WPRI Report:

Ten Years of Welfare Reform:
Five Ways to Fix W-2 

By David Dodenhoff, PhD. 

(Continued)

Fix Three: Insist on Real Work for Everyone Who Can Work

The meaning of "work" under welfare reform

The "Fix Two" discussion of education and training should not divert us from an important fact: welfare in Wisconsin (and everywhere else) now involves work requirements. That phrase, however, means different things to different people. For some, "work requirements" mean that families on welfare cannot collect a check forever; eventually, they will have to leave the rolls and get a job. For others, "work requirements" mean that welfare is no longer a something-for-nothing proposition; anyone receiving a welfare check has to engage in productive activities in return. Strictly speaking, though, those activities need not involve literal work. Instead, they might include job search, for example, or educational activities. For yet others, "work requirements" mean that adults receiving a welfare check must do some kind of real work in return. This could be part-time, low-wage work for a private employer, supplemented by welfare, or it could be volunteer work in a community service job arranged by the welfare agency.

How much work is required?

In their rhetoric, at least, both Congress and the state of Wisconsin have embraced an interpretation of "work requirements" that strongly encourages actual work while on welfare. Earlier this year, Congress reauthorized the federal Temporary Assistance for Needy Families (TANF) program that provides much of the funding for W-2. Though W-2 has its own, state-specific rules and requirements, programs funded with TANF money also have to meet federal requirements. Under those requirements, 50 percent of adults in the single-parent caseload (that is, the caseload headed by only one parent-a mother or a father) generally must be engaged in at least 30 hours per week of work activities. At least 20 of those hours must come from the following list of "core activities":

• Unsubsidized employment,

• Subsidized private sector employment

• Subsidized public sector employment,

• Community service programs/unpaid work experience,

• On-the-job training,

• Providing child care assistance to an individual in a community service program,

• Job search and job readiness assistance, and;

• Vocational educational training.

The first six items in this list are more or less synonymous with "work." Congress has not limited the number of hours or the amount of time participants may engage in them and still be counted toward the 20-hour requirement. Job search/job readiness and vocational educational training, on the other hand, are limited-to 12 weeks per year in the former case, and 12 months over the course of a participant's lifetime in the latter. (There are also limits on the percentage of the caseload that can engage in vocational education activities and still be counted as work activity participants.)

After the basic 20-hour requirement is met, clients can make up the remaining 10 hours from the preceding list, or from the following list of "non-core activities":

• Job skills training directly related to employment;

• Education directly related to a specific occupation, job, or job offer; and

• Satisfactory school attendance at a secondary school or a course leading to a GED.

To summarize (and oversimplify somewhat), Congress requires that roughly half of the W-2 caseload be engaged in at least 30 hours' worth of work activities per week. At least 20 of those hours must come in the form of activities that consist of different forms of actual work, whether paid or unpaid. Exceptions to this 20-hour requirement can be made-albeit temporary ones with specific time limits-for job search and job readiness activities, and for vocational training. The remaining 10 hours' worth of participation can be made up from any of the 11 activities listed above.

How much work actually takes place under W-2?

As with education and training activities, the state does not routinely publish information on the amount and kind of work taking place under W-2. Again, though, other sources of information are available-albeit dated ones. A WPRI study, Wisconsin Works: Only Work Should Pay, contained data on work activities among adult W-2 participants during the period running from the first quarter of 2002 through the third quarter of 2003. The following figures indicate the percentage of W-2 clients engaged in at least some work activities-that is, one or more of the first six items in the core activities list above-and the percentage engaged solely in work activities. 

The first column indicates that although two-thirds of W-2 clients were engaged in some kind of actual work, roughly one-third were not working in exchange for their benefits. The second column indicates that only about one-quarter of W-2 clients were being paid for work and work alone.

The federal government also has published data on work participation rates for federal Fiscal Year 2004, which ran from October 1, 2003, through September 30, 2004. The following data indicate the percentage of non-disabled, adult W-2 work participants engaged in the first six core activities-the activities roughly synonymous with "work"-during that period.³³

Because some clients may have participated in more than one work activity, the percentages may not be added. Clearly, though, and consistent with the WPRI data presented above, a majority of W-2 clients were engaged in some form of work activity in the reported time period.

