THE GOVERNMENT PERFORMANCE PROJECTReport Card: Kentucky FINANCIAL MANAGEMENT: B+ Kentucky has put in place a wide variety of management initiatives, called Empower Kentucky, that cut across all of state government. But much of the impact will be on finance. By next July, for example, the state will have reworked its entire accounting system to give leaders better information about precisely what it costs to deliver specific services to citizens. This is a very tricky task that involves allocating all sorts of indirect costs. There have been some very sensible fiscal decisions over the years. Rather than build up hefty year-end balances (which might tempt legislators to cut taxes precipitously), the state has utilized surplus money on one-time expenditures. The state has a rainy day fund at 3.9 percent of general fund expenditures; its statutory goal is 5 percent. Kentucky has solid, professionally administered cash management. By carefully monitoring its resources, the state believes, it can take a bit of risk, even permitting 10 percent of debt outstanding to be placed into derivatives. The state has a fiscal note requirement for all bills and amendments with potential fiscal impact. CAPITAL MANAGEMENT: A- A central body called the Capital Planning Advisory Board, composed of members from all three branches of government, prepares the state capital improvement plan and makes funding recommendations. The plan covers six years and is updated every two years. The first two-year segment of the plan, as amended by the legislature, is adopted as part of the biennial budget. The state does not have a uniform standard for condition assessment of its facilities, but assessments are done on a regular basis. For example, universities conduct a biennial review. In the 1998-2000 biennial capital budget, the total requested need for maintenance was $158 million. Some 82 percent of that was appropriated, which is rather high when compared with other states. Agencies are given maintenance funds in cash pools and can choose individual projects to pursue without specific approval, as long as the cost is less than $400,000. HUMAN RESOURCES: B Kentucky realizes it does not tend to attract the best and brightest from elsewhere in the country. But unlike other states in similar situations, it has acted on this problem and put proper emphasis on its human resources systems. Exhibit A is the fact that the director of the state's personnel department sits as a member of the governor's executive cabinet. Personnel is a strong, centralized department here, but it offers a reasonable amount of flexibility to agencies in hiring and recruiting. The state has made significant efforts to retrain employees whose jobs are no longer necessary. Also impressive are the state's recruitment efforts, particularly among minorities. Kentucky recruiters can be found prowling campuses in Alabama, Louisiana and North Carolina to find potential employees. There are two negatives in this category, however. First, the state still requires that agencies hire from lists of candidates who earned the top five scores on standard tests (though the list can include many more than five people if there are ties.) Second, the state's effort at a pay-for-performance system so thoroughly alarmed employees in 1986 that not only has it never been funded but the evaluation system proved to be utterly worthless. There's some talk about another reform this year. MANAGING FOR RESULTS: B In addition to evaluation programs by inter-branch boards and task forces, an elected auditor of public accounts conducts performance audits of state programs. The legislative branch has a Program Review and Investigations Committee, which conducts its own evaluations. Outcome measures are used in most public-policy areas that are financed through the general fund, but the state is still struggling with some data-collection problems. The state's planning is coordinated by the Kentucky Long-Term Research Center, which updates a vision document every two years, with 25 long-term societal goals, including subsets of objectives and outcome measures. Data accuracy is not checked across the board, though it is examined in performance audits. There are numerous ways in which planning and measurement have helped Kentucky make better decisions. Reforms in criminal justice legislation—driven in many states by the latest gory headline—were made here on the basis of predetermined goals and state needs. INFORMATION TECHNOLOGY: C+ Kentucky has recently instituted a solid multi-year technology planning process. It has a dedicated $175 million technology trust fund, to be used for projects that can reimburse the fund through clear monetary savings. The state's accounting and purchasing information systems aren't yet integrated. Many agencies use their own, and while some systems are electronic, purchasing is still a manual process in many cases. Agency managers can make speedy purchases of commodity items through state-negotiated contracts, but larger projects require line-item approval by the General Assembly, and easily get ensnared in a cumbersome procurement process that can take eight months or more. The Empower Kentucky reengineering initiatives will make an enormous difference in IT. Many future technology efforts will be required to promise cost benefits, and cabinet secretaries will be asked to sign a commitment to deliver those savings. The only real problem is that projects not connected with an Empower Kentucky initiative are under no such obligation. AVERAGE GRADE: B
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