Public or Private Children's Services? Privatization in Retrospect …

Public or Private Children's Services? Privatization in Retrospect



       Marguerite G. Rosenthal, Ph.D.

       School of Social Work
       Salem State College




Public or Private Children's Services? Privatization in Retrospect



Abstract:


This historical study of privatization, based on archival research and an

examination of the relevant literature of the period, illustrates the changing

relations, tensions, mutual dependencies, and altered policy stances of the public

and private child welfare sectors preceding and during the period of rapid

expansion of federal purchase of service moneys that followed a series of

amendments to the Social Security Act in the 1960s and 1970s. The financially

strapped voluntary service sector was ideologically divided about seeking

increased public moneys, but it quickly accepted the new funds once they became

available. This inquiry into the background of privatization contributes to the

understanding of the unique pattern of service delivery in the United States.




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Introduction: Persistent Dilemmas in Governmental/Voluntary Social
Service Relations


       Observers of contemporary social services are acutely aware that

privatization has become the ascendant modality for service delivery, eclipsing, at

least for the moment, services delivered directly by public agencies. Over the last

fifteen to twenty years, there has been an accelerating trend towards implementing

new governmental initiatives through private organizations including those under

non-profit and recently for-profit auspices; in addition, some states are now

experimenting with privatizing very traditional public functions such as public

assistance administration. The amounts of public monies being spent on

purchased services has been rising dramatically, having increased $.5 billion

between 1991 and 1996 in the state of Massachusetts alone, according to a

conservative critic (Loconte, 1997: 22).

        Several books and studies published over the last dozen years have

examined recent developments in increased privatization and contracting out of

formerly governmental functions as well as newly developing social service

agenda (Gilbert, 1977 and 1983; Abramovitz, 1987; Kamerman and Kahn, 1989;

Demone and Gibelman, 1989; Smith and Lipsky, 1993; Hall, 1995; Brilliant,

1997; Gibelman and Demone, 1998; Hegar, 1998). Explanations for the

acceleration of service contracting have included ideological preferences for

privately delivered services (particularly from the Reagan era, but stemming
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certainly from the revenue sharing/new federalism approach of the Nixon

administration); the presumed efficiency and cost savings associated with

privately provided services (including the breaking up of public sector unions);

       the increased flexibility in service development and service elimination

available through this mechanism (for instance, the development of community

based residential programs as a substitute for public institutions in the mental

health and retardation fields); the greater professionalism linked to private sector

agencies; the presumption that privately provided services are more carefully

attuned to the needs of clients and communities (i.e., that they are less

bureaucratic); and, finally, that such services are less stigmatized than are those

delivered directly by public entities.

       While most investigators acknowledge that the practice of public

agencies? purchasing services from voluntary social services agencies is not a

new phenomenon, most have been impressed by the accelerated pace of

?privatization,? a term that has replaced the formerly used ?public/private

partnership.? What is more, most voluntary service agencies have become highly

financially dependent upon government money for their survival, many receiving

over 70% of their funds from federal and state sources (Smith and Lipsky, 1993,

chap. 3). Even more or less traditional child welfare agencies--the focus of much

of the rest of this article--received 59% of their income from governmental

sources in 1986; in 1960, that figure was 28% (Smith and Lipsky, 1993: 63, citing

surveys conducted by the Child Welfare League of America [hereafter, CWLA]).


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The general impression of the current service-delivery situation is that voluntary

agencies are eager to accept public funds, indeed that they are nearly totally

reliant upon them. However, a critique of this situation--one that replicates an

earlier debate--may be in the making. For instance, a recent lead article of the

Boston Globe's Metro/Region section procalimed: State funding of nonprofits

escalates: Some worry about loss of independence??(Valdes-Rodriguez, 1998).

The article details the situation confronting many private non-profit agencies in

the contemporary social service arena: social services provided by voluntary

agencies but paid for with public funds, and the perception by many in the private

sector that their ability to fashion unique approaches has been severely

compromised. Spokespersons for sectarian agencies particularly express this

view. The newspaper article referred to quotes Joseph Doolin, president of

Catholic Social Services of Boston and associated with the agency for nearly ten

years bemoaned the fact that in 1989, 75% of the agency?s funding came from

the state. In an effort to regain more independence and to reinstate an approach

more consistent with a religious organization, Doolin is noted to have succeeded

in cutting back the percentage of public funding to 50%.

               Because it was using state funds, Catholic Charities was required

               to remove religious items like Bibles and crucifixes from AIDS

               hospices, for example, and residents were not allowed to hold

               prayer groups. ?It made no sense at all,? Doolin said.... ?I sought

               to lower our dependence on the government in a conscious way so


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                 that we could pursue initiatives that are totally privately funded

                 and that reflect our values,? said Doolin. (Valdes-Rodrigues,

                 1998).



          These sentiments mirror tensions that have frequently characterized the

voluntary sector?s relationship to public funding authorities but have become
particularly acute as private agencies have become nearly totally dependent on
public monies for their survival. While public funding of privately provided social
services has been a traditional pattern in the U.S., a great expansion in what has
come to be called privatization occurred following the introduction of federal
dollars as a result of amendments to the Social Security Act between 1962 and
1974.
          In order to understand better the dynamics leading to the dramatic changes

that occurred in the post-1967 era, the writer sought to answer two questions: Did

the voluntary sector actively pursue changes in federal legislation in order to

obtain federal funding in the 1950s and 1960s? and What was the relationship

between the public child welfare sector and the voluntary agencies during that

time period ? While the answers to these questions are not definitive, what is clear

is that many actors in the voluntary sector recognized that their relationships with

governmental authorities were critical for voluntary sector's survival while they

also feared the loss of independence mirrored in the recent statement quoted

above..

