Taking Welfare Private

The weary women who enter the barren, windowless building on Los Angeles's South Figueroa Street find inside, to their surprise, a little oasis of civility-plants, cookies and coffee, and polite managers who escort them to their appointments. This is a welfare office? Yes, but one with a unique ambition-to prove that the private sector can manage the most intimate and abrasive of government functions: the public dole.

Private welfare offices like this MAXIMUS, Inc., operation are the latest in delicate political experiments. Liberal skeptics once squelched any notion that profitmaking firms could perform sensitive welfare functions. But that was many budget cuts ago. Today red tape and urban woes, dramatized by the Los Angeles riots, have forced frazzled government officials to listen to anyone with an M.B.A.

The entrepreneurial rush is on: from California, where maximus has cleared a $1 million profit moving welfare clients into training and jobs, to New York, where America Works produces annual revenues of $2 million (while getting 68 percent of its clients off welfare). MAXIMUS operates in four states and is growing. Lockheed IMS, a unit of the aerospace firm, is looking to cash in on Massachusetts's jobs program.

They advertise their ability to help more clients for less through better computer programs, more flexible staff and fewer archaic work rules that bind government bureaucrats. "Welfare rolls could be cut by a third with aggressive jobs programs," says MAXIMUS chief David Mastran. Government officials seem pleased. New York Gov. Mario Cuomo saluted America Works when it placed its 1,000th client, a woman on welfare for seven years, in a job. The state paid the firm the equivalent of only five months of welfare checks, Cuomo says, "and we only pay if America Works is successful."

Private companies, to be sure, account for only a small portion of the nation's massive welfare bill-$22 billion for Aid to Families with Dependent Children this year alone. And to grow much more, such companies must face opposition from welfare and union officials-like Paul Boldin, coordinator of social services for the American Federation of State, County and Municipal Employees (AFSCME), who question the private firms' savings claims: "There are often no independent bodies verifying what they do," he says.

Company officials disagree. They cite Daniel J. Alesch of the University of Wisconsin at Green Bay, who shows a local county cut welfare costs in half by turning to a private group. Los Angeles County says MAXIMUS saved it $2.2 million; Lockheed IMS says it saved Colorado's child-support payment program $5 million. Another example: a welfare mother costs the government about $23,000 a year, but New York pays America Works only $5,300.

Those figures are hard for even liberal politicians and union leaders to ignore. Peter Cove, America Works founder, and his wife, Lee Bowes, chief executive officer, say the company has won over stubborn critics by proving that welfare recipients can get work. A similar transformation has taken place in Los Angeles, where MAXIMUS once had to rely on a conservative majority of county supervisors to protect its contract. Today the liberals are back in power, but the company is still in business on Figueroa, trying to persuade welfare mothers, just as it has persuaded lawmakers, to reach out to a wider world.