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The Mandate to Measure
By Katherine Barrett & Richard Greene
Information is king. No single idea emerges more clearly from year-long research done for the 2008 Government Performance Project. As always, this report focuses on four fundamental areas of government management: Information, People, Money and Infrastructure. But this year, the elements that make up the information category — planning, goal-setting, measuring performance, disseminating data and evaluating progress — overlap with the other three fields to a greater degree than ever before. Information elements, in short, are key to how a state takes care of its infrastructure, plans for its financial future and deals with the dramatic changes affecting the state workforce.
Grading the States '08 Video:
Watch the March 3 panel discussion. (Windows Media Player required)
Featuring:
• Introduction by Susan K. Urahn, Managing Director, Pew Center on the States
• Overview by Neal C. Johnson, Director, Government Performance Project, Pew Center on the States
• Panel moderated by Peter Harkness, Editor and Publisher, Governing, with Georgia Republican Gov. Sonny Perdue, Michigan Democratic Gov. Jennifer M. Granholm and Susan K. Urahn
Governors understand this. A growing number are now personally involved in improving the way information is used to manage their states. Ted Strickland, Ohio's governor, began a "Turnaround Ohio" plan that includes flexible performance agreements with his agency heads. Similarly, Maryland's Governor Martin O'Malley is building StateStat, a comprehensive means for making decisions based on data, similar to his CitiStat effort in Baltimore. He describes it as a system "that actually sets goals and has the guts to measure progress towards achieving those goals. All of that with relentless follow-up."
Of course, information alone doesn't make a well-managed state. With personnel turnover rates on the rise and retirements looming, states have to figure out ways to retain workers and transfer accumulated knowledge to an ever-changing workforce. On the money front, structural balancing of budgets has been a real trick for states that found themselves flush with cash last year, only to see revenue streams wash away in the current declining economy. Infrastructure maintenance continues to be a bill that bedevils the states. Even Minnesota, scene of last year's deadly bridge disaster, hasn't quite come to terms with what to do there. "We're no different from other states in the amount of maintenance we need to do," says one Minnesota state legislator. "But it feels like nobody's figured out how to find the huge amounts of money necessary, without cutting back on more politically sensitive areas."
All of this has led to a search for new solutions to old problems. The Massachusetts Department of Capital Asset Management, not unlike many homeowners, has seen utility bills grow. As a response, the agency arranged with energy providers to reduce power usage on short notice during peak-demand periods, in exchange for cash. "The more kilowatts you shed," says Deputy Commissioner Mark Nelson, "the more you get paid." There's a double benefit here. Not only does it save dollars, it saves energy.
The following reports on the 50 states are full of such innovations, as well as recommendations for ways in which states can learn from each other. All of these were gathered over the course of the past year, as the GPP engaged in its fourth effort to evaluate all 50 states' managerial capacity.
The approach this year was similar to the one we used in past efforts: Teams of journalists and academics do the heavy lifting of research and analysis. Once again, the print version of the GPP that runs exclusively in Governing is augmented by online information at pewcenteronthestates.org/gpp. That's the place to go for more information about the states, an in-depth explanation of the grades, additional recommendations we make and resources we suggest.
There have been some changes. This year, for the first time, the GPP was created under the auspices of the Pew Center on the States, directed by Neal C. Johnson. One of his goals for the GPP, he says, is "to make sure that the grades are the beginning of the conversation — not the end." As such, a number of initiatives are currently being planned to work with the states to help them learn from one another and improve their management practices in years to come.
We did something else a little bit differently. One staffer worked full-time for months doing in-depth interviews with corrections departments. The idea was to use their experiences to help inform the broader management conclusions reached in the process. "Corrections departments may not be entirely representative of a state's management expertise," Johnson points out, "but they contributed enormously to our sense of the states, particularly in the areas of human resources and information."
It's only natural that many will look to the GPP exclusively for the grades. But it's important to understand that the purpose of the grades is to focus attention on the substantive issues of state government management. Additionally, one of the underlying maxims of the GPP has long been that it's as important to see where things work poorly as where they work well.