          A basic difference between the initiative to expand the purchase of service

model in the 1960s and today's privatization efforts can be discerned. The
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privatization push of the last twenty years is associated with downsizing, cost

containment, and deregulation of government functions (Pierson, 1994; Kahn,

1998). However, the expansion of public contracting that began in the late 1960s

initially stemmed from the opposite impulse, following the entry of federal

monies to support social services in the late 1960s (Gilbert, 1983; Morris, 1985).

The initial explosion of the social service sector, a phenomenon well documented

by many writers (e.g., Derthick, 1975; Gilbert, 1983; Morris, 1985), can be seen

as part of the expansion of the welfare state, characteristic of late-stage industrial

capitalist societies, where large-scale government programs provide a floor of

income and services in an effort to achieve minimum standards of living, health

and social development for the population as a whole and as a counterbalance to

free market forces that create extreme inequalities in living conditions and life

chances. The sense that the U.S. was becoming a more normal welfare state was

reflected in the writing of the mid-1960s (Schottland, 1967, Introduction;

Wilensky and Lebeaux, 1965).

               Modern social services and modern social work developed from

               the Progressive Era, but the scale and nature of the social welfare

               enterprise changed with the entry of the federal government, a

               result of the New Deal. The process gathered momentum in the

               public and private social services and mental health after World

               War II--but especially during the Great Society. It was the

               expansion of scale and scope from the mid-1960s to the 1980s that

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               encouraged and supported the large, publicly assisted, voluntary

               service expansion....(Kahn, 1998: viii).



       I turn now to an analysis of the development of public/private

relationships in social service delivery, beginning with an initial summary of the

early history of those relationships and followed by an in-depth examination of

the activities and discussions among key actors involved before and during the

entry of the federal government as a financial backer of privately-delivered social

services in the 1960s, a key turning point in the history of social service

privatization and the impetus for enormous expansion of the voluntary sector.

Because government and voluntary agencies were both early involved in

providing services for children and their families, because both sectors were

engaged in developing policies to effect delivery of those services, and in order to

provide a focus for this discussion of policy development, this article concentrates

on the child welfare field.

        The era of the 1950s and 1960s evidenced considerable and often

vigorous discussion and debate about what the relationship between the public

and private social service systems ought to be. Most leaders in the voluntary

sector were eager to gain the increased revenues that federal funding might

provide, but others --presaging the critique that Joseph Doolin now makes about

public funding-- were wary that an increased reliance on public funding would

mean their loss of independence, a lessened ability to be experimental, and a

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compromise of their roles as advocates and social critics.

Early History

        Intersections between the public and private spheres of social service

provision have characterized the American system of caretaking virtually from its

inception and, indeed, predate the English Elizabethan Poor Law of 1601 from

which American patterns of social care have derived (for a summary of this

history, see Hegar, 1998). Indenture, contracting out and boarding out were

variations on a theme whereby public poor relief authorities relied upon private

individuals to provide shelter, food and work for various classes of dependents,

including children, through the colonial period. From the mid-1800s through the

end of the century, when there were growing numbers of dependent poor who

both alarmed public authorities and justified the establishment of municipal and

state-run public institutions, an era of erecting public indoor relief facilities

(almshouses, workhouses, mental hospitals, juvenile correctional institutions)

began (Trattner, 1994; Grob 1973). Following the Pierce veto of 1856, when the

President rejected federal assistance to the states for the purpose of building

mental hospitals on Constitutional grounds and with the exception of Civil War-

related programs including the Freedman's Bureau and pensions to war veterans

and their widows (Trattner, 1994; Skocpol, 1992), public policies to alleviate and

remedy the difficulties of various classes of dependents remained the respon-

sibility of local and state governments until the Depression and the New Deal.

        Social policy for dependent groups in the U.S. has been characterized by

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the development of dual structures of care, the public and the private, and by their

intersection. In particular, the granting of jurisdiction to care for otherwise public

charges to private institutions and agencies and public subsidy of them has been a

recurrent practice (Kramer, 1964). Many of these institutions were orphanages or

other child-caring institutions, and their auspices were both religious and secular

(Hegar, 1998). For example, Hegar (1998), drawing on documents for the Orphan

Asylum Society in New York City, found that in 1809, two years after its

founding, the society successfully petitioned the New York legislature for funds

and within another two years was receiving an annual subsidy for its work.

Public support of private philanthropy was very common, particularly on the East

Coast where there was a proliferation of private charitable and reform

organizations throughout the 19th century. This aid took two forms: subsidy (a

lump sum allotment to support the activities of the organization) and purchase of

care (a fee to cover all or part of the costs for care of individual recipients).

        Ralph Kramer (1964), in an elegant analysis of the development of social

policy in the U.S., has contributed to the understanding of the so-called

?exceptionalism? of the United States as compared to most of western Europe by

emphasizing the role that private philanthropy and its interaction with the public

sector have played.1 Explanations of why the U.S. is a ?reluctant welfare state?

have focused on such factors as the absence of a strong union movement and

labor-based political parties (Piven, 1992; Piven and Cloward, 1993; Esping-

Andersen, 1990); the fragmented U.S. governmental structure, including the

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federal and state systems and the separation of powers at each level; American

cultural traditions emphasizing individualism and minimalist government; the

heterogeneity of the American population (Wilensky and Lebeaux, 1965); and

racism as a divisive force militating against an effective working class movement