That a W-2 client was engaged in work does not, however, mean that he or she was working 30 hours per week, or even the 20 hours required for core activities. Unfortunately, the federal data make it difficult to determine what percentage of adults were achieving the 30-hour minimum, and what percentage were not. Data do exist, however, regarding the average number of hours of work per week for adults participating in unsubsidized employment, community service, and work experience, respectively.

These data indicate that a very small number of W-2 participants may have combined activities across two or three areas to achieve 20 or 30 hours' worth of work per week. Mathematically speaking, though, it is clear that the vast majority of W-2 participants with actual work hours were not achieving 20 hours per week of work activities, let alone 30.

To summarize, the most recent available data indicate that a majority of W-2 clients are engaged in work activities while on the W-2 caseload. At the same time, somewhere between one-third to two-fifths of adults on W-2 are not engaged in any form of work. Furthermore, even those who do work under W-2 are putting in a comparatively small number of hours (fewer than 20 per week, in most cases).

Discussion and recommendations

The team that produced the original W-2 proposal had a clear expectation that every able-bodied adult on welfare in Wisconsin would engage in productive work in exchange for his or her benefits. This reflected the emergence, in the 1990s, of the idea that welfare should entail reciprocal obligations. Specifically, in exchange for a monthly cash payment, food stamps, and health care, welfare recipients would be expected to participate in activities to improve themselves, the community, or both.

But why work activities, in particular? Why not intensive education and training? Why not parenting, which is work after all, and important work at that? First, in American society there is an expectation that able-bodied adults who lack independent means will support themselves through work-not education and training, not child-rearing, but work. There is no compelling reason not to extend this expectation to welfare parents (except those incapable of work). Second, a common characteristic of the welfare poor is highly inconsistent employment. Most welfare clients have a work history, but not one of sustained employment over long stretches of time. Part of the logic of work while on welfare, then, is to help acclimate clients to the realities of the work world-where one's livelihood depends on productive, daily labor. This is something that only work itself-not education and training, not child-rearing-can really do. Third, requiring work of the welfare poor is a matter of fairness toward the working poor. Were it not for work-often unpleasant, unrewarding work in undesirable locations and at odd hours-many members of the latter group would themselves be on the welfare rolls. (And some still are.) Requiring welfare clients to do actual work, then, is a way of honoring the efforts of the working poor who do not depend on welfare, and promoting broader cultural values.

With those principles in mind, the following are recommendations for an improved administration of work activities under W-2:
The Department of Workforce Development should set an expectation that at least 75 percent of the W-2 caseload work-in subsidized or unsubsidized employment, or in a work experience or community service slot-at least 20 hours per week.
This is consistent with the federal expectation of 20 hours per week in core activities. It also entails a meaningful, though manageable, commitment to work: in most cases, four hours per day, five days per week. Furthermore, the half-time work schedule would leave an additional 15 to 20 hours per week for education, training, and job search. For those for whom these activities were inappropriate, an additional 10 hours could be used for work.

Is it reasonable to expect this much work from W-2 clients? There are two ways to look at this question-in terms of fairness and practicality. Thinking about fairness, the maximum monthly cash grant under W-2 is $673. A client assigned 20 hours' worth of work per week would be earning about $8.40 per hour-not counting food stamps and health care. This is well over the minimum wage, and therefore seems reasonable. However, the client could also have additional hours of participation that, if included as compensable activities, would drive the hourly wage well below the minimum. There is no argument to be made, though, that education, training, and job search should receive the same compensation as actual work-or any compensation at all, for that matter.

As for practical considerations, around 70 percent of the W-2 caseload is currently assigned to a tier other than W-2 Transitions. For that 70 percent, then, the ability to work-though not necessarily in an unsubsidized, private-sector position, at least not right away-has been verified based on an initial screening. Furthermore, at least some of the W-2 Transitions caseload may be capable of work as well, given that Transitions cases may be assigned up to 28 hours per week of activities other than education and training. According to the W-2 manual, those activities may include "activities similar to a CSJ (Community Service Job) but with more supervision" and "volunteer activity."³⁵ If even one-fifth of the Transitions caseload were able to do 20 hours' worth of work per week-even simple, highly structured, closely supervised work-the state could achieve the 75 percent target.

