The Reason Foundation has published its 23rd Annual Privatization Report detailing "the latest trends and examples of how public officials are reducing costs and improving service delivery through public-private partnerships, outsourcing, and performance-based government."
"Governments are swimming in red ink and realizing the effects of the recession will be felt long after the economy recovers," said Leonard Gilroy, editor of the report and director of government reform at Reason Foundation. "Interest in privatization is sky-high and rightly so. Now more than ever, policymakers need to study their priorities, re-examine what are really core government functions, and then tap the private sector's experti!
se in all of the areas where they can save taxpayer money and improve the quality of services."
The Annual Privatization Report highlights developments across the country, including:
Florida's Council on Efficient Government identified 511 outsourced projects in 2008. A review of 21 potential privatization projects forecast $94 million in savings for taxpayers.
Louisiana Gov. Bobby Jindal established a Commission on Streamlining Government that is using privatization to help reduce the size and cost of state government.
California Gov. Arnold Schwarzenegger signed a public-private partnership law that enables and encourages the private sector to fund and manage road, prison and courthouse projects.
New York Gov. David Paterson created a Commission on State Asset Maximization to identify areas where public-private partnerships can save the state money.
New Jersey policymakers are achieving a major environmental goal by privatizing the cleanup of nearly 20,000 contaminated properties in the state.
The report highlights this positive development for Washington:
The Washington State Legislature approved a pilot project in performance-based contracting for foster care that the governor signed into law May 18. Under the plan, the first pilot programs will be launched statewide in July 2012. After two and a half years, the Washington State Institute for Public Policy will evaluate the pilot program for the governor, who will then decide whether to expand or terminate it.
By January 1, 2011, the Department of Social and Health Services (DSHS) must consolidate and convert its existing contracts for child-welfare services to performance-based contracts linking the contractors’ performance to the level and timing of reimbursement for services. DSHS, as well as private contractors and Indian tribes, may provide child-welfare services, including case-management ser!
vices, under performance-based contracts. Nonprofit private contractors must receive primary preference over for-profit contractors.
With the exception of this effort, the zeal for competitive contracting was in short
supply in Olympia this year. A proposal to create a Washington competition council
(SB 5409) didn't receive a public hearing. Also, the Washington Federation of State Employees is suing to weaken the state's already underused competitive contracting process. A decision by the Appeals Court on that case is pending.
The national health care debate is setting up an interesting compare and contrast back home concerning the strategies of neighboring congressional Democrats Rep. Adam Smith (D-Tacoma) and Rep. Brian Baird (D-Vancouver). Smith is making himself available to constituents while Baird is canceling his town hall meetings.
This comes against the backdrop of news wires abuzz with phrases such as "astroturf protesters" and "anti-government radicals" at town hall meetings voicing their displeasure over how the health care debate is unfolding in Washington D.C. It seems that for some in D.C. and the media, only those Americans who don't have strong opinions and don't try to organize are worthy of having their voices heard.
It should not surprise elected officials that when they push controversial policies there will be some heat back home. Assuming the policy is well thought out a!
nd the typical member of Congress understands what he is advocating, he should have no fear answering even the most hostile question.
Whether a union packs a town hall or tax protesters, these individuals are still constituents and, more importantly, they are Americans participating in representative government.
While some in Congress may prefer that town hall meetings be more like an echo chamber it appears that Rep. Adam Smith has not lost sight of the fact that all of his constituents have the right to be heard and not just those that agree with him.
Commenting in this story about Rep. Brian Baird canceling his town hall meetings to avoid the "lynch-mob mentality" of those opposed to the proposed health care changes, Smith said:
“They aren’t protesters. Th!
ey are constituents speaking their minds.”
said even if the protests are organized, “what’s wrong with that?”
Absolutely nothing. Kudos to Rep. Smith for not hiding from the people he represents.
UPDATED (8/13): Rep. Baird has changed his mind and now will hold townhall meetings. Additional details here.
