Fractals of Change

Broadband vs. NIMBY

Question: Now that the funding for border-to-border no-residence-left-behind highspeed broadband access in Vermont is at hand, what could stop us from fulfilling our e-state dream? (see here for the good news on funding).

Answer: Us!

Question: How can we save us from ourselves?

Answer: Un-sunset 30 V.S.A. § 248a.

To understand this bureaucratic answer, read on.

The plan for extending highspeed broadband to every residence depends on radio links using next generation cellular technology called LTE. The technology will provide us mobile as well as fixed service through a single account. It will indubitably lead to improvements in coverage for cellular voice service as well. But there's a catch. The base radios for this service – like all cellular services – need antennas mounted above interference. Although some of these antennas can go on public buildings and in places like church steeples, many if not most of them will have to be placed on towers. And most of these towers will be new. If we already had towers in the unserved parts of the state, those parts of the state wouldn't be unserved.

The towers can't be invisible or they won't work. At a minimum, the antennas need to be mounted twenty feet above the tree tops. If there are multiple service providers on a tower, which we hope there will be, the antennas for each service need to be separated by ten vertical feet. In general the tops of towers will be forty feet or more above the tree tops. Towers in high places are also a good thing from a communication point of view and high places aren't invisible either.

Although most people in a given area will be happy with new service, it is inevitable that some of those with the best views of the towers aren't going to want to have towers built in their view. NIMBY – Not In My BackYard syndrome – is a fact of human nature; it's not unique to Vermont. But those who oppose projects of any kind have learned how to use Vermont law – particularly Act 250 review by District Commissions and local zoning reviews – to impose very long and often fatal delays on projects.

Remember, the federal stimulus money awarded to Vermont Telephone (VTEL), the Vermont Telecommunications Authority (VTA), and others must be spent within three years! If these projects are unreasonably delayed, they may literally never get done.

When the Vermont legislature enacted Governor Douglas' e-state proposal in 2007, it recognized the danger that NIMBY poses to execution of this ambitious plan. To assure that tower-building didn't get unreasonably delayed, it allowed applicants for projects of three or more towers to go to the Public Service Board (PSB) rather than District Commissions for approval and set strict timelines for hearings. Moreover, local jurisdiction over these projects was preempted by this new 248a process. The 248a process was deliberately modeled after the procedure used by the PSB for electric utility projects. To oversimplify, Act 250 review considers only the negative aspect of a project including aesthetic impact (towers aren't invisible); 248a review requires the PSB to minimize impact BUT allows for the reasonable mitigation of impact by the public good that comes from a project (you need towers to get coverage).

Town by town review of multi-tower projects would be impossible. If one town insisted on re-siting one tower, than other towers would have to move to avoid coverage gaps and the project would start all over again. The 248a single review of the whole project by the PSB solves that problem.

But the whole authorization for 248a reviews expires (sunsets) July 1, 2011 – just when we're likely to need it most. Very simply, execution of our e-state plan for border-to-border broadband and cellular access depends on the next legislature and the next administration cooperating on a bill to removes the sunset clause. The language is as simple as "30 V.S.A. § 248a(i) is hereby repealed." This should happen in January at the start of the new legislative session so that project planners will know that they can become project builders in a reasonably short time. We have a lot to do and we can't let NIMBY stop us.

 

 

WOW

Yeah, wow!

Last week we learned that Vermont Telephone Company (Vtel) was awarded an $81 million federal grant and $35 million loan for its Wireless Open World (WOW) last mile broadband infrastructure project; Vtel will add $30 million of its own equity. It's hard to overstate the significance of this project, particularly in the context of the middle mile grants we were awarded just last month, our sustainable adoption grant, our Smart Grid grants, our mapping grants, the state's Backroads Broadband program, the capital appropriation of $4.5 million to the Vermont Telecommunications Authority (VTA), a 1200 mile fiber backbone buildout by VELCO on its transmission network, our public safety network project (VCOMM), other public investments, and continuing investment by the state's private carriers.

Basically all of the capital is in place for Vermont to achieve its dream – very high speed Internet and cell service everywhere, leading the nation in broadband rather than following, having telecommunications be a reason companies move here instead of an obstacle to economic development! It's now up to us to execute – don't underestimate the difficulty of that. I'll write more shortly on what execution means now that the money is in hand; but the rest of this post is about VTel's WOW plan and how it gets us to universal broadband coverage.

Specifically, Vtel is providing three things with the money: fiber to the home in their "traditional" service area around Springfield, Vermont; wireless Internet access reaching virtually all of the estimated 15% of Vermont residences which can't get good broadband today as well as many small businesses; and neighbor-to-neighbor training to "show how broadband can help find jobs, improve schools, start businesses, access federal and state assistance, and enhance rural life."

All of Vtel's current telephone and broadband customers in fourteen towns in the Springfield area will get fiber to their homes and what Vtel describes as GigE service. A gigabit is one thousand megabits (you knew that, right). GigE means speeds up to one gigabit per second (1 gps). Vermont's minimum standard for acceptable broadband is 5 megabits per second (5 mps); so GigE is 200 times the minimum and more than a thousand times faster than basic DSL – forget about dialup. We don't need GigE speed today; we will someday, though; and it's good to be way ahead of the curve. Vtel sells this service now as a $34.95/month addon to a few of their customers. It does have a 500 Gigabyte monthly limit after which extra charges are assessed, however (there are eight gigabites in a gigabyte). BTW, GigE service is what Google had been promoting for nationwide service and plans to demo in some lucky location. According to Vtel President Michel Guite, Singapore hopes to complete a GigE network by2014; he promises we'll have ours by 2012 or 2013.

In the unserved areas of Vermont, VTel will be building an LTE network – LTE (Long Term Evolution) is so-called fourth generation (4G) cellular data technology. It is the technology which both AT&T and Verizon Wireless are planning to deploy in their networks as are most of the world's major carriers (some, like Sprint, are betting on a similar but competing technology called WiMAX). Note that what we are getting is so bleeding edge that it hasn't been commercially deployed anywhere yet; there's a risk in that but lots of benefit in being a leader. LTE should be capable of data rates well in excess of 10 megabits (10 mps) in each direction and upgradable to much more. It is a mobile technology so your smart phone or laptop or netbook or iPad or Kindle will be connected not only at home but also as you travel.

Indubitably one of the reasons why Vtel got the second largest award announced in this round nationwide – 10% of the total awarded – was that VTel has been investing its own money for years to acquire wireless spectrum (space on the radio waves in Vermont). This spectrum is a rare commodity and is required to offer this service.

The award that Vtel got is only for broadband coverage; there are no stimulus funds for cellular deployment. But the LTE network Vtel is building is the kind of network cellular carriers plan to use both for voice and data. In fact, more and more smart phones already support voice over IP (voice on a data network) so that services like Skype can work. Three years from now, when this network is fully deployed, I'll be very surprised if it isn't filling most of the gaps in our cellular voice coverage.

So, WOW!

Reunion Autobiography

Next June'll be my 50^th high school reunion. The class is putting together a book and we were all asked to write an essay of 400-750 words on what we've done since graduation. Here, in 748 words, is mine:

Harvard would have been just an enjoyable waste of time if I hadn't had to learn to program computers to get a job in the computing center to pay my tuition. When I graduated – knowing I would be a novelist and just needing to earn a living, there were more jobs for computer programmers than people with a BA in History and Lit.

I programmed at Equitable Life in NY, then at Union Carbide in NY and Chicago with a brief intermission for active duty training in the National Guard. Even a short time in the army taught me what it was like to be a hopeless underachiever - "your other *** left, Evslin". I did get to serve in both the Chicago Convention and the Bobby Seal riots, however.

Started a computer consulting business, Solutions, in 1969 and moved to Vermont soon after. Married for the first time in 1973; son Jarah was born in 1975. Wrote the first software for bank to automated clearing house (ACH) transactions and Solutions became a software business. Was elected town moderator, probably to shut me up during town meeting.

Married Mary in 1979 and have lived happily ever after. She came with Kelly. Kate was born soon after.

Ran for the US Senate in 1980; lost. Was Vermont Secretary of Transportation for two years. Went back to Solutions, which Mary had been running, and switched from mainframe to micro software. I wrote and she sold the first Macintosh communication programs.

Sold most of Solutions, including me, to Microsoft in 1991. We moved to Vancouver, BC, where I ran another Microsoft acquisition (their first email product) and the remnants of Solutions. Later moved to Redmond and led the email group and development of what became Outlook and Exchange.

Left Microsoft for AT&T in 1994 after a disagreement with Bill Gates over the future of the Internet. AT&T put me in charge of their Internet strategy; and I led the development and launch of their first ISP, AT&T WorldNet. We popularized flat-rate, all you can eat dialup Internet access at $19.95/month.

But I couldn't convince AT&T to invest in VoIP – basically it meant cannibalizing the (then) lucrative voice business. Knowing that the majors weren't going to invest in what we thought was a great new technology, Mary and I started ITXC (Internet Telephony Exchange Carrier) in 1997 in our poolroom (Princeton equivalent of a startup garage). It was a good time for raising money; VCs camped on our doorstep.

