THE GOVERNMENT PERFORMANCE PROJECTReport Card: Hawaii FINANCIAL MANAGEMENT: C- For years, Hawaii's managers gave off a "don't worry, be happy" feeling when they discussed the state's finances. Now, however—largely as the result of the weak Asian economy—growth is flat, and revenues aren't meeting expenses. In the current biennium, $168 million in one-time revenues are being used to balance the budget, despite diligent efforts to control spending. Furthermore, year after year, Medicaid has been underfunded—one way to achieve the appearance of balance when a budget is passed. In 1997, Medicaid expenditures came in almost 20 percent over the budgeted amount. Largely as a result of its free-spending history and its current troubles, Hawaii has one of the highest debt loads in the country, compared with personal income. The current $1 billion capital budget will bring debt still higher. Not surprisingly, there is no rainy day fund, though the administration is proposing one. A few bright spots: Hawaii has a sound six-year financial plan, practices effective oversight in contracting and does a good job with its financial reports. CAPITAL MANAGEMENT: B- There is no statewide capital improvement plan in Hawaii. Agencies develop their own six-year plans, which are prioritized by the governor's office and submitted to the legislature. In the current biennium, both the legislature and governor agreed to more than double capital spending, on the theory that it would stimulate the state economy. Financially risky as this may be, it is taking care of a big backlog of projects. Because the state's slump has made building cheap, many of the projects have come in under budget. Unfortunately, too little of the $1 billion is going to major repairs and maintenance, for which cash has been in short supply lately. The state insists that its own maintenance assessments do not reveal any major problems. HUMAN RESOURCES: C- Hawaii has one of the most rule-bound personnel systems in the country. An attempt at civil service reform failed several years ago when the legislature voted down 30 of 32 bills presented to it. But despite the rigidities in its system, the state has made some innovations. It has cut average hiring time by about a month, keeps applicant lists up to date, and makes them quickly available. Although agencies initially are given lists that include only the top five candidates for a position, they can request more if the first list proves to be unsuitable. Good training is offered on human resources issues—more than 3,000 supervisors were trained in the state's new performance-appraisal system. Surprisingly, job-related training by agencies is fairly active, even with the weak economy. Hawaii has no bonus system or raises based on performance, and pay raises in general have been less frequent than employees had become accustomed to due to budget problems. The state has instituted various awards and small cash bonuses as a way of providing incentives. The influence of unions on personnel management here goes far beyond pay levels; there are frequent confrontations between labor and state government on arbitration dockets and in the state courts. As the result of one loss in arbitration, the state now must give probationary employees the same rights to grievances as all others, an odd approach to the whole concept of probation. MANAGING FOR RESULTS: C- Hawaii was one of the first states in the country to implement a performance measurement process. Budget submissions require output and outcome targets, and a means for comparing actual results to goals. Ongoing efforts have been made to improve the quality of the outcome measures. However, while individual agencies make some use of this data, it has received scant use in upper-level decision making. In the 1998 legislative session, a bill was actually introduced to create a task force that would examine the possibility of performance-based budgeting. As one state official explains, "We had to testify to them that we already had it." Hawaii and all its agencies develop strategic plans. However, the statewide plan tends to have goals about as contentious as motherhood and pineapple pie. There are no specific measures in the state plan, and it doesn't dovetail with the budget. INFORMATION TECHNOLOGY: F While other states have been focusing on oversight for information systems, Hawaii has been moving in another direction. The budget for its Information and Communication Services Division is 40 percent lower than it was in 1992. The head of the ICSD has less authority than most other department heads, and no enterprise-wide enforcement of policy procedures, standards or guidelines is possible. "The state procurement office makes rules, but insofar as technology, there are no central rules," says Barbara Tom, planning and project management officer in ICSD. Competitive bidding is required for any technology purchase over $25,000. Often, says Tom, "by the time we get the bid out, it's obsolete." Now, the governor has mandated that he wants to approve all technology purchases that amount to $10,000 or more. Hawaii does require all departments to prepare and update annual plans for IT, and it asks for a cost-benefit analysis of new projects. But since there's little or no review of either effort, they're pretty much just paper exercises. AVERAGE GRADE: C-
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