A few years ago, Bill Gates noted that some schools had done away with grades and were giving students as many chances as they needed to get the right answer. Gates wasn't buying that. "Your school may have done away with winners and losers," he said, "but life has not."
Even so, we feel obliged to repeat, as we have in each iteration of the GPP, the following critical caveat: Although the efforts of many men and women were involved in trying to get every grade — and every explanation of that grade — right, it's inevitable that there will be honest disagreement. While these instances can be painful, the work has continued with the sure knowledge that efforts that are totally risk-free tend to accomplish nothing.
Information
Moving Targets
Just a few years ago, states would boast about their latest, cutting-edge piece of technology.
Not anymore. Today, it's not the tools. It's results.
One of those is transparency. In an era when "trust in government" is at low ebb, states are working to open up communications with their constituents. Last year in Colorado, the offices of the governor, state treasurer and controller published a transparent report on state revenues and expenditures. It gave everyone, and particularly individual taxpayers, a better understanding of the budget. "That's important, in the same way it's important for investors in a company to know how the company is performing," says Cary Kennedy, the state treasurer. "We need to understand how the state is performing without the spin."
In Washington State, Governor Christine Gregoire held a series of town hall meetings on the budget to communicate results to citizens and follow up on the budgetary priorities she had previously established with much citizen input. "We want to give concrete information about whether a difference has been made or hasn't," Gregoire says. "We have struggled with this — how do you translate this in a way that really resonates with the taxpayer?"
States also are making it significantly easier for citizens to do business with agencies online. The ability to do transactions on state Web sites is no longer new. The focus is now on preserving the sanity of the people who try to use them. The GPP evaluation found that the majority of states are doing a measurably better job with Web site transactions than was the case three years ago. No state actually lost ground.
Alabama, for example, has its Camellia system, which supports the state's social services. It's a one-stop shop where citizens go and fill in the answers to 25 questions. The answers then are used to find which of 29 state services they are eligible for.
In Michigan, business leaders have benefited from upgrades to, and a rethinking of, the online process for getting permits and forms. For an air-quality permit, for instance, it took up to six months — 18 months in some cases. With the new system, that permit process is now down to a matter of days.
When all is said and done, a state's skill with information is found at the intersection of three distinct operations: the willingness to share data, the capacity to generate good information, and the ability to get those who should use the data to do so.
Sharing data is the easiest of the three. But, while the managerial spirit to share is strong, the technological flesh can be weak. In Maryland's Division of Corrections, for example, an "archaic and obsolete" data system hampers the ability to pull together and publish data for use in performance reporting. This is a crucial piece of the StateStat effort, since the corrections department is the repository for most law enforcement information. Right now, police, courts, parole and other public-safety agencies don't have the ability to share data with each other. Shannon Avery, executive director for the department's planning and policy office, says a lack of data and an inability to generate reports easily is a constant frustration for the StateStat team. Upgrading this system is a top priority of the governor, Avery says, noting that there had been some legal problems but that the project is now back on track with a slightly longer timeline.
Maryland is far from alone in paying a price for the inability to share data digitally. Some state employees in Rhode Island are still operating with typewriters — electric, of course, but still a far cry from the ability to share information in a database. New Hampshire has such weak data-sharing systems that it doesn't know how much it spends each month — kind of like an average Joe who's lost his checkbook. At the opposite end of the spectrum, there's Wyoming. Its transportation department has linked geographic information systems to financial systems and now knows with exact specificity how money is being spent, down to the cost of the salt used between each mile marker on the state's snowy roads.
It's not always a question of sharing data. Often, it's a matter of creating useful information — particularly about performance — from scratch. On that front, there's been a lot of progress.
For starters, strategic planning has become a routine, accepted part of governing. It is the norm for states to have either strategic plans or collections of agency plans. This was true in only half of the states in 1999. In 2008, just nine states were weak in both statewide and agency planning.