(Quadagno, 1994). According to Kramer?s analysis, the predominance of private

care-giving institutions described earlier, relegated the later-appearing public

institutions to a residual function with responsibility for those least amenable to

good outcomes: the chronically mentally ill, the mentally retarded, the criminal

(Kramer, 1964, chap. II). This pattern was reinforced by the very development of

public support of the private institutions and was bolstered by the power of the

elites who were often associated with private philanthropy. In addition, the

seeming financial savings to the public coffers garnered by utilizing already-built

institutions discouraged investing in capital outlays. Another argument in favor

of subsidizing and utilizing private institutions for public purposes was the

association of public programs with the spoils system and the squandering of

taxes (Kramer, 1964: 35-36). Thus, government was denigrated as a positive

ameliorator of social problems. State and local subsidies to private agencies,

including sectarian agencies, though strongly criticized by some (as will be shown

below), became an entrenched method of social provision in the U.S. and forms

the basis, it is suggested, for the system of privatization we see today.

       By the 1880s, several states had established patterns of paying for children

placed in privately run institutions, many of them through annual lump-sum

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subsidies. In New York, legislation required that children be placed in institutions

run by members of their own faith (Hegar, 1998). Serious criticisms of these

practices began to be voiced around the same time, most influentially by Amos G.

Warner of the Baltimore Charity Organization Society who conducted studies of

poverty and philanthropy and whose book, American Charities, was considered

the authority on the subject. Kramer (1964) summarizes Warner?s objections to

public subsidy of private charity as follows:

               (1) Voluntary agencies encourage pauperism by disguising it. (2)

               There is no real economy because so many duplicate institutions

               are necessary, one for each sectarian group, and since intake

               policies are not controlled, tax funds are used to support the care of

               all the inmates of private institutions. (3) Special pressures are put

               upon the legislature in the form of ?log rolling??to influence

               them. (4) It tends to dry up the source of private funds. (5) It

               destroys the freedom of the voluntary agency (Kramer, 1964: 37).


Concluding his scathing description of subsidy practices gone wild, Warner

(1894) called for reforms that most today would recognize as sound

administrative practices where public moneys are involved:

               First, on behalf of the poor as well as the taxpayers it [government]

               must provide for the thorough inspection of subsidized institutions,

               and the systematic auditing of their accounts....Second, the State


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               must keep in the hands of its own officials the right of deciding

               what persons shall be admitted to the benefits for which it pays,

               and how long such each person may continue to receive those

               benefits....Third, subsidies should only be granted on the principle

               of specific payment for specific work (Warner, 1894: 353).



From the Progressive Era to the New Deal: The Growth of the Public Sector

       Warner?s pronouncements were made around the beginning of the

Progressive Era, a period of history marked by exposes of the more exploitative

aspects of unbridled capitalism and many successful reform efforts aimed at

bettering social conditions through increased governmental regulation and

provision. The plight of poor children was a particular emphasis of social

reformers who, beginning in the 1890s, advocated for a set of interrelated laws

and programs including ending child labor, compelling school attendance,

establishing juvenile courts, and promoting publicly provided mothers? pensions.

This last measure, fought bitterly by private charity spokespersons who abhorred

outdoor relief (Lowell, 1890), specifically aimed to provide a means for ?worthy

mothers? to support their children at home and thus eliminate unnecessary family

break-up and placement in substitute care.

       Among the achievements of Progressive reformers and advocates, and

staffed by some of their most articulate representatives, was the establishment of

the U.S. Children?s Bureau in 1912. The Bureau?s founding was recognized as a
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symbol of growing governmental authority, and tensions with private sector

interests were clear. For instance, many in the organized charity sector opposed

both the founding of the Bureau and the development of public child welfare

programs (Weiss, 1974). This research and policy-recommending agency, the first

federal agency with a social policy agenda, was instrumental in promoting an

increased role for government in meeting the needs of the nation?s children,

especially poor children. While remaining on close terms with many voluntary

agencies and organizations, particularly the Child Welfare League with which it

was closely allied, the Bureau nonetheless represented a thrust towards ?public

responsibility? (a term repeatedly used in Bureau documents and correspondence)

for social problems by advocating for the development of public health clinics for

children, mothers? pensions, the juvenile court and, beginning in the early 1920s,

public child welfare agencies .2 The Bureau?s mandate, to research and publicize

social problems affecting children and innovative policy solutions, was carried

out with fervor, and the agency has left a historical legacy in its many published

studies, bulletins, journal contributions, and records of its activities.

        The Children's Bureau?s preference for public assumption of welfare

activities is evidenced in an early controversy involving an effort to reform the

juvenile court in Washington, D.C. so that it would have the power to review

placements of children committed by it to the Board of Guardians, a private

agency in the city. In 1914-15 when this controversy arose, the court was a

symbol of a new and vibrant public agency that would have broad powers over
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children and their families. The proposed increase in the court?s power, a

position fully backed by Julia Lathrop, the first Chief of the Bureau, irked the

private welfare organizations. In 1916, Lathrop wrote to Henry W. Thurston, a

faculty member of the New York School of Philanthropy and a well-known child

welfare expert:

               You and I do not need to beat about the bush. I am in favor of

               county and State boards for protecting children....I have no

               confidence in a theory of law which reposes greater responsibility

               in the agents of large unsalaried boards than in the

               bench....(Lathrop, 1916).

       Over the next twenty years, the Bureau would become disillusioned with

the juvenile court as an effective public institution but not with the idea of public

assumptions of child welfare activities, though it had to act cautiously. By the

early 1930s, it was openly championing state and county child welfare programs

as agents of prevention and early intervention into family difficulties and as more

effective than the courts (Rosenthal, 1986). At the same time, however, state

support of private agencies, especially those providing institutional care,

continued (Hegar, 1998).

