THE GOVERNMENT PERFORMANCE PROJECTReport Card: Tennessee FINANCIAL MANAGEMENT: B Tennessee's budget has been under some stress lately, the result of court-mandated education spending. Higher sales taxes and a strong economy are helping to meet most pressing fiscal needs, but the state had to use $17 million in surplus money from prior years to fund the current year's budget. The state also has had some difficulties in recent years getting a solid fix on Medicaid and corrections expenditures. In addition, the state's rainy day fund is distressingly low—only about 1.7 percent of tax revenues—but it's supposed to go up a little this year, and new legislation requires that 10 percent of future revenue growth go into the fund automatically until it reaches 5 percent of general fund expenditures. Cash management policies are top-notch in this state, and the pension plans are fully funded. Debt service as a percent of total spending has fallen from 1.9 percent in 1988 to 0.8 percent in 1997, and debt is conservatively used. One area where Tennessee always excels is in the clarity and completeness of the financial reports it prepares: The state has received the Government Finance Officers Association's certificate of financial reporting excellence 18 times, more than any other state. CAPITAL MANAGEMENT: B- Tennessee maintains its buildings well. Agencies are charged rent, out of which money is taken for maintenance and day-to-day operations. Within the higher education system, funds are allocated on the basis of a formula that ensures sufficient attention to capital maintenance needs. Other agencies establish their own maintenance budgets independently. Currently, Tennessee is pushing a "one-stop-shopping" initiative, aimed at consolidating similar programs and services in single locations. There is a detailed inventory of capital assets. However, Tennessee doesn't keep track of the amount of deferred maintenance it has accrued, and doesn't have a statewide long-range capital plan outside of higher education. There are no requirements for agencies to develop long-term plans, either, though many do. HUMAN RESOURCES: C+ There are problems in Tennessee's personnel management system: Turnover among employees is relatively high, and hiring is still constrained by old-fashioned civil service rules that limit managers to a list of five applicants. But the state is trying to address the trouble spots. Job vacancies are now listed on the state Web site, and computer-based testing has replaced the old manual procedures. An imaging system designed to help multiple agencies view a single application is about to come on line, and that should help considerably. This was one of the first states to reduce its number of job classifications significantly; Tennessee was down to about 1,200 almost 15 years ago. Since then, however, the number has crept up again, and there are currently about 1,800 separate classes in the executive branch. Training, shortchanged in recent years, is another high priority now, and the state is about to roll out a new series of managerial courses. There's no merit pay in Tennessee, but employees in certain occupations who go through valid professional certification programs can receive salary increases of up to 9 percent. While there is no formal statewide workforce planning in Tennessee, personnel officials make a real effort to stay ahead of obvious future staffing needs, such as preparing for the opening of new prisons. MANAGING FOR RESULTS: C The Volunteer State released its first annual strategic plan in February 1998. Departments are encouraged to cascade the strategic planning process downward through their organizations, and quarterly meetings are being held with senior management teams to assess pro-gress and ease inter-departmental cooperation. This is entirely an executive-side initiative; there has been no legislative input. Nor has there been any legislative requirement to measure performance, though measures have been used informally by the governor's office. "That is one of the great shortcomings that this administration has seen," says Buddy Lea, assistant director of the state-run Center for Effective Management. Despite an absence of statutory requirements, about half the state's agencies have performance measures, though their quality varies widely. Human services departments tend to do a particularly strong job. Tennessee has been actively engaged in performance contracting, and is pursuing better cost-accounting, with more than half the agencies rolling out a new system for activity-based costing. INFORMATION TECHNOLOGY: B+ Tennessee's IT system is highly standardized, under a powerful CIO who is unafraid to pull the plug on floundering projects. "The biggest mistake is to chase a bad project down a hole," he says. The state has a comprehensive information planning process involving all the major institutional players; agencies prepare their own plans covering three years. Technology training is increasingly strong, with an average of between one and two weeks of training for every technical worker in the state. The state's centralized information systems have not been doing a particularly good job of producing the data to track state government performance, but they should do better with the help of new data warehouses that will make more information available to managers. Much of Tennessee's capital IT funding is offered as loans to agencies; this holds them accountable for a project's promised return on investment, because agency managers are held accountable for repaying the loans. AVERAGE GRADE: B-
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