Performance auditing and evaluation also are pervasive. A decade ago, it was rare for a state to have an agency or department responsible for delving into the success or failures of programs. Even Florida's much-praised Office of Program Policy Analysis and Government Accountability had just gotten started. Now, departments that take a close look at how well things are working are present in four out of five states. The value of such efforts is clear. In Montana, to take one small example, auditors pinpointed security weaknesses by buying back discarded state computers to see what data remained on the hard drives. Twelve of 18 drives still had retrievable information on them.
The push to produce results-oriented information, rather than data on the amount of work done, has continued to evolve. Pennsylvania, a state that once argued that outcome-based information was unnecessary, is now among those moving to measure results.
One of the biggest obstacles to progress in managing for performance is the disconnect between the production of performance information and its use in the budgeting process, particularly by legislators. Michigan and Georgia, for example, produce a great deal of excellent performance information, but officials report that the data seem more a burden than a tool to many legislators. In Alaska, says Jo Ellen Hanrahan, a management analyst with the state's Office of Management and Budget, "Our performance measures are on the Web but not linked to one another nor to the budget dollars." And in Alabama, a state whose agencies have advanced dramatically in their generation of results information, one corrections official reports bleakly, "I am afraid the legislators don't care too much about that information."
Nobody expects a legislative turnaround to happen soon or without snags. But it will come. Consider this: Thirty years ago, many state government experts wondered whether the states would ever accept uniform accounting for their books — the body of standards now known as Generally Accepted Accounting Principles (GAAP). When New York began to experiment with this newfangled bookkeeping, it uncovered a $2 billion deficit. "The books were so loose and kept in such an undisciplined manner," said Ned Regan, who was New York's comptroller at the time, "that governors and legislators could not be held responsible for their actions."
Today, all states comply with GAAP.
People
Building a Base
Vendors who sell to Wisconsin could be forgiven for thinking the state doesn't have enough money to pay its bills. But the delays they experience in getting paid have nothing to do with the state's cash flow. Wisconsin simply doesn't have enough staff to process the bills.
Personnel shortages are a problem, not just in Wisconsin but in a majority of states. In the past few years, much attention has been focused on the imminent retirement of huge waves of older state employees. That hasn't happened yet — so far, many of those eligible to retire have elected to stay on the job. Nonetheless, in states such as Georgia, Indiana and Louisiana, total turnover last year ranged between 18 and 23 percent.
Some state officials argue that high turnover is now a fact of life that states should plan for. Anticipation of high turnover "should get rolled into agency workforce plans," says James Honchar, deputy secretary for human resources in Pennsylvania's revenue department. "But managers are reluctant to believe turnover is the way it is."
And yet, many men and women are heading for the doors. There are lots of reasons for the phenomenon. Low compensation, untrained supervisors and lack of recognition are among the issues.
But turnover is a significant expense for states. It results in more use of costly overtime, less efficient delivery of services and an absolute loss of the dollars spent on hiring and training. "It costs money every time you have to go out and hire, do psych evaluations and background evaluations," says Nancy Swecker, director of administration for West Virginia's corrections department. The department calculates the price tag at $20,000 for each new corrections officer.
The pain of turnover is exacerbated by a relatively new trend that is cutting across many states: losing new employees while they're in their probationary period — generally between the six- and 18-month mark. In 2004, 11.6 percent of new hires quit during this period. In 2007, that number zipped up to 13.2 percent. During the same time period, the percentage of new hires that were fired stayed flat at a little over 8 percent.
The numbers in the worst-hit states are alarming. Mississippi leads the list with nearly one out of every two new employees not making it past the first year or so. Arizona loses 42 percent of new employees during the probationary period; Virginia and South Carolina, 32 percent.
So, what are states doing to hang on to new, young hires, many of whom march out the door and into the private sector? Some solutions are emerging. Georgia used to line up its compensation and benefit package with other states. Now, it's focusing on the private sector instead and shifting its compensation and benefit package accordingly. "We're working against the mentality of, 'You work for us for 30 years and then you get this great pension and retiree medical,'" says Steve Stevenson, commissioner of the merit system of the personnel administration. "That's not really what the emerging workforce is looking for. They're looking for bigger base pay and pay for performance."
