NCPA - National Center for Policy Analysis

Federal Roadblocks To Privatizing Welfare Programs

February 17, 1999

In December, the U.S. Department of Agriculture rejected a request by the state of Arizona for a waiver to allow a private company to determine eligibility for food stamps in a two-county pilot project. Federal officials rejected a similar request from Texas two years ago.

Wisconsin also wants to try privatizing food stamp eligibility determination; however, state officials think their plan might pass muster with the USDA.

  • Arizona wanted to allow people seeking benefits under its welfare-to-work program to be able to apply for an array of programs in a single visit.
  • Arizona would have given private vendors financial incentives for getting people off food stamps, says a Wisconsin official, and such incentives are why federal officials want states to keep using public employees to determine benefit eligibility.
  • However, Wisconsin's plan includes no such incentives, and the goal is to reduce food stamp caseloads through employment programs.
  • Florida has also applied for a waiver to allow a private vendor to determine eligibility for food stamps, Medicaid and cash assistance.

Arizona wasn't hopeful that its privatization plan would be approved, so in September it awarded a $37 million contract to a private firm to run programs that don't require a waiver -- such as training, job counseling, child care and transportation support.

Of course, instead of one-stop shopping, people seeking benefits will have to visit a state office to apply for food stamps and go to a different office to apply for other benefits.

Source: Ellen Perlman, "Setbacks for Privatized Welfare," Governing, February 1999.


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