The deal seemed too good to pass up or to ever undo: Iowa would create "charter agencies" and give them unprecedented freedom and flexibility to sidestep onerous rules and regulations--including personnel restrictions and procurement oversight--in return for a promise of superior, documented agency performance. For departments that signed up, there was another deal sweetener: the right to hang on to 50 percent of any savings achieved through more efficient operations.

That was the offer embodied in 2003 legislation worked out between then-Governor Tom Vilsack, a Democrat, and the Republican-led legislature. Under the terms of the deal, the state would embark on an experiment in bureaucracy-busting whereby agencies could trade results for regulatory relief. To assure the legislature that this newfound freedom wouldn't lead to some permanent group of "rogue" agencies, Vilsack agreed to a five-year sunset provision, after which time the legislation would presumably be renewed if the experiment proved successful.

With the law signed and Vilsack asking for volunteers to step up and agree to be charters, the state's Department of Management even ginned up a "Bureaucracy Detector Test," a six-question survey that was designed to help agencies gauge the extent to which they felt driven by rules versus a focus on results. High scorers were prime candidates for charterdom.

In the end, more than a half-dozen departments signed up, and several of them made measurable progress in overhauling and improving performance in a wide range of policy and program areas, from streamlining environmental permitting to reducing recidivism among state inmates to boosting the state's childhood-immunization rate.

The experiment was deemed so successful, in fact, that it won an Innovations in American Government Award in 2006. "I thought it was for real and I liked the idea a lot," says Bob Behn, a lecturer at Harvard University's Kennedy School of Government who follows public-sector management trends.

But the novel approach proved to be short-lived. Vilsack chose not to run for a third term in 2006 (he decided to run for president, instead), and was succeeded by fellow-Democrat Chet Culver. But Culver seemed to have little interest in continuing Vilsack's charter-agency reforms. The legislature, for its part, seemed to view charters as a boutique exercise in narrow executive-branch freedom not worth repeating. So charter agencies faded into the sunset.

"I was not a big fan of charter agencies," says state Senator Jeff Danielson, who did his Master of Public Administration thesis on the misuse of performance measures in government. "I viewed it as kind of a fad, as basically the culmination of the privatization movement where you tell an agency to be entrepreneurial and operate on its own, but the reality is they still had to deal with legislative oversight and rules."

What's more, no other state decided to follow Iowa's lead on creating charter agencies, even though one of the main criteria for winning the Innovations Award is that the idea be readily replicable. (Louisiana, under Governor Kathleen Blanco, did take a hard look at charters, but the legislature wasn't keen to embrace the notion, says Jim Chrisinger, who helped craft the charter legislation while he was in Vilsack's Department of Management.)

And so, at first glance, this would appear to be a classic story of management-reform failure: a successful experiment in red-tape cutting disappearing in the blink of an election, the victim of the traditional "not invented here" mentality of a new executive and a typical lack of enthusiasm for management initiatives on the part of legislatures.

Except it's not that simple. When you look into the rise and fall of charter agencies in Iowa, it turns out there's a back story, which has a powerful forward spin. Management reform in Iowa actually isn't dead at all. If anything, it is now more deep-seated than ever, and it is spreading. Why that's true, and how it came to be, is the real tale of management reform in Iowa, one that could be a powerful lesson for other states and localities interested in launching management reforms and making them stick.

According to Teresa Hay McMahon, who heads up the performance and results division in the Iowa Department of Management, bureaucratic reforms under Vilsack actually took two tracks: one, the highly visible piece of legislation creating charter agencies in 2003; the other, a less-visible, grassroots push to make Iowa government more responsive and efficient.

That grassroots approach had its genesis in a meeting in the spring of 2003 between officials at the Department of Management, the Department of Natural Resources and leaders of the Iowa Business Council, which represents the 20 largest companies in the state. The business coalition, which requested the meeting, wanted to talk to DOM and DNR officials about the burdensome and lengthy process for extracting pollution permits out of the DNR.

What the business coalition proposed, essentially, was that the state try emulating a practice that top-performing, private-sector companies in Iowa had been refining for years: creating so-called "hot teams" assigned the job of regularly reviewing business processes and suggesting how things could be done faster, smarter and better.

This meeting led to an official partnership between the state and Iowa business leaders, McMahon notes, focused on the concept of lean government. The mechanism for pushing "lean" would be to create teams of public- and private-sector experts who would scour agency processes looking to wring out efficiencies wherever they could.

The charter-agency legislation passed in 2003 certainly embodied the spirit of hot teams and leaner government. But charters carried one piece of very heavy, very visible baggage: In order to generate legislative interest, the idea of creating charter agencies was sold, in large part, as a potential answer to the state's budget woes.