Academics who have studied young workers pinpoint another issue: a desire for more responsibility and the ability to make a real difference in a job. With appropriate employee training, state agencies could fill middle-management positions with younger workers eager for challenges. That's the idea behind New York's Technology Academy, which was established to deal with shortages of higher-level IT professionals. It tries to attract rising stars and then fast-tracks them for management.
Leadership training can take many simpler forms as well, such as job shadowing, which allows people to work closely with someone one level up. It also may include mentoring or having trainees attend outside conferences, receive education stipends and even design and implement a real-world project.
Technological tools can be useful for training in departments where staff is placed in rural areas or spread throughout a large state. A number of states are using e-training and videoconferencing to make training available, effective and efficient — despite geography.
Georgia is using these technologies for at least 10,000 of its customer-service employees, teaching them how to be friendly and helpful, as well as how to identify ways to speed up processes. The curriculum includes cameos by an unexpected duo: comedian Jeff Foxworthy and Governor Sonny Perdue. The 20-hour module of video-workbook sessions doesn't cost agencies very much, and the state is now measuring the results by establishing and monitoring customer-service-level indexes for all agencies.
With many states facing budget cuts next year, there are concerns that training will be one of the first areas slashed. It's particularly vulnerable since most states do little to document the benefits of training, even if officials know intuitively how much it helps.
Of course, even if states were able to hang on to new hires, they'd still have to make sure that a hunk of institutional knowledge doesn't walk out the door when older employees retire. Tapping into the information that these long-term employees have is known as "knowledge transfer," and it's key to efficiency and effectiveness in government.
But it's not easy to do. Right now, a great deal of the dialogue about knowledge transfer is little more than that — a lot of people talking. Some states rely on rehiring retired employees, with somewhat questionable results since rehired employees often simply return to their traditional tasks and are not encouraged to "transfer" their knowledge to younger co-workers.
Still, the need to keep valuable information alive and well is significant. And some states are figuring out ways to accomplish that. Virginia, for example, spent $250,000 to put together a knowledge transfer system that 35 partner agencies could share. Each has software that allows it to map the specific skills and knowledge that are needed for various jobs and then tailor training programs to those specifications. When Virginia's workers' compensation manager, Sue-Sheila Strong Keener, was diagnosed with a fatal illness, Virginia officials were given a poignant view of how knowledge transfer operates. "We had her mentor her high-performing employees because you can't pre-select in the public sector," says Sara Wilson, the director of Virginia's Department of Human Resource Management. "They would job rotate so that everyone got exposure to the various jobs she did."
When it comes to holding on to personnel, non-cash incentive programs are increasingly popular. Utah has a "Walk the Talk" program that gives employees the chance to give a manager a 3x5 card that praises another employee who has accomplished a task that notably advances the goals of the agency. Every so often, there is a drawing from these stubs for gift baskets or other non-monetary rewards.
States' HR offices are reaching out to other partners to recruit and attract personnel. Some special recruitment programs are targeting young people and the special needs of the state. Hawaii's Department of Human Resources Development, for example, has teamed with the Department of Economic Development to develop incentives to keep Hawaiian residents from leaving for the mainland and to lure those who have left into returning to work there. Alabama and Georgia have targeted returning military personnel for jobs as corrections officers.
Money
Budgeting for Realities
Oh, for the joy of the past four years. Revenues flooded state coffers. Tax cuts were possible. Only a handful of states faced fiscal problems.
Not anymore. An overall recessionary climate, coupled with the subprime loan mess, has hit a number of states hard. A few months ago, Nevada had a sizable hole in its current biennial budget. By January, the hole had grown to more than $500 million and was getting bigger. To make up for the shortfall, the budget has been cut 4.5 percent across the board, and the state has put a hiring freeze into effect.
