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Thursday, Sept. 22, 2011 04:44 pm

Maximus to the rescue: The backstory

On Tuesday, Sept. 20, the Springfield City Council approved a $50,000 contract with Maximus, Inc., “to perform a review of a fiscally-sustainable staffing level for the city.” During debate, aldermen disagreed on whether the contract was designed as an efficiency study or a personnel-cutting study, but I think Bill McCarty, director of Office of Budget and Management, was pretty clear when he said the mayor’s budget plan was “predicated on cutting staff” and that this review was needed for budget development.

The city has turned to Maximus for help apparently based upon positive reviews from Sangamon County, which has paid Maximus to review numerous departments over the years including reviews of the sheriff’s office, the public health department, the recorder’s office and most recently the coroner’s office. In fact, the Sangamon County Board passed a resoultion in April 2011 to authorize negotiations with Maximus for a “master agreement that would establish financial and performance guidelines for any future services.” Maximus, it seems, is firmly established with Sangamon County government and is now gaining entry to Springfield city government.

Maximus is one of the largest providers of business process outsourcing services in the U.S. and the countries it serves. Maximus employs more than 7,000 people and conducts business in almost every state, with more than 200 offices in the U.S., Canada, Australia, the United Kingdom and Israel.

According to the company’s annual federal Securities and Exchange Commission report for the period ending Sept. 30, 2010, Maximus “is primarily focused on administering government-sponsored programs such as Medicaid, the Children’s Health Insurance Program (CHIP), health care reform, welfare-to-work, Medicare, child support enforcement and other government programs.”

And they make a lot of money doing it. For the period ended Sept. 30, 2010, Maximus reported revenue from general operations of $831.7 million and, according to Bloomberg Business Week, it has upped its 2011 general revenue forecast to between $925 and $930 million. Like Ross Perot, who made millions in Medicare and Medicaid outsourcing with his Electronic Data Systems Corporation (EDS), David V. Mastran, founder of Maximus in 1975, has made the business of poverty and public service very lucrative, especially for company executives and board members.

According to Forbes.com, Richard A. Montoni, chief executive officer and director of Maximus, received a total 2010 compensation package worth $3,258,409. Other top executives at Maximus received the following 2010 total compensation packages: chief financial officer and treasurer - $1,437,768; president of human services, $1,167,109; president of federal services, $1,086,141; and president of health services, $1,758,791.

Being on the Maximus board of directors is also a pretty good deal. The Maximus website lists eight current directors, which include a very prominent Illinoisan – former Gov. James R. Thompson, Jr. While each director’s compensation varied in amount and type of compensation, weighted more in stock awards than cash, Thompson and his seven fellow board members received combined board compensation totaling $2,183,275 in 2010 alone. From 2007-2010, when the rest of the country was reeling financially, total combined compensation of these directors was $5,149,644.

Another troubling aspect to this company is that the increase of poverty and pressures to downsize government actually makes for good business. They say as much in their SEC report: “Our core health and human services business has benefited from steady demand over the last five years. We have not experienced any material adverse change in demand as a result of government budgetary pressures. We believe the critical nature of our services in helping governments provide and administer important safety net programs in the U.S., such as Medicaid, welfare-to-work and CHIP, to the most vulnerable populations helps insulate our services from significant downward pressure, particularly during an economic downturn.”

Recently the Project on Government Oversight released a report concluding that the federal government actually pays billions more to hire private contractors than what it would pay current public sector workers to perform comparable work; a Heritage Foundation reports states the opposite. Analyses supporting both sides of this debate are plentiful, but there is little disagreement that over the past several decades, privatization of government services has increased dramatically and hundreds of billions of dollars are spent outsourcing public services.

Do we as Springfield and Sangamon County taxpayers care that we currently pay large salaries to top directors to manage city and county government departments, but we apparently need to pay more for outside consultants? Is anyone concerned that a private for-profit company like Maximus, which pays millions of dollars annually in compensation packages to a few top executive staff and board members, is earning that money from public coffers? Does anyone wonder why so little information was provided publicly about Maximus, the need for this audit, its scope of work and what guidelines will drive the process?

Perhaps it’s just me but I’m not sold.

Sheila Stocks-Smith of Springfield, who ran for mayor in the April election, is a special projects consultant. 
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