State Disabled Worker Program Faces Overhaul

A controversial program that forces state agencies to spend millions buying goods and services from companies that hire disabled workers while sidestepping competitive bidding rules is about to undergo some big changes.

Leonard Mitchell staples box seams for a state-contracted order at Expanco, Inc. in Fort Worth on Feb. 20, 2015. Photo by: Laura Buckman

A controversial state program that steers more than $100 million in state funds each year to firms that hire disabled workers is on the verge of a major overhaul.

State lawmakers took a hard look this year at the State Use program, which subsidizes jobs for more than 6,000 disabled Texans but has drawn concerns that it costs the state too much while encouraging the payment of sweatshop wages.

Starting Sept. 1, the Texas Council on Purchasing from People with Disabilities, the obscure entity that directed the program for more than 30 years, will no longer exist. The Texas Workforce Commission will take control with orders to assess the program's future and give disabled advocates more input.

“It’s not going to be some obscure corner of the government working whatever agenda they have,” said Shaun Bickley, a self-advocate coordinator with Texas Advocates, a group that lobbies for better treatment of people with disabilities, and a critic of how the council ran the program. “It’s a more equitable arrangement and more representative in serving the community this program is meant to serve.”

Under the State Use program, state agencies are required to ignore competitive bidding rules and favor a network of about 120 nonprofits for a wide range of purchases including office supplies, safety equipment, landscaping and janitorial services. For a nonprofit to become part of the State Use network, at least 75 percent of its employees working on state contracts must be disabled.

State agencies routinely pay more for products and services through the State Use program than they would under a traditional competitive bid process. A review last year by the state Sunset Commission, for example, found one state agency that could have cut its janitorial costs nearly in half outside of the State Use program. The agency was paying $15,992 annually, while it could have paid $8,632 on the open market.

Supporters argue that the extra cost is justified to create job opportunities for the disabled, a group with an unemployment rate more than double the broader population. Critics question whether the program is worth the expense, particularly given that the number of disabled employed by firms in the program has declined in recent years, according to a state report.

“My concern with the State Use Program as it was being administered, was that there was no clear way to measure the outcomes of the program,” said state Sen. Juan Hinojosa, D-McAllen, one of the authors of Senate Bill 212, which dissolved the council and transfers the program to the Workforce Commission. The bill passed the House and Senate unanimously in May. Gov. Greg Abbott allowed the bill to become law without his signature. A request for comment from his office to explain his decision to neither sign the bill nor veto it was not returned.

The Workforce Commission plans to keep the program going as it is for now while officials assemble a new advisory board, according to spokeswoman Debbie Pitts.

“TWC does not want to disrupt the employment opportunities for individuals involved with the program and will work to make sure there is a smooth transition of functions,” Pitts said.

Among the issues the new board will tackle is the future of TIBH Industries, the Austin firm that has administered the program since its inception. 

A private nonprofit, TIBH serves as a middleman for every purchase made through the State Use program, overseeing contracts and recommending how all products and services should be priced. Lawmakers have questioned whether TIBH has a conflict of interest in playing such a central role in pricing while its entire revenue stream, as well as the salaries and bonuses paid to employees, is based on commissions of 5 to 6 percent on sales through the State Use program. The firm’s current contract with the state expires in 2017.

John Luna, chairman of the soon-to-be-dissolved council, has described the council’s arrangement with TIBH as “a proven example of a private sector success in a not-for-profit structure.”

“It seems to us that we are looking to fix a problem that frankly does not exist,” Luna said at a hearing in November. The council did not respond this week to a request for comment.

TIBH President Fred Weber said his firm is focused on keeping its prices competitive with the open market while continuing to support employment for the disabled. He expressed confidence that the Workforce Commission will be fair in how it decides the future of the program, and his firm’s role in it.

"I would assume that they’ll look at the pricing mechanisms but I guess that’s really to be determined as we sit down and meet with the Workforce Commission about the contract," Weber said.

Another target for criticism has been the handful of nonprofits in the program that pay some disabled employees below minimum wage, in some cases as little as 61 cents an hour. The firms are among more than 100 in Texas that have special permission from the U.S. Department of Labor to pay such wages to disabled workers. Pay is usually determined by worker productivity.

“I think part of the new oversight will be taking a look at how responsible it is for state funds to be supporting these sub-minimum wages,” Bickley said.

One of those firms, Fort Worth-based Expanco, has more than 130 disabled people working on state and federal contracts, as well as for companies like Lockheed Martin. President David Dodson said the majority of Expanco’s workers function “well below 50 percent” compared with a nondisabled person, which is why most are assigned work that is repetitive and simple. Pay for disabled workers is based on productivity and pegged to an $11-per-hour wage for a normally productive worker. Many of the workers can’t make it through a six-hour shift and so spend part of their day in a classroom environment learning basic skills like counting. 

Dodson said he fears that in their effort to overhaul the State Use program, officials will force companies like his to let go of workers that will have few other prospects for work.

“It’s not a pretty picture for those of us that are trying to help the most severely disabled individuals in employment,” Dodson said. “You get pictured as some villain out there and yet in my opinion the real villain is the people trying to take this opportunity from those folks.”