We developed technology to use the Internet to carry the middle of calls placed from one phone to another – mainly international. Our customers were phone companies. Actual callers didn't know or care that they were using VoIP. This allowed us to use the cheap pipes of the Internet and to undercut the monopoly rates on international calls that phone companies liked to charge. We became the seventh largest wholesale carrier of international calling minutes in the world.

ITXC went public in 1999. Roller-coaster. First day opened at $12; closed at $27. Went as high as $127 on one heady day when we were also at the World Economic Forum in Davos. Then the Internet bubble burst; went as low as $1 before recovering a little. We weren't invited back to Davos.

Fought off a hostile takeover attempt in 2003 but were then in play and were acquired in 2004. ITXC is now part of giant Tata Communications; Mary and I retired.

I finally wrote my novel: hackoff.com: an historic murder mystery set in the Internet bubble and rubble. Self-published, over-estimated demand, and still have boxes of them left. Will give out free at reunion.

We moved back to Vermont and got involved in trying to get better rural broadband. Mary was founding Chair of the Vermont Telecommunications Authority.

In early 2009 Governor Jim Douglas asked me to be Vermont's Chief Recovery officer (Stimulus Czar). He said he needed someone who both had startup experience (the state was about to get $1 billion) and knew where the men's room is at the legislature (I had been Transportation Secretary 30 years before, remember). Some of the money was well spent; some not; a lot still hasn't been. But we will have a smart electrical grid and much better broadband.

Am now Chief Technology Officer for the State working on energy and telecommunications policy and using IT much more in state government. That'll end sometime before reunion and I'll re-retire and see what comes next.

 

The End of the Age of Incentives

The Vermont Clean Energy Development Fund, of which I'm a board member, is meeting next week to approve the allocation of reservations for the last helping of Vermont Business Solar Tax Credit money available; when this money is gone, it doesn't look like there'll be any more. Nationwide, most but not all Stimulus grants have been awarded (although much of the money has not yet been spent).

But this is just the tip of the iceberg. State and federal budgets are larded with tax credit, grants, and low income loans aimed at getting individuals and businesses to do things they presumably wouldn't do without incentives. States are desperately short of money because they can't print it; even the federal government, which does print money, is taken aback by the size of its debt and acting relatively restrained.

There are plenty of incentives left but there won't be as many new ones – at least for a while; existing incentives will wither away as funds run out. Whether you think government incentives are essential to guiding private choices, think that they are a complete waste of time and often misguided, or are somewhere in the middle, it's time to consider life with less incentives. Without government incentives, people and businesses are probably just going to do what makes economic sense to them. That won't be all bad.

We've lived with government incentives for so long under both Republicans and Democrats that we will need to consciously change both the way we do business and the way we do government to prosper in the post-incentive economy. A recent meeting made this very clear to me.

I met with some people who are interested in growing the use of ground-source heat pumps (also known as geothermal heating) in Vermont. Some of these people were in the geothermal business – that's fair enough; others were just interested in helping Vermont reduce its dependence on fossil fuels. Many buildings including homes can be heated much more cheaply with a ground-source heat pump (which uses electricity to pump heat from the ground) than with an oil or propane furnace; payback on the capital expense required to install the heat pump at current oil and electricity rates is from six to ten years without any government incentives (I have one of these so I can vouch for the numbers). There are some incentives available but less than for solar photovoltaic (electricity from the sun) systems, for example.

Naturally the discussion turned to incentives – we're used to living in an economy where the government puts its fingers on the scale. New incentives, I said, are pretty much not going to happen; in fact, incentives for competing energy projects are going to be running out. It didn't take the businessmen in the room long to point out to me that this is good news for heat pumps, which have a solid business case; the business case for solar photovoltaic (which I also have) is non-existent in Vermont with current technologies and without incentives. If you assume that you have to pay interest on the money you spend to install solar electric panels and you don't get any help from the government, you never recoup your investment at current electric rates even with the regulatory subsidy called net-metering. Take away the uneven government incentives and more money will go into heat pumps.

A dollar spent on heat pumps in Vermont, where three-quarters of us heat with oil or propane, saves many more gallons of oil than a dollar spent on photovoltaic panels (solar hot water is a different story, however). If you're concerned about CO₂ emissions, less gallons burned mean less tons emitted. In this case – although perhaps not in every case – removing the unequal subsidies, means better economics, energy independence, and environmental results.

When we were flush with government money, the solution would have been "add a subsidy for heat pumps". When more subsidies are no longer an option, removing competing subsidies may be an even better alternative.

But, proponents of solar electricity will point out, there is a lot of subsidy going to many other competing energy sources; they're right and these subsidies need to be removed as well. For example, oil drilling is subsidized through the tax code and concessionary leases (and perhaps through lax safety standards); corny ethanol is subsidized at fifty cents per gallon and an exclusionary tariff; compact fluorescent light bulbs are highly subsidized in Vermont, and the Obama Administration is offering low interest loans for nuclear plants. Are you ready to remove these "incentives"? All of them?

Life beyond incentives is going to be an interesting discussion for quite a while.

Vermont Broadband Stimulated with $45.6 Million

The US Commerce Department recently announced that Vermont was awarded two broadband stimulus grants totaling $45,649,894 for "comprehensive community infrastructure". These awards should assure that Vermont achieves its e-state goal of going from broadband laggard to broadband leader. The projects will bring some benefits within a year; they'll be completed within three years. By that time, the ready availability of very highspeed broadband at reasonable prices should become a competitive plus for Vermont in attracting new residents and businesses and assuring that existing Vermonters and Vermont companies don't have to leave the state because of lack of cyber service.

These grants are for something called "middle mile" infrastructure in telecom jargon. Despite the jargon, this is infrastructure you care about and, arguably, what Vermont needs most. Here's why:

The modern Internet is based on the fantastic data-carrying capability of fiber optic cable. If we use the hackneyed metaphor that fiber is data's superhighway, then everything else is just an unpaved driveway. Driveways are fine for from our garages to the road; but we wouldn't want to go all the way to work or to the movies or shopping on a driveway. The places in Vermont which have poor or no Internet access available are generally places far away from the nearest fiber connection.

Cable connections to the Internet are reasonably fast for most users because cable companies run fiber to the neighborhoods they serve. The cablecos then use coaxial cable (doesn't matter what that is) to build driveways from the fiber to individual houses. Telephone companies usually have fiber in their central offices which are usually in the center of town; they use their copper wire as the "driveway" for DSL access. If you live too far from the central office, you live too far from the fiber and the copper driveway is too long and too much of an obstacle – no DSL for you. Wireless ISPs (WISPs) reach otherwise unreachable homes with radio; the radio connection makes a very good driveway over surprisingly long distances; but the WISPs often serve areas where there is not even fiber available at their base radio locations; so, although they are much better than dialup, they often can't provide the capacity we now need at affordable prices.

Building "middle mile" infrastructure simply means extending new fiber routes deep into Vermont towns and neighborhoods. The first customers of the new fiber funded by the grant program will be community anchor institutions like schools, hospitals, libraries, public safety locations, and government offices. Today, far too many of these institutions are on data dirt roads; within a couple of years, they'll be connected directly by fiber at a cost not significantly more than what they're paying for inferior access today. Most will have gigabyte access (a billion bits per second). This can be easily upgraded should they need more. Even with the speed our data-hunger grows, these institutions shouldn't have to worry about bandwidth for the next decade.

But, once the fiber is there in the neighborhood, businesses which need their own fiber connections will be able to have them built at low cost because fiber is already nearby. For example, the Vermont Telecommunications Authority (VTA), which received a grant for over $33 million as part of a more than $48 million project, plans to serve 450 community anchor institutions with 773 new miles of fiber; but they also believe the project will be able to serve as many as 2500 businesses along the route.

OK, you say, but what about me? I'm still stuck with a choice of dialup or satellite; what's all this middle mile stuff mean to me? Turns out it should be a very good thing. Vermont Telephone Company, Inc (VTEL), which was awarded over $12 million as the federal part of a $17.6 million project, says that it plans not only to offer gigabyte access to 207 new community anchor institutions with 348 miles of new fiber at year three prices averaging $918/month but also to sell wholesale Internet access at $10/megabit/month. You're not going to buy wholesale Internet access, yourself; but the local ISP or WISP who wants to provide you service will finally have a decent "middle mile" connection they can afford. Currently some WISPs are paying as much as $200/megabit or more for very small amounts of bandwidth. Having fiber in the neighborhood will make all the difference in the world to them – and to you.

The VTA project, Vermont Fiber Link, is a public-private partnership with Sovernet Fiber Corp., which will own and operate the network. More data about this project is available at http://www.ntia.doc.gov/broadbandgrants/applications/summaries/4245.pdf.

The VTEL project is called VT Broadband Enhanced Learning Link (VT BELL). More information at http://www.ntia.doc.gov/broadbandgrants/applications/summaries/7508.pdf.

 

 

Vermont’s Smart Green Move

Would you say that hydropower is renewable? Well, if you live in New England or certain other states including California, your state law says large scale hydropower coming from Canada is NOT renewable.

Current Vermont law defines renewable energy as "energy produced using a technology that relies on a resource that is being consumed at a harvest rate at or below its natural regeneration rate" but doesn't stop there. "For purposes of this chapter, the only energy produced by a hydroelectric facility to be considered renewable shall be from a hydroelectric facility with a generating capacity of 200 megawatts or less." Whoops, there goes a million kilowatt dam.

