Open Government

WPC's Center for Government Reform's mission is to partner with stakeholders and citizens to work toward a government focused on its core functions while improving its transparency, accountability, performance, and effectiveness for taxpayers.

Open Government Blog

Reason Foundation releases Annual Privatization Report

August 6, 2009 in Blog

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."

Here is an excerpt from Reason's press release:

"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.

How does Washington's pension administration compare?

August 5, 2009 in Blog

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.'"

Report recommends major IT changes

August 3, 2009 in Blog

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 FTE
IT costs

IT governance

IT service
IT

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.

More Talk on a Second Stimulus Package

July 24, 2009 in Blog

Stateline.org today carries a Q&A session with state legislators from both parties around the nation asking "What would make you push for a second stimulus?"

The answers vary from "anything" to "hell no". Interesting stuff.

A second stimulus? Consider the ramifications first.

July 22, 2009 in Blog

Some policymakers in D.C. and syndicated columnists/economists have already begun talking about the need for a second stimulus package to bolster the $787 billion passed by Congress in February.

But before they move to quickly to spend even more taxpayer dollars on various government projects, a little reading should be in order; namely, this report from Wells Fargo.

In a "Decision-Makers' Guide to Stimulus Part Deux," the authors of the paper first take Vice President Biden to task for saying, "the truth is, we and everyone else misread the economy." The authors point out that, "Everyone did not misread the ec!
onomy. Contrary to political rhetoric, economic analysis outside the beltway clearly anticipated a nine percent plus unemployment rate even with the stimulus package."

One of the major concerns over the last several months as government spending ramps up, is inflation. Again, the authors of the paper address this:

"Unfortunately, a second stimulus could add too much to the growth momentum to be consistent with stability in the long-run inflation interest rates and currency expectations. Inflation/debt concerns, which are already rising, would accelerate quickly and thereby prompt negative interest rate/dollar reactions that would create a boom/bust cycle..."

The stimulus/bailout mentality goes back to the reality that politicians don't always make the most sound economic decisions because they are influenced by the immediate short-term political gains and do not take into account, or minimize, the long-term costs!
. But this type of thinking has immediate economic ramificatio!

Stimulus funds GMAP

July 22, 2009 in Blog

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. 

Here are additional details (click on the links):

Democrats’ Proposed Health Plan Leaves 17 Million Uninsured

July 15, 2009 in Blog

The new health care reform plan unveiled today by Democrats in Congress is not universal care.  The Democrat-proposed plan provides for 17 million people to go without health care coverage.  The plan carries other risks, such as:

  • It raises taxes during a recession.  Higher taxes, even on the so-called rich, means there would be less money available for investment and job creation, delaying the recovery and increasing hardship for people who are out of work.  Business owners would slow or stop hiring, as they wait to see what their new payroll tax will be, and whether they will be forced to pay the proposed 8% “pay-or-pay” penalty each year.
  • The government option would crowd out private coverage.  Many workers would be forced onto the government plan against their will, as employers drop their current coverage in an effort to shift health costs to taxpayers.  Yet the President’s family and those of Members of Congress would not be forced onto the government option plan; as dependents of federal employees they would continue to receive first-class coverage.
  • Eight million people with Health Savings Accounts (100,000 in Washington) might lose their coverage if it doesn’t meet the federal definition of mandated insurance.  Innovative patient-centered medical practices in Washington, such as Dr. Erika Bliss’ Qliance clinic in Seattle, would be forced to close.

Here's a good illustration of how the proposed health care plan would work was released by the Joint Economic Committee.

House-Democrats-Health-Plan

Public versus private health care costs

July 9, 2009 in Blog

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.

In a 4-3 vote, the PEBB members decided:

"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).”

Despite this fact, PEBB member Greg Devereux (head of the Washington Federation of State Employees) had this to say about the vote:

“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.”

Needless to say Devereux was among the no votes.

Meanwhile the Seattle Times reports:

"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.

Sneak peak at supplemental budget

July 2, 2009 in Blog

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.

The convergence of technology and democracy

July 1, 2009 in Blog

There's no doubt that 2008 was an evolutionary leap forward in the use, and focus on, technology as a main driver of civic involvement in the democratic process. Then-candidate-Obama's masterful use of social networking for both messaging and fundraising took the nation, and the electorate, by storm. By comparison, the Republicans ramped up their focus on technology trends as well, but let's face it, the Democrats fired on all cylinders in this area.