In other words, in approving charter agencies, there was a lot more chatter about saving and raising money than about encouraging efficient, effective government. In fact, charters passed with a clear promise: that between all the charter agencies (whichever those turned out to be), they would somehow contribute $15 million per year toward state deficit-reduction.

"We had to do a lot of legislative hand-holding," says Randy Bauer, who was Iowa's budget director in 2003, of the push to create charters. "The committee we were working through was Appropriations and what they cared most about was the financial bottom line."

The fact that charter legislation went through money committees and that legislators focused on revenues and savings, says Bauer, who is now a government fiscal consultant, probably undercut to a significant degree what charters were really supposed to be all about. "The savings were hardly the difference between being in the black and in the tank," Bauer says. "But they were tangible, they were the quick win. But money wasn't what this legislation was ultimately about."

Its aim, supporters note, was leaner, more responsive government. And charters did make interesting progress on the efficiency and effectiveness front. The DNR, which was one of the first agencies to sign up as a charter, reduced turnaround time for air-quality permits from 62 days to six days, and for wastewater discharge permits from 28 months to four-and-a-half months (without reducing environmental protection, the DNR claims); the Department of Human Services increased health care coverage for children by 12 percent; the Department of Corrections reduced probation-failure rates by nearly 20 percent; and across all charter agencies, the turnaround time for key personnel actions was reduced from months to mere days.

Two things about such gains: First, in many cases it didn't take "charter" status to make such improvements; the departments had the power to pursue such reforms all along--the charter designation simply got them off the dime. Second, those sorts of gains were hard to quantify in terms of dollar savings, and the higher-visibility focus of charters continued to be on the combination of promised savings and revenue enhancements.

As if to underscore the monetary side of the charter equation, two of the key departments that contributed most to the experiment's bottom line were the Alcoholic Beverage Division, which runs the state's liquor stores, and the state lottery. In other words, part of the state's plan for charter agencies' fiscal success involved getting Iowans to drink and gamble more--or at least to cut those agencies loose to more efficiently accommodate Iowans' drinking and gambling habits.

But as charters moved along the fiscally focused path, there continued to be a strong undercurrent of parallel reform embodied by the broader "lean" concept. Governor Vilsack, who was well aware of the lean initiatives and hot-team tactics started at DNR, requested in 2005 that every executive-branch agency in Iowa officially commit to "lean." That was a rallying cry, says McMahon, that the DOM heartily embraced, one that was already being actively pursued in partnership with the Iowa Business Council.

How the broader drive toward "lean" ultimately supplanted charters was straightforward enough, if invisible to all except the wonkiest followers of Iowa government.

In 2006, with charter agency legislation ready to sunset and Vilsack's overall reform agenda in jeopardy, McMahon says a group of state officials committed to the "lean" initiative began working with members of the Iowa Business Council to get the word out to both gubernatorial candidates about maintaining the push for efficient, effective government. "Vilsack was leaving," says McMahon. "And we didn't want all this to be just another flavor of the month." So she and others worked with the business council throughout the campaign. "Every time either gubernatorial candidate met with members of the business council, they told them, 'There's this thing called "lean" that you need to support.' "

In January 2008, public- and private-sector officials joined forces to create a "Lean Government Collaborative," to work with and in state agencies to do process improvement. While the collaborative had Governor Culver's support, executive-branch reformers such as McMahon were well aware of how ephemeral reform can be when it comes with a label and an elected executive's name. So she and her allies turned to the legislature once again to try to codify good government in state statute.

From Senator Danielson's viewpoint, it didn't take much persuading; even lawmakers who might not have a master's degree in public administration could understand the difference between an environmental permitting process that took 62 days versus six, he says. Legislation--with no sunset provision--passed unanimously in both houses in the 2009 session, officially creating and funding an "Office of Lean" in the Department of Management. "Legislatures come and go," says Danielson. "We wanted something with a sense of permanence so it didn't just become another fad."

Lean in Iowa, "is absolutely flourishing," says McMahon. And it's attracting some outside interest, as well. In June, her office hosted a "lean government exchange" that drew 130 people from state and local governments around the country, as well as federal officials, and officials from Mexico and Canada.

These articles are part of a continuing series on public performance measurement focusing on citizen involvement. Support has been provided by the Alfred P. Sloan Foundation. Although the foundation may assist some of the programs described in these articles, it had no control or influence over the editorial content, and no one at Sloan read the material prior to publication. All reporting and editing was done independently by Governing staff.