THE GOVERNMENT PERFORMANCE PROJECTReport Card: Colorado FINANCIAL MANAGEMENT: C Colorado law mandates that spending growth be capped at 6 percent a year, a pretty restrictive rule. But the limit doesn't include capital expenditures, and last year (an election year), capital spending zoomed from $198 million to $468 million. A voter-imposed mandate also has created a troublesome constitutional limit on revenues. If revenues grow by more than the percentage increase in population plus the inflation rate, the state needs to return the excess to taxpayers. This makes it difficult for budgeters to even out the bumps between good years and bad years. A huge $72 million estate tax windfall in 1998, for example, went straight into tax refunds and was thus unavailable for any state spending needs, however deserving they might have been. There are other potentially unpleasant side effects to this system. If Colorado wanted to admit more students to its state universities, for example, their tuition would increase revenues, which might have to be distributed to taxpayers, leaving the colleges without enough money to pay for the new students. Though the state has a solid rainy day fund, good cash management, little debt and fine contracting oversight, its practice of making complex decisions through voter referendums has wreaked havoc on its ability to manage its own fiscal affairs. So its grade dips to a C. But don't blame the budget office—it's the voters who did it. CAPITAL MANAGEMENT: C Colorado's management of capital expenditures is a mixture of great and awful. The state has a top-notch planning system, with effective targeting of needs and solid identification of necessary maintenance projects through required facility audits. There's consistent involvement of the legislature in the process, which is a plus, and procedures designed to prevent project delay. That said, controls on spending for the non-capital, operating side of the state budget encouraged the election-year capital expenditure bonanza of 1998 (see above). The $468 million spent on capital projects during the year represented more money than in the previous two years combined. That may be a one-time issue. More worrisome is Colorado's practice of funding capital projects only for their first-year needs. This commits the state to costly projects without having to allocate all the cash. If the economy turns seriously sour, there is serious risk of leaving projects unfinished. This dubious practice started because managers realized that "they could get three times as many projects authorized by asking for a third of the money in the first year," says George Delaney, a former budget director. Meanwhile, since routine maintenance comes out of the operating budget, the state's spending limits tend to drive agencies away from sensibly keeping up their assets. HUMAN RESOURCES: B Colorado has been reducing its number of job classifications and has had notable success at the managerial level, where it now uses only four general titles. Though the hiring process takes longer than personnel people would like, signing bonuses and pay differentials are permitted for hard-to-fill jobs. The state is looking into alternatives to written tests for some positions. "For security officers in juvenile institutions," says a Human Services official, "you may have someone who is very good but does not perform well on a written test." Two years ago, the legislature established a new personnel management system—scheduled for full implementation in mid-2000—that eliminates step pay increases based on longevity and replaces them with a pay plan aimed at meeting standards of individual performance tied to agency goals. MANAGING FOR RESULTS: C In this decentralized, weak-governor state, there is no statewide strategic plan and no requirement for strategic planning at the agency level. Nonetheless, such planning does take place within departments. For the past three years, the state's cabinet secretaries have had their own performance agreements with the governor's office. Agency budget requests are supposed to incorporate goals, objectives and performance measures, but the measures have been based on outputs rather than on actual results. Thus far, the measures haven't had much impact on the state's budget process. The legislative and gubernatorial budget offices are working to improve them. INFORMATION TECHNOLOGY: C Colorado has an impressive automated bid system that permits all procurement opportunities to be posted on the Internet in three hours and creates solid information to help track data on contracts. The state has accelerated its request-for-proposal process by cutting down on the detailed specs included and letting the vendors figure out solutions to technology problems in their proposals. Beyond the bidding process, however, IT systems are not integrated. "We have far too many separate systems that by themselves are doing pretty well," says Andre Pettigrew, executive director of general support services. "The state is going to have to consider a fully integrated solution." Colorado does not have a chief information officer, but it has created a CIO Forum, which may be a step toward creating a CIO position and may also lead the way toward overall standardization of technology. AVERAGE GRADE: C+
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