Grading the States introduction THE GOVERNMENT PERFORMANCE PROJECT Report Card: Colorado GOVERNOR Bill Owens (Republican, elected 1998) LEGISLATURE House — 38 Republicans, 27 Democrats Senate-18 Democrats, 17 Republicans FINANCIAL MANAGEMENT: C+ The last time we wrote about Colorado, its budgeters were convinced that the voters had scuttled the ship of state. And they had a point. Citizens had passed a referendum mandating that state spending growth be capped at 6 percent a year, a restrictive rate. On top of that came another ballot initiative requiring that when revenues grow by an amount greater than population growth plus the inflation rate, all excess funds have to be sent back in the form of a tax cut. All in all, it’s a recipe for limiting the state’s options in the event of an economic downturn. Whatever the economic climate, there’s no question that laws such as this are enemies of straightforward financial management. An unexpected tax windfall can’t be used to meet urgent spending needs. A state university that wants to improve its program by raising tuition may be prevented from doing so. But the trouble still lies in the future. For the moment, the state seems to have adapted to its voter-imposed restrictions — aided, of course, by the booming economy. In many ways, Colorado is well organized to cope with fiscal challenge. It has far better planning than many others. The process for examining the fiscal impact of legislation is careful, and long-range projections go out five years and are well publicized. A 4 percent reserve is built into each budget, and the state maintains a rainy day fund of about 3 percent. CAPITAL MANAGEMENT: B Colorado’s handling of its maintenance needs has improved substantially over the past couple of years. Facility audits have been instituted, and agencies are now submitting five-year maintenance plans. Over the past five years, 100 percent of all recommended major maintenance projects have been funded by the legislature. “The bottom line is that we’re seeing improvements in the conditions of facilities statewide,” says Larry Friedberg, director of state buildings and real estate programs. The state’s most serious problem two years ago was its commitment to a level of capital expenditure that didn’t look sustainable. But so far, at least, they are sustaining it, and leaders are convinced they can continue to do so, at least barring economic catastrophe. As in other areas, Colorado’s capital planning processes are top drawer. Agencies must demonstrate the need for their proposed projects by pointing to those provisions in the state strategic plan that the projects fulfill. One weakness: the project management system is still paper-based, which slows down the flow of important information. HUMAN RESOURCES: B- Colorado has a shiny new HR performance-management system, offering agencies an impressive array of employee appraisal methods. However, the system has not been given a chance to work as intended. It was supposed to be the basis of a pay-for-performance program, but that was killed by the legislature. Now there is talk of reviving the original plan starting later this year. But funding from the powerful joint budget committee is still up in the air. The administrative rules here are admirably flexible. In the past year and a half, work-force planning has been initiated, and a special task force has been established to improve the accessibility of training for all workers. In general, training is strong, particularly for managers. As in many decentralized states, however, some small agencies struggle to afford the basics. Although HR leaders are innovative, they’re shackled by tough constitutional requirements. They’re prohibited from recruiting employees from out of state, for example, unless they get a special waiver. Colorado also requires detail-oriented exams and uses candidate lists from which only the three top-scoring applicants can be considered. This was never good, and as the job market has gotten tighter, its ramifications have grown worse. In 1999, the most recent year for which statistics are available, 19.5 percent of state jobs were open at some point during the year. MANAGING FOR RESULTS: C+ Performance measures have been used at the agency level here for a long time. But consistency has been lacking. Now, for the first time, the governor’s budget instructions ask agencies for a strategic plan, prioritized objectives and rigorous justification of requests. Additionally, each agency is required to conduct a Targeted Base Review, wherein its entire base budget is reviewed for efficiency and effectiveness over four years. This should help considerably. Colorado is in the process of working toward a statewide strategic plan, but it doesn’t have one yet. The agency plans tend to focus more on goals than on actual strategies, and are not as outcome-oriented as state leaders would like. INFORMATION TECHNOLOGY: C Plans are under way to upgrade to new entity-wide IT systems that will centralize and unify both financial management and human resources procedures. Right now, the executive branch is asking the legislature for preliminary funding for the three- to five-year project; nothing significant will be implemented for over a year. Colorado was an early advocate of Internet-based transactions, but it’s far from a national leader now. When the state designed a new income-tax system that was supposed to go online, it “kind of fell flat on its face,” admits one state official. That slowed things down somewhat. Now the state says it will achieve a genuine breakthrough in the IT transaction field within the next 18 months. The state finally has a CIO, who reports to a cabinet-level secretary of technology. Under the CIO’s direction, Colorado is in the process of standardizing all IT components. The state has also geared up to provide more centralized tracking and oversight of major IT projects. 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.