One of the few benefits of the current economic situation is the renewed interest by government officials to base policies on the ability to reach performance expectations. Of course, to hit performance goals you need to know what benchmarks to use. It looks like the state Department of Retirement Services (DRS) is taking this fact to heart. Here is a copy of a proposed sole source contract posting DRS issued this morning:
"The Department of Retirement Systems (DRS) contemplates awarding a sole source contract to CEM Benchmarking, Inc. (CEM) for a twenty-four month period to provide complete public pension administration benchmarking services. This contract may be extended for up to an additional two, twelve-month periods. Services include preparation of a benchmarking report analyzing and comparing public pension administrative and business functions, coordinating a !
conference for public pension systems, providing 'best practices' on a common public pension administrative aspect, and, providing a peer network forum.
The benchmarking report includes analysis of performance and cost data from a minimum of fifteen public pension administrators, each having more than 200,000 active members and annuitants; analysis of at least twelve common public pension administration activities; analysis of at least five factors contributing to cost differences; and, sufficient statistical analysis to enable DRS to validate these conclusions. CEM will also coordinate a conference for public pension systems, which will cover current issues of interest to public pension administrators; prepare one best practice analysis on a common public pension administration service; and, provide a peer network forum of other public pension systems.
CEM specializes in providing benchmarking services for public pension systems that administe!
r defined benefit and/or defined contribution plans. CEM has a!
lmost twenty years of experience in pension benchmarking and currently maintains over 500 clients worldwide. CEM is the only known specialist able to provide independent analysis of the factors that make public pensions unique.
The contract will be issued on or about August 25, 2009. Offerors contemplating the above requirements are required to submit capability statements detailing their ability to meet DRS’ requirements within five (5) calendar days of this announcement. In the absence of other qualified sources, it is DRS’ intent to make a sole source award of the contract."
It will be interesting to see how Washington's pension system compares. One recent analysis of the state's pension system indicates Washington may be out of the norm in how it invests its portfolio. According to a report by the Evergreen Freedom Foundation:
"The Washington State Investment Board was considered a 'daring, cutting-edge investor,' according to Institutional Investor Magazine, because of its decision to risk more of its pension portfolio on private equity than any other major state plan.
In 2007, the private equity market began to falter, and $154 billion worth of leveraged buyouts were pulled. Private equity investors were warned they could expect lower returns. Despite these facts, the board’s trustees voted to increase the state’s private equity allocation from 17 percent to 25 percent—significantly outpacing the next-most-aggressive state funds in Oregon and Pennsylvania, at 14 percent.
Wilshire Associates reports that across all 125 state pension plans in 2008, the average private equity asset allocation was 5.6 percent. Washington’s 25 percent allocation is more characteristic of an endowment fund than a pension fund.
The state’s priv!
ate equity losses could prove to be worse than what is shown on paper b!
ecause they are illiquid—meaning they are traded infrequently and values are hard to establish. In December 2008, the investment board’s then Executive Director Joe Dear said in an interview that 'private equity is valued on a lag basis, so we haven’t begun to see the real effects of the downturn in the private equity portfolio.'"
A report released earlier this summer could fundamentally alter the state's IT (Information Technology) Governance if acted on by state lawmakers. Among the recommendations include eliminating up to 832 Full Time Equivalent (FTE) IT employees and centralizing the state's IT systems. Titled "An Evaluation of Washington State’s Approach to IT," the report notes:
The State budgeted approximately $1.39 billion on IT personnel, goods, and services for the 2007-2009 Biennium – a 20% increase over the previous biennium. In the face of the current fiscal crisis, now is the time to evaluate ways to improve the efficiency and cost effectiveness of IT. However, efficiency and cost effectiveness alone is not enough. Ultimately, IT must support the business of government. As Gove!
rnor Gregoire stated in the 2009-2011 Budget Highlights:
“These are hard times for everyone. Our families are tightening their belts, and that’s what government needs to do. The State must squeeze every ounce of value out of every taxpayer dollar while maintaining our priorities…”
Here is a summary of the findings and recommendations:
IT reforms are!
high on the Governor's agenda for the coming session and will be part of the State Auditor's statewide performance review. These efforts coupled with this report could mean the state's IT systems are in store for a major reboot.
