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Where Can the Shumlin Budget Find $130 million?

"What do you think he'll cut?" asked Anne Galloway, editor of vtdigger.org. She pointed out that Governor Shumlin said last week at a press conference that wholesale elimination of programs is not on the table. I'm assuming this means no major programs will be eliminated although it could be read as allowing "retail" cutting of programs (cutting just a few). He's also said no to increasing "broad-based" taxes, which he defines as "any tax affecting all Vermonters". Note that there is wiggle-room in this definition as well; for example, state income tax is only paid by a minority of Vermonter. But let's assume for now that this means no tax increases.

Even with increased revenue estimates as the economy turns up, there is a budget hole of about $130 million to plug. Having spent the previous two budget seasons on the 5th floor of the Pavilion where the Governor and his staff work, I know the kind of work that has been going on since the election to prepare the budget the Governor will present to the legislature and the state on Tuesday. In fact Governor Douglas instructed his staff to prepare a complete budget before they left office as a starting place for the next administration. "Do it as if it were going to be our budget," he said. I re-retired shortly after that so I don't know what was in or out of the preliminary Douglas budget and certainly don't know any specifics of the about-to-be-proposed Shumlin budget.

But there are actually lots of ways to bring down the cost of state government. Some began under Challenges for Change last year and can be harvested and expanded now. Others were proposed as part of Challenges for Change but turned down by the legislature; a governor who is a Democrat may be better able to sell these to the legislature than we were – especially now that the Stimulus money is gone and Republican control of the US House assures it won't be coming back anytime soon. And then there are really big steps that are much better taken in the first year of a new administration than the second, so that the pain can be forgotten and some of the benefits realized.

The lists below are an educated guess of what Governor Shumlin might propose if no taxes are to be raised or major programs cut. Remember, most of the state budget is spent on Human Services and Education so most cuts have to be where the money is.

Further savings to be had in things that got started under Challenges and are now ripe for harvesting:

  • Increase performance contracting – making clear what RESULTS (not just activities) we're contracting for and only paying if we get those results
  • Reduce driving by state employees
  • Reduce phone costs of state employees by using VoIP
  • Eliminate paper in the internal transaction of state business
  • Increase use of myvermont.gov for external transactions
  • Allow Forest and Parks to continue getting out of the general fund by living on fees and growing fee income through creative management and marketing
  • Continue reducing prison time both with preemptive programs to keep people out of trouble and good transitional programs to try to keep them out of trouble when get out of jail.
  • Close a prison – probably Windsor

Opportunity in the places where the legislature wouldn't let us cut for Challenges:

  • Since state employees have taken a cutback in both pay and number of positions, it now makes sense to cut back the funding for groups that operate on behalf of the state – "designated agencies" in human services, the plethora of housing agencies, the overabundance of economic development organizations (50 and counting last year). Severe cutbacks in administrative funds will force consolidation (but it won't be phrased that way). The consolidation is overdue and will result in better service
  • Cut benefit program cost by coordination of care – there is no good information now on the total benefits going to an individual or a family. If we had that info, we'd find some people are very good at collecting from multiple programs (and other don't get what they're due). An arbitrary goal could be set for savings from de-duping. This is better done by a Democratic administration – the equivalent of Nixon to China
  • Tighten eligibility for some programs
  • Expand successful programs like Blueprint from Health so that care is better coordinated
  • Reduce the cost of some health programs by allowing non-doctors to perform and supervise more activities
  • Sell state buildings and lease space as needed

Other things that can be done:

  • Focus almost all non-transportation capital spending on energy efficiency in state properties to get immediate savings
  • Move most state computing functions to an outsourced cloud
  • Don't let people buy junk food with food stamps. Even if the spending on stamps isn't cut back, health will improve
  • Look for further reductions in state employee and teacher benefits
  • Vastly reduce the use of Boards to perform executive branch activities and eliminate most boards
  • Further decriminalize marijuana use and possession

 Things I don't think the administration will propose but I would (still within the constraints Governor Shumlin set):

