June 24, 2003
What they didn't tell you

The Gunther Concept, which now has permalinks even if they are blogspotted, found a curious omission in this Sunday Chron story about Gregg Phillips, the $144K-per-year "leader of the most sweeping social services overhaul in modern Texas history". Here's what the story says:

After three tumultuous years as former Mississippi Gov. Kirk Fordice's young political choice to lead a major overhaul of that state's Department of Human Services, the embattled executive director could no longer stand the heat. Facing a tidal wave of opposition, he resigned in 1995.

State employees protested privatization of child support collections. Legislators, upset by the issue and at odds with Fordice, threatened to close the agency. Advocates for the poor called Phillips a liar, and a Jackson Clarion-Ledger editorial cartoon portrayed him as Pinocchio.

"I had a son in second grade at the time. The final straw was when he came home really upset one day because some of his friends had seen someone being ugly to me on TV," he said recently from his new office at the Texas Health and Human Services Commission.

As HHSC deputy commissioner for program services, Phillips will make key decisions on downsizing and consolidating 12 agencies serving the blind, deaf, nursing home residents, abused children, mentally impaired, physically disabled and other needy Texans into only five agencies.

Phillips also will oversee the privatization of eligibility screening for services to sick and needy Texans as part of a new state law designed to shrink government and save $1.1 billion. Instead of the 800 Mississippi state jobs jeopardized by privatization, Texas aims to eliminate 3,600 health and human services workers during the next two years.


The ambitious social services overhaul in Texas might take up to six years to complete, Phillips said, predicting the most complex and challenging tasks will be privatizing eligibility screening and splitting mental retardation and mental health services into separate agencies.

He said he no longer believes the argument should be whether privatization saves more money than government-run services. The focus should be to create competition by preventing either public or private monopolies, perhaps splitting tasks among several bidders.

Republican leaders who pushed through the changes in Texas human services predict it will lead to greater efficiencies and better outcomes for the needy and taxpayers. But advocates for the poor who remember Phillips' work in Mississippi, predict his leading role could end in chaos, disaster and perhaps squandering of tax dollars.

"He really knows his stuff," said Rep. Arlene Wohlgemuth, R-Burleson, author of House Bill 2292, the health and human services overhaul, noting Phillips played a critical role in drafting the new law.

She said he possessed a wealth of knowledge needed for such an ambitious reinvention of government and if he didn't have an answer, he quickly got one.

"There are not very many conservatives who are all that involved in health and human services issues. I knew he was," she added. "He had an excellent reputation."

Larry Temple, who worked for Phillips in Mississippi before landing at the Texas Workforce Commission as the director of welfare reform, predicted a successful future for his friend in Texas.

"He's no-nonsense, very direct, very focused, extremely loyal," Temple said. "He's a good soldier, the kind of guy you can depend on to carry out any mandates you're given."

Temple said Phillips is the "perfect person" to pull off changes in the landmark legislation, but several civil rights advocates and others in Mississippi disagree.

"Mr. Phillips has been identified as one of those people that can come in and make all those drastic cuts and not feel any compunction about what he's doing to the poor people of Texas," said Wendell Paris of Mississippi Action for Community Education in the poverty-stricken Mississippi Delta. "If he does in Texas what he did in Mississippi, I feel sorry for the poor people of Texas."

Many recall controversial welfare-to-work policies, which reduced welfare rolls by more than 80 percent, sometimes by putting welfare recipients to work in poultry processing plants or casinos. Their benefit checks went to employers to subsidize their low-wage jobs. Phillips described the approach as "tough love," but Paris saw the impact they had in less flattering terms.

"Those Texas legislators ought to research what his history is, and they ought to be ashamed of themselves," he said, noting the state's recruitment of both Temple and Phillips. "They're bringing in that whole crew of these ruthless wolves hiding in sheep's clothing."

Carol Burnett of Mississippi's Low Income Child Initiative said Phillips was a "very controversial choice" to head Mississippi's human services department because he was so inexperienced with the issues faced by poor families.

"I think his work in government is more political than it is really trying to promote any kind of improvement over time for human services for low-income families," she said. "I regret that type of person is the choice to head agencies that have such incredible influence over how programs are shaped that so influence the lives of children and families."

