Grading the States introduction THE GOVERNMENT PERFORMANCE PROJECT Report Card: North Carolina GOVERNORS Mike Easley (Democrat, elected 2000) James B. Hunt Jr. (Democrat, 1977-85, 1993-2001) LEGISLATURE House — 62 Democrats, 58 Republicans Senate — 35 Democrats, 15 Republicans FINANCIAL MANAGEMENT: B The North Carolina economy is doing its best to weather an unexpected storm — actually three storms: hurricanes Dennis and Floyd, and a winter blizzard that dumped 20 inches of snow on the state a year ago. The combined effect of these calamities is a $141 million revenue shortfall in fiscal year 2000, due to mop-up expenses nobody could have predicted. Add in about $2 billion in lawsuit liabilities over the past several years, and an increase in Medicaid and health benefit costs, and the result is a state in precarious fiscal condition. North Carolina has used its rainy day funds (aptly named, in this case), and has rescheduled about $20 million in corporate tax refunds and several hundred million dollars in teacher payments. The latter two moves may be questionable, but aside from the trials and tribulations of the past year, the state has excellent financial practices. Its bonds have a triple-A rating from all three rating agencies (and have maintained it, despite the disasters). North Carolina makes long-range budget projections, has good controls over spending, and makes good use of the Internet in procurement for tracking requisitions, soliciting bids and communicating with vendors. For the second year in a row, the budget was enacted into law on time. That is a distinct contrast with fiscal year 1999, when the budget was 117 days late. CAPITAL MANAGEMENT: B North Carolina’s current performance in this category is attributable largely to God. When Hurricane Floyd ravaged the state in 1999, leaving billions of dollars of damage in its wake, it was decided to treat the repair effort as an extraordinary capital project. A special session of the legislature reallocated about $150 million from FY 2000 capital budgets. Not only did that leave planned projects undone but it also caused all but about 8 percent of maintenance to be deferred. The state’s recovery operations continued through the 2000 calendar year, leading to just a $14 million FY 2001 capital budget — and those funds went to two projects aimed at securing matching federal funds. As with the overburdened financial management system, however, North Carolina’s capital management is fundamentally solid, with good prioritization of capital requests. After years during which the transportation department had a long-term plan but ignored it, work has begun on a new plan, which will include multi-modal initiatives and passenger and freight transportation provisions. HUMAN RESOURCES: B+ North Carolina has made significant improvements in providing more consistent salary increases for employees. Managers have been given the flexibility to adjust salaries for issues of equity, avoiding turnover and dealing with changes in job requirements. Other states have taken similar actions, but rely on agencies to squeeze the dollars out of their own budgets. North Carolina has made the important move to a statewide salary-adjustment account as its funding mechanism. There is still work to do in terms of rewarding superior performance with cash, but there are some good recognition programs that honor individual achievement. One negative: North Carolina still has about 3,000 job titles. This includes university employees, so the total can’t be directly compared with those in most other states, but however you cut the pie, it’s still too many. Managers are working at reducing job-title bloat by establishing broader titles and pay bands. The state would also benefit by using more mediation and other alternative dispute resolution techniques to help cut down on lengthy grievance appeals. MANAGING FOR RESULTS: B North Carolina has some 3,000 key performance measures. While that is almost certainly too many for analysis, the state is committed to the measurement process and is dealing with the glut of information by using Web-based technology to make the measures as useful as possible to legislators and managers. What’s even more important is that the state designates an accountable manager for each performance measure. “You start having six or eight years of data, and you have a person’s name,” says state planning officer Sheron Morgan, “then that accountable manager will start to get calls and messages asking about their numbers.” North Carolina’s leaders have gotten a bit bogged down, however, in moving beyond the goal-setting process to a useful strategic plan for the state. “Goal setting is a rhetorical process and it brings people together and gives them a warm fuzzy feeling of commonly shared values,” says Morgan. “But we’re not very good at following through.” INFORMATION TECHNOLOGY: B+ The state has made dramatic improvements in this area in the past couple of years, thanks in large part to a legislative awakening: a 1999 law that moved toward an enterprise approach for IT management. The chief technology officer, who used to work for the Commerce Department — a peculiar arrangement at best — now reports directly to the governor. Project management is excellent. Every month, agencies must report to the state’s central IT offices on what’s happening with its project initiatives. Such tight controls help to assure good outcomes. Equally important is the comprehensive statewide technical architecture that covers all aspects of IT. Opinions on the quality of entity-wide systems vary depending on whom you talk to in North Carolina. Still, it’s undeniable that they are old and not genuinely integrated — although there are ways to share information between them. AVERAGE GRADE: B 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.