  • Eliminate most targeted grants and tax credits for economic development – perhaps with some of the savings put into reducing the corporate tax rate and the rest banked
  • Consolidate the Agencies of Economic Development and Agriculture
  • Put all permitting in one department within the Agency of Administration (much better for people needing permits as well)
  • Set a limit on education staff statewide by capping admissions to the state –funded teachers' retirement plan
  • Work towards a statewide teachers contract with mandatory performance pay
  • Either give the Dept of Ed authority to perform some of the functions now performed by districts and supervisory unions or drastically shrink it
  • Switch to a 401(k) defined contribution plan for at least recent and new hires (requires negotiation with the union but essential to Vermont going forward)

Related post:

Challenges for Change: Post Mortem

 

Challenges for Change: Post Mortem

Lately there has been a lot of talk about Challenges for Change, a joint legislative-executive exercise from last year which was supposed to result in $37.8 million of savings for the general fund in fiscal year 2011 and $72 million in FY12 – such savings to be achieved through greater effectiveness rather than simple cutbacks in services delivered. I was the Douglas administration point person for Challenges so it's fair to blame me for the parts that didn't work, either because I didn't lobby effectively enough for the needed legislative authorization or because execution was faulty. You can read this post as informed or biased or both.

Although much of what we tried to accomplish in Challenges didn't work – often, but not always, because the legislature refused authorization to try, there is much that did work and will make the state government more effective in the future. There's a lot to learn both from the parts that worked – because we ought to do more of them – and from what didn't work. Some of the things that didn't work need to be tried again.

Because I re-retired in September, I don't know the current status of all the Challenges in detail. The final first year results won't be known until the state fiscal year is closed at the end of June. I do know that it is likely that most – but not all of the first year savings goal will be achieved but some through the use of one time funds and some through plain old cuts. The second year goal won't be reached through first year momentum; reaching that goal will require more legislative action this year.

Below is a post I wr0te just after the legislature adjourned giving the status of Challenges as authorized. There are some marked updates based on later events. Next week I'll write more on lessons learned.

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. Update: I hear that at least most human services contracts HAVE been written with clear and enforceable performance requirements. This has enormous potential moving forward to assuring we get the results we pay for and don't pay for results we don't get. Locking in this gain depends on the current administration strictly enforcing these clauses; there'll be pressure not to.

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%. Update: Forest and Parks did very well with its flexibility in progress towards increasing park revenue and out-of-state visitors and eliminating dependence on the general fund for park funding. Very significant efforts were underway when I left to reduce printing and mailing costs by going online and reducing travel and phone costs and the time employees spend driving by using online conferencing. Achieving results depends on enforcement by the Secretary of Administration and implementation of changes by Buildings and General Services (BGS) and the Department of Innovation and Information (DII). Former BGS and DII commissioners Gerry Myers and Dave Tucker got these efforts off to a great start. I'm very optimistic that former Representative Michael Obuchowski, who was on the steering committee for Challenges and is now BGS commissioner, will do what needs to be done and more.

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! Update: I was on a committee – established by the legislature – which was supposed to provide guidance for economic development planning and was supposed to work with the state economists to find measures for economic development success. Ably chaired by Steve Morse and with the active participation of very skilled volunteer members, the committee came up with some useful guidance which is about to be published – and put itself out of business (a very good example). But the disappointment is that the state economists basically said that there is no way to measure the success of economic development efforts in terms of jobs created or salaries obtained. IMHO we ought to vastly reduce expenditures whose effects we can't measure.

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. Update: As everyone knows, the local districts did NOT make the voluntary cuts and Governor Shumlin said onetime federal money would be used to cushion the blow for FY12. We are headed right for a cliff in FY13. We blew an opportunity to change the trajectory of more staff to less students gently; it'll now have to be done much more abruptly. Too bad!

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.

More posts I wrote while involved with Challenges are at http://blog.tomevslin.com/challenges-for-change/.

Tiger (Sound) Bites

On my next to last day as Chief Technology Officer for the State of Vermont, my friends from VermontTiger.com came by to do a live interview. Murphy's law has no exceptions for CTOs; the technology didn't work as planned; the interview wasn't live - but it does exist.

We talked about what worked and didn't in stimulus, Vermont's broadband prospects, energy policy, and the swarm of organizations - for profit and nonprofit - in orbit around planet government, which are more of an obstacle to reducing government spending than the people visibly on the government payroll. I'll be writing about these things now that I have more time to blog; but you can get a preview by checking out the Tiger post and associated audio.

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.

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.

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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