THE GOVERNMENT PERFORMANCE PROJECTReport Card: Michigan FINANCIAL MANAGEMENT: A- Michigan may be the tax-cut capital of America in the 1990s. Since the decade began, it has enacted 24 separate tax cuts, totaling around $11 billion in forgone revenues. It intends to reduce its income tax in each of the next five years. Still, it has managed to keep its fiscal affairs in good shape. Its rainy day fund is around 5 percent of general fund and school aid expenditures. It has four fully funded pension plans, and the state's investments reap respectable returns, with solid oversight. "We know how to do tax cuts and balance our budgets," says Mary Lannoye, the state budget director. "It forces you to restrain growth." Not that it has been easy. As the state saves money, for example, by putting welfare recipients to work, it finds itself with ballooning day care costs. In 1998, the day care bill was $330 million, and it will reach $580 million in the year 2000. Some of Michigan's programs—such as the state's immunization effort—get their appropriations in a lump sum, allowing for managerial flexibility. Other programs still operate on a traditional line-item basis. The integrated financial management system does not support cost accounting, but some agencies are moving forward in this direction, notably the Department of Transportation. CAPITAL MANAGEMENT: B+ Michigan has departed from the traditional design-bid-build scenario for major projects. It works directly with builders right from the design phase, contracting for a guaranteed maximum price, no overruns permitted. In some cases, the state contracts with a designer and a builder as one team. The state also approves major projects in two pieces; the first year is designed to clarify the plan and get more realistic estimates. Michigan's long-term capital planning is done at the departmental level. Though it's not required, many agencies have five-year plans. They submit only one or two years of requests at a time, however; these are prioritized on a statewide basis during the annual budget preparation. There is no statewide capital plan. The state doesn't track total deferred maintenance, but its managers maintain that they are making progress against a backlog of necessary rehabilitation and repair. Routine and preventive maintenance appear to be well funded. HUMAN RESOURCES: B+ Michigan's Department of Civil Service has redesigned its policies to be responsive to agencies' needs. As part of a reform of its classification system, it consolidated a number of titles into broad ones for division directors and senior executive service employees. The hiring process has been speeded up dramatically, in part through alternatives to written exams for some classifications and the electronic submission and evaluation of applications. The Department of Transportation used to take nearly 90 days to fill a position. Now it's closer to 30. For hard-to-fill jobs, such as entry-level auditors or civil engineers, managers can offer jobs on the spot. There is a pay-for-performance system, but right now only 2,000 out of 59,000 employees participate; union members, for example, aren't eligible. Michigan may still be a little weak on the training side, but it is taking steps to remedy the situation. In 1997, it established an Office of Performance Excellence, to work with departments and identify training needs for leadership development, project and contract administration, and customer and quality service improvement. Tuition assistance is also available, even for courses that aren't related to an employee's job. MANAGING FOR RESULTS: B Individual agencies in Michigan have been in the performance measurement business for years. Recently, the state has tried to extend the process to all its agencies and to improve the quality of measures and develop a base of expertise. In 1997, it assembled 150 employees from all over state government—including the legislative side—to learn that, as one management services official likes to say, "this approach is a positive as opposed to a gotcha thing." Input has been sought from citizens as well as state employees. An aspect of measurement that tends to be missing in most states is validation of the data. Michigan does not have this problem. Data accuracy is ensured through the use of automated data-gathering systems, internal research, review and audit. One thing Michigan does not have is an enterprise-wide strategic plan. But an agency workgroup is currently considering such an effort. INFORMATION TECHNOLOGY: B+ Michigan maintains excellent centralized accounting, purchasing, budgeting and human resource information systems—as well as a centralized management database from which information can be easily extracted for analysis and reporting. Agencies maintain some top-notch mission-specific systems as well. For example, the Office of Retirement Systems is supported by mainframes that provide online data to customer service reps, who then respond to retiree questions. The state has consolidated all its data centers, as well as its telecommunications networks, resulting in significant savings. Its staff is well trained in technology use, and there is an excellent procurement system. The one real weakness here is the absence of a statewide strategic plan (other than for the Y2K problem) that would guide information technology planning on a long-term basis. That weakness may soon be remedied (see above). Michigan is also struggling to get a fix on ways of evaluating the returns it is getting from technology projects. AVERAGE GRADE: B+
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