There is reason to believe, however, that an even greater proportion of the Transitions caseload is capable of work. Over the past five and a half years, Transitions cases have increased from roughly 22 percent of the W-2 caseload to about 27 percent.³⁶

Because of the long-term increase in Transitions assignments, the Transitions tier is now the second largest placement category under W-2 (after "Case Management Follow-Up"). The increasing percentage of Transitions cases would make sense if the caseload were, for some reason, becoming increasingly populated with hard-to-serve clients over time. The Legislative Audit Bureau has found, however, that "the characteristics of the program's participants have remained generally consistent since W-2 was implemented statewide in September 1997."³⁷ This suggests that Transitions may have become something of a "parking lot" for challenging cases that nonetheless could be assigned to a higher tier. If this is true, the state should be able to achieve even higher work engagement rates than 75 percent.

The Department of Workforce Development should establish work-focused performance measures on which contract right of first selection would be based.

The current W-2 agency contract does not establish specific percentages of the caseload that must be working, or average weekly hours expected among clients who work. Such measures should be incorporated into the contract and included as criteria in decisions about contract renewal, right of first selection, and possibly even W-2 agencies' funding from the state.

Fix Four: Improve Participant Monitoring and Tracking

How well are client activities monitored?

There are currently more than 10,000 open W-2 cases. For a moment, though, think about just one. Imagine a single mother on W-2, assigned to 15 hours per week of work in a community service job position, and an additional 10 hours of education time. If the client is not participating in these activities, she is making no progress toward a life without welfare. Furthermore, if she is not participating, there is supposed to be a consequence-a reduction in her family's monthly benefit payment. If she is not participating, too, the W-2 agency responsible for her will have a harder time meeting the state's performance benchmarks. If it does not meet those benchmarks, the agency can lose its contract to administer W-2. If she is not participating, the state as a whole will have a harder time meeting the federal government's performance standards. If it does not meet those standards, the state can lose federal funds.

With so much at stake, client monitoring-that is, tracking and documenting client participation in assigned activities-takes on an extremely important role under W-2. Unfortunately, a variety of anecdotal evidence suggests that the state and W-2 agencies do a poor job of keeping tabs on at least some W-2 clients. Jason DeParle made note of this in his book American Dream, which explored welfare reform through the lives of three families living in inner-city Milwaukee. His account cast serious doubt on the adequacy of W-2 client monitoring, and on the integrity of the data going into, and therefore coming out of, the W-2 computer system, known as CARES:

Keith Garland, the Maximus manager of quality control, studied attendance at MaxAcademy, the agency's signature effort. More than three-quarters of the people assigned to the class never showed up for a single day. Out of a caseload of nearly fifteen hundred, Garland said, "We had maybe one hundred people doing something." As for the rest: "We didn't know what people were doing. We didn't have a clue."³⁹

***

In grading the agencies for contract renewal, the state's sole source of information was the computer system, CARES. The state had no way to know whether the assignments in the computer were real, much less whether clients were doing them. . . . "It became a CARES game," says Mona Garland, the former operations manager. "You just go in there and code them this, this, and this to make CARES look right. . . . They may not really be assigned to thirty hours, but you go into CARES and make it look like they're assigned to thirty hours. The job-seeker may not even know."⁴⁰

***

"CARES is a fantasyland" (quoting a W-2 caseworker).⁴¹

The Department of Workforce Development would no doubt respond that while there were problems with client monitoring in W-2's early years-the years covered in DeParle's book-those problems have been addressed. The available evidence, however, suggests otherwise. For example, in various audits over the years, the Wisconsin Legislative Audit Bureau (LAB) has repeatedly found problems with documentation on W-2 cases. The following are a handful of incidences cited in various LAB reports:

