Senator Eliot Shapleigh - El Paso, Texas

A dispute remains unsettled between the Texas Health and Human Services Commission and the state auditor's office over how much would be saved by privatizing the commission's human resources and payroll functions.

Last year, the commission, which oversees all of the state's health and welfare services, said it was beginning its effort to privatize some services now provided by state workers as a cost-saving move.

Because the commission disagreed with the auditors' preliminary analysis that only $1.1 million would be saved, the figure was dropped from the auditors' final report, released Tuesday.

Instead, the figure was replaced with a statement that auditors were unable to quantify what savings would come from outsourcing.

Responding to the critical audit, HHS Commissioner Albert Hawkins acknowledged "errors and omissions" in its cost analysis, but said the errors were not significant enough to change the commission's calculation.

He noted that outsourcing "would meet business requirements while providing the greatest savings and efficiency to the state."

The only cost-saving figure in the report was another estimate from the commission itself, which revised potential savings to $32.7 million over five years. But the auditors' report, which did not quantify savings, disagreed with the amount HHSC said it would save.

When HHSC first proposed privatizing its administrative functions, it estimated it would save $63 million over five years.

That figure was revised down to $45 million.

"Our conclusion remains the same," said HHSC spokeswoman Jennifer Harris. "It's clear that outsourcing is more cost-effective."

The shrinking savings estimates have fueled critics' contention that the state's rush to privatize, not just consolidate, functions that HB 2292 mandated, will end up costing taxpayers, state employees and those who use the state's social services.

"There is no joy in saying we told you so when taxpayers are stuck with the bill," said Rep. Carlos Uresti, D-San Antonio.

Many legislators opposed the privatization move, Uresti said, "to avoid promising taxpayers more than we can deliver. Today's report shows that our concerns were well-founded."

Hawkins said its cost analysis was never intended to provide exact figures.

Celia Hagert, a policy analyst for the Center for Public Policy Priorities, noted that auditors didn't accuse the commission of not offering precise numbers, but of using inaccurate and incomplete numbers when trying to quantify savings.

The center, which lobbies for poor and working-class Texans, has been one of the most outspoken critics of HHSC's privatization drive.

"How can you support decision-making and negotiate the best contract if your numbers are inaccurate?" Hagert asked.

In response to auditors' continued request that "all relevant costs" be considered when analyzing the cost-effectiveness of outsourcing, Hawkins wrote that the commission chose to include only those budget costs "directly related to the human resources, payroll and supporting automation operations."

Precisely documenting all relevant costs, Hawkins wrote, "was deemed cost-prohibitive, overly time-consuming, and of dubious value to the decision-making process."

But those costs are real, said Andy Homer, director of government relations for the Texas Employees Professional Association.

For example, he said, employees and their supervisors are now doing many of the tasks once done by human resource professionals. That means time away from their real jobs, Homer said.

As the audit was finalized last week, one of the last — and largest — portions of the newly privatized services was rolled out, and it's not working, according to union officials, who say they've been inundated with complaints.

An e-mail to all HHSC employees on Monday acknowledged the problem.

Harris said additional costs associated with the rollout would be borne by Convergys, the contractor that submitted the winning bid, and not by the state.