40 years ago this month the brave crew of Apollo 11 landed on the moon with Neil Armstrong famously saying, “That’s one small step for a man, one giant leap for mankind.” With this feat America won the race to the moon. Now President Obama is hoping states will shoot for the moon again, this time in a “Race to the Top” for education excellence.
At stake for states is access to $4.35 billion in federal education funds. The catch, however, is that access to these funds is dependent on states demonstrating that they have several education reforms in place.
While some states are in a position to take advantage of these funds and take one giant leap for education performance, Washington unfortunately, is closer to the experience of the failed Apollo 1 mission than the success of Apollo 11.
Confirming this fact, Go!
vernor Chris Gregoire has indicated that Washington is unlikely to satisfy the eligibility requirements for the federal funds.
According to the federal Secretary of Education Arne Duncan:
“Under Race to the Top guidelines, states seeking funds will be pressed to implement four core interconnected reforms.
To reverse the pervasive dumbing-down of academic standards and assessments by states, Race to the Top winners need to work toward adopting common, internationally benchmarked K-12 standards that prepare students for success in college and careers.
To close the data gap — which now handcuffs districts from tracking growth in student learning and improving classroom instruction — states will need to monitor advances in student achievement and identify effective instructional practices.
To boost the quality of teachers and principals, especially in high-poverty schools and hard-to-staff subjects, states and districts should be able to identify effective teachers and principals — and have strategies for rewarding and retaining more top-notch teachers and improving or replacing ones who aren’t up to the job.
Finally, to turn around the lowest-performing schools, states and districts must be ready to institute far-reaching reforms, from replacing staff and leadership to changing the school culture.”
Washington’s grade for each of these criteria sadly is failing because powerful leaders of the teachers’ union have consistently opposed bringing constructive change to public schools.
Washington will likely miss out on the first round of “Race to the Top” funds but, like Apollo 11, we can achieve success if state leaders shoot for the moon through real education reform, instead of holding our state back and shooting for just keeping the teachers’ union satisfied.
Today's GMAP (Government Management Accountability and Performance) public meeting was on the state's stimulus efforts. Lots of interesting tidbits were reported including:
$4 billion has been allocated to the state - $827 million spent so far.
The Governor believes the states are being used as pawns in a political fight in D.C. on whether the stimulus package is working; she complained that some Senators were questioning the value of the stimulus package prior to her testimony yesterday in Congress on green jobs.
The Governor reported that her colleagues expressed concern at the national governors meeting about what type of information is to be reported to the feds and the time line for those reports.
The bulk of the state’s stimulus jobs are at Hanford. The Governor is concerned that some of those jobs aren’t being filled by Washingtonians; instead the contractors are hiring out of state workers.
The Department of Transportation expects to create or retain 5,000 jobs as a result of stimulus funds.
The State has obligated the 4th highest amount of transit funding in the country.
The transportation construction market may have hit its saturation point as recent bids are coming in at or above engineer estimates in contrast to previous bids coming in below.
There is a high correlation with “legislative earmarks” and projects not coming in on time or on budget due to the circumvention of the normal vetting process and review.
Depending on your perspective, the decision yesterday by the Public Employees Benefits Board (PEBB) to raise premiums, deductibles, and co-pays for public employees is either a "travesty" or common sense reality.
"Due to the state’s budget shortfall, the HCA required that the medical plans meet a budget target that would keep the average employee contribution at around 12%. To do this, the plans increased the costs of certain benefits, deductibles, and out-of-pocket maximums. The employer will continue to pay 88% of the premium costs, based on enrollment across all PEBB medical plans."
This "average employee contribution at around 12%" compares very favorably to those in the private sector that still have jobs and health insurance. According to a 2008 study on state health care costs by the Washington Alliance for a Competitive Economy:
“State employee health care benefits are generous, and the 12 percent share of prem!
iums paid by employees is low. A recent Towers Perrin survey of 200 large employers found that the average employee’s share of health care premiums was 22.6 percent in 2008, up from 20.1 percent in 2003 (Towers Perrin 2008).”