In April 2004, DWD began reviewing the information reported by W-2 agencies on participants who had completed a degree or certificate-such as a general educational development certificate, high school equivalency diploma, or technical college training-to determine whether the information supported the agencies' claims. . . . DWD reviewed electronic case records for all 365 participants W-2 agencies claimed had obtained a degree or certificate from January through March 2004. It found that the records for 243 participants (66.6 percent) indicated the participants may not have obtained degrees or certificates.⁴²

***

We conducted a more thorough analysis of trial job wages by reviewing the electronic case files of 262 W-2 participants who, according to data provided by DWD, had held trial jobs from January 2001 through February 2004. . . . However, we found that the case files for 26 participants contained no information to indicate that the participants had actually held trial jobs, and the records for the other 236 participants were often incomplete.⁴³

***

We reviewed all 195 cases for which the W-2 agencies determined that participants had been sanctioned appropriately. . . . The accuracy of sanctions could not be determined in 48 cases because of incomplete or contradictory information in the case files.⁴⁴

***

During our prior two audits, we reported internal control concerns related to the counties' and W-2 agencies' compliance with DWD's case file documentation requirements (Findings WI-04-15 and WI-03-17). For example, during our FY 2003-04 audit, 11 of 30 TANF case files and 9 of 30 Child Care case files we selected for review were deficient in supporting one or more eligibility requirements or were not made available for our review. Of particular concern was a higher rate of noncompliance for cases in Milwaukee County, representing potentially serious internal control weakness.⁴⁵

***

[W]e were unable to determine whether sanctions were appropriate for an estimated 220 cases (15.4 percent), because incomplete or contradictory information in the CARES computer system made such a determination impossible. For example, data on placement type, participation history, and hours of non-participation were often insufficient to allow us to render a judgement (sic) on the appropriateness of the sanctions imposed.⁴⁶

Similarly, a 2005 report by the federal Government Accountability Office found Wisconsin to be among the states suffering from the following shortcomings in its systems for monitoring client work participation:

• Lack of guidance on the type of documentation needed to support reported hours of work activities. Without guidance, there is no assurance that the local staff collecting the data know what type of documentation is adequate to support hours reported or whether any documentation is required. The type of support needed would depend on the activity but could include pay stubs and time and attendance reports. Without guidance, staff at different locations are more likely to use different standards for what support is needed.
• Guidance allows for reporting hours missed for good cause. Some states have guidance specifying that when recipients are absent from a scheduled activity and the case worker determines that there is a good cause for the absence, the missed hours can be reported as worked. This results in hours that were not worked being reported to ACF as worked.
• Insufficient monitoring to verify that hours were reported correctly. Some states do not have a monitoring process in place to perform timely reviews to verify that hours were reported correctly. Without sufficient monitoring, states cannot be assured that local staff are reporting hours that are supportable and complete.⁴⁷

Discussion and recommendations

W-2 agencies and the Department of Workforce Development can, and do, produce reams of data on client activities. Complete, accurate, reliable data are necessary for the chain of accountability to work as it should, from client-caseworker interaction at the street level, all the way up to the intergovernmental relationship between DWD and the federal Department of Health and Human Services. If the data are incomplete, inaccurate, and unreliable, then all of the talk of performance and accountability is just that-talk.

The state should address the issue of data integrity in client monitoring by adopting a simple recommendation:

• The Department of Workforce Development should implement a case monitoring and documentation audit process, the results of which would be used (among other criteria) in determining the right of first selection.

The idea here is simple. Once or twice per year, DWD auditors-or perhaps Legislative Audit Bureau staff-would pull a random sample of each W-2 agency's cases. For each case, the auditors would first determine the activities to which the case head had been assigned. Auditors would then check for appropriate documentation of client participation in the assigned activities. Finally, auditors would verify that the information recorded in the client's electronic CARES record comported with the documentation on client participation. A breakdown anywhere in the process-failure to assign activities to the client, lack of appropriate documentation on client participation in assigned activities, or lack of correspondence between that documentation and the client's electronic record-would constitute a finding of non-compliance. A sufficient number of such findings would result in a loss of the agency's right of first selection, and possible monetary penalties.