Vermont, however, has just become a leader in recognizing energy and environmental reality. H.781 of this session of the Vermont Legislature repeals the exclusion of large facilities; effective July 1, 2012, hydropower generated by Hydro Quebec (HQ) from its facilities on James Bay IS legally renewable. HQ was very eager to have green Vermont set an example and will even share some of the financial benefits with Vermont if other states use HQ power as renewable.

Why in the name of Webster's Unabridged, you may ask, does it matter, whether the law says hydropower is renewable or not? The water is going downhill anyway and we don't use it up by routing it through a turbine and harvesting multi-megawatts as it goes by; what could be more renewable?

But it does matter what state law calls "renewable". Many states have requirements that their utilities obtain an increasing amount of power from "renewable" sources. If you rule out large hydro (or out-of-state sources of all kinds), it becomes both difficult and expensive to meet that requirement. There aren't many new hydro sites available in the US. Solar electrical generation in the Northeast is impractical without huge government subsidies and even then is very expensive for electric customers and still has limited potential. There are a relatively small number of sites for effective wind turbines and the best ones are in scenic places and attract heavy local opposition.

Some numbers help. Wholesale power from the Vermont Yankee nuclear plant (not renewable), currently costs about $.04 per kilowatt hour (kwh); power from HQ under the current contract is around $.066/kwh; power from coal (which we don't use much in New England) is in this price range or cheaper. Most Vermont residents pay about $.15/kwh at retail for home electricity. However, Vermont utilities were recently required to buy solar power at $.30/kwh – twice retail –and those projects still require tax breaks and other subsidies to break even. We ratepayers, of course, end up paying the bill twice – once to the electric utility and once more in taxes. There was huge controversy over the Cape Wind project off Cape Cod. After many years it was finally approved. The first wholesale contract signed for its output was at $.30/kwh with an annual escalator! Even though the wind is free, building offshore is expensive. If we are going to rely on local wind and sun for our renewable energy, we are going to be facing very high energy bills. In Vermont the problem is exacerbated, of course, by the pending expiration of Vermont Yankee's license and the real possibility that it won't be renewed.

OK, you say, this shouldn't be about money; we should use less electricity anyway. Higher prices will discourage electricity use. That's dead wrong from either a carbon-phobic or energy independence point of view. We need to use more electricity so that we use less oil. 73% of us in Vermont heat our homes with oil and propane compared to the national average of only 15.5%; most of us drive a lot. 61% of our household CO2 emissions come from heating; 31% from driving. If we're going to reduce our dependence on oil significantly, it will be because we use MORE electricity.

So both energy independence (at least independence from oil producers) and lower CO2 emissions depend on reasonably priced electricity. That's why not only Republican Governor Douglas but also the Democratic chairs of both the House and Senate committees with environmental responsibility supported the designation of Hydro Quebec power as renewable and why most environmental groups in Vermont supported the change in the law. However, there is still opposition to declaring large hydro renewable from both those who believe that aboriginal people are being disadvantaged by the flooding of their historical hunting ground (despite the compensation they agreed to accept) and those who would rather not compete with low-cost large-scale hydro for the lucrative business of supplying "renewable" energy; it was this coalition which was originally responsible for voting Canadian hydro off the renewable island.

See http://vtdigger.org/2010/06/09/irwin-a-requiem-for-vermonts-green-stamp/ for the antiHQ argument by Keefer Irwin and http://vtdigger.org/2010/06/09/deen-lawmakers-paid-close-attention-to-hydro-quebec-impacts/ for a rebuttal by David Deen, who is Chair of the House Committee on Fish, Wildlife and Water Resources and has impeccable environmental credentials.

Here's how they see the story in Montreal.

The Interpreter’s Tale – Now on Kindle

The pickpockets of Barcelona are the best in the world; so why are they wasting their time stealing cheap mobile phones? What does all this have to do with Gaudi and his architecture, Catalonian nationalism, and al-Qaida? Why is super-hacker Dom Montain in Barcelona?

The answers to all these questions – which you may not have been asking yourself – are in my long short story (or very short novel) "The Interpreter's Tale", which is now available on Kindle for just $.99.

When I first wrote "The Interpreter's Tale" after a visit to Barcelona and firsthand experience with its famous pickpockets, I published the story as an Amazon Short – a category downloadable only to a PC and not to Kindle and, for some reason, downloadable only in the US. Amazon never promoted the category and finally discontinued it but encouraged authors to move their work to the very successful, very promoted Kindle. And so I have.

You can also use Amazon's free Kindle app to read Kindle listed books on your PC or to download free samples.

My novel hackoff.com: an historic murder mystery set in the Internet bubble and rubble sells better on Kindle than in its hardcover edition; it'll be interesting to see how "The Interpreter's Tale" does.

Below is a teaser from the story.  It'll cost you $.99 to find out how it ends.

*********

Barcelona, not Madrid, was the leader's first choice for an attack on Spain. It is well-known that he hates Barcelona, considers it the well-spring of Muslim humiliation which began with the Reconquista in 722AD, continued with the Crusades, and led to the current unsatisfactory state of the world.

Usually the leader's first choice is what happens. But last time Allah did not will it so. The local cell in Barcelona was incompetent; that in Madrid excellent. As the leader feared, the Basques were first given credit for the attack; but this myth was soon dispelled. Spain, as he said it would, recognized their power and elected politicians committed to withdrawal from Iraq.

One does not question the decisions of the leader, even if one is respected enough to be in The Cave (The location of The Cave is always changing. Sometimes it in Afghanistan, sometimes in Pakistan; but it is always The Cave). If one is very respected, one may ask to be informed by what wisdom the leader has made his decision. One has asked to be enlightened of the wisdom by which a further attack on Spain is planned after the success of the operation in Madrid and the quick capitulation of the Spanish, Allah be praised.

"The Spanish are still infidels," the leader reminds them. "They have troops in Afghanistan even though these troops are cowards who are prohibited by protocols from actually fighting. Their culture remains degenerate. They respect neither the Prophet nor those who worship him. There must be a clear lesson that partial capitulation will never be accepted nor will it be proof against our power.

"Allah willing," he continues, " a new time has come. The Caliphate will be restored. This time it will not succumb to the bickering and rivalries and impieties which led to the downfall of the old Caliphate. The world will be united in the one true faith as the Prophet tells us that it must be. It is our honor to be the means to this end. A new lesson is needed and, Allah willing, shall be delivered." He turns in a way which indicates that this discussion is ended.

But then he turns back. "Certain mistakes were made in the last operation," he says. "Our men were prepared to be martyrs but they did not have to be. Worse yet, some were captured before they could be martyred. Allah did not make them strong enough and the infidels learned much more than they should have. These mistakes must not be repeated."

"What are those mistakes that we may avoid them in the next operation?"

"Those who have a need to know already do know. There is no need to spread the knowledge further." He turns away again and this time the conversation really is over.

**************

End of shameless promotion

Vermont Gets Personal

 

Look at the upper right hand corner of the Vermont.gov web site; you'll that the state is giving you a chance to get personal. Follow the not logged in link to set up your own myVermont.gov account.

A myVermont.gov account makes online personal interaction with the state much easier both for residents and visitors. Because you can enter your name and address(es), for example, as a permanent part of the account, you DON'T have to reenter this information each time you access a different state service. You can also personalize your myVermont.gov home page so that it contains exactly the information you want arranged in a way that you find convenient.

To get myVermont.gov started as quickly as possible, we've integrated a handful of existing state services. The site has an open architecture (computer jargon meaning it can be changed and enhanced quickly) so that other existing state services can be added quickly and so that new services, which are in the process of rapid development, can easily provide users myVermont.gov functionality.

Here's what you can do with myVermont.gov today. All listings you select appear on your homepage:

• Filter the e511 road report listing for Vermont to only the roadways that most interest you.
• Get a running list of recent online service receipts from participating services.
• Have a map displayed of local State of Vermont locations.
• Have news fed from the Vermont.gov News Releases. You may filter what news you see by State Agency/Department.
• Get up to the minute State of Vermont Job Postings from the Department of Human Resources.
• Customize a listing of available Vermont Government Online Services for easy access to the services you use most.
• Follow the status of your annual Income Tax Refund and Filing.
• Add links from participating Vermont Government websites. You may also add any links from around the internet for easy access.
• Add quick links and listings of State Employees to your page from the Vermont State Online Directory.
• Follow the status of your annual Homestead Declaration.
• Have random facts about Vermont appear right on your page. New facts appear each time you visit.

New services will be added on an almost weekly basis.

Although myVermont.gov is especially useful to Vermonters, out-of-staters are also encouraged to set up a free account. It's a good way for visitors to see up-to-date road reports for the routes they use in and out of the Green Mountain State, track local Vermont weather, and get a map of state parks and other attractions in their favorite part of the state. Soon existing online functions like making a reservation at state parks and getting a hunting and fishing license will be accessible directly through myVermont.gov with all of the convenience of NOT having to reenter your personal information.

Challenge Glass: Half Full or Half Empty?

Before adjourning, the Vermont legislature passed a Challenges for Change Bill which is supposed to result in more effective government while saving $37.8 million in the general fund for fiscal year 2011 and $72 million for FY12. But is the bill adequate to achieve these goals? What happens if the goals are not achieved?

