B&G Interview: Questions for John Cape

John Cape was New York Governor George Pataki's budget director during the last two years of his administration. In that short span of time, Cape became one of the most respected budget directors in the United States, and he certainly had one of the toughest jobs. That wasn't a surprise to Cape, who had worked for New York State since 1973 and in the budget office for the last 24 years.

Cape has always been a straight shooter, and he was kind enough to share some insights and advice with readers of the B&G Report. Having left state office, Cape has just joined Public Financial Management Group, Inc., working with former Iowa Budget Director Randy Bauer to establish a state strategic consulting practice.

Do you miss the New York State budget office?

After you've shaped public policy for 35 years, it becomes sort of like a heroin addiction. What I'm doing now is like methadone.... I'm one of the two directors of state strategic consulting, helping state governments deal with fiscal and management issues. I'm currently working in the state of Illinois doing staffing analysis for some of their major agencies.

Did you give your successor any advice?

I told him to be conservative, to care about risk and to be relentless, which is the only way to get things done in New York.

What do you need to be particularly conservative about?

New York lives and dies by Wall Street like Michigan does with the auto industry.... So when Wall Street catches cold, New York's finances get pneumonia. You have to be conservative about your outlook for Wall Street and conservative about the way you construct the government financial plan. That's especially true when you're changing the direction of major programs. Major governmental programs at the state level are like aircraft carriers. They don't turn on a dime. There's lots of inertia involved. But budget directors are under the gun to say 'let's implement this savings initiative and we'll start saving tomorrow.' You have to be realistic about the incremental benefits in the short run.

When you try to implement efficiency initiatives, what generally happens?

You hear a lot of whining. New York has two great wine areas. The Finger Lakes is great wine country and the Capital District where whine, with an "H," has been raised to an art form. Managers and employees in government like to whine about anything.

I used to have a sign in my office that said "No whining."

What was the biggest surprise for you when you took over the top budget position?

I think the thing that surprised me was the level of independence and the level of final decision-making authority that the budget director has in New York and the degree to which the governor and chief of staff deferred to the budget director's judgment on things fiscal.

This was especially true with Governor Pataki.

I would say, "This is just a bad idea. We can't do this."

And the senior staff would say "OK."

And I'd think, "Yikes."

I think all budget directors are struck by that. When you actually sit down in the budget director's chair, there's a tremendous amount of power that goes with it. You have to be careful with using it. The decisions you make and the judgments you make affect the lives of millions of people.

What are the scariest words from a governor?

When they say, "I've been thinking...." Or when they say "I had dinner with an interesting fellow." That's another one that's never going to be good.

The one I got from Gov. Pataki is when he'd call up and say, "You're going to hate this.... I know it's money we don't have, but I know this is the right decision."

I'd say "You're right."

He'd say "Really? You agree?"

I'd say "No. I am going to hate this."

You worked under four New York governors. What did you learn about leadership?

It's all about two things - vision and tenacity. If you have both of those, you can do almost anything in government.

What was your best moment as budget director?

I would say it was implementing the hospital-closure recommendations that we did. New York, like a lot of states, is way over-bedded in hospital and nursing-home beds. One of every four hospital beds is empty, and one out of five nursing-home beds is empty as well.

We came up with an independent commission that operated like a base-closing commission. The idea was to wring that excess capacity out of the system by recommending a series of downsizing and facility closings of hospitals and nursing homes. This was incredibly controversial in New York because it's such a huge part of our economy. Medicaid alone is $49 billion a year, which is larger than Florida and Texas put together. It's a huge issue when you're going to do anything with the health-care industry in New York, but we were able to get that done. The commission actually came out with its recommendations and they're being implemented. That will pay huge dividends in the long run. And it's something nobody gave a chance of getting done when we proposed it.

This hasn't gotten a lot of attention nationally, and I'm sort of surprised by that because this is a situation that's got to exist everywhere. The hospital system in this country was built when a normal maternity stay was six days and a gallbladder operation was ten days. The nursing home sector was built before there was such a thing as home care and wheelchair ramps and broad-based meals on wheels.

Any lessons you learned from the hospital-closure effort that other budget directors might find interesting?

One, we created this base-closing commission model, which took the legislature off the hook. This model gives individual legislators cover. It protects them politically against the implications of having an impact occur on their local hospital, which is the third rail of politics.

The other thing was to enlist the support of other interest groups, including education - to say if we have to pay for empty hospitals and nursing home beds we simply won't have as much money for education aid as we would like. Because the health care industry is so powerful in New York, you really had to develop allies within other interest groups. That combination of developing powerful allies and politically insulating the legislature was the key to this program's success.

Whose idea was this?

It was Governor Pataki's idea. Everything that's a good idea was Governor Pataki's. Every bad idea was mine.

In what way has government gone in the wrong direction since you started in the early 1970s?

Legislators are much more interested in influencing management decision-making and operations of agencies than they used to be and trying to insert political judgments for programmatic judgments. I've seen this build incrementally since the 1970s, and I think my colleagues have seen the same evolution. I think it's just about universal and I think it's universally negative.

What's the biggest mistake agencies made in dealing with you or your office?

Trying to keep us from getting information.