       An opportunity to expand the development of public child welfare

agencies came with the writing of the Social Security Act and the child welfare

provisions that the Bureau pushed for inclusion. In 1931, although twelve states

had legislation creating or enabling county departments of social services, only

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5% of all counties with less than 30,000 population had public social workers.

The Bureau?s original child welfare proposals called for $1.5 million of federal

money, to be matched by state dollars, in a grant-in-aid program available to all

the states for administrative costs related to establishing and running public child

welfare programs (federal moneys could not be used to pay for foster care or

similar services). The proposal won the approval of the Committee on Economic

Security (the writers of the Act), but immediately, there was strong objection from

private child welfare agencies and particularly from the Catholic constituency that

feared both governmental control of their activities and usurpation of their role by

public agencies. Msgr. O?Grady of Washington, D.C., who was to remain a

leading spokesperson for Catholic social service interests and who was

particularly wary of encroachment by public agencies, threatened to lobby against

the child welfare proposals. Eventually a compromise was worked out, limiting

the development of public agencies in ?primarily rural states? where private

agencies were generally unknown. In addition, the requirement for matching state

money would be eliminated because it was feared that with limited funds, Eastern

states with long-standing subsidy practices would meet their matching

requirements by withdrawing subsidies from the private agencies. The

compromise allowed the legislation not only to go forward but also to receive the

active endorsement from the Church (Witte, 1963).

       Within two years, ten states enacted provisions for statewide child welfare

services, and by 1939, all states as well as Alaska, Hawaii and Washington, D.C.

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were cooperating with the Bureau through approved state plans (Lenroot, 1960),

but the actual funding remained very low. Federal funds were restricted to paying

for staff and administrative expenses; they could not be used to pay for foster or

institutional care and thus were unavailable for reimbursing private agencies for

care services (Atkinson, 1938), a prohibition that conformed to the principles set

out by Harry Hopkins for other welfare functions: No federal money would be

used to purchase services from private agencies (Coughlin, 1965, p. 126).

        The meagerness of the federal appropriations for child welfare services, in

combination with the decision to allow the states to implement a variety of

activities meant that the influence of public child welfare was more symbolic than

actual (Atkinson, 1938). Most child welfare services were related to foster care

despite the Bureau?s interest in preventive programs. For years, the Bureau,

along with its Child Welfare Advisory Committee, and other sympathetic experts

endeavored to increase both the level of federal funding for public child welfare

services and the extent of its jurisdiction (U.S. White House Conference on

Children in a Democracy, 1940). The Bureau had to be diplomatic in its dealings

with private sector agencies; however, there are clear intimations that its staff

were concerned that huge investments in buildings and entrenched institutionally-

based approaches to dealing with children in need of care, inhibited the growth of

more progressive methods of handling such cases (in-home services and foster

care rather than institutional care).

                It is generally conceded...that despite the enormous contribution of

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                private agencies to child welfare, some of them have in time come

                to be in some respects an obstructive force in the development of

                an adequate program of child welfare. Anxious to continue their

                activities, some of them have discouraged the exercise by public

                authorities of their responsibility for child care (U.S. White House

                Conference on Children in a Democracy, 1940).


It was not until 1958 that the Act was amended to extend jurisdiction of federally

assisted public child welfare programs to all states and localities in the country,

and 1962 that prohibitions against paying for foster care were eliminated.

       Rebecca Hegar (1998), citing other researchers, reports that private child

welfare agencies during this period were under enormous financial pressure as a

result of the Depression: agencies lost donors, public funds to subsidize them

were curtailed, and the demands on the agencies increased. The result was

increased reliance on public child welfare services, funded almost entirely by the

states, although many of these contracted out substitute care arrangements to

private ones.

Church and State

       Much private philanthropy, but by no means all, was developed through

religious auspices, and, as Kramer (1964) and Coughlin (1965) have discussed,

the various denominations took different positions on the question of the

superiority of religiously sponsored social welfare as opposed to public programs.

As a corollary, religious groups also differed in their interpretations of the
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appropriateness of public subsidy or reimbursement for religiously provided

social services. The main supporter of church-sponsored social welfare, including

public support thereof, has been the Catholic Church, as evidenced in the

O?Grady activity discussed above and below. Catholics, responding to what they

interpreted as direct attempts of Protestants to convert their children through such

efforts as the child-placing practices of Charles Loring Brace and others in the

latter half of the nineteenth century, established their own powerful, largely

institutionally-based welfare structures, particularly those for children (Trattner,

1994). Where they were able, especially in the large cities, they obtained public

funding for the care of their wards, and they successfully established a legal

theory that made distinctions between public aid to parochial social welfare and

public aid to parochial education,3 This theory holds that since the children of the

various denominations were to be public charges in any case, and since the First

Amendment of the Constitution requires free exercise of religion, it was and is

appropriate for public dollars to pay for care in religiously based institutions (for a

discussion of this theory and the debates around it, see Kramer, 1964, chap. V;

Kramer, 1966).

