THE GOVERNMENT PERFORMANCE PROJECTReport Card: South Dakota FINANCIAL MANAGEMENT: B+ South Dakota has been doing some serious tinkering with its tax structure, but has handled the process responsibly so far. In the past two years, it cut property tax rates by 20 percent, then sought to compensate for the lost revenue with a broadened sales tax. The sales tax didn't bring in as much money as expected, but expenditures were cut to make up the difference. The result is that the budget remains in balance. The state does an excellent job at estimating general fund revenues, an easier task than in most places because of the absence of an income tax, which is vulnerable to economic fluctuations. The state estimates expenditures carefully; when it makes an error, it's usually in assuming that it will spend more than it actually does. The state's rainy day fund is at its cap of 5 percent of general fund appropriations. South Dakota does move a bit slowly in sharing its financial reports; it takes eight months to release year-end statements, two months more than most other states. Meanwhile, the legislature and public get revenue updates only once a year. The state uses cost accounting sporadically, and doesn't formally analyze long-term budgetary trends. CAPITAL MANAGEMENT: B South Dakota turns conventional capital management on its head. It takes a long-term approach to maintenance and repair, but not to planning for new projects, at least outside the university system. Routine maintenance is aided by a procedure in which the state bills many of its agencies in the capital complex a flat rate per square foot each year to pay for maintenance, snow removal and other ongoing expenses. Major repair costs are kept down by using crews of prison inmates to do a great deal of work (at 25 cents an hour). Right now, for instance, inmates are repairing and installing roofs on buildings at university campuses. HUMAN RESOURCES: C+ Unlike most states, South Dakota has been centralizing rather than devolving its personnel management. This challenges most expert thinking, but it has helped provide a consistency that was previously lacking in the state's HR policies. As it centralizes, South Dakota has tried not to handcuff agencies in their day-to-day decision making. For example, it allows managers to request complete lists of all qualified candidates for any position, rather than having to select from the top three or 10. However, the state requires that agencies interview everyone who is on the certification list. This can be an immensely time-consuming task. General state funds are used to provide the agencies with free supervisory and other personnel-related training. Still, agencies are responsible for most professional instruction, and the Bureau of Personnel doesn't track how much they spend on it. What's more, there's evidence that computer training isn't sufficiently utilized (see information technology, below). One big shortcoming: South Dakota has done little to motivate employees with incentive pay. There are almost no merit increases, no individual performance bonuses or group performance bonuses. "There are a number of people who believe in merit pay," says the commissioner of personnel, "but we are unable to identify a system that is workable, given the amount of money that we have and the diversity of employees." MANAGING FOR RESULTS: D South Dakota has a performance budgeting statute that was passed in 1994 and has been ignored every year since. Aside from a sprinkling of output measures in the budget, there's no performance-based budgeting at all here. The auditor general has asked the administration whether it has any intention of complying with the statute. The finance and management commissioner says it's something he'll consider for some agencies in the 2001 budget. There is no statewide strategic plan in South Dakota. A few agencies have developed such plans, but there is no central guidance for them. The governor has developed citizen task forces to address issues of public concern about governmental programs. INFORMATION TECHNOLOGY: B As with human resources, South Dakota has a very centralized IT system. The chief information officer oversees everything from desktop computers to telecommunications. All technology is either standardized or developed by the CIO's staff. Unfortunately, the state's central systems are not well integrated, and users who want to employ data for managing sometimes have to go to several different systems for helpful information. South Dakota does have a strategic plan for information technology. Only a handful of agencies have written their own plans, but the CIO is trying to push them in that direction and their absence may be less of a problem here than in decentralized states. The acquisitions process is reasonably speedy, and all large acquisitions are done centrally. The state does a cost-benefit analysis on major projects. Generally—though not always—there's a follow-up. Though the state does an acceptable job of offering IT training, agencies don't always go along. They balked, for example, when the CIO demanded a half-day of training for all agency employees on the state's desktop operating system. "I can't tell you how many agencies tried to talk me out of it," he says. "We forced it on them. You go to some agencies and their people are starved for knowing what to do." AVERAGE GRADE: B-
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