Wisconsin Department of Workforce Development

February 17, 1999

Janice Mueller, State Auditor
Legislative Audit Bureau
131 West Wilson Street
Madison WI 53703

Dear Ms. Mueller:

Thank you for the opportunity to review and provide a response to the Legislative Audit Bureau (LAB) report on the first year of operation of the Wisconsin Works (W-2) program. The Department appreciates the professional manner in which LAB staff approached this topic.

First, the Department wishes to emphasize that profits referred to in the report are projections, not actual figures. Profits drawn to date by W-2 agencies for moving people from welfare to work are actually 50 percent less than the profits identified in the report.

Second, agency profits are the result of unprecedented caseload reductions due to better than expected performance on the part of contractors. Wisconsin’s dramatic and national trend-setting caseload reductions were made possible by the dedication and performance of these pioneering agencies that accepted the challenge to eradicate the AFDC legacy of intergenerational poverty and to assist families in achieving economic self-sufficiency. This is an extraordinary achievement.

Third, the significant decrease in the cash benefit caseload has also meant that funds are available to support expanded services for low income families, as announced by Governor Thompson on February 16, 1999. Included are initiatives to:

• Lower child care co-pay from 16 percent to 12 percent of family income.
• Increase child care eligibility to 185 percent of the federal poverty level.
• Expand child care services for disabled children.
• Increase training and scholarships for child care workers.
• Create a Community Youth grant program.
• Support workforce attachment for families up to 200 percent of the federal poverty level.

Fourth, unlike most public sector contracts, W-2 contracts required agencies to assume a substantial risk. The risk agencies took in agreeing to implement W2 was unprecedented in the 60-year history of the federal government’s troubled welfare program. Under the failed AFDC system, no limits were placed on the amount of funds available to provide cash assistance to recipients.

This all changed under the first round of W2 contracts. No longer were contractors simply reimbursed because they spent money. The W-2 contracts required agencies to provide services to all eligible persons within the limited funds provided. The W2 agencies were expected to perform within established budget limits, and the measure of performance under the contracts was moving people from welfare to work.

For the next round of contracts, the Department will restrict the amounts of total profit available to agencies and move to a performance bonus model. Contracts will include a variety of performance standards that address both the quality and quantity of service provided. The Department is proposing that a cap of seven percent of the total contacts be reserved for performance bonuses. It will be necessary for an agency to achieve minimum levels of performance to receive bonus funding. Two percent of the total contract funds will be available for meeting the base performance criteria, and the remaining five percent will be available to recognize exceptional performance.

In conclusion, I would like to highlight something that was indicated in the report. That is, that the information presents a snapshot view of activity through the 12th month of a 28 month contract. The calculations of profit and community reinvestment are preliminary until the contract is closed out. Agencies are responsible for meeting their contact obligations through the full 28 months, so to the extent expenditure patterns differ in the last 16 months of the contract compared to the first 12, the impressions contained in the report will need to be modified.

We believe strongly that W-2 contractors should be commended for their outstanding performance in reducing caseloads and assisting individuals enter the world of work.

Thank you again for the opportunity to review and comment on your report.

Sincerely,

Linda Stewart, Ph.D.
Secretary