       Although highly contested, this theory dominated through the 1960s, and

not only did religiously sponsored institutions receive public moneys, but they

also could and did discriminate against caring for wards from other religious

backgrounds. Writing in the mid-1960s, Kramer found that religiously sponsored

agencies also received tax exemptions as charitable institutions and, in many

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cases, were not subject to licensing laws. Additionally, distinctions in attitudes

about the primacy of religiously-based welfare institutions versus public ones

could be discerned. Catholics placed emphasis on the supremacy of religious

institutions and advocated for public support thereof while fearing the

encroachment of government generally. Protestants preferred the growth of the

public sector. Jews largely agreed with the Protestants but were also more than

willing to take public moneys to support their agencies (Kramer, 1964). Bernard

J.Coughlin, S.J. (1965), drawing on his doctoral study of various religious

denominations and their involvement with social welfare, found similar attitudes

expressed; however, what was of greater concern to many was the threat to their

autonomy associated with the contracting for government money. Calling for

governmental protection for a strong voluntary sector, in which religiously based

institutions represent the moral and philosophical forces in society, Coughlin

articulated, in a sophisticated and impassioned way, the Catholic position for

public support of autonomous religious social welfare institutions at exactly the

point when federal dollars for such purposes were just becoming available

(Coughlin, 1965, chap. 8). Unlike Msgr. O?Grady, however, Coughlin applauded

the trend enunciated by his mentor, Schottland, that pointed to an increase in

public moneys, apparently from a developing thrust on the federal level, to be

used to purchase services from voluntary agencies (Coughlin, 1965: 126).

       Catholic agencies, which once demanded that all Catholic children be

served by them and with public funding if necessary, were by 1960 relaxing this

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position considerably (Coughlin, 1966). The question of the role of sectarian

agencies and their relation to public support remains contested, as the quote near

the beginning of this paper indicates. As the voluntary service sector struggled

with developing policy to respond to the availability of federal moneys in the

racially charged atmosphere of the late 1960s, it stated firmly that private

agencies could not discriminate on the basis of race. However, participants in the

policy-making group organized by the CWLA could not agree that sectarian

agencies should serve those from other religious backgrounds (CWLA, 1968).

Now that this issue has been resolved in favor of serving all comers, the question

of religious position-taking within the service delivery setting (crosses on the

wall, for instance) remains problematic.

Private Agencies in Crisis - Inching Towards New Partnerships with
Government


       Records and publications of two of the most important organizations

representing child welfare interests in the 1950s and early 1960s, the Children?s

Bureau and the Child Welfare League of America, reveal increasing attention to

documenting the arenas of exclusive and intersecting practice within and between

the public and private sector agencies. The Bureau, as has been detailed above,

maintained both a research-dissemination and an administrative function for child

welfare services during this period of time. The League, founded in 1920 as a

coordinating and advocacy body for the nation?s private and public child welfare

agencies, served an important policy-setting function for those agencies; was the

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public voice for the child welfare profession; and coordinated lobbying efforts on

occasion and when offered an opportunity to do so. Its executive director, Joseph

Reid, was nationally recognized as a spokesperson for child welfare interests and

for shepherding his constituency towards progressive child welfare practices.

Together, these national bodies advocated for an expanded child welfare network

that would require ever-increasing public expenditures to perform their rather

traditional functions of investigations into problems such as child neglect and

abuse, foster placement and supervision, institutional placement and (in the case

of the private agencies) adoption.

       A reading of the League?s records and correspondence during this period4

shows that there was considerable concern that the private agencies were in

financial difficulty for several reasons: United Funds and similar confederated

funding sources had begun to reduce funding of the traditional child-serving

agencies; private donations were similarly declining; and, perhaps most crucially,

the agencies were in a losing competition to newer modes of intervention into

individual and family problems, particularly psychiatric ones. Kramer (1964,

Chap. IV), examining trends in the then-recent past, noted the declining revenues

derived from private giving available to the voluntary agencies, resulting in a

static service-giving capacity for those agencies, at the same time that

governmental expenditures and directly provided services were growing rather

dramatically. In 1929, government welfare accounted for 4.1% of the gross

national product, more than doubling to 8.6% in 1955, while philanthropic

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welfare remained stationery, 1.3% in 1929 and 1.5% in 1955 (Kramer, 1964: 73).

At the same time, voluntary agencies--particularly those involved in child

welfare--saw a greater proportion of their income coming from state dollars being

used to purchase care, from 1.5% in 1938 to 5.05% in 1960, and a rapidly

declining percentage of the funds expended by the United funds (Kramer, 1964:

79; 89). Kramer (1964:79-80) citing Ruth Werner?s 1961 book, Public

Financing of Voluntary Agency Foster Care published by the Child Welfare

League, found that in 1956, half of public money for foster care was being spent

directly by public agencies while the other half was purchasing care from

voluntary ones. However, when three states (New York, Pennsylvania and North

Dakota) with large purchase of service programs were excluded, 86% of the

public foster care dollars were being spent by public child welfare programs

directly. There was, moreover, great variability among the states in the use of

purchased care and in some cities, where private agencies were well-established

and where purchase of care arrangements were entrenched, most of the care was

done by voluntary agencies paid for with public funds. In New York City,

perhaps the most extreme example, 90% of the primarily sectarian voluntary

agencies? funds came from public moneys (Kramer, 1964: 80). Private agency

services were concentrated in adoption and institutional care, largely for

dependent/neglected children (a holdover from the orphanages and likely a reason

for concern about private sector practices), whereas the public agencies were

more heavily involved in family foster care and services to children in their own

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homes (Jeter, 1962).

       A crisis in funding and even in mission was recognized by some in the

private child welfare field. Thus, a meeting of the Committee on Principles and

Responsibilities in Private Child Welfare held by the League in 1955 revealed a

critique of the activities in the voluntary sphere. In answer to the question: What

is Unique to the Private agency?, the discussants came up with three items: 1) to

gratify the individual?s sense of ?charity;? 2) to serve as an effective advocate

for more funding for children's services generally (a function the governmental

agencies were unable to do directly) and as a spokesperson for children; and 3) to

identify areas of unmet need. On the other hand, greater expertise was not a

formulation that this group held; indeed, they stated that practices in many private

agencies were often of low quality. In fact, the stance taken in the early 1950s

was for an expansion of public sector agencies (remembering that federal funds

were still restricted to rural areas) and limited purchase of care for individual

children from voluntary agencies on a case by case basis (e.g., CWLA, Public

Policy Committee, 1950).