This wasn't supposed to happen. In the days following the dot-com bust and 9/11, most states trimmed back. They didn't add ongoing expenditures that were based on non-recurring surpluses. They made promises reminiscent of Scarlett O'Hara's boast that she'd "never go hungry again."
Some of the worst-hit states are those that forgot these lessons and treated temporary surges in income as though they would go on forever. In Arizona, for example, a year of 16 percent revenue growth was followed by 18 percent. "That created an attitude that the sky's the limit," says state Senator Bob Burns. The legislature built up spending to match revenues and cut income taxes. Now, with a weakened economy and revenue falloffs, it confronts a $870 million shortfall for fiscal year 2008 — nearly 10 percent of its general fund budget. As a result, the fiscal 2009 budget proposal uses a series of accounting gimmicks — such as shifting $55 million in July 2009 sales tax revenues to June 2009.
In Louisiana, some state leaders are concerned that their state not misuse the influx of post-Katrina money from the federal government, plus revenues that flow from rebuilding. "It's fool's gold," warns John Neely Kennedy, the state treasurer. "History demonstrates that at some point, revenues will come back to earth."
It's not as though all states are unprepared for a downturn. Many rainy day funds have been built up, a number of them above the traditional 5 percent of general fund levels. Most states have been cautious in recent years about increasing long-term benefits for employees. At the same time, improvements in Medicaid management have helped to cut back on health-cost growth.
But as each challenge is faced, another grows. Many states confront new Medicaid pressures not because of a surge in costs but because the federal government has reduced its contribution and tightened its regulations. Then there are retiree health care costs. New accounting standards require that governments calculate their long-term retiree health obligations, and that has put pressure on current budgets as states struggle to deal with substantial obligations that will mount relentlessly if they aren't faced. Connecticut, where finances are in good shape right now, has a $21 billion liability for retiree health care over the next 30 years and has put aside only $10 million toward it. Although it was only a nominal payment, it was, says Michael Cicchetti, deputy secretary of the Office of Policy and Management, a way "to get people used to the notion that they have to put money aside."
A fair number of states, including Montana, Utah and Washington, have been careful about keeping budgets in line with changing tides. Washington State's long-term perspective and sophisticated projections, for example, have helped it avoid unpleasant surprises. The state generates long-term budget outlooks — at least six years out — that are not just insider planning documents but, says Candace Espeseth, assistant director of the state's budget division, something the legislature looks at, as well. "We have quarterly updates for many of our forecasts and our caseloads," she says. "We're constantly realigning."
One very good sign for the future: The timing of the pending budget problems and the maturation of technology are coming together in such a way that governments are positioned to communicate with citizens about the state's fiscal health in ways they never have before. Budget offices report getting more citizen input as a result of online mechanisms and the posting of public hearings online. That might not make the hard budget decisions any easier, but governments should be able to let people know — on their own terms, not just through local media — what's going on, and in turn, get more feedback from citizens on budget moves.
This openness isn't just a by-product of technology. New Jersey now has a process in place to publish any changes that are made after the governor's budget proposal — including the name of the lawmaker who made the change. The system worked well last year. The state got its budget done ahead of time, and there were fewer unexpected programs crammed in at the last minute.
Of course, challenges for the states' money managers stretch way beyond budget issues. This year, as in years past, contracting and procurement are weak points. States are benefiting from new technologies that allow them to do more purchasing online. But some are having trouble keeping up and many still grapple with issues of flexibility versus control. New Hampshire is at the extreme of the control spectrum. Purchases above $5,000 can't be made without approval from an elected board.
Many states, though, have set about finding innovative approaches for procurement and contracting. California developed its Award Schedule, which allows agencies to spend up to $250,000 on transactions without using the traditional bid process, as long as the companies and products involved are on product schedules put out by the U.S. General Services Administration. Before Minnesota procurement employees are awarded the authority to make purchases, they must attend rigorous training programs on procurement. And Georgia has established a series of indicators to inform agencies about dollar savings and procurement cycles for their purchases.