“This today is an absolute travesty...They (the Legislature) won’t tax anybody else, but they’ll tax state employees…I think it’s a crime. The Legislature didn’t have the guts to provide the health care funds. They are destroying the quality of the workforce in this state.”
"In what is becoming an annual ordeal
for policyholders, Regence BlueShield is raising premiums for 135,000
individual health-plan members in Washington by an average 17 percent
on Aug. 1.
It is the third consecutive year that the state's largest provider of
individual coverage has boosted rates by double digits. And it comes
after two other insurers, Group Health Cooperative and LifeWise Health
Plan of Washington, recently imposed similarly steep premium increases."
Considering the average public employee versus private employee health care costs, was the PEBB's decision "a crime" or instead grounded in economic reality?
It appears the only alternative would be taxes increases or additional service cuts to provide the benefits demanded by Devereux and others.
Although the new fiscal year and biennium are only 1 day old, it's not too early to start thinking about next year's supplemental budget. Based on yesterday's caseload forecast, the Governor is already hinting at what agencies can expect to be proposed.
Here are details on the caseload forecast as reported in The Olympian:
"More Washington residents will receive Medicaid and children’s health assistance in the next two years than earlier forecast, creating a $250 million shortfall in the state’s already-strained budget.
The new forecast was released Wednesday by the Caseload Forecast Council, and Gov. Chris Gregoire’s budget office released an analysis showing that $113.4 million of the expected increase is in aid to needy families that qualify for Medicaid.
An additional $69.6 million!
is for children’s health care, including some children whose families qualify for Medicaid and others whose citizenship has not been verified. General Assistance Unemployed costs also are up $12 million, and nursing-home costs are up by $6 million."
Coupled with last month's poor revenue forecast, the state's new budget is already projected to be in the red. In response, the Governor's budget office (OFM) sent a memo to agency directors yesterday detailing her strategy:
"On June 18, the Governor directed the following administrative actions by cabinet agencies:
Full Time Equivalent (FTE) reductions equivalent to a 2 percent reduction in 2009-11 budgeted GFS FTEs.
Continuation of specific GFS savings in out-of-state travel and training, personal services contracts, and equipment purchases.
Spending restricted to only critically necessary activities.
She also has encouraged non-Cabinet agencies to impose similar measures.
The Governor’s reductions are intended to create savings that mitigate the effect of the June revenue drop. OFM will continue to watch revenue collections and caseload/enrollment projections as we approach the September and November forecast updates for GFS revenues. Ongoing expenditure and revenue pressures will very likely require further action, including revisions in a 2010 supplemental budget. The reductions in this memo represent the first steps toward supplemental budget changes for expenditures funded by the GFS."
Included in the memo are two tables showing the projected FTE and spending reductions. These figures are a good first look at what the Governor may propose in a supplemental budget.
If enacted by agencies, the Governor's proposal would reduce FTEs below budgeted numbers by approximately 642 and spending by $374 million.
While this is a good first step, additional spending corrections by the Legislature next session will be necessary to rebuild the state's rainy day account. Otherwise we may not be able to respond effectively to any future curve balls the struggling economy may throw our way.
2009 may go down in history as one of the most ambitious policy years in history. First there was the 1,073 page federal "stimulus" bill passed by Congress in February. Then last Friday the House passed the 1,200 page cap-and-trade bill. Next up is the restructuring of the nation's health care sector with current proposals totaling hundreds of pages.
Congress is considering these massive proposals under the direction of House Speaker Nancy Pelosi who promised in 2006 to "create the most open and honest government in history," if given power. In fact, she went a step further and said, "Lawmakers must have the opportunity to read every bill before they vote on it. It’s common sense."
With Pelosi running the House, it's safe to assume lawmakers were provided time to read these policy tomes line-by-line before adoption, right?
th bills were voted on within hours of the final versions being made available.
