New Democrat Update - August 2009
MORE STEERING, LESS ROWING
The fiscal storm hitting Colorado's budget so severely is not going away any time soon. The traditional medicine has already been largely used up. The list of old tricks is quite long - implementing spending/hiring freezes, cutting travel and training, declaring across-the-board cuts, imposing furloughs/layoffs, conjuring ever more creative accounting, deferring maintenance and other expenses, accelerating revenues, spending down reserves, foregoing pay and COLA increases.
Instead of reducing this or that line item, the legislature should start emphasizing the state money it does have, by leveraging and using it to collaborate with the resources of the private sector, nonprofit organizations and other public agencies. Recognizing that it is not the only player that cares about the desirable result, the state could acknowledge what relatively little it does have to spend and freely admit that there is only so much government can directly accomplish with the dollars and people it actually commands.
Building such collaborations requires two very distinct functions of governing. "Steering" functions focus on doing the right things, while "rowing" functions focus on doing them right. By separating these roles, both can be performed better. Once separated, steering can be consolidated to assure that policy is integrated and mutually reinforced across government. Using consolidated funding streams, steering organizations can "purchase" key results from those who row.
For example, many other people and organizations care about better health outcomes - organizations such as the American Cancer Society, foundations, other levels of government, employers who want to pay less for health costs, schools that know healthy kids learn better, and every individual who wants to feel better, do more, live longer, and pay less for "sick care." Even more have an interest in contributing to solutions - recreational sports leagues, unions, service clubs, churches, youth groups, for-profit companies that sell products and services that contribute to better health, and more.
Despite reduced levels of funding, state government would still wield considerable leverage to lead a cooperative effort among all the key players that are capable of generating better health outcomes for the dollar. Public resources could come in the form of matching grants,"seed" money to launch much larger initiatives and to contract with outside service providers.
In addition to financial resources, each entity would bring unique talent, knowledge, skills, access, and more to improve outcomes. Together, this network of organizations could design and put into motion a web of interconnected strategies and actions to maximize health outcomes.
State government could also ask its own departments, or other public agencies (cities, counties, special districts, separate authorities) and outside service providers to bid on the work. In some cases, the state may choose to bid out the work exclusively to public bidders (internal state bidders or bidders from various government agencies). Perhaps the information technology division of one department can do a better job of providing technical services to other departments.
Or the state can ask agencies to bid against private competition. To do so, an entity, like the State Auditor, could ensure that there's a "level playing field" among private and public bids.
For example, the Illinois Department of Children and Family Services dramatically turned around the effectiveness of its foster care program by using performance contracting with out-of-home placement providers. Paying providers for kids' outcomes (successful long-term placement, adoptions, etc.), instead of days of care, changed the incentives for providers, saved money, and improved outcomes for children.
RESULTS OVER RULES
Similarly, the state could also encourage performance contracts - for example, between department heads and managers or between state and local governments. Like the strategy mentioned above, the focus shifts from one based on paying for inputs or meeting specifications to one based on producing more cost-effective outcomes important to taxpayers, accompanied by simplified reporting and less red tape. Major opportunities include human services and health care, as well as transportation construction and maintenance.
The relationship between state and local governments can also be significantly reformed. Colorado could strike a new and better deal - less funding for local government in return for relief from state requirements. In other words, the state gets better results, greater efficiency, and improved compliance while local governments are empowered to find ways to provide better service at less cost as a result of fewer top-down mandates and greater freedom to meet the needs of their communities. Savings in local allocations could be augmented by savings on red tape at both ends.
Instead of the discussion being all about shrinking government finances, the focus can become network building and orchestration in the pursuit of important public goals. Instead of organizational silos, hierarchical structures, walled-off budgets, and one-size-fits-all rules, policy would be about using government to lead an effort to achieve results at less cost with each of the players focusing on that it does best. Instead of falling short by trying to do it all by itself, state government will be "steering" the best "rowers" available.
CHARTERING GOVERNMENT
Along those same lines, Colorado should implement "charter agencies." Charter agencies/departments commit to producing measurable results, namely, improvements in service quality and lower operating expenses. In return, departments are freed from red tape through waivers to certain rules, as well as given special authorities.
Based on what each side wants - and is prepared to give - the basics of a new deal would be negotiated between the head of the department and the head of each charter agency. Each charter agency negotiates a “Flexible Performance Agreement” (FPR) with the department head, including what measurable results they will produce, lower net expense targets, and what authorities and flexibilities (some of which might require new legislation) they will receive.
Similarly, entire cabinet-level departments could also be made into charter departments, again receiving flexibilities in return for performance commitments (again, better service at less cost). These arrangements would be specified and controlled through FPRs between the cabinet head and the legislature’s Joint Budget Committee.
Iowa implemented this initiative and saved the taxpayers $20 million a year for the first two years and $50 million in the third year - all while improving results and quality of service. For this effort, it won a Harvard Innovations in American Government Award in 2005 and also the Council of State Governments' Innovation Award.
The old bureaucratic approach holds departments accountable for playing by the rules. Chartering holds departments accountable for getting results as cost-effectively as possible.
At a time when state finances have never been so squeezed - and promise to be for the foreseeable future, Colorado cannot afford to pass up any opportunity that saves money, while providing the same or better service.