Grading the States introduction THE GOVERNMENT PERFORMANCE PROJECT Report Card: Hawaii GOVERNOR Benjamin J. Cayetano (Democrat, elected 1994) LEGISLATURE House — 32 Democrats, 19 Republicans Senate — 22 Democrats, 3 Republicans FINANCIAL MANAGEMENT: C Hawaii is starting to do a quite a few things better in this category. The legislature finally set up a rainy day fund last year, with $20 million of the state’s tobacco money, and the unreserved end-fund balance has been rising. The pension system is now almost fully funded, and short-term investments were pooled last year for the first time. This is done pretty routinely by many other states, but it’s an important improvement for Hawaii. Still, finances aren’t in terrific shape. For a long time, Hawaii financial management was predicated on the philosophy that it was OK to eat chicken today, even if that meant eating feathers tomorrow. A legislative analyst’s office was created in 1994, but was never staffed. Financial technology systems are still far behind the times. And Hawaii has the highest debt levels in the country, with 13 percent of its general fund resources consumed by debt service. The state regularly underestimates its expenditures for Medicaid and other social services. In fiscal 2000, spending on children’s mental health was 18 percent over budget. In addition, pending litigation could hit the financial balance like a volcano. Notable is the question of money that may be owed to native Hawaiians for land designated for their benefit when Hawaii became a territory. CAPITAL MANAGEMENT: B Here, too, there are improvements to take note of. Hawaii now has a statewide capital improvement plan, and agencies are submitting project and financial plans to the Department of Budget and Finance. Until recently, the agencies submitted their requests separately to the legislature, which created some dissonance in the planning process. Of course, the legislature still has final say on capital expenditures. In recent years, contracting has been in some turmoil here: Weak economic conditions led to a low-bid environment, in which experienced contractors were shut out because they charged too much, and a big stack of change orders resulted. Now the state has incorporated past performance into its contracting standards, which has helped. The highway division doesn’t calculate its total deferred maintenance, but 20-year projections show a maintenance need of about $5 billion. The state acknowledges that each year it falls a little further behind on the task of resurfacing its roads. HUMAN RESOURCES: C Civil service reform has failed repeatedly here, but last year the legislature finally agreed to sunset all existing civil service laws as of July 1, 2002. “We got rid of all the excuses,” says Davis Yogi, director of human resources. Now a modern civil service system can be created from scratch, shucking some of the practices that made the old system rigid and painful and led agencies to hire temporary workers in droves as a back-door way of avoiding the rules. “They’re called temporary hires, but they’ve been there 10 years,” Yogi says. One of the major changes will involve severing the link between state and local pay levels. In the past, all workers in state and local government — whether they worked in Honolulu or on a remote island — had to be paid the same. This created serious problems. Even with reform, big obstacles remain. Cuts in staff and resources stand in the way of recruitment. Formal work-force planning is taking a backseat while the personnel staff concentrates on designing its new basic structure. Most serious, the state has been unable to reach agreement on its union contracts, which expired on January 31, 2000. MANAGING FOR RESULTS: C Hawaii has long had systems in place for MFR. In fact, a cursory look at the documents might suggest the state is a national leader in this field. Budget submissions include output and outcome targets and compare results to goals. But all of this is kind of like a palm tree falling in an empty forest. No one hears. The managers in charge of MFR are candidly disappointed. They say decision makers get the data, then don’t use it. “A lot of staff who were here when we first initiated performance-based budgeting have retired,” says one official. “And the people who have come on haven’t had the theoretical grounding or training that were there with the first group.” State leaders insist they’re trying to re-energize the process; and tough budget times may help make the case that MFR is important (although it also limits the resources for the task). There have been a couple of genuinely positive moves. Both the transportation and education departments — which eat up large portions of the budget — have launched new efforts to better utilize performance measures. INFORMATION TECHNOLOGY: C- For years, Hawaii all but ignored information technology. In fact, when state leaders decided recently that they needed to purchase software to help managers access financial data, they were stunned to discover that the software had been in place for more than a decade. An unidentified bureaucrat had simply decided that it was unnecessary and turned off the switch. Now, after years of penury, the executive branch is requesting a 50 percent IT increase. Legislators seem inclined to go along. And last October 20 was a red-letter day. The governor declared that technology standards were no longer the responsibility of individual agencies, and agency heads would have to meet a statewide requirement. At the same time, directors and top managers agreed that their top IT priority would be enterprise-wide messaging — not just e-mail but the ability to exchange real work-flow information. One major weakness still isn’t being sufficiently addressed: IT training. The wealthier departments do a reasonably good job. But departments without discretionary cash tend to shortchange their employees on this front. 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.