Hoping to change this, one citizen group is asking lawmakers to sign a pledge to read and post online for 72 hours the health care bill before voting. As reported by Politico:
. . . Let Freedom Ring, a group that promotes constitutional government and traditional values, has launched a campaign to get all 535 lawmakers in the House and Senate to pledge to not vote on the health care bill (likely to top 1,000 pages) until they have personally read it and the bill has been posted on the Internet for 72 hours.
“People were shaken into a new state of awareness when people talked about the size of the stimulus bill and the fact that, in all probability, no member of Congress or senator had read the bill,” said Colin A. Hanna, president of Let !
Freedom Ring. “That struck people as inherently absurd, almo!
st in the existential, theater-of-the-absurd sense. We all know lots of bills are not read, but sometimes the scope and nature of a bill rises to a different level than everyday legislation.”
I pledge to my constituents and to the American people that I will not vote to enact any healthcare reform package that:
1) I have not read, personally, in its entirety; and,
2) Has not been available, in its entirety, to the American people on the Internet for at least 72 hours, so that they can read it too.
Simple enough. Read the law you are proposing and allow voters the time to read it as well. Seeing how this is supposed to be the most transparent Congress in history, no doubt Pelosi is encouraging lawmakers to sign this ple!
Ok, so the arm wrestling comment was an exaggeration but according to Politico only one copy of the cap-and-trade bill was available on the floor of the House today:
“Republicans say Democrats are ramming their climate-change legislation through the House without enough time for members to read the bill — let alone to understand it — all in violation of their promises about creating a more transparent legislative process.
Rep. Joe Barton (R-Tex.), running the debate for his party, asked repeatedly Friday afternoon if there was even a copy of the current version of the bill anywhere in the House chamber. Democratic Rep. Ellen Tauscher – sitting in the speaker’s chair although she’s already been confirmed as Obama’s undersecretary of State for Arms Control and International Security — repeatedly dod!
ged the question.
Rep. Ed Markey (D-Mass.), one of the bill’s sponsors, finally rose to say that a single copy of the current version of the bill was available at the speaker’s desk and on the Internet, which members would have to leave the floor to access.”
I know democracy can be messy but this is ridiculous. Is it asking too much for members of the House to take the time to at least read and understand this 1,200 page bill before voting?
"Our audit found County officials should improve oversight and safeguards over its cash receipts, expenditures and assets. In many instances, oversight and safeguards were impaired by a lack of sufficient monitoring to ensure policies are complete, followed and staff is adequately trained to operate within those policies.
Further, County officials do not consistently provide or enforce performance measures or expectations in holding staff accountable. As a result, the County exposes itself to greater risk of loss, less ability to control expendi!
tures, and increases the risk for non-compliance with laws, regulations and contractual requirements. Consequently, our audit identified 12 findings."
The Auditor also attempted to conduct a performance audit of the County's construction management practices but terminated the audit "because the County was unable to provide complete and timely access to files and records related to construction projects" that the auditors requested.
Though a long list of problems was identified, perhaps the most curious finding of the audit concerned the County's management of construction records. From the audit (emphasis added):
"For the files we could access, we observed one file group where the naming conventions did not reflect what project or projects the file contained. The files observed were named after popular science fiction characters.
County personnel stated the County does not have !
standard procedures for naming, organizing and storing electronic records and does not have protocols for file protection or shared drive access and permissions.
Instead, individual project managers are permitted to name their files whatever they want, organize them however they want and establish whatever restrictions to access they want."
So what sci-fi projects was King County engaged in?
In response to an email inquiry the Auditor's office said the files referenced above were named: Hulk, Jabba, Kahn and Kirk.
Though the County may escape the Wrath of Kahn, the wrath of voters is another story. In light of this audit you may start hearing them channeling the Hulk: "D!
on't make me angry, you wouldn't like me when I'm angry."
