For Immediate Release
Wednesday, July 19, 2000
Private Profits Eat Up $27 Million of Milwaukee's Welfare Funds: New AFSCME Report Shows Taxpayer Dollars Going Substantially to Profits, Not Poor People
WASHINGTON, DC. —Milwaukee, Wisconsin, one of the few American jurisdictions to contract out administration of its cash assistance program to the poor, has completed its first full contract period with deeply disturbing results, according to the American Federation of State, County and Municipal Employees (AFSCME). A new AFSCME report shows that for the contract period of September 1997 through December 1999, the five administering, private agencies for Wisconsin Works (W-2) in Milwaukee County landed $27 million in profits out of a total budget of $318 million.
"Wisconsin's experiment with welfare reform is a travesty," said Gerald W. McEntee, president of AFSCME. "Essentially, the less a private company spends of its W-2 allocation, the greater its profits. The greater its profits, the less money there is available to serve the poor." McEntee also noted that because approximately 85% of the state's welfare recipients reside in Milwaukee County, this failed experiment has had perilous consequences for a large portion of the state's poor families.
McEntee noted that if Milwaukee County were administering the program rather than private agencies, the entire welfare budget would be available to the county for additional investments in public services, and no private entity would profit from reduced spending on services to poor families. The issue of exorbitant profits has caused the state to modify contracts with W-2 agencies for the 2000-2001 period, but even this action will not stop public monies from going to private profits, McEntee said.
The five agencies (two for-profit companies and three non-profits) have entered into contracts to administer W-2 in Milwaukee County and have been allocated taxpayers' money to serve welfare beneficiaries. The profits the agencies have accrued range from $3.5 million by YW Works to $9.9 million by Employment Solutions. Maximum, UMOS and OIC have each accrued more than $4.5 million in profits.
Maximus, one of the for-profit companies administering W-2 in Milwaukee, also has come under fire for many of its employment, contracting and service delivery practices. The company admitted that five of its employees and consultants incorrectly spent W-2 welfare reform money on its bid to win lucrative welfare-to-work contracts in New York and other cities. Wisconsin's Department of Workforce Development is now conducting a more extensive review of Maximus' operations. Included in this review is the propriety of Maximus diverting W-2 clients to MaxStaff, its own temporary help agency.
Maximus also has been the subject of about a dozen discrimination complaints brought by former or current employees who are alleging race, sex and age discrimination. Others have accused Maximus of cronyism and favoritism, which has resulted in the hiring and promotion of friends, lovers and relatives of top management. In New York City, the Manhattan district attorney's office has launched a criminal investigation of Maximus' bid for $104 million in welfare-to-work contracts. The City Comptroller has accused the company of improperly influencing the contract award process.
Copies of AFSCME's report on Milwaukee's W-2 welfare-reform experiment, "Private Profits, Public Needs: The Administration of W-2 in Milwaukee, An Updated Report," can be obtained on AFSCME's web site at www.afscme.org.