       This position was made very clear in a 1955 letter from Reid to

Schottland, then Commissioner of Social Security, in response to legislative ideas

probably raised by him and apparently floated at a recent meeting of the National

Social Welfare Assembly:

               In regard to ?maximum utilization of other agencies providing

               similar or related services,? we feel that this might be interpreted

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               to require purchase of services from voluntary agencies under

               circumstances that might interfere with the development of sound

               public programs. (CWLA , 1955, Box 43, Folder 2 )


Schottland was a supporter of the voluntary sector, believed that progressive

service experimentation took place largely within its purview, but recognized the

need to develop standards regularize the relationships between public and private

service entities. He also apparently approved of public support for the work that

the voluntary agencies did, stating that private agencies, through their

contributions-based work with otherwise public charges, were in essence

subsidizing the public sector and not vice versa (Schottland, 1955).5

       In the 1950s, the League had two working committees, one drawing up

principles and policies on private child welfare and another doing the same for

public child welfare. A 1958 position paper, the conclusion of a twelve-year

process, consolidated these efforts, called for universal availability of child

welfare services with government as ultimate backer, ?as the only instrumentality

representative of all of the people? by stimulating voluntary services and by

direct provision for those not otherwise cared for (CWLA, Statement of

Principles and Policies on Private and Public Child Welfare Administration,

1958). Again, individual purchase of service arrangements, to meet special needs

(including religious ones), were supported, and language concerning specific

contracts and accountability for such arrangements was included. The repeated


                                                                                  24
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insistence upon case-by-case purchased care for specific purposes was the one

recommendation that challenged the outright subsidy plan that still characterized

some public funding arrangements with large, private organizations. The

document was specific in its recommendations that voluntary agencies remain

independent:

                The chief source of private agency financing should be private

                contributions. The private agency must remain in control of its

                policies and retain its autonomy and freedom of action. When a

                large proportion of its services are used by another agency through

                a purchase of care plan, these powers are in jeopardy (Ibid. sec.10).


Similarly, agencies were advised to maintain autonomy from central fund-raising

bodies (Ibid. Sec. 20). In a letter to Joseph Reid in which she commented on a

draft copy of this document, Katherine Oettinger, Chief of the Children?s Bureau,

emphasized that the recommendations should not be misunderstood to mean that

government had a financial responsibility towards the voluntary agencies nor that

voluntary agencies were to be considered superior to the public ones (Oettinger,

1958).

         The League?s major concern with regard to the public agencies was

assuring sufficient legislative mandates and funding to serve all children with

needed services in a non-discriminatory manner (CWLA, Statement of Principles

and Policies on Private and Public Child Welfare Administration, 1958, Sec.22).


                                                                                   25
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This position was echoed testimony to increase the federal responsibility:

increasing funds and extending public child welfare services to the whole country.

Only half the counties in the U.S. had public workers devoted full time to child

welfare work (Cohen, 1958).

       This stance had the acceptance of those engaged in policy formation with

the League. However, it was opposed by Msgr. O?Grady who had effectively

blocked the effort to extend public child welfare services nationally in 1935.

Appearing before the House Ways and Means Committee in 1956 to testify

against extending federal moneys to cover the cities, O?Grady voiced the strong

opinion that voluntary agencies were unduly criticized by government officials

and that supporters of expanded federal involvement in child welfare services

were threatening to undo the private sector.

               It may be that there are certain people in our midst who do not

               think that we can solve our social welfare programs (sic) except

               through the power and the force of government...If our government

               believes in voluntary effort, it is hard to understand how it can

               propose legislation of this type.... Can all this be done by a few

               Government specialists, or can it be done only by those who are

               fired by the spirit of faith in the sacred character of the human

               personalities of children and of their parents? (O?Grady, 1956).

       The work of the League in developing standards to govern the relationship

between the public and private sector relations was echoed at the Children's

                                                                                    26
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Bureau where a major study, examining the nature and distribution of child

welfare services between public and voluntary agencies (referred to above) was

published by the Children?s Bureau in the early 1960s (Jeter, 1962), and

preparation for this publication generated an enormous correspondence between

the Bureau and many national voluntary organizations as well as individual

voluntary agencies (U.S. Children?s Bureau, 1959). 6

        In 1958 the Secretary of Health, Education and Welfare had appointed two

advisory councils, one on public assistance and one on child welfare services,

with a mandate to report to him and to Congress by the end of 1959. The

recommendations on public assistance led to the well-known shift to a social

service focus for ending welfare dependency authorized in the Social Security

Amendments of 1962 (see below). The recommendations related to child welfare

were focused on the implementation of the 1958 amendments, extending public

services to all jurisdictions, and called for some important changes: broadening

the definition of the services to include prevention and service provision in out of

home care; expanding the reach of services to meet growing needs; and most

importantly, strongly recommending increased funding to include federal

participation in the payment for foster and other out of home care (Child Welfare

Services: Report of the Advisory Committee, 1960). With respect to purchased

care, the report stated:

                The Council believes that public and voluntary agencies should



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               join ranks to make use of all available resources to improve

               services to children. It also endorses the principle of purchase of

               services by the public agency from qualified voluntary agencies

               whenever needed. Such services should be purchased on a case-

               by-case cost-of-care arrangement. In 1935 when the Social

               Security Act was passed, some States had programs to care for

               dependent children outside the family group, but no special

               provision was made for them through Federal grants....Today,

               because of the mounting costs of maintaining these youngsters

               away from home, they deserve top consideration by the Congress

               (Ibid: 4).


