Daniels' Administration Misled On Fed Approval Of FSSA Privatization

When Governor Daniels' administration announced yesterday the federal government had given it approval of his plan to privatize many of the welfare programs currently administered by FSSA, it said nothing about a critical fact concerning that approval--funding for the proposed 10-year contract was approved for only one year due to "questions and concerns" the Bush administration has with the plan. As the Star's Tim Evans now reports:

Indiana will receive just one year of funding for Gov. Mitch Daniels' proposed 10-year state welfare privatization plan so federal officials can monitor a program they say raises several "questions and concerns."

Without acknowledging those reservations, the governor's office announced Wednesday it had received the go-ahead from the U.S. Department of Agriculture
and U.S. Department of Health and Human Services.

The administration said the approvals were the last hurdles Daniels needed to overcome before deciding whether to sign a $1.16 billion contract with a business group headed by IBM. "You can expect a decision by the first of the year," the governor said.

But critics -- including House Speaker B. Patrick Bauer, D-South Bend -- said the administration failed to note in its announcement that the USDA's funding will cover just one year, rather than the full 10-year term of the proposed deal.

The USDA detailed several lingering concerns in a letter to Family and Social Services Administration Secretary E. Mitchell Roob, including questions about the delegation of duties between employees of the state and its vendors, the proposed implementation schedule and oversight of the private contractors.

"Given the concerns . . . (the agency) will carefully monitor the implementation and operation of the project and provide additional funding approvals upon successful completion of the pilot phase and successful completion of each implementation roll-out phase," wrote USDA Regional Administrator Ollice C. Holden.

Roob said the federal response is typical for multiyear contracts.

IBM did not respond to a request for comment.

The fact that approval for the contract has only been given for one year is very significant. Roob's suggestion that this was "typical" is simply not accurate. More telling is IBM's silence on the announcement. In fact, one would have to question the feasibility of IBM, ACS and the other vendors undertaking this gigantuan task with only a one-year commitment for federal funding, particularly given the fact that Democrats now control both houses of Congress and key Democrats are questioning the privatization plan. The failure of the administration to disclose this important fact will only fuel skeptics' distrust of the administration in this undertaking.