(NOTE: The federal government recently implemented a requirement that state welfare agencies adopt "a system for determining whether the hours they report toward the participation rates correspond to hours in which work-eligible individuals actually participate in work activities."⁴⁸ This will be known as a Work Verification Plan, and is intended to ensure the integrity of states' reporting on work participation data. If properly implemented, this should address many of the concerns identified above. However, Wisconsin's Work Verification Plan needs to include an audit procedure of the kind recommended here.)

Fix Five: Create a Single Administrative Region in Milwaukee

W-2's revolutionary administrative structure

Under AFDC-the predecessor to Wisconsin Works-county social service agencies had sole responsibility for running welfare programs in Wisconsin. In the run-up to W-2, however, the state required county agencies to meet performance targets as a measure of their capacity to run the new program. The state targets included caseload reduction, job placement, and AFDC expenditures. Counties that met the state's standards in these areas (as most did) earned the right to remain as program administrator. Counties that failed to meet the standards were allowed to bid on the business, but had to compete for it against private vendors. As a result, private companies-some for-profit, some not-for-profit-ended up running W-2 in nine different counties.

One of those was Milwaukee County, which the state divided into six separate administrative regions. Five different agencies ended up administering the six Milwaukee regions when the program was launched. The distribution of agencies and regions was as follows:

Milwaukee Region 1: YW Works, a for-profit, limited liability company formed by the YWCA of Greater Milwaukee, a non-profit organization, and two for-profit companies, the Kaiser Group, Inc., and CNR Health, Inc;

Milwaukee Region 2: United Migrant Opportunity Services, Incorporated (UMOS), a not-for-profit, community-based organization;

Milwaukee Region 3: Opportunities Industrialization Center of Greater Milwaukee, Incorporated (OIC), a not-for-profit, community-based organization;

Milwaukee Regions 4, 5: Employment Solutions of Milwaukee, Incorporated, a non-profit subsidiary of Goodwill Industries of Southeastern Wisconsin, Incorporated, also a non-profit; and

Milwaukee Region 6: Maximus, Incorporated, a for-profit corporation based in Virginia.⁴⁹

What has gone wrong in Milwaukee ⁵⁰

Today, UMOS, Maximus, and the YWCA remain as program administrators in Milwaukee. But the 10 years that have passed since the launch of the program have not been kind to the concept of welfare privatization. Problems began to appear in 2000, when Maximus, one of the for-profit agencies, was discovered to have improperly billed hundreds of thousands of dollars' worth of expenses to the W-2 program. These included costs for employee work on projects other than W-2, in states other than Wisconsin; expenditures for social functions and entertainment; and corporate memberships and donations. By the time all of the requisite audits were complete, Maximus ended up reimbursing the state for roughly $500,000 in disallowed or questionable costs, and donating another $500,000 for community services as a show of good-faith.

Just as the flap over Maximus' spending was dying down, a similar controversy erupted at Employment Solutions (ESI), the W-2 agency for Milwaukee Regions 4 and 5. Like Maximus, ESI had spent W-2 money on questionable and disallowed costs: meals, entertainment, social functions, credit card interest, and staff time devoted to projects other than W-2. The agency was forced to reimburse the state approximately $350,000 immediately. Auditors believed that additional funds should be repaid for inappropriately billed staff time, but noted that ESI's records were inadequate to determine the precise amount. On this matter, the state and the agency ended up settling on additional reimbursements of $135,000.

Part of the settlement, however, included ESI's agreement to drop out of the W-2 program. Unlike the financial improprieties at Maximus, the ones at ESI were accompanied by allegations (by employees) that some of the disallowed spending was intentional. This eventually triggered an FBI investigation of the company. The surest way for the Department of Workforce Development to put this public relations fiasco behind it was to insist that Employment Solutions stop serving as a W-2 agency in Milwaukee.