The short answer is that the bill does enable some needed sustainable change in State government; it will save money; but there were also opportunities missed. Moreover, about $5 million of the FY11 savings comes from using one-time federal money (which there is a small probability that we won't get at all and which we won't have in FY12); and there is a huge potential problem in education funding, which was not adequately addressed for FY12.

The administration asked the legislature to authorize actions the administration estimated would save $31 million in FY11 and said that it could find another $7 million in restructuring savings without additional legislation. The legislature actually authorized restructuring which should save about $23.5 million (by my estimate) plus it said to use $5.16 million of federal funds, which leaves the administration the task of finding about $9 million in savings. It's a hard job but not impossible.

If the saving goals are not met for FY11, the administration does have the flexibility it should have – with plenty of notice to the legislature – to make up the difference with plain old cost-cutting. Hopefully that won't be necessary; but this is a better alternative than using rainy day funds as a backstop as some people had suggested.

Performance contracting and grant making: That is fully authorized. We will be able to demand that vendors, service providers, and grantees be held to and paid for measurable results.

Charter units: Another solid success. Innovative units of state government can be freed from many bureaucratic restrictions and will be able to deliver better services at lower cost. Lots of good ideas here and all that needed legislative authorization received that authorization with the exception of permission to sell off 500,000 square feet of state office and put it back on the local tax rolls. We weren't counting on that for immediate savings; but it makes a lot of sense considering that the state workforce has already shrunk by 8%.

Regulatory: The legislature granted considerable freedom to expedite and simplify permits. It encouraged notices of proposed rules to go online but didn't allow them to be completely removed from newspapers. Online applications will save work for both applicants and the State. However, some strange language in this section of the bill says: "It is the intent of the general assembly that permitting and administrative efficiencies created by regulatory reform component of 'Challenges for Change' shall not be used to reduce staffing or resources at the agency of natural resources, the natural resources board, or the agency of agriculture, food and markets." We can be more efficient, but we can't use efficiency in this area to save money!

Four challenges to the Agency of Human Services: Lots of good things are authorized including a clinical utilization and review board to reduce unnecessary (and sometimes dangerous) medical procedures, expansion of the successful Blueprint for Health program to include mental as well as physical health, further integration of different services to children and families across formerly distinct bureaucratic silos, and more. There are small cuts in payments to "designated agencies" - non-profits which have regional state-granted monopolies on delivering certain services to human services clients; even the small cuts were made smaller in a last minute amendment of the floor of the Senate to attempt to assure that the cuts didn't simply result in less client service. In the administration view, this is a lost opportunity to require that the designated agencies restructure themselves to deliver services more effectively.

Corrections: Real progress was made here, too. Less people will be in prison AND public safety will be better protected. Diversion will keep some people out of prison altogether and get them the treatment they need. Better reintegration services including transitional housing and job help will make it possible not only to release some people more quickly but to do a better job of keeping all who are released out of trouble and reducing the danger they pose to others (there are very few people we keep in jail forever so we do have to think about reintegrating most offenders at some point). Rare and expensive prison beds will be reserved for those who should not be let out. Until the last minute, the bill contained a prohibition of closing even a wing of a prison – even if it became empty. This restriction was lifted in a compromise that only allows the closing of a prison while the legislature is in session, presumably so the legislature can prevent the closing. There is an irony here: communities usually object to building a correctional facility nearby; but they also object when there is a possibility of closure and associated loss of jobs and business.

Economic development: This is an opportunity missed. The administration hoped to restructure the web of more than fifty state-supported organizations that work on job creation into nine regional service centers offering one-stop shopping to job-creating businesses and communities which want economic development help. The plan would have introduced competitive bidding for state contracts for job creation and had targeted FY1 and FY12 savings of $3 million. The organizations didn't want to consolidate or to compete for state money; they convinced the legislature that both were bad ideas. In the end there is a token decrease in funding, no consolidation, no competition and less than $1 million/year in savings. There is a baby-step towards performance contracts. The real loss here is that we won't be encouraging job creation more effectively!

Education funding: To put it kindly, this challenge was side-stepped. To put it bluntly, the failure to require SUSTAINABLE savings in FY11 and the failure to REQUIRE any savings have set us up for a funding disaster in FY12 for the education fund and for the general fund which helps to support it. The plan relies on voluntary local cuts in a system where the pain of cutting is local but the cost of not cutting is spread statewide. The result of these perverse incentives is that the employment of adults in Vermont school systems continues to rise even though our number of students is steadily declining.

We will be better off, in my opinion, for having addressed some of the challenges. We will regret, I'm afraid, the challenges we didn't address. The challenge glass is half-full; that's better than empty, worse than full.

Vermont Dares to Lower Taxes as Stimulus Funds Wane

Last night, before the Vermont state legislature adjourned, it did an extraordinary thing: it LOWERED both capital gains and estate taxes. Vermont is investing in its own future (see the Associated Press story here). Especially in the midst of a revenue crunch, this move makes great economic sense even though it defies conventional political wisdom on a couple of fronts.

 

Vermont, like most states, is cutting costs in the face of declining tax revenues and the imminent end of federal stimulus dollars. But most states are also raising taxes. Why not Vermont? There are two good reasons:

 

1. We’re already among the most highly taxed populations in the country; we simply don’t have room to raise taxes.
2. In the not-very-long-term we’ll get more revenue by lowering taxes and would simply lose revenue by raising them further.

 

Suppose you own a business which is losing customers to low-priced competition. Would you raise prices to make up for the revenue you’re not getting from your lost customers? Of course not, you’d just lose more customers and more revenue.

 

You have to lower your prices to get your customers back; that’s obvious. But many companies whose products are overpriced also have an inflated cost structure. They can only lower prices if they can also reduce costs. Companies that can’t reduce costs and can’t match their competitors’ prices go bankrupt (see General Motors except your business probably won’t get bailed out).

 

Vermont’s not a business but it does have customers – the people who pay taxes – both visitors and permanent residents. A lot of them – us – are here because of Vermont’s quality of life. We’re willing to pay some premium for that; Vermont doesn’t have to be a bargain basement state to attract people. In fact, if we degraded our environment or became a seriously unfriendly place, we’d certainly lose our customers,

 

But we have become overpriced!

 

 Last year the legislature raised both the capital gains and estate tax. That seemed to put us past a tipping point. Increasingly training for Vermont accountants includes a substantial segment on how to help your clients change their tax residence. People who pay lots of taxes, start businesses, and create jobs are more and more afraid to live here. They’re terrified of dying here.

 

So we reversed much of last year’s tax increases even as other states – our competitors – are being forced to raise taxes. It’s a small step but a very big change in direction. Eventually tax cuts will bring us more revenue as the tax base grows and makes further cuts in tax rates possible. The national news about Vermont now is that we are reducing taxes to prepare for future success – a good story for a state with a reputation for high taxes.

 

But there’s still the question of costs. If we’re going to continue to reduce the price of state government, we have to bring costs down. That’s why Challenges for Change, a program to reduce the cost of state government through structural change, also passed the legislature this year. More on that in my next post.

Granddaugther Margaret

7lb 7oz. long black hair (really). picture doesn't near do her justice. Daughter Kelly efficiently delivered her with husband Marc's help in just a little more time than it took Jet Blue to get me to New York.

 

Outcomes and Stakeholders

Although the $38 million of fiscal year 2011 general fund savings anticipated from Challenges for Change often dominates conversation, there are two perhaps even more urgent reasons for passage of a complete Challenges Bill before this legislative session wraps up:

1. The anticipated budget gap in fiscal year 2012 is $100 million or more greater than that in FY11 since there will be no more stimulus money available then. Full implementation of Challenges will save over $70 million in FY12 and every year thereafter as well as helping to head off a property tax tsunami to fund education.
2. Vermonters will receive BETTER service from their state government if the kind of restructuring which is in the Challenges proposals is implemented. The legislature specified what the positive outcomes from Challenges are supposed to be when it passed Act 68 earlier this session.

When the legislature specified outcomes for restructuring, it also specified, by implication, who is supposed to benefit from the outcomes. Understandably, some of the opposition to Challenges proposals comes from those who were not specified as beneficiaries and who might lose funding or have to undergo more change than they are comfortable with if the Challenges proposals are implemented.

For example, one of the specified outcomes for the economic development challenge is "Vermont achieves a sustainable annual increase in nonpublic sector employment and in median household income." The intended direct beneficiaries of this challenge are clearly Vermonters looking for new jobs or more income. The state coffers are an indirect but important beneficiary as well; that's presumably why the words "nonpublic sector" are in the outcome.

The administration's proposal is to consolidate the fifty or so separate organizations providing economic development in the state into nine (the exact number isn't important) regional service centers which will provide one-stop shopping for job seekers, employers looking to create jobs, and towns doing planning for economic development. The purpose is to do economic development more effectively; the fiscal benefit is that administrative consolidation should mean that less money (about $2 million less) should go further in achieving the mandated outcome of more and better-paying jobs.

Not surprisingly, some of the organizations, like regional planning commissions and regional development corporations, which might have to consolidate or change have concerns about this plan. They have expertise in regional economic development and planning so they are and should be listened to; they do provide valuable services. They are what is referred to as "stakeholders". However, some both in the Legislature and out have said that no plan should be adopted unless these stakeholders agree to it. That flies in the face of outcome-based budgeting. The Legislature did NOT specify as an outcome that nothing would change for these organizations or even that they continue to be funded. It specified that more and better-paying nonpublic sector jobs be created. All arguments for or against a specific proposal have to be measured against the legislatively-mandated outcomes and the budget constraints; not against upset to the status quo.