While the first paragraph quoted here evidenced nothing startling, the

implications of the second were that federal funds could be used to pay for

institutional and other privately provided out-of-home care if the

recommendations were adopted.

       A report prepared by the well-known social welfare scholars, Elizabeth

Wickenden and Winifred Bell (1961), for the Advisory Committee on Public

Welfare took a stronger cautionary position on public moneys supporting private

agencies. Wickenden wrote:

               Voluntary agencies, hard pressed to find needed financing on a

               voluntary basis...often turn a hungry eye toward the broader tax

               base. This is a natural but nonetheless dangerous temptation. For
                                                                               28
                                                                                         29

               the voluntary agencies to become the instrument of government,

               the reasons for their very existence is undermined (Ibid.: 45).


Purchase of care on a case by case basis using public moneys and publicly

supported demonstration programs in voluntary agencies were the only exceptions

that were justified. In the Congressional debates of 1962 that led to the first of a

series of major changes in the social security provisions aimed at public welfare

and child welfare practices, significant attention was paid to the role of social

services for the first time. Appearing before the House Ways and Means

Committee, Reid enunciated a cautious and cautionary position on the question of

whether or not federal moneys should be used for purchase of care.


               We commend the proposed legislation for recognizing the

               partnership of public and privately financed agencies by making

               provision for the purchase of services from private agencies when

               they can be more economically or effectively provided by a non-

               profit private agency....As a nation we have long expressed our

               religious and moral conviction of responsibility for our fellow man

               through our private social agencies....(Reid, 1962b: 3)


He went on to insist on the necessity for accountability in purchase of care,

particularly with regard to federated funding: United Funds tended to assume that

once an area of service provision received public funding, they no longer had a

responsibility to continue providing moneys. This threatened the ability to
                                                                                    29
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develop sound programs to combat dependency and neglect since ?maximum

public and private financing? were needed (Ibid.: 3-4).

       However, Reid also said:
               We also believe that experience in this country, particularly in

               child welfare...has clearly established the undesirability of

               developing large quasi-public social agencies which, though their

               management is private, receive all or most of their funds from

               public sources (Ibid.: 4).


Therefore, as previous statements had made clear, the method of funding should

be by purchase of service, case by case, and never through large-scale subsidy

(Ibid.). Reid also made a plea for federal reimbursement for institutional

placements, these largely in private facilities. Elsewhere, and just days before,

Reid had complained that United Funds were reducing their support of casework

services, and he spoke more strongly about the need for good public programs,

solid accountability of private agencies where purchase of care was practiced, and

the dangerousness of legislation that required states and municipalities to

purchase care from private agencies whenever such care was available, regardless

of its quality (Reid, 1962a).

Expert Commentary on Public/Private Relationships

       The rather polite discussion about public/private agency relations coming

from the League and the Bureau received a more spirited if not acrimonious

treatment in social work forums of the period. In June, 1961, the Social Service
                                                                                    30
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Review (SSR) published an article by Coughlin that clearly stated his position in

favor of expansion of social welfare and social work in the private sector.

?Professional social work faces decision. Either it will continue its

metamorphosis into a government bureau [and thus become merely civil servants]

or it will identify itself as an association distinct from government? (Coughlin,

1961: 188-89). The latter was clearly preferred because of the flexibility, the

freedom to advocate, the ability to act out of religious conviction, and its position

as ?an avenue for an active citizenry, so important to the life of a democracy?

(Ibid.: 189-90). But in order to survive, private welfare needed public funds; the

alternative to no funding was ?social welfare...more or less coterminous with

public welfare? (Ibid: 191). The SSR also published a statement in its Notes and

Comments section of the same issue (page 198) that noted that this was a

controversial issue that had, in previous issues, received considerable criticism.

Six months later, Ralph Kramer published a letter roundly countering Coughlin?s

position. Stating that voluntary agencies could easily become as bureaucratic as

governmental ones, that voluntary agencies often failed to live up to their

potential to be flexible and innovative, and that there was nothing ?voluntary

about a voluntary agency which receives the bulk of its funds from governmental

sources,? Kramer concluded:

               While the future of the voluntary agency may be endangered, it is

               dubious if tax subsidies will ?save? it. What is required is a

               comprehensive re-evaluation of the voluntary agency and its future
                                                                                     31
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                rationale....This seems to be a much more constructive approach

                than looking to government to prop up a presumably tottering and

                failing voluntary system, or sounding the alarm over the two-

                headed monster of ?public welfare bureaucracy? and its "civil

                service influence? (Kramer, 1961: 442).


       In 1962, purchase of care was authorized for federal participation, and

public welfare agencies could now purchase services from other public agencies

with 75% federal reimbursement. Public child welfare services were now

positioned to be available everywhere in the country, but the voluntary sector,

except by indirect service provision, had gained little. The hope that foster care

payments could be used for care in private institutions was explicitly rejected by

the House Ways and Means Committee (Cohen and Ball, 1962). For child welfare

advocates and for the private sector practitioners, only modest changes had been

accomplished.