A third scandal, and the most sensational one, began to emerge in late 2003. In November of that year, a federal indictment was brought against then state Senator Gary George. Among other things, the indictment alleged that George had received $270,000 in kickbacks from an attorney working for OIC, which was then one of the W-2 administrative agencies in Milwaukee.⁵¹ OIC sought to distance itself from the scandal, saying that any wrongdoing was attributable solely to attorney Mark Sostarich, who counted both the W-2 agency and Gary George among his clients.⁵² In the wake of the indictment, however, the Department of Workforce Development put OIC on probation. DWD hired a consultant to monitor OIC's finances on-site on a daily basis, and ordered a financial audit of the agency.⁵³ Though OIC claimed to welcome the scrutiny, Carl Gee, president and CEO of the agency, was soon indicted for actively participating in the kickback scheme.⁵⁴ Gee, who went to trial rather than pleading his case out, was convicted of conspiracy and sentenced to two years in prison. Gary George, for his part, was ultimately sentenced to four years in federal prison after a guilty plea.

The kickback scheme and resulting criminal convictions garnered significant headlines, but they were not the only OIC stories of note. In addition, in September 2004 the state insisted on significant changes in the agency's W-2 operations, noting that it had:

• Failed to meet most of the state's performance standards for the program,

• Improperly claimed W-2 reimbursements for some agency expenditures, and

• Failed to pay some of its subcontractors within a reasonable time frame.⁵⁵

OIC was given 10 days to issue a plan to address these and other problems. The state was not satisfied with the agency's response, however, and began withholding funds and threatening to terminate OIC's contract:

"We are seriously looking at options for changing the OIC contract," JoAnna Richard, a top Workforce Development official, said in a prepared statement. "We are looking at a full range of options, from termination to changing regions or to changing the program management" at OIC, Richard said.⁵⁶

The downward spiral continued when the state Legislative Audit Bureau issued a report recommending that OIC repay the state more than $325,000 in W-2 funds it had spent on questionable legal work (most of it done by the aforementioned Mr. Sostarich). The audit also uncovered another $90,000, roughly, in questioned or unallowable costs, and identified several areas for further scrutiny.⁵⁷ (The Legislative Audit Bureau eventually put OIC's total for unallowable or questioned W-2 costs at $514,505.⁵⁸ ) The state also reduced OIC's contracts not once but twice, reassigning its clients and a large chunk of its funding to other Milwaukee agencies.

This was not the end of the story, however. Fresh OIC financial scandals emerged in 2004, relating to a questionable $45,000 cell phone purchase and mishandling of home weatherization program funds. Then, an independent audit commissioned by the state (but paid for by OIC) criticized the agency for sloppy bookkeeping, and uncovered hundreds of thousands of dollars' worth of additional, improper spending.⁵⁹ In the wake of these findings, OIC announced in February 2005 that it was closing its doors.

***

The situation in Milwaukee would be troubling enough if the private providers were guilty of nothing more than poor stewardship of taxpayer monies. They have also, however, suffered from serious performance issues. The state has established a variety of performance measures for W-2 that are used, among other things, to determine which agencies have performed well enough to earn automatic contract renewal. These measures include things like job placement, job retention, earnings gains, and degree or certificate attainment among W-2 clients. During the 2003/2004 contract cycle, W-2 agencies in 50 percent of the state's program regions performed well enough on these measures to earn a contract renewal. In the six Milwaukee regions, none did. Then in the 2004/2005 contract cycle, W-2 agencies in about 75 percent of the state's program regions earned a contract renewal. Again, none of the Milwaukee agencies did.⁶⁰ In fact, the Milwaukee agencies have been among the worst performers in recent years. In 2004/2005, nearly half of W-2 agencies met all 10 of the state's performance measures; none of the Milwaukee agencies did. About one third of W-2 agencies met eight of the state's performance measures; only one of the Milwaukee agencies was in this group. The other two Milwaukee agencies were among the roughly 20 percent who met seven or fewer of the state's performance measures.⁶¹

Discussion and recommendations

Introducing competition and privatization into the W-2 program was a bold, innovative, commendable experiment. In most of the state, it has worked relatively well. In Milwaukee, where the success or failure of W-2 hangs in the balance, it has been an embarrassment. The Milwaukee agencies have validated the worst fears of skeptics of privatization, and have left the advocates of pubic-private competition (including the author) red-faced.