Here's a brief guide to some stakeholders and which of them the legislature did and did not make explicit beneficiaries of the outcomes it specified:

• CUSTOMERS are people who give money to the State. They include people buying licenses, applying for permits, buying liquor and lottery tickets, and paying taxes. They have a choice. If Vermont is not a good value, they can and do go elsewhere. We want more customers; they provide the money to care for the clients. Taxpayers are explicit beneficiaries of the money saved through each of the challenges. Other customers, like those buying hunting licenses and liquor or renting campsites or applying for permits have been specified as beneficiaries of various outcomes.
• CLIENTS are people who RECEIVE services from the State in the form of a benefit. We want to treat clients well and we want everyone who is eligible to be a client to know they are eligible; however, we don't want don't want to keep people as clients; we want to help clients become independent. Of course many people are both clients and customers. In all of the Human Services challenges and some of the others, outcomes have been specified in terms of benefits to clients.
• The GENERAL PUBLIC. That's all of us. We are the direct beneficiaries of lower costs and the indirect beneficiaries of many of the challenges. We are the direct beneficiaries of better facilities for and supervision of people coming out of jail – both of which make us safer, a more transparent regulatory system, better facilities at our parks and recreation areas, and performance-based contracting which assures that we get the results our tax dollars pay for.
• VENDORS and SERVICE PROVIDERS are intermediaries between the state and the clients and customers. This is true whether the service providers are paid through grants or contracts. The interests of vendors and service providers come AFTER the interests of customers and clients. In the future grants and contracts must be performance-based. The outcomes do NOT specify that vendors and service providers have to benefit. Clients of programs have to be protected but not the specific programs themselves. We don't worry that sending less prisoners out-of-state will mean a revenue loss for out-of-state prisons; we don't worry that mailing less letters will cost the Post Office money; and we shouldn't worry that performance-based or competitive contracting will mean a change for service providers whether they are for profit or non-profit.
• STATE EMPLOYEES. Some people have been surprised by the fact that the Challenges proposals from the administration do NOT rely on large layoffs of state employees to achieve the budgeted savings. Although state employees are not specified beneficiaries of the challenges, their numbers have been reduced by 10% over the last few years and they have already agreed to a pay cut. More effective operation and consolidation within state government may lead to some localized cuts and will certainly make it possible both to perform well with this reduced workforce and to avoid replacing some workers who retire. In many cases Challenge proposals include giving state workers better tools to do their jobs so that Challenge outcomes can be achieved.

The next few weeks will be crucial I determining the success of Challenges for Change. In the best case discussion will improve the proposals which have been made and we can go on to the big job of actually implementing the Challenges and providing better outcomes for less money; in the worst case, we will be distracted from the outcomes, stick stubbornly to our positions, refuse to make tough choices, and stunt Vermont's recovery from the recession as well as leave the next governor and legislature with even harder problems to solve and even less time to solve them.

The Challenge of Choosing

An editorial in Friday's Burlington Free Press opines: "The proposal to replace newspaper notices of proposed state rules changes with online postings presents Vermonters with a false choice. The obvious course is to use all media -- print, broadcast and online -- to ensure reaching as many people as possible." The Free Press is reacting to one of the proposals in Challenges for Change, a set of initiatives designed to improve the outcomes achieved by state government within budgets which have been reduced by $38 million.

There couldn't be a better example – although a relatively small one – of the choices facing Vermonters as we deal not only with harsh fiscal realities but also the possibilities of using new technologies to improve old services at a much lower price. This, like the others, is not a "false choice"; state government can't do everything in every possible way. It (and we) have to choose the most effective ways to achieve the outcomes that are important to us.

The facts are these:

• From the dawn of the newspaper era, governments have paid to publish notices. These payments have been an important source of revenue to newspapers (the Free Press correctly acknowledges that they receive income from these notices).
• Vermont state government currently pays about $100,000/year to publish notices of proposed rule changes in sixteen newspapers across the state. This is not all of the newspapers in Vermont, BTW; the Secretary of State has kept the list to sixteen to save money.
• After an initial investment of probably less than $10,000, all notices of proposed rules can be published online at a cost of less than $1000/year.
• Most people don't get their news from the paper edition of newspapers, anymore. In fact, newspapers rank behind TV, radio, and the Internet as a news source in most recent polls I've seen. (Local news is an exception so far, however).

The advantages of newspaper publication are:

• You may notice a proposed rule in a newspaper even if you're not looking for it.
• Not all Vermonters have broadband Internet; some don't even go online at all.
• People are used to finding proposed rules in newspapers.
• Vermonters can go to their neighborhood library to read newspapers they don't subscribe to.

The advantages of online publication are:

• rules.vermont.gov (if that's what we call it) will be searchable. If you missed publication of a rule, you can always go back and find it. You can search by keywords so that you only find those rules which interest you.
• You will be able to subscribe to rules.vermont.gov, so you automatically receive an email, an RSS feed, or a tweet when a rule of interest to you is published. Most Vermonters have a way to get email.
• If you want to see the full text of a proposed rule, you can click through to it. Newspaper publication only contains a summary because rules are often voluminous.
• If you want to comment on a proposed rules, you can immediately do that online.
• Not all Vermonters have newspaper subscriptions or read newspapers.
• Vermonters can go to their neighborhood library to get online.

So neither solution is perfect; it's just that the online solution is better because of increased functionality. Some people will miss rules that are published online (but they can search for them or subscribe to them). Other people will miss rules in newspapers. Just as a note: we don't pay to publish proposed laws in newspapers; we just publish them online (somewhat late in the process). The newspapers report on proposed laws when they think they're newsworthy. Nothing will prevent them from reporting on proposed rules of import as well.

The Free Press' suggested solution is: "expand notices for proposed rules changes to the Web, as well as radio and TV." In other words, spend even more than we're spending now – but get more.

The Challenges for Change proposal is, after a transition period in which there are newspaper notices directing people online for proposed rules, spend almost $100,000/year less and get better results than we're getting today (but not as good results as we might get if we spent much more money and continued the old as well as embracing the new).

This is a choice; life – and government – is about choices. We can't afford to do everything. We have to choose.

Many of the arguments against proposals in Challenges for Change are like this one. An organization which has been delivering a service for the State finds an example of someone who may have to make a change or could be disadvantaged if change is made in service delivery. Not all of these organizations are as straightforward as the Free Press is in mentioning their own economic interest in the status quo or in acknowledging that there are many who may benefit from a new form of service delivery. On the other hand, these organizations do have experience in the subject under discussion. These arguments have to be listened to; in some cases it is possible to do things better than initially proposed in Challenges and the proposals should be modified or even replaced completely. That's what discussion is for.

But, in the end we have to make choices. Some – not all choices – have to be made by the time the legislature adjourns; that's always true of budget choices whether you do traditional budget cutting or take the more constructive Challenges for Change approach. We would have had an easier time if we confronted some of these problems last year; on the other hand, we would not have the choices that Challenges has presented us if the legislature had not initiated this change process at the end of the last session.

Challenges for Change – The First Progress Report

The first progress report (here and here) on Challenges for Change (a project to improve outcomes important to Vermonters while helping to trim a quarter of the projected deficit in the state budget) was delivered to the Joint Legislative Government Accountability Committee (JLGAC) at noon Tuesday in the well of the Vermont House of Representatives (the biggest room in the state house and pretty well filled). Some people think we proposed too much change; some people say too little. You should judge for yourself.

If you want to weigh in on these ideas, this is the time. The legislature plans to be in session for about another month and committees of jurisdiction are already holding hearings on the various ideas. Many do require legislation. The Vermont legislature is very open so you can be heard there. You can also talk to your local legislators, of course. Just want to email a comment? Whatever is sent to challenges@leg.state.vt.us will get the attention of both legislators and the executive branch.

There will also be a joint (executive and legislative branches) public hearing on the Challenges on Tuesday, April 6, in the state house in Montpelier; that's our chance to listen and another chance for you to talk. Speakers will be limited to two minutes to give everyone a chance to be heard. Written comments ( which can be longer) are acceptable as well.

The dialog will continue even after the legislature goes home for the year a month or so from now. Even given the changes in legislation we've asked for, there is much implementation work which we want to do collaboratively with the organizations which are affected. These organizations which help deliver governments services are very important to the success of this effort to deliver those services better.

Below is the full text of the introduction to the Challenges for Change report; it's long but you may find it interesting – or challenging.

This is the first progress report on Challenges for Change, a plan to make Vermont government and services more effective so that better results are delivered at lower cost to taxpayers. Challenges for Change was authorized by Act 68 (the Challenges Bill) of the 2009-2010 legislative session; this report and subsequent quarterly reports are required by the act.

The Challenges Bill specifies the broad areas from which savings must come and identifies those outcomes which agencies and programs must achieve. This initial report details the progress made by the executive branch since the passage of the bill one month ago; this report is not intended to be a full or final plan, but rather an update to solicit feedback and promote refinement of ideas. The report also contains, as required by the bill, proposed measures by which the General Assembly can track progress towards the outcomes and proposals for changes in existing legislation necessary to achieve the outcomes and meet the budget constraints.