Washington Congressman Brian Baird (D) once again introduced a resolution this week calling for a 72 hour review period on legislation. Baird's House Resolution 554 is co-sponsored by Rep. John Culberson of Texas (R). Here is the full text of the proposal as introduced on June 17:
Amending the Rules of the House of Representatives to
require that legislation and conference reports be available on the
Internet for 72 hours before consideration by the House, and for other
SECTION 1. PURPOSE.
The purpose of this resolution is to:
(1) Modernize the operations of the House of
Representatives using information technology that has transformed and
increased the efficiency of many aspects of American society such as
financial services and markets, transportation, manufacturing,
agriculture, and commerce with consumers and businesses.
(2) Slow the explosive growth of the
$11,000,000,000,000 national debt of the United States, reduce
excessive annual budget deficits, and control the size and scope of
government by ensuring that there is adequate scrutiny of proposals for
new and amended laws, taxes, and expenditures.
(3) Enhance public participation in American democracy
and improve the quality of proposed legislation by allowing the
opportunity for its review by State and local government officials,
small business owners, large business leaders, journalists, scientists,
academics, labor leaders, nonprofit organization leaders, authors of
weblogs, and interested citizens.
(4) Help restore public trust in government and enhance
respect for the House of Representatives and the Congress by ensuring
that their operations are conducted with the openness, order, and
dignity befitting the world's oldest democracy.
SEC. 2. AMENDMENTS TO RULE XIII REGARDING AVAILABILITY OF LEGISLATION AND REPORTS.
(a) Clause 4 of rule XIII of the Rules of the House of Representatives is amended--
(1) in its side heading, by inserting `legislation and' before `reports';
(2) in paragraph (a) by striking subparagraph (1) and inserting the following new subparagraph:
`(1) Except as specified in subparagraph (2), it shall not
be in order to consider in the House a measure or matter until 72 hours
(excluding Saturdays, Sundays and holidays except when the House is in
session on such a day) after the text of such measure or matter (and,
if the measure or matter is reported, the text of all accompanying
reports) have been made available to Members, Delegates, the Resident
Commissioner, and the general public pursuant to subparagraph (3).';
(3) by adding at the end of paragraph (a) the following new subparagraph:
`(3) Without further amendment before floor consideration,
the full text of the measure or matter and each committee report
thereon shall be posted continuously by means of the Internet in such a
manner that they are conveniently accessible using existing technology,
anonymously and at no cost, in a format that is searchable by text.';
(4) in paragraph (c), by striking `the third calendar
day' and inserting `at least 72 hours' and by striking `on' and
(b) Rule XIII of the Rules of the House of Representatives is further amended--
(1) in clause 5(b), by striking `and the Resident
Commissioner' and inserting `the Resident Commissioner, and the general
(2) in clause 6(c), by striking `or' at the end of
subparagraph (1), by striking the period at the end of subparagraph (2)
and inserting `; or', and by inserting before the period `a rule or
order proposing a waiver of clause 4(a) of rule XIII or of clause 8(a)
or 8(b) of rule XXII, unless a question of consideration of the rule is
adopted by a vote of two-thirds of the Members voting, a quorum being
SEC. 3. AMENDMENTS TO RULE XXII REGARDING AVAILABILITY OF CONFERENCE REPORTS AND AMENDMENTS REPORTED IN DISAGREEMENT.
Clause 8 of rule XXII of the Rules of the House of Representatives is amended--
(1) by striking subparagraph (a) and inserting the following new paragraph:
`(a)(1) It shall not be in order to consider a conference
report until 72 hours (excluding Saturdays, Sundays and holidays except
when the House is in session on such a day) after the conference report
and the accompanying joint explanatory statement have been available to
Members, Delegates, the Resident Commissioner, and the general public
pursuant to subparagraph (2).