Infrastructure
The Rough Road
Last spring, there was a prison riot in Indiana. The casual observer, informed by Hollywood movies, might guess that the roots of unrest were vicious gangs, escape efforts or hostile guards.
In fact, the real genesis of the problem at the New Castle medium-security facility was more mundane: bad planning for infrastructure. Back in 2001, the prison was built to avoid overcrowding at other prisons. But the state provided only enough money to operate at 25 percent of capacity. Inmates still had to be sent out of state. In 2005, inmates started to return, and in the following year, a private company began running the prison. To take advantage of still-unused capacity, the prison imported prisoners from Arizona. The contractor, however, was unable to hire sufficiently experienced staff. And when the Arizona inmates who were accustomed to a less-restrictive environment rebelled, the prison was unable to respond adequately. Two staff members were injured.
The state has fixed many of the planning problems that led to this event. But the impact of prior practices here and elsewhere serve as a cautionary tale. It's critical that states look at how they will use the facilities and the full cost of maintaining them.
Perhaps the most serious disconnect comes when states underestimate the costs of maintaining new roads, bridges and buildings. Even though a growing number are aware that maintenance is an area of concern — and states such as Georgia, Idaho, Indiana, Tennessee and Vermont have made real improvements — an alarming half of the states are decidedly weak in infrastructure maintenance.
In part, that's because the dollar amounts are huge when it comes to transportation. South Carolina legislators are considering a proposal to phase in $200 million annually over five years to help rehabilitate roads. Unfortunately, the state auditor suggests that funding would have to grow by $1 billion a year for 10 years to bring those roads up to speed. Deferred maintenance in New Jersey's transportation system is now $13 billion, with the state's bridges falling into steadily worse repair.
Massachusetts estimates that over the next 20 years it will need up to $19 billion more than it expects to bring in just to maintain its transportation system. Right now, it has about $2.2 billion in non-transportation deferred maintenance. Although the state still isn't doing complete infrastructure assessments, it has made progress over the years. The fact that it has a system in place to make estimates of this kind puts it in better shape than a number of other states.
Such systems are becoming more common, replacing the old way, where, says Missouri's facilities management director, David Mosby, "every couple of years, departments made a call about the condition of their assets." Today, the Show-Me State uses a sophisticated capital-planning system created at the Massachusetts Institute of Technology that helped assess 27 million square feet of state buildings in a period of 18 months.
There has been some marked improvement in capital planning over the past few years. It generally is more transparent, more focused on the long term and more objective.
Take Alabama. It had fallen way behind in keeping up with maintenance. In its prisons, for instance, the normal locking mechanisms on cells had fallen into such disrepair that the state is using padlocks instead. "It's a terrible system," says Vernon Barnett, chief deputy commissioner of corrections. "If there was a fire, people wouldn't be able to get out because officers would be running around opening all those padlocks."
But Alabama now is taking steps to improve. Beginning with the 2009 budget, agencies must provide the finance department, which sets the governor's budget, with detailed and prioritized project requests, including justification for the projects, forecasts of operating and maintenance costs, and possible alternative funding sources.
The most abused terms in infrastructure contracts are probably "on time and on budget." But advances are being made by several states on this front. The Arizona Department of Transportation, for instance, has established a "partnering" system under which each contractor and the state agree to a "mission statement" for a project, as well as a ladder of escalation for resolving disputes. This partnering has kept claims down.
California has experienced some success in the on-time department. After a fiery truck crash melted a key freeway exchange in the Bay Area, it took only 16 days — not the normal 150 — for Caltrans (the state's transportation department) and its contractors to clear the span, build a new bridge and reopen the exchange. How was this accomplished? Caltrans offered a bonus of $200,000 for each day the work was completed ahead of the deadline, with a maximum of $5 million. Given the importance of this road to commuters, the state got real value for its money.
"Government can work," Governor Arnold Schwarzenegger said of this effort. "It can be efficient, it can lead."