State governments have shown mixed success in weathering the worst financial storm since World War II in which plunging revenues have coincided with surging costs. Some states have been successful in figuring out how to deal with the crisis while others have struggled.
This conclusion is based on research released today in the Government Performance Project's (GPP) “Grading the States 2005,” the nation's only comprehensive, independent analysis of how well each state is managed. The new GPP report provides state-by-state information, analysis and tools to compare each state. All 50 states received grades in the GPP's report, which can be found in the February issue of Governing magazine. The project is funded by The Pew Charitable Trusts.
The report grades the states in four categories – Money, People, Infrastructure, and Information – on a scale of A through F. It is designed to show leaders how to identify their state's strengths and weaknesses and how to compare their performance with other states.
Because management and outcomes are linked, the management of state government is especially important in tight fiscal times. And since the states are taking a larger role in executing domestic policy, neglecting sound management practices may affect the delivery of vital services to citizens, the report said.
According to GPP Director Susan Tompkins, the quality of management performance by state governments is often critical to the success of a state's programs and policies. “The last few years have seen the biggest financial crisis for state governments in 50 years,” said Tompkins. “The way a state has reacted to this crisis managerially has had a big impact on citizens and will for years to come.”
The project, the result of more than a year of research by a team of academics and journalists, found that states are trying to balance their books with a range of spending cuts, efficiency measures, borrowing and revenue-boosting strategies, but are still faced with structural deficits.
Despite the financial constraints, there are many positive initiatives in state government, the report said. It highlighted Virginia's excellent financial management, Georgia's ground-breaking human resources policies, and Utah's continuing success in maintaining its infrastructure.
In its research, the project used an extensive online survey filled out by designated state managers; a systematic analysis of public documents, and interviews with legislators and executive officials, independent citizen groups and academics. The assessment criteria were updated from previous surveys to reflect the results of good management, not simply a dedication to process.
In managing their money, most states have tried to balance the books by cutting funding to government in ways that risk long term damage. The report went on to say that many have tried hard to avoid using accounting gimmicks.
Several states, however, used stop-gap measures to square their books, the GPP found. New Jersey borrowed $1.9 billion to balance a $28 billion budget last summer, a tactic that prompted the State Supreme Court to rule that the state may not do it again. Tennessee's governor transferred 9 percent of the state's highway money to the general fund and deferred its replenishment.
The GPP found that states vary widely in their approach to long-term financial planning. Virginia decided in 2002 that having six-year budget forecasts was so important that the state mandated doing so. But Massachusetts has a $3 billion structural budget gap because it cut taxes in reaction to an unsustainable spike in revenue during the 1990s.
Massachusetts might have been able to avoid the problem if it had a formal long-term planning mechanism that would recognize when revenues are not liable to recur, the report said.
The most serious challenge states face in managing people is the approaching retirement of many employees, an event for which some states are ill-prepared.
In more than half the states, one in five employees will be retiring over the next five years. In Tennessee, the proportion is 40 percent, and Maine and Nebraska are close to that, researchers found.
Some states are taking the problem more seriously than others. In Georgia, which the report said may be the best-managed human-resources operation in the country, agencies' personnel plans are included with their strategic and budget plans, and reported to state leaders in the budget process.
Staff retention is an issue in states where salaries are low or stagnant, and has been exacerbated by an anti-government ethos in some parts of the country that seeks to belittle the value of the work done by state employees, the report said.
Researchers found that to boost morale, it's possible to express appreciation of employees even if there's no money for bonuses. In Michigan, select groups of employees who deserve recognition are invited to cabinet meetings where members stand in their honor. The GPP's assessment of infrastructure management also yielded mixed results.
Nebraska has created a six-year plan for all construction and major maintenance projects. But in New Mexico, the governor, the House and the Senate are allowed to spend their non-transportation capital budgets independently of any statewide needs. “Not surprisingly, projects are frequently under-funded and delayed,” the report said.
Overall, the biggest infrastructure challenge is under funded maintenance, the GPP found. Oklahoma budgeted no money for facilities maintenance last year while California has shifted funds from maintenance to balance its general fund for the last two years. The repeated deferral of maintenance will eventually result in higher repair bills, the report warned.
The GPP also urged states to work closely with their neighbors to coordinate infrastructure policy. The report praised the cooperation between Florida and Georgia to cope with extra highway traffic resulting from last year's hurricanes.
On information management (IT), the states are entering a new era in which technology is playing a central role in government to gather, analyze, and disseminate information.
Michigan is in the forefront of the technological revolution and is now aligning its IT initiatives with government and business initiatives.
The GPP found states have taken “e-government” to a higher level, offering online versions of a range of services including drivers' licenses, income tax forms, and benefits applications. More states are now gathering data to create useful performance information.
Some agencies are using web-based performance information to improve their work, the GPP found. New York's Department of Environmental Conservation can now capture data about air quality with technology that didn't previously exist.
To view the complete report on all 50 states and to compare one state's performance to the other 49 states, visit the project Web site.