Private Approach to Public Welfare: an L.A. Innovation

When Los Angeles County set out to comply with new state and federal requirements to move people off welfare, it alarmed the social services bureaucracy in Sacramento by taking a most unusual step.

In a move unique among local governments, county officials turned over supervision of its massive workfare program to a private company.

State officials, both before and after the county acted, repeatedly objected to the notion of privatization in such a sensitive public domain involving people’s livelihood and well being. The state-federal GAIN (Greater Avenues for Independence) is designed to train and place welfare recipients in self-supporting jobs.

The county stuck to its guns, however, and so far has gotten its way. Alone among public jurisdictions anywhere that use state and federal funds for such a purpose, Los Angeles County has placed a private firm in charge of GAIN.

The county overcame the state’s objections by using the personal touch of well-placed people, all of the same ideological persuasion. A network of conservative Republican politicians, old friends since they were Sacramento colleagues during Ronald Reagan’s governorship, intervened and eventually prevailed--on behalf of themselves, the county and the private company that holds the GAIN contract.

“It was serendipity that we were all involved in this,” said John A. (Jack) Svahn, a top former California and Washington welfare official under Reagan and vice chairman of Maximus Inc., the firm that is running the $7.9-million GAIN program in the county.

In phone calls, meetings and sometimes by the use of their prominent names, Svahn, county Supervisor Pete Schabarum and David B. Swoap, former federal and state welfare official and one of the authors of the workfare concept, provided the key to salvaging the private contract idea.

“I placed a call to somebody and said this is getting ridiculous,” Schabarum said of his role in breaking the state-county deadlock in October.

Statewide, GAIN was designed as the ultimate answer to the nagging question of how to get welfare parents off the dole and into self-supporting jobs.

Historic legislation adopted by the state in 1985 and the federal government this year requires welfare parents with children older than 6 to enroll in remedial academic classes and job training and, ultimately, to find work.

Elsewhere in the state, the counties, using state and federal funds, administer the education and job training programs and set up child care. In Los Angeles County, however, that is done by the Maximus company, which began hiring a staff in October after the Board of Supervisors gave the go-ahead. Maximus is in the early stages of the program that, when it hits full stride, could be processing 100,000 recipients.

Maximus got the contract after Los Angeles County, with 40% of the state’s welfare parents, decided that it could save money by looking for outsiders to administer GAIN.

Bids were circulated last spring. Responses came back from, among others, Catholic Charities, the Young Women’s Christian Assn. and Maximus Inc., a Virginia-based public relations and consulting firm that advises government agencies on how to run welfare and other programs more efficiently.

Support of Voters

In deciding to go private, the county had the authority of voters, who passed Proposition A in 1978 permitting the Board of Supervisors to contract with private firms in an effort to save money and reduce the number of county employees.

In the intervening years, the county has awarded private contracts for such positions as auto repair and golf course personnel, parking lot attendants, custodians, county doctors and flood control drain cleaners.

Top county officials, including County Administrative Officer Richard Dixon, said the GAIN contract represented one more beneficial opportunity to turn public work over to private companies.

From the start, the idea was controversial, criticized by top Deukmejian administrators and by liberal Democrats, including an author of the GAIN program, Sen. Bill Greene of Los Angeles, whose impoverished South-Central district is the home of many welfare recipients.

They said private operation of GAIN violated state law. Governments cannot allow private parties to make decisions, for example, on a recipient’s mental health or employment potential, issues that routinely come up in the GAIN program, they argued.

One high-ranking Deukmejian official who asked that his name not be used questioned the idea of profiting from welfare, whether by a corporation or a recipient drawing excessive benefits.

Pet Project

Despite continued opposition from the Deukmejian Administration and Democrats in the Legislature, the county moved ahead with what was becoming a supervisorial pet project. Privatization was and is strongly supported by a majority of the board as a fair and efficient way of saving the county money.

Aware of the state opposition, the informal network began to form to change the Deukmejian Administration’s stand.

A vital member of the network was the board’s most enthusiastic backer of private operation of GAIN, Schabarum, 59, a GOP Assemblyman for five years during Reagan’s tenure as governor. He left Sacramento in 1972 when Reagan appointed him supervisor.

Another in the network was Svahn, 45, vice chairman of Maximus, the company that eventually won the county contract. He was Reagan’s state director of social welfare in the early 1970s, when he got to know Schabarum, and he held important welfare posts in Washington in the Nixon and Ford administrations.