Although much of the initial planning since the Challenges Bill was passed has been done internally, we have now reentered a very public phase of the Challenges for Change approach. This is the beginning – not the end, not even the middle – of a process that needs ongoing and robust public participation. Direct feedback and creative alternatives from lawmakers and members of the public will enhance these plans and help the State achieve the required outcomes.

Not Traditional Cost-Cutting

Although the initial impetus for the Challenges was a need for constructive ways to address part of our anticipated $154 million fiscal year 2011 budget gap, this is not a traditional cost-cutting exercise. In cutting, one starts with the way we do things today and asks: How can we reduce the cost? There is usually no consideration of the outcomes involved. The focus is on trimming inputs, e.g., the number of people involved, office equipment, travel, or other such expenses.

By contrast, this reform package starts with the desired outcomes and the amount of money Vermont can afford to spend and then asks: If we rethink how we do things, how could we improve our outcomes with this amount of money?

In fact, the appropriations decision for Challenges has already been made with the passage of the initial Challenges bill in February. In FY2011, agencies and programs under the Challenges umbrella must deliver desired outcomes for $38 million less in general funds, as well as relieving $11 million of property tax pressure. These endeavors pave the way to $72 million less in general funds and $26 million of property tax relief in FY2012.

These budget goals are critical as the State grapples the lingering recession. To meet these targets without the Challenges process, the alternative is to revert to the usual cost-cutting methods – an option all parties are trying to avoid.

After a month of planning, it is possible to identify much of the $38 million in required General Fund savings. The next report, due in three months, will have sufficient detail on all of the plans to see how money will be spent in a way which accomplishes the outcomes while achieving all of the savings.

Emergence of Key Redesign Themes

State employees and private citizens have worked hard and with great energy and innovation to make these initial plans. The plan to meet each challenge is different, but several broad themes have emerged across many of the challenges:

1. Program & Service Integration: Clients and taxpayers are better served by a few coordinated programs with more flexibility than a confusing morass of hundreds of programs. Service delivery needs to and can focus on clients rather than programs. Geographic and administrative consolidation of some functions is essential to effective delivery of many services.
2. Better Outcomes through Improved Technology: In the age of the Internet, technology can often be used to provide service more quickly and conveniently to clients at lower cost to the State. Automation of basic administrative functions frees skilled professionals to have more direct personal contact with clients when in-person time is crucial to good outcomes.
3. Path to Independence: The success of many aid programs is best measured not by how many they serve but by how many they help toward self-sufficiency and independence.
4. Performance Incentives: Just as a focus on outcomes allows state workers to deliver better service at lower cost, state contractors and grantees will perform better at lower cost when they are offered incentives for performance and judged by results rather than having to jump through bureaucratic hoops.

    

Improving Outcomes, Acknowledging Impacts

The savings which have been identified and will be identified come through being more effective rather than from abandoning clients or slashing services. Nevertheless, when government spends less, someone receives less – and someone pays less taxes or someone else has benefits preserved. Our decisions will have an impact.

In some of the easy cases, when we purchase fewer postage stamps or less fuel oil, the effect is mainly felt out-of-state. In other cases, we will purchase less from in-state non-profit partners or for-profit vendors; where we can, we give them an opportunity to recoup by being more effective themselves.

In some cases, because of our budget constraints, we must choose either to provide more effective service to Vermonters or to retain the existing administrative infrastructure within organizations. There simply are not enough resources to support both.

In other cases, being more effective over time will reduce the need for workers at the state or partner level. Given the upcoming demographic bulge in retirements, attrition should allow most of these internal economies to be achieved, but, given economic uncertainty, there is no guarantee against selective reductions in the future.

That said, without the constructive approach of Challenges for Change, there would be few options outside benefit cuts and further reductions in force to close persistent budget gaps for FY2011 and beyond. There is no doubt that those impacts would be much more severe than the plans presented within this progress report – and, more importantly, without the corresponding benefits of improved outcomes.

Form of this Report

The portion of this report dealing with the Education and Special Education Challenges was prepared independently by the Commissioner of Education. The Corrections Challenge report was produced by the Agency of Human Services in conjunction with the Judiciary and law enforcement representatives. All other reports were produced by appropriate departments of the executive branch. The official report to the General Assembly consists of this book and its Human Services addendum. However, agencies have developed and will develop further information in support of their plans for use by the various committees of jurisdiction.

In general, each section details:

1. Progress Report: General discussion of work to date, process to brainstorm ideas, key plans and implementation outlines.
2. Challenge Outcomes and Proposed Measures: The outcomes and measurements as required by the Challenges Bill.
3. Savings Identified To-Date: These are preliminary estimates based on available data. These estimates will continue to be refined as the process continues and plans are informed with legislative feedback and public input.
4. Legislation Required: If plans require statutory changes, those modifications are outlined.

    

Next Steps

The Challenges for Change process is new territory for everyone. We are confident that this initiative will prove a better way to deliver the highest quality services to Vermonters in the years to come. Public participation is critical for its success. A joint public hearing will be scheduled within the next ten days and the legislative committees of jurisdiction will take testimony and receive public input beginning immediately. Based on feedback and new ideas, we will continue to fine tune plans to achieve the desired outcomes.

If an individual or group disagrees with a proposal offered in this report, we will ask for and welcome an alternative that achieves the mandated outcomes, is fiscally sustainable, and does not raise taxes or use reserve funds. The pace will continue to be swift and creative proposals will be a positive addition to the dialogue. We look forward to working with the General Assembly and all Vermonters on this important endeavor.

myVermont.gov

One of the themes of the executive response to Challenges for Change, Vermont's effort to deliver better government at a sustainable cost, is greatly increased use of the web for service delivery. Online forms and online information mean better service for those who are already used to shopping and information gathering online AND lower cost to the state. The Department of Information and Innovation (DII) has set up a fast response team so that the many of the forms which are the interface between the state and its clients can be implemented on the web quickly.

We need to be able to move at Internet speed; we should be able to get new forms online in a week or so after the need is identified. Moreover, these forms need to be part of what we call myVermont.gov, a single portal for interaction with the state which is smart enough to remember what you already told it. like your address. so that you don't have to start from scratch each time you find a new way to interact with the State online. And this development has to use the latest web technology to keep costs way, way down.

As a shakeout of the fast response unit and a demonstration to skeptics within state government that fast, cheap, good development is possible, I asked a week or so ago for two prototypes which we can demo. Here they are (but remember these are just prototypes):

https://secure.vermont.gov/TAX/registration/ is a prototype of the form that businesses will be able to use to register with the tax department. We do want new businesses and new taxpayers so we want to make registering easy. Note that myVermont.gov feature of using stored addresses.

http://rules.cms.vt.vprod.cdc.nicusa.com/ is a prototype of a site that we want to use to post new rules for comment. Today these are advertised in newspapers as they have been since just after the invention of the printing press. We think a searchable site which you can even subscribe to via email, RSS or twitter and on which you can post comments directly and read everybody else's comments is a better way to provide this service – it's also a lot cheaper.

Challenges for Change Scorecard

On Tuesday, March 30, the legislature will receive the first progress report on Challenges for Change, a series of recommendation for ways that Vermont government and services can be made more effective so that better results are delivered at lower cost to taxpayers. Although the initial impetus for Challenges was a need for constructive ways to address part of our anticipated $153 million fiscal year 2011 budget gap, this is not primarily a cost-cutting exercise. Although challenged agencies and programs must deliver FY11 savings of $38 million to the general fund and relieve $11 million of property tax pressure and pave the way to $72 million of general fund savings and $26 million of property tax relief in FY12, the most important measures of the success of the Challenges will be whether the State of Vermont succeeds in delivering better outcomes for its citizens while spending less money to do so than it did it in the current year.

Traditional cost-cutting, which is being used to close about three quarters of the budget gap this year, is done by squeezing for efficiency, reducing benefits, and, in relatively few cases, by eliminating programs. Traditional cost-cutting starts with the way we do things today and subtracts. Traditional cost-cutting is pretty straight forward: you put in less money at the top and less money or service comes out at the bottom. You do your best to save essential services and protect the most vulnerable. You tend to spread the pain around for political reasons (politics happens in democracies). In the end you often have a collection of under-funded and inefficient services albeit at a lower cost.

The Challenges for Change approach is hardly new but it is radical. In the private sector we often talk about "management by objectives". The Vermont Challenges are about " government by outcomes." The legislature set a series of outcomes for each of the nine challenge areas when it passed Act 68 in late February. It also set the budget for each of the challenge areas by specifying how much savings are expected using current budgets as a baseline. The OBJECTIVE of the Challenges is to achieve the specified outcomes; the CONSTRAINT on the agencies responding to the challenges is the amount of money available to achieve the outcomes. Part of what makes it possible to achieve better outcomes with less money is that it is NOT necessary to spend money on traditional programs which are not effective at delivering the specified outcomes. Usually the legislature mandates programs without making the expected outcomes clear; this time the outcomes are specified and the agencies are given the freedom to pick the methods required to achieve the outcomes.

