W-2 Can Benefit from Reforms Developed in New York City

February 18, 2006
Andrew R. Feldman

The Milwaukee Journal-Sentinal

In the 1990s, Wisconsin rightly earned a reputation as a leader in welfare reform. It was one of the first states to require able-bodied recipients to work or receive job training in order to qualify for benefits.

At the same time, it expanded supports for low-wage workers to make work pay for families leaving the rolls. These innovations had, by the late 1990s, made Wisconsin as famous for welfare reform as it was for cheese.

Now, almost a decade after its W-2 welfare program became law, implementation problems and scandals in welfare operations in Milwaukee have threatened the Badger State's image as a leader in social policy.

More importantly, they imply that poor families did not receive the help they needed and that tax dollars were wasted.

To boost the performance of its welfare-to-work services, Wisconsin should draw on policy innovations enacted elsewhere.

An important source of innovations today is New York City. Its welfare system has several features that Wisconsin — and Milwaukee in particular — should replicate.

First, New York has developed an aggressive system of accountability. There, as in Milwaukee, private contractors (non-profit and for-profit organizations) deliver all welfare-to-work services.

But in New York, providers must come before city officials several times a year for VendorStat meetings.

In each meeting, city officials review the provider's performance measures and ask tough questions about problem areas. A random sample of case files is also examined to monitor service quality.

VendorStat meetings foster a culture in which ongoing improvements are expected, not just desired. In Milwaukee, no such accountability tool exists.

Second, New York contracts with most providers on a pay-for-performance basis.

This means that providers get paid by the city only if the welfare recipients they serve become employed and stay employed. No results, no pay.

Pay-for-performance contracts give providers a sense of urgency about helping people gain self-sufficiency. They also simplify oversight, allowing city officials to focus on monitoring outcomes rather than how providers spend money.

In Milwaukee, on the other hand, providers are paid mostly based on services delivered, not on results.

Third, New York has reduced the risk of mismanagement by contracting with almost a dozen service providers, rather than just four providers as in Milwaukee.

This increases competition among providers and makes it easier for city officials to stop contracting with poor performers.

A final point of difference is that in New York, city workers - not private contractors, as in Milwaukee - decide who is eligible for benefits and, also, who is considered "work ready."

Keeping these functions within the public sector ensures that assessments are not influenced by profit motives. It also creates a clearer chain of accountability if problems arise.

New York's system is not perfect. In particular, the city's welfare rules are quite loose, allowing many recipients to avoid participation and work obligations without facing major penalties. In this respect, New York could take a page from Milwaukee, where rules are enforced more strictly.

The learning that can occur between welfare systems today is an important benefit of the national welfare reform bill passed in 1996.

States, and often cities, run their own welfare programs, making them innovation labs from which others can learn. New York's focus on accountability and results could, through replication, ratchet up performance in Milwaukee's welfare system.

With 41% of children in Milwaukee living in poverty, innovation in helping adults gain stable employment and self-sufficiency cannot come too soon.

Andrew R. Feldman is a doctoral candidate in public policy at the Kennedy School of Government at Harvard. A native of Milwaukee, he is writing his dissertation on New York City's welfare system.

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