`(2) Without further amendment before floor consideration,
the full texts of the conference report and the accompanying signed
joint explanatory statement shall be posted continuously by means of
the Internet in such a manner that they are conveniently accessible
using existing technology, anonymously and at no cost, in a format that
can be searched by text.';
(2) in paragraph (b), by striking subparagraphs (1) and (2) and inserting the following new subparagraphs:
`(1) It shall not be in order to consider a motion to
dispose of a Senate amendment reported in disagreement by a conference
committee until at least 72 hours (excluding Saturdays, Sundays and
holidays except when the House is in session on such a day) after the
report in disagreement and any accompanying statement have been
available to Members, Delegates, the Resident Commissioner, and the
general public pursuant to subparagraph (2).
`(2) Without further amendment before floor consideration,
the full texts of a Senate amendment reported in disagreement and any
accompanying statement shall be posted continuously by means of the
Internet in such a manner that they are conveniently accessible using
existing technology, anonymously and at no cost, in a format that can
be searched by text.'.
SEC. 4. PROTECTION OF CLASSIFIED INFORMATION.
Nothing in this resolution or any amendment made by it
shall be interpreted to require or permit the declassification or
posting on the Internet of classified information in the custody of the
House of Representatives. Such classified information shall be made
available to Members in a timely manner as appropriate under existing
laws and rules.
SEC. 5. SENSE OF THE HOUSE REGARDING AMENDMENTS.
It is the sense of the House that, with the objective of
preventing circumvention of clause 4(a) of rule XIII of the Rules of
the House of Representatives that the Committee on Rules should develop
standardized policies and procedures to require that proposed
amendments (except those offered under an open rule) that are major in
size, scope, or cost be posted on the Internet for an appropriate
number of hours.
Perhaps one of the things most taken for granted about today's state revenue forecast is the fact that no one is fighting over the numbers. When the state's nonpartisan revenue forecast committee issues its projections you don't see dueling press releases from partisans claiming that the numbers are wrong and the state should instead base its projections on the source of a political party's choosing.
Unfortunately the same can't be said about the debate occurring in Washington D.C. concerning the nonpartisan Congressional Budget Office's (CBO) projection on the cost of the health care reforms being considered. As noted by The Hill:
"Democratic leaders are growing frustrated with Senate Republicans and the Congressional Budget Office (CBO) for clouding prospects for timely passage of the healthcare overhaul by way of their critiques . . .
Democratic leaders have also grumbled about the CBO, which released an analysis Monday that may result in Senate Finance Committee Chairman Max Baucus (D-Mont.) delaying action on his panel. CBO has reportedly scored the Finance Committee’s proposals at $1.6 trillion, forcing Baucus to chop the package by $600 billion . . .
Growing frustrations with CBO have spurred some Democrats to consider shelving cost estimates from the agency and using projections from another source, such as the Office of Management and Budget (OMB), which is part of the Obama administration . . .
Peter Orszag, the director of Office of Management and Budget, however, has downplayed the possibility of using projections from his agency instea!
d of CBO.
'CBO scoring is going to be used in t!
his process,' Orszag said late Wednesday."
The whole point of nonpartisan forecasts is to help remove politics from the process and provide accurate information to the public and lawmakers. If those numbers get in the way of speedy action and instead force more thoughtful debate, the only losers are politicians --- not the taxpayers they serve.
Despite a drop in projected revenue, the state's top economist Dr. Arun Raha believes the worst is over. According to Raha the "free fall in the economy is behind us . .. decline in revenue is moderating."
That said, today's news creates additional pressure on the state budget. For the first time since the 2001-03 biennium (impacted by the 9/11 terrorist attack), traditional General Fund revenue collections are projected to be negative biennium over biennium as shown here:
2001-03: $21,141 million (0.6% decrease)
2003-05: $23,389 million (10.6% increase)
2005-07: $27,772 million (18.7% increase)
2007-09: $27,706 million (0.2% decrease)
2009-11: $27,692 million (0.1% decrease)
The impact of this is a reduction in the amount of reserves available for the state to weather any unforeseen bad news. 2007-09 reserves are reduced to $218 million. 2009-11 reserves are reduced to a paltry $53 million, Both reserves are well below one percent of expenditures (a 10 percent reserve is recommended).This includes the constitutional rainy day account.
