expect cost savings to take on greater importance in the future.

As agencies successfully privatize functions, elected officials see the benefits and become more comfortable with expanding privatization opportunities. A majority (57 percent) of agency officials surveyed expect that increased support by political leadership will lead to more privatization in the future.

Also important, the survey found that social service contractors are more likely than other private contractors to be carefully monitored. While 57 percent of states responding to the survey reported they do not have an overall, standardized process for monitoring contracts, 57 percent do have such a system in place for social services. Highly visible problems with some social services may have caused state officials to be more vigilant about monitoring outcomes.

Foster Care Privatization in Florida

A case study of a recently privatized social service illustrates the factors that are critical to the success of contracting initiatives. In 1998, Florida passed legislation facilitating a major reorganization of the Department of Children and Families (DCF) and mandating that foster children be placed in private care by 2003.

Governor Jeb Bush recently reported the agency is making progress toward achieving its goal of moving troubled children into the care of community groups. Bush stressed the state was seeking input from private care providers on how best to ensure success, adding "We don't want to give you (private providers) a manual."

The state established ambitious goals for moving children into private, community-based care. Officials expect approximately 30 percent of the 15,000 children currently in the child welfare system to be transferred to private care in the next 10 months.

Florida officials are also carefully measuring the performance of privatized foster care. For example, the YMCA in Sarasota County has taken over child welfare services and reduced the time children stay in the foster care system before they are reunited with family from 24 months under DCF to less than 10 months. In addition, the number of months in foster care before adoption has been reduced from 45 months to less than 30 months.

Bush predicts the Florida foster care overhaul will become a model for other states. With its emphasis on empowering local agencies, establishing performance goals, and monitoring outcomes, the program offers a microcosm of the changes occurring in state-based social services across the nation.

Robin A. Johnson is director of the Privatization and Government Reform Center at the Reason Public Policy Institute.

For more information ...

Competition and Choice in NYC Social Services. Has the privatization of social services resulted in greater competition and choice? This study examines privatization in five different social services. (Baruch College, 1999)

Request PolicyBot documents #6577411 (part 1, 18pp.) and #6577412 (part 2, 17pp.)