This report considers the themes of decentralization and competition in welfare reform. The goal of the report is to describe and assess the promise contained in these two themes of improved services and economic opportunity for families assisted by welfare. The specific services analyzed in this report are welfare employment and training services in the state of Texas. Federal to state level decentralization is distinguished from state to local decentralization. The theme of competition is observed in Texas in the form of contracting out and privatization. The study confirms the effectiveness of contracting, but raises questions regarding the future prospects for competition. Decentralization is shown to improve services and economic opportunity more effectively when it is structured to allow for innovation.