There is an important catch, however. Sometimes existing Vermont law requires that certain programs be continued; at other times the law even specifies how a program is to be carried out and that "how" may not be very efficient. In some cases agencies may need new law to give them the authority they need to achieve the outcomes within the constraints. When the administration makes this first report to the legislature next week, it must specify all changes in law needed so that the Challenges can be met. There is no second chance this year. The legislature will be gone (most people think) by the beginning of May. There is no way to change law when the legislature has finished its work. The next chance will be next year with a new legislature and a new governor. It is a lot to ask of this legislature to make substantive changes to law in the last month of this session on the threshold of the campaign season and with the rest of the budget and many other bills requiring final attention. Nevertheless, the legislative leadership and the administration both are committed to this effort. The original Challenges for Change bill passed with overwhelming non-partisan majorities in both houses and set the scene for this second bill. Now comes the hard part!

When you go to a ballgame, you get a scorecard for keeping track of the action. Below is your scorecard for the Challenges for Change action coming up. Note that the important news won't be the budget numbers; those have already been set. What will be important to score are:

1. Have the agencies proposed reasonable measures for tracking progress towards outcomes so that the legislature (and citizens) can perform an oversight role and has the legislature acted reasonably in accepting or rejecting the proposed measures?
2. Are the legislative changes proposed appropriate for achieving the outcomes given the financial constraints and has the legislature actually enabled the agencies to achieve the outcomes when legislative action is needed?
3. Are the agencies actually developing plans to make themselves much more effective in achieving the outcomes? Just to set the stage properly, this is only a progress report a month after passage of the bill so planning, particularly at a detailed level, is not complete. Nevertheless you should be able to judge whether real restructuring or disguised traditional cost-cutting is being done. Subsequent reports are required quarterly.

Here are the Challenges themselves as described in Act 68.

1. The charter unit challenge is to identify units of state government which agree to improve specified results while spending a combined total of $2 million less in fiscal year 2011 than in fiscal year 2010 and, in fiscal year 2012, spending $4.5 million less than in fiscal year 2010, or by generating all or a portion of these amounts in entrepreneurial revenue. The charter units will enter into formal agreements with the secretary of administration to specify between three and eight measurable results to improve, and the flexibility in practices and procedures needed to accomplish the target results.
2. The performance contracting challenge is to institute performance contracting and performance grant-making to achieve better results from contractors and grantees at a fiscal year 2011 cost which is 3.5 percent lower than fiscal year 2010 spending, and at a fiscal year 2012 cost which is 10 percent lower than fiscal year 2010 spending. The goal is to pay contractors based on results, while reducing the total price of contracts and grants. It is also to reduce the cost of compliance for vendors while maintaining compliance with essential state requirements.
3. The client-centered, results-based, human services challenge to the state's human service administrators, employees, and service providers is to redesign delivery of the state's human services programs and health care system as a client-centered, integrated system that improves outcomes within budget constraints. There are four parts to this challenge:

• Client-centered intake and client-centered coordinated and managed services. Improve the outcomes for individuals and families receiving services from the agency of human services, while spending five percent less in fiscal year 2011 than in fiscal year 2010 and in fiscal year 2012 spending 10 percent less than in fiscal year 2010…
• Support services promoting independence of elders and individuals with disabilities. Maintain or improve services for elders and individuals with disabilities by redesigning how support services are provided and by allowing family members who desire to be caregivers to provide part of the support services, while spending two percent less in fiscal year 2011 than in fiscal year 2010 and five percent less in fiscal year 2012 than in fiscal year 2010.
• Expand the policy of using payment methods based on outcome measures. Redesign grants and contracts made by the agency to service providers to use payment methods to achieve spending five percent less in fiscal year 2011 than in fiscal year 2010 and 10 percent less in fiscal year 2012 than in fiscal year 2010, while maintaining or improving service.
• Outcomes-based contracts with the designated agencies. Improve the outcomes of individuals and families served by the 17 agencies designated under 18 V.S.A. § 8905 to provide mental health services and services to individuals with a developmental disability, while spending five percent less in fiscal year 2011 than in fiscal year 2010 and 7.5 percent less in fiscal year 2012 than in fiscal year 2010, by enhancing collaboration among these agencies and by redesigning the contracts.

1. The corrections challenge is to the secretary of human services, commissioner of education, and administrative judge to collaborate to develop a plan which if implemented would reduce the number of people entering the corrections system, decrease the recidivism rate, improve community safety, and reduce the corrections budget by $10 million in fiscal year 2011 and $10 million in fiscal year 2012.
2. The focus on learning challenge is to education policy makers and school administrators to improve student learning and reduce costs of administration, resulting in education spending savings of $13.3 million in fiscal year 2011, and education spending savings of $40 million in fiscal year 2012.
3. The special education incentives challenge is to education policy makers and school administrators to improve special education student outcomes, including graduation rates and employment, while spending five percent less in fiscal year 2011 than in fiscal year 2010, and 7.5 percent less in fiscal year 2012 than in fiscal year 2010.
4. The regulatory reform challenge is to the state's environmental and energy regulatory systems to achieve the current standards, goals, and requirements of federal and state law and regulation through improved administrative, application review, and compliance processes while spending three percent less in the agency of natural resources' and agency of agriculture, food and markets' budgets in each fiscal year 2011 and 2012 than in fiscal year 2010.
5. The economic development challenge is to improve economic development results while spending $3.4 million less in both fiscal years 2011 and 2012 than in fiscal year 2010.

 

It's going to be an interesting last month of the session. Please wish us luck.

The e-state; More for Less

Technology can make government both more effective and much cheaper to operate. Does this sound too good to be true? It's not; it's a fact.

Bureaucracies in the private and the public sector were designed around bureaus, places that records were kept. It used to be that you had to go the branch of the bank where your account records were to make a withdrawal; other branches didn't know what your balance was. If you needed to interact with the government bureaucracy, you had to go to the office where your records were kept; otherwise no one would be able to deal with you. To make life even more complex, your tax records might be in one office; your fishing license in a second office; and your property information elsewhere. Sound familiar?

But once records become electronic, they're wherever you need them to be. It doesn't matter whether they're in a corporate data center, on a disk in a state office. or somewhere off in a huge computer center operated by Google or Amazon (technically this is called being "in the cloud"). When you need access to them, they're where you are. You can withdraw money from any ATM (at least if you don't mind fees); you can charge at any store; and you ought to be able to go into any government office to do whatever government business you need to do.

Spurred by shrinking budgets and enabled by cheaper and cheaper technology, Vermont is moving away from paper and towards electronic records – towards becoming an e-state. As this migration continues, costs'll come down and you'll get better service.

Currently many agencies which deal with the public have regional offices to make it convenient for you to get to them. Because, in many cases, your files are kept in your regional office, you can only do business in that office. Moreover, different agencies have different files and different specialties; so, in order for there to be an office of whatever you need near you, there have to be lots of offices in each region. In the cases where you can do business by phone, you have to be sure to call the office near you. If there's a line of people waiting at your local office, you wait, too, even if there are office workers with no clients at some other regional office of the same agency.

But flash forward to your records living in the cloud. Now it doesn't matter which regional office you go to or call, your records are accessible when needed. Moreover, the state doesn't need as many specialized offices because any kind of record can be retrieved at any office and much of the specialized expertise is available online. So the state can have less offices (less cost) and yet it is more likely that there'll be an office which can help with your particular case near you whether you're at home or on the road (better service) because you can go to any office.

If all the workers in one office are on the phone, calls can go to another office. The callers records are wherever they need to be.

But, you're asking, if my records can be wherever I am, why do I have to go to an office at all? Good question. More and more often you won't have to. Nor will you have to wait for mailed documents to go back and forth. Just as we can renew our car registrations online, we'll soon be able to transact most of our business with the state from applying for a permit to getting a fishing license to getting benefits in time of need. It costs state government less to do business online; it's usually better, faster, and more convenient service for you. Doesn't mean regional offices will all go away; sometimes we all need inperson help. But this switch to web-based government, just like the switch to web-based flight reservations and banking, means better service to clients at lower cost to the service provider. Not too good to be true.

Broadband Stymied

Unfortunately, no matter what else the stimulus bill may or may not have done, it's slowed down the rate of broadband deployment in the US over the last year. The Rural Utility Service (part of the US Agriculture Department) and NTIA (part of the US Commerce Department) have awarded only 15% of the first round money they promised to make available. To be blunt, they failed in their mission. They are now poised to compound that failure with an absurd deadline of March 15 for second round applications prior to availability of first round results.

Telecom providers and community projects alike concentrated on their stimulus applications from passage of the American Reinvestment and Recovery Act (ARRA) in February of 2009 until the application deadline in midAugust of last year. Money was (and is) hard to get, so looking for a share of the promised $7.2 billion of ARRA money seemed like a good idea even though the odds were long. According to NTIA, there were $19 billion in requests for the $1.2 billion they intended to make available in the first round. RUS says that they had $28 billion in requests for $2.5 billion in grants and loans. Even with some applications being to both NTIA and RUS, the odds were at least ten to one against any individual applicant!

The grants were supposed to be announced in October; everyone waited. The first announcements were made in December. A few more have dribbled out since. So far the agencies have announced awards for only about 15% of the money they said they would make available in round one. Doing the math, the odds go to a staggering seventy to one against getting funded (so far) in round one. Probably not many applicants would have spent the money they did on applications or waited so long to move ahead if they'd known how long it would take for so little to be given out.