       The amendments that were passed in 1962, as the next major set of

amendments of 1967, were specifically aimed at reducing dependency of public

assistance recipients and were only tangentially concerned with child welfare

matters. They were to usher in a new era of expanded service provision, much of

it in the voluntary sector. Debate about the appropriate public/private mix and

relationship continued unabated in professional journals, with a rather constant

theme of the need for greater clarity in the role of each, the urgent need for better


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planning and coordination at the community level, and the caution that standards

and accountability continued to require strengthening where public support of

private agencies was concerned (e.g., Mencher, 1958; Johnson, 1959; Mayo,

1960; Levin, 1964; Kramer, 1966; Beck, 1970).

       Examining the behavior of both the federal bureaucracy (the Children?s

Bureau) and its major advocacy constituency (the Child Welfare League of

America) during this prelude to the dramatic changes that were about to take

place, it is clear that both organizations continued to support the mantra of the

Progressive Era: seeking incremental changes, the child welfare community,

although under severe financial stress, looked primarily to expand the public

sector as the primary vehicle to enhance comprehensive services to all who

needed them. That this expansion might have some payoff for voluntary

agencies was desired, but ambivalently. Tensions within the private sector, based

largely on sectarian differences that reflected disagreements in their approaches to

social intervention as well as philosophy about the proper role of government,

inhibited the effectiveness of advocacy efforts (Schottland, 1968). Another

significant factor was the nature of the socio-political environment of the times,

conservative if not reactionary (this was the just post-McCarthy, after all) and not

marked by any significant organized efforts for social change (Ehrenreich, 1987).

Unlike the era of social activism preceding the establishment of the Children?s

Bureau in 1912 or even the Social Security Act of 1935, advocacy efforts for

change were weak. Schottland, who had been Commissioner of Social Security

                                                                                     33
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from 1954 to 1959 and who may have been a behind-the-scenes primary

advocate for a purchased service system, held the position that, when it came to

legislative advocacy, the social welfare experts had been more successful as

blockers than builders of new systems of care during the period just under

discussion (Schottland, 1968). By the 1970s, events had overcome the debate, and

what we now call privatization was an established fact.

The Explosion of the Voluntary Sector under Federal Auspices: The Social
Security Amendments of 1962 and 1967

       There is a significant literature that documents the dramatic changes in

social service delivery as a consequence of the Social Security amendments in the

1960s, particularly that of 1967. The changes leading to the mushrooming of

purchased social services need to be put in context: the War on Poverty, the

enactment of Medicaid and Medicare, the Community Mental Health Services

Act were all built on a model of federal moneys being used to purchase services

or care from private providers, whether individuals or agencies. In addition,

significant reorganization of the Department of Health, Education and Welfare

and the leadership chosen during the Johnson and Nixon administrations led to

significant diminution of the role and power of the Children?s Bureau while

enhancing that of, first, the Welfare Administration (with a primary emphasis on

public assistance) and, later, the Social and Rehabilitation Service (SRS) (Breul

and Gordon, 1973; Derthick, 1975; Wickenden, 1976 ).

       Social services, never clearly defined, were unrealistically expected to

solve the problem of growing welfare dependency in 1962; when they failed,
                                                                                    34
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Congress became disillusioned. The amendments of 1967 were primarily focused

on punitive welfare policies such as the Work Incentive Program (WIN), and

social work advocates were consequently largely engaged in a battle to defeat as

much of the get-tough provisions as they could, although they supported

provisions to provide 90% federal funding to expanding child care for working

parents. Apparently, they paid less attention to the fact that the proposed (and

ultimately approved) amendments dropped the old prohibitions against federal

funding of voluntary social services. As Wickenden noted, this policy shift

represented ?a departure from our traditional adherence to the interaction of

independent, competing forces as a goad to progress? (Wickenden, 1976: 580)

and it was one that ?voluntary agencies backed into...without very much

consideration of its implications? (Ibid. emphasis added). While the purchase of

service language had been carefully debated in 1962, less attention was paid

within the administration in 1967 and apparently it was almost ignored by the

Child Welfare League: a memo to League affiliates in December, 1967,

discussing achievements in the amendment process, says nothing about purchase

of service (CWLA, 1967). Reid?s testimony on various versions of the bills that

ultimately became the 1967 amendments touched upon purchase of care in a

positive way that again supported case-by-case support, but it certainly did not

emphasize this point (CWLA 1967a).

       The federal personnel responsible for administration of the purchased

services in 1962 were cautious and traditional social workers; under the
                                                                                   35
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reorganized HEW administration of the late ?60s, they were expansionist, hostile

to social work and loose in their oversight (Derthick, 1975). Definitions of

eligibility were greatly expanded to include group eligibility for those living in

poor communities and ?former and potential? public assistance recipients, and

administration of social service expenditures on the state level were separated

from the public welfare apparatus. Clever manipulation on the part of state

officials in Illinois and California who successfully substituted federal moneys for

state dollars in human services expenditures, soon were emulated or attempted by

other states, leading the way to huge increases in federal outlays of moneys (Bruel

and Gordon, 1973; Derthick, 1975; Mott, 1976). Federal expenditures for social

services were $194 million in 1963, nearly $282 million in 1967, and over $3

billion in 1982 (Morris, 1985: 159), notwithstanding the $2.5 billion limit

imposed by the Nixon administration in 1972 and the Title XX legislation of 1974

that codified the framework for federal spending and spending limits within the

context of ?new federalism,? the predecessor to today?s ?devolution.? Although

much of the original Title XX legislation was geared towards the public assistance

recipient population and was not focused on child welfare needs, by 1982,

traditional child welfare activities such as protective services, foster care and

institutional care had captured about 17% of the Title XX expenditures and child

care (no doubt much of it for working welfare recipients) accounted for an

additional 20% of the budget (about $1.5 billion in federal dollars, half of the total

federal expenditure on children?s related services) (extrapolated from Morris,