Texas Again Demonstrates the Pitfalls of Privatization


This past week, the Dallas Morning News revealed that a key figure who contributed to the privatization of Texas' food stamp eligibility program is now receiving taxpayer dollars to help fix the problems that the private system created.  Gregg Phillips, who was Deputy Commissioner at the Texas Health and Human Services Commission (HHSC) and led the push for privatization a few years ago, now heads AutoGov Inc., a company that has received $207,500 from the state government in the past four months to assist in eliminating the errors in the provision and eligibility determination of the state's food stamp program.

As Mike Gross, Vice President of the Texas State Employees Union, relates, "The whole thing smells very bad.  We're now hiring the guy who got us in the mess in the first place.  It is absolutely stunning."

The "Revolving Door" Between the Government and Private Contractors:  As PSN noted in our report, Privatizing in the Dark, a significant issue with privatization is the potential corruption that results from the revolving door between private contractors and state departments.  Gregg Phillips personifies this trend.  Before landing a key role at the Texas HHSC, he performed a similar function in Mississippi, "where he... handed out a major state contract and then gone to work for that firm.  Phillips hired Chris Britton as a consultant for designing the bidding process, after which Britton went on to work for Accenture, the winning bidder.  After Phillips himself left government service, Britton’s company joined with one founded by Phillips to land a $670,000 state contract from the Texas government."

Texas' Experience with Privatization:  In 2005, Texas granted Accenture a $899 million contract to operate the state's food stamp eligibility program.  However, the venture quickly turned sour, leaving thousands of people without benefits for which they were eligible.  Under Secretary of Food, Nutrition, and Consumer Services at the United States Department of Agriculture (USDA), Kevin Concannon, finds that the failed privatization system resulted in "a five-year slide" in processing food stamp applicants.  In fact, Texas now has the worst performing food stamp program in the entire country. Under Secretary Concannon additionally discovered that Texas could be receiving $1 billion more in federal food stamp funds and serve over 650,000 additional applicants if it approved more applications of eligible Texans.  Furthermore, Texas supermarkets are losing approximately $1 billion annually in food sales because of the problems with food stamp provision in the state. Not only has Texas failed to protect its residents, provide benefits to eligible children and families during an economic downturn, and lost almost one billion dollars in potential market activity, but the state is now paying an official who championed the privatization scheme to find remedies for its monumental errors.

These types of incidents undermine public accountability.  Progressive lawmakers should take action to prevent such debacles from occurring by either halting failed privatization schemes, similar to Indiana Rep. Gail Riecken's efforts to end privatization of social services in her state, or require corporate transparency in the state contracting process, much like initiatives in Alabama, Arizona, Hawaii, and Vermont

The Dallas Morning News
- Exclusive: State privatization champion gets contract to help clear up welfare mess
Illinois PIRG - Privatization and the Public Interest
Progressive States Network - Corporate Transparency in the State Budgets
Progressive States Network - Privatization During an Economic Downturn: Still Inefficient and Problematic
Progressive States Network - Privatizing in the Dark
United States Department of Agriculture (USDA) - Letter to SNAP Commissioners