But it gets worse.

Without having finished notifying people whether or not they have round one grants, NTIA and RUS recently announced that March 15, 2010 is the deadline for round two (the final round) of broadband applications. Applicants, of course, must prepare applications immediately; more first round information is supposed to dribble out; but, as of now, there's not nearly enough information about round one.

• Many applicants have not yet received word of whether or not they've been chosen. This means, if not selected, they haven't received the promised information on why they were rejected which would certainly be helpful in preparing a new application. If they've been selected, in whole or in part, a new application is, of course unneeded (some may be on some sort of waiting list but there's no information on that).
• Since we don't know for sure what awards remain in round one, we don't know which territories still need coverage.

Particularly frightening is that incumbent carriers were allowed to provide non-public information to dispute the claims of applicants that their projects would extend coverage to unserved Americans but there is no mechanism for making either the allegations public or for applicants or states to dispute the data which may have been used to disqualify applications. This is hardly transparency. See http://www.ntia.doc.gov/broadbandgrants/applications/responses/722pnr.pdf for an example of a filing by Comcast apparently challenging a request by Vermont Telephone Company (VTEL). Nothing against Comcast; but, if they are going to dispute coverage data, they should have to make their own data public and subject to rebuttal.

So what should be done?

An organization called National Association of Telecommunications Officers and Advisors (mainly non-profits and community organizations) has called on NTIA and RUS to move the deadline out to May 1 so that first round information will be fully available to second round applicants. That's a good start but it's not enough; there's no reason to think RUS and NTIA will do a better job of awarding the second round money plus the unawarded remainder of first round money than they did in administering the first round – especially now that they must also finish the award process and start monitoring for those projects which were funded.

• There is a statutory deadline of September 30, 2010 for awarding all the money. The agencies can't waive this so Congress may have to extend it.
• The agencies should, as many of us urged them to do in the beginning, give the states a significant role in the process both to assure grants comply with state plans and just to speed up the grants with local knowledge. Fine with me if Congress just delegates all of this to us at the state level.
• No one should be allowed to use non-public data to impugn applications and rebuttals must be allowed.

   

Counter-cyclical Government programs which are a day late and a dollar short are worse than no program at all. It's already clear that the broadband stimulus money isn't going to be spent during the latest recession. The unfulfilled promise of the money has slowed down broadband progress and cost jobs. Just leaving the money in the private sector from whence it came (or from whence it will come when the bills are due) would have been much better than dangling an undelivered carrot of stimulus.

   

Fiber to the Neighborhood

The Vermont Telecommunications Authority (VTA) has asked the Vermont State Legislature for $5 million dollars of capital for "middle mile" infrastructure; the request was included in Governor Jim Douglas proposed capital budget. If appropriated, this money will be used along with the $40 million in revenue bonding authority the VTA already has to build radio communications sites for cellular service and wireless broadband and to bring fiber connections to Vermont neighborhoods. Most of the cost of this infrastructure will come from the private sector; some may come from stimulus grants; but the capital appropriation is needed to get moving sooner rather than much later. If we wait long enough, private money alone will probably build towers and fiber everywhere. Waiting, however, means not only a lack of economic development in the places where communications are still sub-standard, it also means the whole state loses out on the benefits of 100% connectivity (more on that argument here). This post is about the importance of fiber to the neighborhood.

When your phone company tells you that you can't get DSL – which is brought to you over your copper phone wires, it's probably because there is no fiber in your neighborhood.

When your iPhone slows to a crawl, it's probably because there's no fiber to your neighborhood cell tower.

If you don't have a nearby cell tower at all, you probably won't get one until there is fiber in your neighborhood.

Fiber optic cable caries the vast majority of the world's data (voice is just a small part of data) almost everywhere that data goes. Incredible amounts of data can speed incredible distance on light waves channeled through thin fibers; the bundles of fiber can be coiled; they can turn corners; and the light stays in the fiber and gets where it's going. Except in big cities and modern development, most of this fiber hangs from electric transmission poles; some travels through conduit; some is in sewer pipe; and some just lies on the ground. The modern Internet simply wouldn't exist without fiber optic technology.

Very few of us have fiber connections all the way to our homes. Fiber links telephone company central offices (and some remote locations); but copper wires carry voice and data from the end of the fiber to our phones and computers. Copper works for carrying data short distances; it's not very good for carrying it far. That's why you can get fast DSL in the center of town and can't even get slow DSL at the end of the road.

Cable companies use fiber to bring their television channels and data services to your neighborhood. They then use coaxial cable (cheaper to splice into and to connect to devices) to carry a signal to and from your house. When a new town gets cable service, first it gets fiber to the neighborhoods.

Cell towers and the antennas of wireless internet service providers are better and better for transmitting larger and larger amounts of data for short distances. But they have to be connected to the Internet. That connection is rarely by radio (although it sometimes is); in most cases the best way to assure that a tower has enough connectivity is to attach it to a fiber spur which is attached to the rest of the (mostly fiber) Internet.

A key part of Vermont's telecommunications plan is to work with private companies to assure that there is fiber in every neighborhood. Remember, we have fiber already in most downtown locations – although perhaps not enough and perhaps not enough competition among fiber providers. We now need fiber in small towns and remote neighborhoods. It needs to reach all the way to our government offices (because they are now data factories and repositories and need to be reachable online); it needs to reach the schools, which will quickly become reliant on high speed broadband to bring courses from all over the world to local classrooms. The fiber needs to reach hospitals and even health clinics. And it needs to be close enough to your house so that copper, radio, or coaxial cable can bring reasonably fast broadband to your computer (and your television).

Some people say we should have fiber all the way to every house. Some people in Burlington and in the Springfield area do have fiber connections to their homes. Maybe someday we all will. If that happens, the fiber we're now building to neighborhoods will have been a needed step along the way. Meanwhile, fiber to the 'hood will help make sure all have at least adequate broadband connections even if some other technology connects the last mile.

More about VTA plans for last mile infrastructure is here.

Should Vermont Pay for Broadband Deployment?

"Does extending broadband access to the last unserved 5% of Vermonters really stimulate economic development?" one Vermont senator asked.

"Why should the State provide money to make that happen?" asked another senator.

Two good questions at a time when Vermont is struggling to close a $153 million budget gap and will have to stop doing some of the things it has traditionally done. Should we really be doing something new?

It was my job to answer these questions since I was testifying before a senate committee in support of Governor Douglas' proposal to use $3.17 million of federal stimulus money for a program called Backroads Broadband designed to make sure that the hardest to reach last 5% of Vermonters do get broadband access in the near future. (More about Backroads Broadband is at http://cto.vermont.gov/blog/backroadsbroadband. Currently about 85% of Vermonters have access to broadband; we think programs under way including some luck with competitive stimulus grants'll get us to 95%; that's why we're planning for the last 5%).

So does serving the last 5% really make a difference to economic development?

In my opinion, yes.

First of all, the unserved people are not spread evenly around the state; they're in clusters. In some areas there is no broadband availability at all. Who's going to open a new business in a place where they can't go online? How can potential workers in these areas work from home or learn from home if they can't go online? Given broadband, though, these are often places where housing is cheap and space is available at a reasonable price for new businesses. These are places where economic development is needed. These are places where economic development can occur – but not without broadband.

Second, economic development depends on an educated workforce and schools to which potential new employers want to send their children. If even a small percentage of the kids in class can't get online at home to do their homework, then teachers won't be able to give online homework. If teachers don't give online homework, kids won't be prepared for the world they're about to enter. Potential immigrants to the State, who might start home businesses or larger ones and want to live in this beautiful place, aren't going to come if the schools aren't good enough for their kids.

Third, the State needs lower taxes and a higher tax base to succeed economically AND socially. Like a business which must cut prices to stay competitive, Vermont must find ways to cut costs to support a lower price for government services. E-government, delivering state services online, makes it possible to deliver better services at a lower cost. But, if any significant part of our population can't get online, we'll have the cost of developing new web-based service delivery systems PLUS the cost of maintaining traditional office-visit-based systems. We've got to be able to assume in the near future that the same percentage of people who can make a phone call from home (by cell or landline) can also go online.

But should Vermont spend money –even if it came from the feds it's still our money – in order to accelerate broadband penetration?

Again in my opinion, yes.

Government needs economic development to generate tax revenue to support government – and, of course, the people of the state need jobs. Government does all sorts of things to encourage job creation including tax breaks, low interest loans, and direct grants to individual businesses. Many economic development policies depend on government being able to pick the "right" businesses to invest in – a dicey proposition at best. But we do all these things because we need economic development.

What government does best is build or incent the building of the infrastructure needed to attract economic development. This was and is true for railroads, canals, ports, electrification, telephone, and roads and much, much more. Often government doesn't have to invest as much in infrastructure in urban areas where the economics are good as in more rural areas; but a whole nation, state, or region benefits from good infrastructure and a good economy throughout. Government investment in infrastructure DOESN'T require being right about which business'll succeed; infrastructure creates opportunity and private capital comes in to take advantage of the opportunity. The good businesses succeed, the bad ones fail – but our investment in infrastructure is a winner.

You know the old saying about how it's better to teach a man to fish than to buy him fish sticks. Well, especially when times are tough, we need to make sure Vermonters can fish for opportunity online – all of us.