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March 20, 2010

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.

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