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January 16, 2010

Challenges for Change

Vermont has a $150 million hole to fill in its fiscal year 2011 general fund budget. State revenues are at a five year low with no immediate prospect of a return to bubble-highs; there is a recession-fueled increase in caseloads for social services; federal stimulus money is running out. Short term fixes and deferral aren't going to solve the problem because the prospect for FY12 is even worse. And property tax rates are going from unaffordable to absurd. Are you ready for good news, yet?

Challenges for Change is an intentionally broad brush agreement between the Douglas Administration and leaders of the Vermont House and Senate to save $38 million in general fund expenses and $12 million in the property-tax supported education fund in FY11. The promised savings are $72 million in the general fund and $26 million in the education fund in FY12 and at least that much annually in future years. This doesn't solve the whole budget problem, obviously; the Governor will present a proposal for a fully balanced budget on January 19; but the Challenges are a constructive way to close a substantial part of the gap.

The plan was developed by a joint legislative and executive branch steering team as a report to the Join Legislative Government Accountability Committee (JLGAC) chaired by Senator Diane Snelling. Public Strategies Group (consultants from Minnesota hired by JLGAC) played a key role in providing information on what has worked and not worked in similar (but less ambitious) efforts in other states, in writing the actual report, and as a catalyst between the two branches of Vermont government. Although I was not part of the team which wrote the report, I am now on the steering team and part of my assignment with state government is to coordinate executive branch actions in meeting the Challenges.

Will the Challenges be met?

One criticism of the Challenges plan is that, although it specifies from which agencies savings will be made, it doesn't say which line items in those agency budgets will be reduced. John McClaughry, who has been prescient about the fiscal crisis the State is now facing, writes: "Based on the PSG's 32-page report (net of padding), explained at a January 6 news conference in the Governor's office, one would do well to harbor considerable skepticism about the prospects of the purported savings…. How are these magic percentages [of savings] arrived at? There isn't a hint."

Actually, the devil is in the LACK of detail. Too often programs are passed by legislatures in Washington or Montpelier which specify minutely how to spend money but don't define measurable outcomes all this spending is supposed to produce. For example, there might be a program to pay for emergency room visits (in fact, there is). Once a stream of payments is available, we get what we pay for: more emergency room visits. We don't necessarily get healthier people; we don't measure the success of the program by health outcomes; in fact, we don't know exactly what outcome was intended when the program was passed.

Challenges for Change first challenges the legislative process to come up with measurable outcomes to be achieved from money spent, to define precisely what "success" means. The Challenges bill, which legislative leaders have promised to pass right at the beginning of the 2010 legislative session, will define WHAT outcomes legislators expect from the executive agencies in eleven specific areas and will specify the amount of money available to the agencies to achieve those outcomes. The promise already made is that general fund money available will be $38 million less than in FY10 (with some adjustment for increased caseload). The bill will NOT contain instructions to the executive branch on HOW to obtain the specified outcomes, no micro-management.

The next challenge is to us in the executive branch: we need to come up with programs and processes which achieve the desired outcomes within the limit of the amount of money available. Although we will report to the legislature on plans to meet the challenges, we will not require legislative approval for how we actually obtain the results unless some existing laws must be changed to enable us to meet our objectives. In fact, we will have to straighten up bureaucratic obstacles that we've put in our way and make much better use of information technologies than we have in the past to meet this challenge. Note, however, that we can't make detailed plans to produce the outcomes until we have legislation saying what these outcomes are supposed to be. That's why no detail now. That's why there shouldn't be any detail now.

We believe that we can achieve better outcomes while spending less money. Is this a pipe dream? Not really. There is no magic here; we're not really doing more with less funding. We will stop spending money on activities which do not contribute to the desired outcomes (which means that some programs will probably be cut, eliminated, or combined); we will be free to organize and build processes aimed at the outcomes rather than having the legislature (whose skill is not management) tell us how to operate. More money will be delivered on target than otherwise because we'll know what the targets are. We, management, will be accountable and responsible for meeting the outcomes specified in the legislation. The legislature, having defined the outcomes desired, will be responsible for monitoring our progress and accomplishments; and we will have to deliver the proof of outcomes to them and to the public. The Challenges' savings goals are net of the investments in information technology and other areas that we will have to make in order to be more effective.

Iowa undertook a similar effort with the help of PSG. You can see many of the outcomes that were set and reports on meeting them at http://www.resultsiowa.org/department_performance.html.

Another criticism of the Challenges report is that it ignores early reforms and plans for reforms. Bill Schubart, who is a keen observer of things Vermont, writes: "…Secretary of Human Services Hogan's mantra was 'if you can't measure the effects of a social program, you can't improve it.' Under his leadership, the Agency of Human Services put in place objective measurements in partnership with sixty Vermont community catchment areas to track and measure the effectiveness of their programs." Schubart points out that much in the Challenges is similar to what Hogan recommended and did. He's right; it's a strength of the current Challenges plan, I think, that it builds on some of the best of what has gone before. Some of the people who contributed to the plan worked for Hogan and certainly learned from what happened under his leadership. Mary Powell and David Coates headed a Citizen's Commission on State Government five years ago. Their findings also helped frame the new plan. Best of all, Con, Mary, and David are all still in Vermont and I hope we can get their advice going forward.

We have a unique opportunity. The depth of the national and state fiscal problems make it clear that we have to work across political boundaries to preserve the essential missions of government even at the expense of traditional programs and processes. There's bipartisan agreement in Vermont that further taxation is not an option and will only further erode the tax base needed to support government services. Technology needed for more efficient (and measurable) state government and programs is now cheap; communications are getting better and better. There is no guarantee that we'll succeed in meeting the Challenges for Change; but failure really isn't an option.

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