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The Arizona Works pilot
program was created to determine the feasibility of privatizing public
assistance administration in the State of Arizona. The first phase of the
pilot program began on April 1, 1999, and will continue through December 31,
2002. The pilot program is required by statute to save a minimum of 10 percent
in administrative expenses when compared to the Department of Economic
Security’s (DES) estimated costs. However, the pilot program’s costs have been
from 6 percent up to 37 percent higher each year than the estimated cost for
DES to perform the same functions. Costs have been higher because the pilot
program’s contract payment formulas were not adjusted for two decisions by the
federal government that significantly limited the program’s original intended
scope of work, and the manner in which costs could be charged it.
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