Loving a Loser

Few events in the workings of government are more poignant than when a clever and creative idea is perceived as a failure--for reasons that have little to do with the actual innovation and more to do with faulty implementation or uncontrollable outside forces.

It's too bad. Not only does this deprive the innovator of the potential benefits of the program but other entities that might find the innovation useful or replicable tend to avoid the scent of failure and thus miss out on perfectly reasonable ideas.

Minnesota, for example, was one of the first states to try to improve management by integrating strategic planning and performance measurement. Its program, Milestones, was a good idea. Unfortunately, the program has run into obstacles, including problems in its implementation. In its early days, for instance, the effort was run out of a planning office that was often in conflict with the budget office. These kinds of things can be fixed in the next iteration, but the failure eroded other states' interest in the idea.

Or consider Oregon's decade-old effort to provide health care coverage to greater numbers of needy citizens. The idea was to limit access to procedures and techniques deemed to be of less value than others. The state, with a great deal of citizen input, developed a list of health care benefits--from most important to least. Then, theoretically, the legislature could decide how much money it could afford to spend on health care in any given budget and effectively draw a line on the list at the point where spending cap and service benefits met.

This was pretty controversial stuff, and there were problems with the original methodology. But it seemed to us then--and it still does now- -that this was the beginning of a great idea: It made health-care rationing, which occurs everywhere in different guises, transparent.

Although the federal government gave the state a waiver to try the new plan, when it came to actually limiting services, the feds got more than a little jittery. The state was permitted to expand benefits to more citizens but not to enforce the cut-off point on its list. Thus, instead of being hailed as a pioneer in health care financing, Oregon's bold efforts have gotten a reputation as something of a washout.

Then there's Michigan's so-called single business tax. It was initiated in 1976 as an effort to get rid of a melange of taxes on businesses, many of them unpopular and some--such as taxing inventories under the personal property tax--considered bad tax policy. Michigan eliminated seven of these taxes and replaced them with a single business tax, which advocates believed was fairer to business and provided more stability to the state's tax stream.

Sounds good to us. But the single business tax is being phased out with an expiration date of 2009. Although the nature of the tax was certainly controversial in tax circles--it was similar in many ways to a value-added tax, and no other state had tried something this ambitious--its first few years demonstrated a great many benefits. The problem was that Michigan didn't do a very good job at public relations. While it's supposed to be a good thing for tax systems to be transparent, Michigan leaders discovered that transparency left them vulnerable to misinterpretation. "It makes Michigan look like a high tax state on businesses because the single business tax is listed as a corporate income tax," says Tom Clay, director of state affairs for the Citizens Research Council of Michigan. The single tax looks unreasonably high when compared with the systems in other states that have a corporate income tax as well as some of the taxes that Michigan rolled into its single business tax. "It also has an undeserved reputation for being a tax that has an undue burden on small businesses," Clay says.

Right now, it's unclear what Michigan is going to do to replace the single business tax, but other states don't seem to be trying to emulate Michigan's effort. "In retrospect," says Clay, "maybe Michigan could have reached out and provided better information to other states than it did. We could have done a better job at working with chief financial officers and other tax officials from multi-state corporations."

Obviously, there's a certain amount of personal opinion in our belief that the single business tax, Oregon's health care plan and Minnesota's Milestone effort are really good ideas. But we think it's indisputable that all of them have significant merit, whatever their shortcomings. Almost all governments understand that an idea that succeeds wildly in one place may not be right for them. We just wish that more of them would see that the opposite is often true as well.