THE GOVERNMENT PERFORMANCE PROJECTReport Card: Arkansas FINANCIAL MANAGEMENT: B- Arkansas can claim credit for its own unique approach to budgeting. A longstanding Revenue Stabilization Law requires preparation of a multi-option budget that matches potential expenditures to different potential levels of revenue. If the revenue ends up coming in below the best-guess estimates, spending is automatically rolled back to a predetermined level. State leaders maintain that this diminishes any need for a rainy day fund, and Arkansas does not, in fact, have one. Revenues regularly exceed expenditures, and surpluses almost always go to one-time capital expenditures in the second year of the biennium. The state is rather rigid in its general approach to spending. Agency appropriation bills are subdivided into line items covering programs or divisions, and even have line items for such specific expenses as conference fees and travel. The rules for moving money from one line item to another are very restrictive. Even the executive branch is permitted to make only a 5 percent shift of funds without submitting it to review by the legislative branch. Arkansas lacks any formal fiscal note process, though both the budget office and legislature do ad hoc analysis. CAPITAL MANAGEMENT: C The Arkansas Department of Building Services reviews all cost estimates, feasibility studies and building programs for the state. It maintains a list of all state buildings, along with an assessment of their condition. The capital requests are reasonably detailed, but planning is done only for a two-year period, which is not ideal. Agencies have little choice but to be responsible for their own maintenance, since there is no dedicated stream of maintenance funding in the operating budgets. For the most part, projects tend to come in on time and on budget. But over the years, the state has accumulated a large number of deferred maintenance needs. "You're always running behind on maintenance," confirms Mike Stormes, budget administrator. "It just kind of hangs over your shoulder all the time." HUMAN RESOURCES: C+ Compared with agencies in most other states, those in Arkansas have a great deal of flexibility in making their hiring decisions. They can choose what kinds of tests—if any—to offer. The Office of Personnel Management coordinates with the state Employment Security Department and Department of Workforce Education to track labor market trends. The personnel management office also works with agencies to track their staff classification and compensation needs. The state is making efforts to upgrade the training of its workers. It offers a Certified Public Managers Program, a joint effort that is sponsored by several of Arkansas' public universities. Special entry pay rates have been made available for workers in the information technology field, but they are the exception; other than in IT, there were no funds for any merit pay increases in Arkansas state government this biennium. In past years, when employees who scored high in performance evaluations were given cash benefits, the number of grievances "went crazy," according to Maria Jones, bureau director of the Department of Health. The state Legislative Personnel Committee is currently reviewing the idea. Meanwhile, Arkansas officials report that the state had a turnover rate of 23.4 percent in 1997. That means, effectively, that one out of four workers left during the year—enough, one might assume, to disrupt the smooth functioning of any human resources system. The accuracy of the data seemed questionable, but when asked about it, the Office of Personnel indicated that it "has never been a problem from the standpoint of hiring and refilling those positions." MANAGING FOR RESULTS: D Arkansas adopted a strategic management plan, the Designing Arkansas document, in 1994, but little came of it. There are no performance measures collected by the state (though measures are required when work is contracted out). A few agencies do collect data and have strategic plans, notably the Department of Health, but they are rare. That said, a commission made up largely of business people recommended last year that Arkansas require performance-based budgeting, adopt performance-based pay and incorporate cost accounting for its programs. Governor Huckabee supported the recommendations, and the state is expected to begin a pilot project this year. Some legislators are also on the bandwagon, and have formed a committee to explore the possibilities. INFORMATION TECHNOLOGY: D One state official says it's misleading even to ask about technology systems in Arkansas, because the question "assumes the state has a technology system." As in the case of Managing for Results, Arkansas gets a low grade based on current accomplishments. But if the present state of achievement is weak, there appears to be genuine momentum in this area. The Information Systems Act of 1997 created a new department to centralize IT planning efforts in Arkansas, and a fair number of initiatives appear to be in the early stages of development. The state is preparing policies and standards, and requiring agencies to create individual strategic plans for IT. Perhaps most important, the acting director of the state finance department wrote a letter to the legislature in December requesting funding for a new statewide financial management information system. AVERAGE GRADE: C-
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