White House Rejects Bid to Privatize Welfare

WASHINGTON — The Clinton administration has indicated it will not allow states to turn over a vast array of social service programs to private companies to administer, dashing the hopes of many large corporations and political conservatives who saw the new welfare law as an opportunity for massive privatization.

The administration has told state officials in Texas, regarded as the forerunner in privatization efforts, that they can proceed with some plans to work with the private sector but that only state employees can be charged with the task of determining who is eligible for Medicaid health coverage and food stamps.

That decision makes it impossible for Texas to create the “one-stop shopping” welfare service it had envisioned, under which private companies would handle several social service programs in one place. The plan could have privatized the work done by 13,000 state employees.

“Eligibility will need to be determined by state workers,” White House advisor Bruce Reed told reporters. He said the administration was still working with Texas on precisely what the state could hand over to for-profit companies.

The back-and-forth between the White House and Texas has dragged on for months and angered Texas officials, who were anxious to get a decision.

President Clinton has been caught between two powerful groups. On one side are public employee unions, which said the plan could force layoffs of state workers and would put sensitive decisions about the poor in the hands of for-profit companies. On the other side are prominent Republican governors, who argue that partnerships with corporate America will bring efficiency and save money.

Members of the Texas congressional delegation have vowed to continue pressing for the plan.