Warren Yoder, director of the Public Policy Center of Mississippi, said Phillips' controversial privatization of child support collections under a contract to Maximus Inc. was limited by the Legislature in scope.

Even so, he said the experiment was a failure, and the Legislature later turned both child support collections and welfare-to-work training programs back to the state.

While this seems like a reasonable get-quotes-from-supporters-and-detractors-alike approach, there's a factual matter that wasn't addressed. According to this report by the Mississippi Legislature's Joint Committee on Performance Evaluation and Expenditure Review (PEER), Phillips departure from his position there caused ethical questions to be raised:

After terminating his employment as MDHS Executive Director, Gregg Phillips immediately contracted with Synesis, a subcontractor of the LEAP program, which creates the appearance of impropriety and could constitute a violation of state ethics laws. (See page 26.)

Gregg Phillips, former Executive Director for the Department of Human Services, signed a contract modification in 1993 which added two mobile learning labs to the LEAP program. Centec Learning entered into a contract with University of Mississippi to convert two vehicles into these mobile learning labs, while also maintaining and operating them for the term of the contract.

On April 26, 1995, Gregg Phillips resigned his position as Executive Director of MDHS and on the same day entered into a contract with Synesis Corporation, of which Centec is a division. Contract terms called for Mr. Phillips to be paid $84,000 per year to make industry contacts and market Synesis products and services.

Mr. Phillips's actions create the appearance of impropriety, facilitating an erosion of the public trust.

LEAP stands for Project Learn, Earn, and Prosper, and it was developed by Mississippi's Department of Human Services (MDHS) as part of program called JOBS (Job Opportunity and Basic Skills), which in turn was created to comply with the federal Family Support Act of 1988. All of that is in the introduction in the beginning of the report - the bit about Phillips is towards the end.

The PEER committee made the following recommendation:

The Executive Director of the PEER Committee shall immediately refer copies of this report to the Executive Director of the Ethics Commission and the Attorney General for an investigation of Mr. Gregg Phillips's contractual relationship with a LEAP subcontractor for determination of violation of state ethics laws. If the Ethics Commission and the Attorney General do not determine this to be a violation based on strict adherence to the law, the Legislature should consider making terms of the ethics law more specific to address contracts executed by an executive officer who does not report to a board or commission.

As noted in this followup story, the contract with Centec was for $875,000 and was one-third of Centec's entire net worth at the time.

Phillips was not ultimately prosecuted for this; as the PEER report anticipated, his behavior violated the spirit rather than the letter of the state's ethics laws. I have no idea if the Mississippi legislature followed the recommendation to amend the law to ensure that no one else can get away with what Gregg Phillips did. I do know that I would have found this information to be a more substantial criticism of Phillips' tenure than some crabbing by bleeding heart types. Gunther suggests writing a letter to the editor and point this out to them, along with the links he dug up. I've called and left a message for reporter Polly Ross Hughes to ask her about it. Though my past history in getting clarifications from the Chron is spotted at best, I'll try to be optimistic.

Posted by Charles Kuffner on June 24, 2003 to Scandalized! | TrackBack

I am currently an online PhD student at Capella University. I am working on a project "against" privatization in the State of Texas and would appreciate any information, links, input or articles you might have.

Thank you

Posted by: Kathryn McMahon on April 13, 2004 7:00 PM

I have tons of information on the privatization of State services, i.e. Health and Human Services in Texas. If interested, provide me with your email address. I can also put you in touch with others who would provide you information as well.
I am a current employee with the Department of Human Services and a member of TSEU who is fighting against privatization - not just for my job but because I know that our poor, elderly and disabled will not be able to navigate the system they have in mind. I also know that this is not about saving money or providing access to services but it appears to be a political game set up years ago!




I have much more. Let me know.

Fighting Privatization in Texas.

[email protected]

Posted by: kccaseworker on June 12, 2004 6:22 PM

I am writing a paper on ethical issues about House Bill 2292. Any other updates would greatly be appreciated.

Posted by: Cheryl Balthazar on October 2, 2004 10:09 PM