Assigned to FS FOR COMMITTEE

ARIZONA STATE SENATE

Phoenix, Arizona

FACT SHEET FOR H.B. 2617

Arizona works; procedures; appropriation (NOW: Arizona works)

Purpose

Expands the Arizona Works privatized employment program for welfare recipients to a statewide program effective January 1, 2000.

Background

The Arizona Works welfare privatization program established by Law 1997, Chapter 300, amended by Laws 1998, Chapter 211, was initially designed as a two-year pilot program to privatize employment services for TANF recipients in the East Valley. After the first two years, the provider was to expand into a designated rural area for another two years. The program was to be completed in 2003, at which point the Legislature was to evaluate whether to roll out the program on a statewide basis. The pilot project was awarded to Maximus and is set to begin operating next month. Current law permits only one private vendor to operate Arizona Works.

The proposed legislation will rollout Arizona Works statewide and will open up the bidding to as many as three vendors, no more than one of whom may be a public entity. The bill divides Arizona into three distinct geographic areas known as the Eastern, Western and Southern Sites. It also provides for Maximus to continue operating in the East Valley under a new contract and within the new larger geographic area, the Eastern Site. The other two districts (the Western Site and the Southern Site) are to be served by whoever wins the bids for those parts of the State. Operations are required to begin by July, 2000 in those two sites. Concerns about a multiple vendor plan include the complexity that would be added to the provision of services by subcontractors doing business in more than one district; cost efficiency achieved by economies of scale would be lost and duplication of services may be unavoidable. Also at issue is the short time frame for implementation provided by the legislation, which may not be realistic.

The statewide privatization before the outcome of the Maximus pilot project is seen as premature by some interested parties. Proponents argue that welfare recipients need to find employment before their eligibility runs out, and that speeding up the privatization plan will better serve these clients.

Concern has also been expressed about the impact this legislation will have on the existing Arizona Works provider, Maximus. The existing agreement extends to Maximus the opportunity to become the sole statewide provider of employment services after 2004, if certain conditions are met. FACT SHEET H.B. 2617 Page

It also provides for payment terms and time frames that will be changed substantially by the new bill. To the extent the new law would eliminate expectations Maximus may have for the future of its program, it may be seen as a breach of contract, for which Maximus might pursue a claim for lost opportunity costs and reimbursement of its start-up costs. Additionally, H.B. 2617 may be portrayed as special legislation to the extent it awards a new contract to Maximus by legislative act.

The fiscal impact of this legislation is under review. The Joint Legislative Budget Committee (JLBC) has stated that its fiscal note for the other privatization bill S.B. 1402 (Jobs Now) is not applicable to H.B. 2617.

Provisions

Duties of the Arizona Works Agency Vendors (AWAV's)

1. Transfers the following duties from DES to the Arizona Works Agency Vendors :

· Administering the provision of cash assistance to TANF recipients.

· Determining employability of cash assistance recipients and conditions under which work participation will be required of them.

· Determine length of time of a person's ineligibility for cash assistance.

· Establish minimum work participation levels required by federal law.

· Adopt procedures for establishing good cause for non-participation in work requirements.

2. Requires AWAV's to do the following:

· Develop an employment plan and a personal responsibility declaration with each program participant.

· Implement the scheme of graduated sanctions for clients who fail to comply with work requirements.

· Determine the ten percent savings in administrative costs which the AWAV's must offer by reference to the JLBC cost estimate.

Arizona Works Agency Privatization Board (AWAPB)

3. Replaces the Arizona Works Agency Procurement Board with the Arizona Works Agency Privatization Board and designates membership.

4. Requires that the AWAPB perform the following:

· Adopt procurement policies that include requesting and reviewing for proposals, and strikes a requirement that the procurement policies be substantially equivalent to the existing Arizona Procurement Code.

· Enter into four-year contracts with vendors to operate the Arizona Works program in three distinct geographic districts defined as:

· A combination of DES service districts I-E (Maricopa County-East) and III as the Eastern site.

· A combination of DES service districts I-W (Maricopa County- West), IV, V and VI as the Western site .

· A combination of DES service districts I-C (Maricopa County-Central) and II (Pima County) as the Southern site.

· Award the Eastern site contract by 1/1/2000, and issue the requests for proposals on the Southern and Western site contracts by 2/1/2000 and execute these contracts by 4/1/2000, with the contract to begin by 7/1/2000.

· Select an independent evaluator to conduct a performance review of Arizona Works at the end of the fourth year of the program.

· Adopt rules for waiving the limit on the number of subsidized employees allowable to any employer.

· Adopt rules for excluding employers from participating in the subsidized employment program.

· Adopt rules for hearing procedures for graduated sanctions appeals.

· Provide oversight on subsidized placement of clients.

· Continue in effect any administrative services contracts for the Arizona Works Agency Procurement Board

Pay for Performance Scheme

5. Repeals provisions relating to calculation and award of performance-based incentives for the Arizona Works provider and adds a new pay for performance and performance incentive plan pursuant to which:

· AWAV's will receive $1400 per client to be paid

25 % on assignment to the program;

25% at time of job placement;

35% after the client has been in the job six months; and

15% after the client has been in a job for one year.

· The $1400 will be augmented by an amount calculated using the formula ((county unemployment rate) minus 2% x 2 x $1400), to arrive at an adjustment for placing clients in counties with higher unemployment rates.

· AWAV's will receive incentive payments, not to exceed ten percent of the TANF block grant for any time period during which a client earn $2 or more over minimum wage.

Other Provisions

6. Requires JLBC to:

· Determine current costs of the employer redesign program in each Arizona Works area.

· Review intergovernmental agreements and transfers of personnel and monies relating to Arizona Works in conjunction with its review of the first year of implementation of the program.

· Submit a report of its review to the AWAPB as well as the Legislature.

7. Adjusts cash assistance benefits to the 1995 federal poverty level from the 1992 level.

8. Replaces the $350 maximum monthly grant available to certain Arizona Works participants with an amount calculated from the 1995 federal poverty level.

9. Repeals the statute establishing the privatized Jobs program.

10. Expands the Arizona Works program to multiple vendors and strikes provisions relating to the statewide rollout of the Arizona Works pilot program.

11. Specifies that the contract bidders may include one or more private or public entities and prohibits AWAPB from awarding a contract for more than one site to a public entity.

12. Specifies that the current Arizona Works provider may continue to serve the Eastern Site under a new contract until January 1, 2004.

13. Prohibits community colleges and Indian tribes from bidding on a contract site as the primary vendor.

14. Excludes residents of Indian reservations and municipalities in which more than 35 percent of the residents are eligible for federal assistance as Native Americans.

15. Eliminates eligibility for Empower Redesign as a basis for determining eligibility for Arizona Works

16. Exempts Arizona Works from the Competitive Government program.

17. Contains definitions

18. Makes technical and conforming changes

19. Contains a delayed repeal of July 1, 2009.

House Action

HS 2/18/99 DPA 3-2-1-0-0

3rd Read 3/11/99 34-23-3-0

Prepared by Senate Staff

March 23, 1999

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