The agencies' disappointing performance has had implications beyond the misuse of public funds and sometimes inadequate client service. It has also threatened support for the W-2 program as a whole by linking it to instances of scandal, waste, fraud, crime, and incompetence. Furthermore, the Milwaukee agencies have jeopardized the provision of consistent, reliable casework for the city's poor. In the past five years,W-2 participants have been shuffled from one provider to the next as various agencies have gone out of business or been pushed out of the program due to poor performance. (One part of the city has been served by a succession of three different W-2 agencies in the past five years.) Finally, the W-2 agencies in Milwaukee have forced DWD into a process of continual regulatory improvisation, trying to limit existing damage and forestall further embarrassment. The department has at various times insisted upon on-site financial monitors; a reduction of W-2 agency responsibilities coupled with an increase in the number of agencies operating in Milwaukee (to diminish the risk of another large-scale failure); limits on agency expenditures for promotions, telecommunications, executive compensation, bonuses, legal services, and rent; mandated supplemental audits; and state oversight of corporate governance issues (down to the level of regulating board meeting minutes).

Certainly, none of this was inevitable. At the same time, one must recognize the risks inherent in large-scale contracting for social services. Running a program like W-2 requires a combination of human expertise, knowledge, and technological sophistication that is not widely available. If a W-2 agency performs poorly, the state cannot simply find a replacement in the Yellow Pages. Furthermore, if a change from one vendor to another is necessary, this requires a difficult transition process. This appears to be why DWD continues to rely on contractors who have been embroiled in scandal or who have failed to meet state performance standards. These agencies have programmatic experience and human and technological capacity that are very hard to replace at this point in the life of W-2. Based on the record of the Milwaukee agencies, however, the state needs to fundamentally change the way the W-2 program is administered in Milwaukee:

• The Department of Workforce Development should create a single administrative region in Milwaukee to be operated by a sole private vendor.

This recommendation is intended as a last-ditch effort to save managed competition and private administration of W-2 in Milwaukee. What would unification of the five Milwaukee regions accomplish? It would put the current Milwaukee agencies on notice that only one of them will be administering the program in the next contract round. This means that any financial malfeasance or performance shortcomings would likely be fatal to their chances of being the sole vendor in Milwaukee when the next contract begins (in 2010). Furthermore, each would know that by outperforming the others during the current contract, they would gain a leg up in their bid to be the sole Milwaukee vendor. Poor performers, in turn, would know that they would likely be facing the end of their involvement in the W-2 program-something that has not been a realistic threat to this point. Once a single Milwaukee vendor was chosen, that vendor, too, would know that poor performance would likely mean being forced out of the program altogether, and being replaced by one of its former competitors. Again, to this point in the life of W-2, that has not been a realistic threat.

If all of this does not improve the Milwaukee vendors' performance, nothing will. And what if, in fact, the Milwaukee vendors' performance does not improve? In that case, the experiment in welfare privatization in Milwaukee clearly will have failed, and the state will have to assume administrative responsibility for W-2 there.

Conclusion

Now in its 10th full year of operation, the W-2 program has lost some of its former luster. The early excitement over the program's novelty has given way to the criticism and frustration that inevitably arise when one tries to translate ideas into practice. The W-2 program, though, is now showing flaws in both ideas and practice.

The most important change needed is to reinstate the primacy of work under W-2. Every able-bodied, able-minded W-2 participant should be expected to work at least 20 hours per week. This should be seen as the central feature of the contract between taxpayers and W-2 clients. Part of that contract, too, should be stricter time limits on participation in program activities, as recommended above. Finally, the contract should include assurances from the state-backed by contract performance standards, and verified through audits-that client participation in work activities is being closely and accurately monitored.

Wisconsin Works participants also have a right to expect more from the program. In addition to a cash payment, W-2 should offer them a better chance to succeed. In part this means more time up-front to find a good job, rather than just any job. It also means an end to "terminal" basic education and training programs, which have not served welfare recipients well. Finally, it means a change in W-2 administration in Milwaukee, from a hodgepodge of private agencies to a single entity under the Department of Workforce Development.

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