Grading the States introduction THE GOVERNMENT PERFORMANCE PROJECT Report Card: California GOVERNOR Gray Davis (Democrat, elected 1998) LEGISLATURE Assembly — 50 Democrats, 30 Republicans Senate — 26 Democrats, 14 Republicans FINANCIAL MANAGEMENT: B- Many of California’s most egregious finance problems of the late 1990s have been cleaned up. Perhaps most important, the state showed a positive balance of $622 million at the start of the 2000 fiscal year, compared with an accumulated deficit of $3.6 billion as recently as 1997. The rainy day fund, which was empty in 1997, now equals 2.4 percent of general fund revenues. What’s more, the state has passed its budget on time two years in a row; a break with woeful precedent. The healthy condition of the state’s balances will trigger an automatic sales-tax reduction next year. But some scary long-term problems will not be easy to fix. Medicaid is a huge cost drain — significant additional appropriations were required in the past two years and will likely be needed again. CAPITAL MANAGEMENT: C+ Capital planning for a large state can be difficult without adequate forecasts of future needs. California’s capital program currently is based on the consolidation of agency plans into a section of the governor’s annual budget. But beginning in 2002, a five-year infrastructure plan will be submitted to the legislature annually, in conjunction with the governor’s budget request. In the past, agency plans weren’t terribly realistic; the heightened focus on a long-term statewide plan should drive them to consider more comprehensive program needs. The Davis administration has emphasized sustainable buildings, which is good. But the effort is being stymied by a lack of information about the condition of the 17,000 buildings the state actually owns. Agencies are expected to conduct condition assessments annually, but they aren’t constrained by any statewide guidance. And the state doesn’t compile estimates of backlogs into a single figure. Analysis of transportation projects, on the other hand, is very well done, and maintenance of roads is thoroughly planned. With a large cash balance in fiscal 2000, the state was able to accelerate about $500 million of highway improvements. HUMAN RESOURCES: C A full 80 percent of the state’s work force is unionized, and there is a history of labor trouble: The state went four years — from 1995 to 1999 — without completing contract negotiations. The current contracts were finally signed between April and September 1999. The state is using labor-management partnerships for the first time. It also is making an effort to inform its workers about benefits that were established in the past but not publicized. Even so, there is a substantial exodus from the state work force, with turnover rates in fiscal 1999 totaling 18 percent. Work-force planning efforts, which could help deal with turnover, are accelerating. One big problem is the state’s discipline process. It can take up to a year for an appeal of even a minor disciplinary case. In the last round of labor negotiations, some unions agreed to an expedited procedure, but the State Personnel Board balked, on the grounds that discipline was not a negotiable issue. Firing people is very hard here, even during probation, since employees get full appeal rights their first day on the job. Only 0.35 percent of employees are terminated during probation, compared with 2.5 percent in New York, another heavily unionized state. MANAGING FOR RESULTS: C- California still hasn’t made a concerted effort to utilize performance measures. A handful of agencies have worked to develop them, including the parks and transportation departments. However, some early efforts to link outcomes directly to budget dollars — in the parks department, for example — proved failures. There is no statewide strategic plan, although there is a so-called “little budget book,” which contains broad-based goals. Agencies do have strategic plans — they are required to have them by executive order — and some are well done. But there’s been no effort by the central government to utilize them, or even, in many cases, to read them. The bright spot here continues to be the legislative auditor’s office, which does meaningful evaluation of agencies and programs. INFORMATION TECHNOLOGY: B- California was one of the earliest IT innovators, with individual agencies conducting their own experiments. As time went on, and consistency became key, the state discovered that it had a great many incompatible systems. Given the enormous size of the agencies, standardization would be incredibly expensive. However, California’s IT efforts have been salvaged by one significant factor. As the state reports: “Because we haven’t required departments to focus on consolidated systems, to be able to exchange information between our partners we’ve had to make sure they used a common language. The only common language is the Internet.” Inefficiencies today occur primarily because of a lack of comprehensive data format and content standards. Alleviating this will require reengineering of business practices, and a comprehensive statewide effort has barely begun. Meanwhile, officials in human resources, for example, complain that it can take weeks to get simple pieces of information, such as numbers of vacancies. In many other respects, the state is doing reasonably well. Statewide IT planning efforts are in place, and most of the larger agencies do a good job, with a great deal of input from stakeholders. Major project problems in the past have led to the development of a good project management system, which puts reasonable constraints on cost and time overruns. Post-implementation audits are done to make sure projects deliver their promised benefits. And the state has made solid progress at putting transactions and information 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.