This past session the legislature changed the definition of the General Fund to include additional accounts. By adding those new accounts the revenue forecast is essentially flat as shown here:
2005-07: $29,785 million (17.3% increase)
2007-09: $29,812 million (0.1% increase)
2009-11: $29,834 million (0.1% increase)
Meanwhile, the Chair and ranking member of the House Ways and Means Committee told the Association of Washington Business (AWB) they see no reason for a special session. As reported by Jason Hagey:
"State Reps. Gary Alexander, R-Olympia, and Kelli Linville, D-Bellingham, agree that Washington legislators should not convene for a special session this year, despite growing budget woes.
Linville told a meeting of the AWB’s Governmental Affairs Council that Gov. Chris Gregoire should use her limited authority to trim the budget enough to get through until January when the Legislature meets again for a regular session."
"blockquote" style="margin-left: 40px;">"If at any time during the fiscal period the governor projects a cash deficit in a particular fund or account as defined by RCW 43.88.050, the governor shall make across-the-board reductions in allotments for that particular fund or account so as to prevent a cash deficit, unless the legislature has directed the liquidation of the cash deficit over one or more fiscal periods . . ."
Whether or not the Governor takes this action it is clear that additional reforms to the state budget will be needed to help put the state back on a sustainable spending path.
With the threat from federal budget deficits growing each day, it appears the President is turning to the promise of performance-based budgeting as a solution.
Consider this June 11 memo to agency and department heads issued by President Obama's budget director Peter Orszag:
"Our goal is to build a transparent, high-performance government capable of addressing the challenges of the 21st century. The American people deserve a government that works, where the public interest is prioritized, where the impact of government spending is transparent and held to high, objective standards, and where results and good management matter . . . To be successful, we must focus resources on our highest national priorities, including investments in health reform!
, clean energy, and education. At the same time, we must enforce fiscal discipline, making sure that we invest in what works, do not waste taxpayer dollars on programs that do not work or are duplicative, and improve performance across the board."
One of the ways Orszag hopes to accomplish this is to focus agency attention on high-priority performance goals:
"Identification of agency high-priority performance goals is a first step toward developing the President’s agenda for building a high-performing government. There will be regular reviews of the progress agencies are making to improve performance in priority areas including problems they encountered and plans to address those problems. To prepare for these reviews, each agency is asked to identify a limited a number of high-priority goals and begin to define the strategies and means to achieve them . . . The agency goals identified for this !
purpose should generally have:
High direct value to the public or reflect achievement of key agency missions, as opposed to being focused on internal agency management or other administrative priorities.
Congressional authorization and appropriations required for successful implementation; though additional legislative changes may also be identified to contribute to success.
Coordination, operational, or other implementation challenges including across multiple agencies that once resolved, will likely lead to improved effectiveness or efficiency.
Performance outcomes which can be clearly evaluated, and are quantifiable and measureable in a timely fashion.
Significant challenges unlikely to be overcome without a concerted focus of agency resources."
Perhaps with an eye towards the spending problem in D.C., the memo goes on to direct agencies to prepare two alternative budget requests based on a freeze in spending and a five percent reduction.
Whether or not the President's proposed budget next year actually reflects this process, the information provided by agencies in response could prove to be invaluable for Congressional budget writers --- should they take the initiative to review it.
As we've previously recommended, Washington state lawmakers should also focus on agency performance when making budget decisions. Providing those who control the purse strings with this type of information allows them to make informed decisions on which purchases will deliver the highest results for taxpayers and those who rely on essential services.
Jason Mercier is Director of the Center for Government Reform at Washington Policy Center and is based in the Tri-Cities. He serves on the boards of the Washington Coalition for Open Government and CandidateVerification, and was an advisor to the 2002 Washington State Tax Structure Committee. Jason is an ex-officio for the Tri-City Regional Chamber of Commerce. In June 2010, former Governor Gregoire appointed Jason as WPC’s representative on her Fiscal Responsibility and Reform Panel.