Washington Roles

After Reagan became President, Svahn was social security commissioner, undersecretary of the Department of Health and Human Services and chief domestic policy adviser to Reagan. For a short time, Svahn was a fellow at the conservative Heritage Foundation; he linked up with Maximus about a year ago.

Schabarum and Svahn worked together on other matters. For example, Schabarum wants to be secretary of transportation in the Bush Administration. He said he called Svahn, who has strong conservative connections in Washington, to discuss the appointment. Svahn confirmed the call in a telephone interview, saying, “You have to let it be known you’re interested in one of those positions. People generally do tend to call people you know.”

Another in the network was Swoap, 51. A private lobbyist for Los Angeles County, he was an architect of the 1985 GAIN law, drafted while he was Deukmejian’s Health and Welfare Agency director. Another alumnus of the Reagan governorship, he was state welfare director.

When Reagan was elected President, Swoap became undersecretary of health and human services. Later he moved back to Sacramento to run the state Health and Welfare Agency for Deukmejian.

He is in a partnership with Michael Franchetti, Deukmejian’s former finance director, as a private lobbyist. Clients include Mobil Oil, Pepisco and Eli Lilly & Co.

The old colleagues went into action last summer on behalf of Svahn’s company, Maximus. Their immediate task was to remove the Deukmejian Administration’s objections to a private company administering a government program. By this time, Maximus had been awarded the GAIN contract contingent on state approval.

The Swoap-Franchetti lobbying concern, with its Deukmejian connections, was crucial. “One of the reasons we are retained by Los Angeles County . . . is to try to help them work through the bureaucratic maze in Sacramento,” Franchetti said.

Svahn, trying to save the contract for his Maximus firm, also played a part in the lobbying effort. By chance, Svahn saw Swoap in Sacramento. He learned that Swoap was lobbying for Los Angeles County and that their interests coincided. From then on, he said, he had a number of conversations with Swoap in which the contract was discussed.

Svahn also contacted Schabarum aide Tom Hibbard to see what the supervisor was doing to help, but he did not talk directly to Schabarum, according to both men. Hibbard said he referred Svahn to the governor’s office. He said Svahn probably had as much influence there as Schabarum.

Schabarum, meanwhile, already had been brought into the fight to privatize GAIN at the urging of Dixon.

“It would be most helpful if you were to contact the governor or (chief of staff Michael R.) Frost of his office, to enlist his support for our current efforts,” Dixon and Department of Public Social Services Director Eddy S. Tanaka wrote to Schabarum on Sept 9.

“We believe that the current (state) concerns will not be resolved without the intervention of the governor’s office, “ the two county officials wrote. Deukmejian and Schabarum served together in the Legislature.

In the background was the improvement in relations between Los Angeles County and the Deukmejian Administration since April, when Frost succeeded Steven A. Merksamer as chief of staff. Merksamer had little interest in county problems, officials said.

Frost spent more than two hours on April 12 in a private wide-ranging discussion of county issues with at least three members of the board, Dixon and others.

Apparently, the meeting violated the Brown Act, the state law that bans most closed meetings of government bodies, because a quorum of the five-member board talked public business in private. Dixon said, however, that he assumed the meeting was legal because County Counsel DeWitt Clinton “was present and did not admonish us that there was a violation.” Clinton did not respond to several requests for comment.

The meeting appeared to mark a favorable turning point in relations between the county and the governor’s office.

Schabarum confirmed as much in an interview with The Times last week. “There’s a far more timely turnaround in communication with Mr. Frost,” he said. By chance, his point was emphasized when he interrupted the interview to take a telephone call from Frost, the governor’s chief aide.

On Oct. 13, the improved relations paid off for the GAIN privatization effort. Vance Raye, Deukmejian’s legal affairs secretary, called state and county officials and Swoap into his office, where the conflict finally was resolved.

A compromise was reached that resulted in a few procedural changes for the county but, overall, with permission to proceed with the private GAIN contract. And, resolving the major sticking point, state officials said they had satisfactory assurances that the county would not permit Maximus employees to exercise judgments in individual workfare cases.

Schabarum said he had used some Deukmejian Administration contacts to “try to unwind (the problem) and get it on the right track.”

There are still obstacles. A suit filed by county employee unions challenging the legality of the private contract is pending in Superior Court.

And there still is the outside chance of federal officials intervening. The contract is before Family Services Administration Director Wayne Stanton for final approval.

THE CHIEF ARCHITECTS