Grading the States introduction THE GOVERNMENT PERFORMANCE PROJECT Report Card: Arizona GOVERNOR Jane Dee Hull (Republican, took office 1997) LEGISLATURE House--36 Republicans, 24 Democrats Senate — 15 Republicans, 15 Democrats FINANCIAL MANAGEMENT: C For anyone who doubts the need to accurately assess the fiscal impact of new legislation, Arizona is Exhibit A. Last spring, the legislature passed a bill that offered expanded tax rebates to consumers who purchased alternative fuel vehicles. Fiscal analysts reported that it would cost a modest $3 million to $10 million. Unfortunately, they missed the target by so much that the estimating arrow landed someplace in Nevada. The impact turned out to be closer to $600 million — nearly 3 percent of the entire state budget. A special session that changed eligibility for the rebate cut it to $200 million. Part of the problem was that the Department of Revenue simply underestimated the appeal of the incentives. But the mistake also highlights the crush of activity that short-staffed financial officials deal with at the end of legislative sessions. “This was one of 140 bills we reviewed in the last month of the session,” says Thomas Betlach, the Arizona budget director. “We’re working to make some changes.” There is a well-stocked rainy day fund, and pensions are fully funded. The state faces increased Medicaid spending, which was about 10 percent over the original budget for the second year of the current biennium CAPITAL MANAGEMENT: C+ Arizona switched this year to a biennial budget, requiring it to plan for at least two years instead of one. That, by itself, is a major improvement in the capital management process. There have been other positive changes. With state-owned buildings in the capitol area completely full, the government spends quite a lot of money leasing space — more than $10.5 million annually in the Phoenix area alone. So, it has moved to privatize lease-to-own financing. Private companies build necessary space on state-owned land, then the state rents it for a designated period of time, usually 20 to 25 years. At the end of the period, the state owns the facility. Project budgets are tight, thanks to a state law that holds project managers liable for budget overruns. But once infrastructure is built, maintenance efforts are erratic. The Department of Administration wants to produce a 10-year major-maintenance plan for the 2,700 buildings it manages. But it doesn’t have enough people to do a thorough job. The Department of Transportation polls the state’s drivers, asking them to compare state roadways with local systems and with roads in other states. The results help DOT plan projects, measure performance and provide justification for requested maintenance funding. Unfortunately, the budget for maintenance is about $20 million short of the level needed to give the public what it’s asking for. HUMAN RESOURCES: C Arizona’s employee turnover rate is a disturbingly high 18.4 percent, in part because the state lags about 13 percent behind the market in salaries. Although managers can reward superior job performance, there is dissatisfaction with the amount of funding available to accommodate this. Additionally, says one HR official, “I think we need to do a better job of training managers and supervisors to work with employees on performance.” Training has begun to improve, though, with a new mandatory leadership program that began in 1998. The state has stepped up job recruitment activities, with more community outreach and Internet advertising than in the past. The first state job fair is planned for this month. The hiring process is automated and relies on a resume database that can be searched for matches to job openings. Work-force planning is just getting started. It won’t be easy, given the poor condition of the human resources management technology, which is so antiquated that many of the programmers who understand it are no longer working for the state. MANAGING FOR RESULTS: C+ One Arizona official sums things up: “We collect so much information at the agency, program and sub-program level that the state is overwhelmed.... We are data rich, but insight poor.” He’s right on both counts. Arizona churns out huge quantities of performance measures — and they’re fed into a useful computer system — but they’re insufficiently used by the legislature, which is still focusing on old-fashioned line items. The legislators, one manager says, “still want to know how much an agency spent on travel rather than are they getting the job done.” INFORMATION TECHNOLOGY: B- With strong support from the governor and powerful legislators, Arizona decided two years ago to make a major effort in IT. There had been a vacuum in central control, and now there’s an agency and an oversight body established for that purpose. They’ve made a huge difference. The state won the 1999 NASIRE award for Statewide Initiatives/Policy, Planning and Management. The central IT office evaluates all state agency projects and investments for costs and benefits, and approves only those that make sense. After projects have been implemented, analysts monitor them monthly. Result: a reported three-year savings of $90 million through the elimination of unjustified projects and refinement of others. One of the most impressive efforts deals with Medicaid and health care. Data is maintained on all people eligible for these programs, and can be shared by anyone who needs it. Of course, there’s no IT magic in the desert air. The enterprise-wide financial management system requires a “complex system for queries,” according to the state budget director, but a data warehouse is planned to alleviate that. Although the state has a powerful infrastructure to make Web-based transactions possible, it’s behind the curve in actually putting transactions online. AVERAGE GRADE: C+ Copyright © 2001, Congressional Quarterly, Inc. Reproduction in any form without the written permission of the publisher is prohibited. Governing, City & State and Governing.com are trademarks of Congressional Quarterly, Inc.