Raising Alabama

A reform-minded governor thinks performance measurement is the first step toward a healthy state future.
by | October 2000

One of the Cabinet officers in Alabama's reform-minded administration has a shorthand way of explaining what she and her colleagues would like to do. They want to convert the "make me" state into the "catch me" state.

"Make me" isn't a bad description of the way the system works now. Alabama is the federal court order capital of the country. Federal judges are making the state do so many different things that the federal courts might as well be recognized as a de facto branch of Alabama government. And virtually all the court orders are the product of responsibilities that Alabama simply failed to live up to in the past: desegregation of the schools, decent treatment of the mentally ill, adequate facilities for its prison population, and a long list of others.

The "catch me" state would be a different place altogether. It would be a place where education, social services and the quality of life in general would attract new business and affluent new residents, and generate imitation, not suspicion. Creating it is the goal that has preoccupied Governor Don Siegelman and his cohorts since they took office in January of last year.

Those sorts of ideas aren't unusual; many governors come into office with them. But Siegelman's strategy for reaching his goal is unique. He thinks the way to begin creating the new Alabama is with a large- scale commitment to performance measurement. A performance-based budgeting program is already in place in three agencies, and there are plans to roll it out in an additional seven. Besides genuinely wanting to modernize management and budgeting in the state, though, Siegelman has an ulterior motive.

Ultimately, the governor believes, the key to remaking Alabama's image lies in boosting state revenues to the point where all the instruments of government can provide decent service. Only then will the stack of court orders disappear, and Alabama's reputation as the "make me" state finally fade away. But without hard numbers on what the state has begun to accomplish--and a more concrete picture of what it could accomplish with more money--Siegelman acknowledges there is little hope Alabamians will be willing to spend the tax dollars that long-term solutions require.

The whole proposition may be a long shot. Siegelman is not the first Alabama governor in modern times elected on the promise of doing great things. The others have all been victimized by one overriding reality: the tax system. Alabama has been dominated for the past century by farm and timber interests for whom a low property-tax rate is the foremost article of faith. In simple terms, Alabama has kept taxes high for those with little money and low for those with lots of it, and the state itself has constantly had to scrabble for funds just to maintain its existing operations.

What's more, most ordinary citizens seem content to leave it so. Attempts to tackle the revenue issue head-on are widely regarded as political suicide. If someone were to run on a platform of a tax increase, says Paul Hubbert, education lobbyist and one-time Democratic gubernatorial nominee, "then someone would run against them on a platform arguing that we have enough money, we just need to spend it more wisely, and that person would win."

Siegelman, as he approaches the midpoint in his first four-year term, is not pushing the tax issue directly. Asked about current initiatives and next year's plans, the 54-year-old governor offers a list that includes early intervention on the education and juvenile justice fronts, renewed vigor on environmental protection, and a continuing push on economic development, among many other ideas. But he says nothing about trying to reform the state's tax structure to pay for any of it. Asked how he'll pay for new initiatives, he talks about efficiency and performance measurement--about "savings accrued in other agencies as a result of strategic planning and performance-based budgeting."

Siegelman, a man of obvious political ambition, clearly understands the toxicity of the tax issue in Alabama. He also understands that tightening up management and budgeting will only get him so far, and that to make real progress the state is going to have to spend more money than it now takes in. It's an interesting dilemma: Pushing a new tax system could be politically fatal. But without a new tax system, Siegelman may never have the revenues he needs to accomplish the things he wants to do, for the state's future and for his own.

And so right now he is pinning his hopes on a multi-step performance- measurement scenario. First, the state illustrates with solid numbers what it is accomplishing with the money it's getting from citizens. Then it makes the case that, even responsibly spent, current revenues won't cover all of Alabama's pressing education, social service, public safety and economic development needs. Ultimately, performance- inspired tax revision must follow.

Siegelman has at least one key ally in making the strategy work. Democratic House Speaker Seth Hammett, an articulate legislative veteran, has been waiting years for the opportunity to put a performance base under the Alabama budget, and isn't at all shy when it comes to talking about tax increases. "When you begin to establish objectives and show people that you're serious about meeting them," Hammett says, "then you build credibility into the legislative budget process. And once that credibility is improved, then we can say, `We were able to achieve these results with these resources, and here's what we could do with an increase in tax revenues.' If you just say, `Let's increase taxes to improve education,' that's not going to work. You need to say, `If we increase taxes, then we're going to improve adult literacy by X percent.'"

For that equation even to get off the blackboard, though, another set of participants will be pivotal: state agency commissioners, whose job it will be to develop the sort of performance measures that resonate with Alabamians. Right now, the Siegelman administration has launched performance-based budgeting in the departments of Mental Health and Mental Retardation, Youth Services, and Human Resources.

The choice of agencies wasn't arbitrary. All three are either under or just getting out from under federal court orders involving quality and scope of services. All are agencies that in the public's mind provide amorphous services to an often invisible clientele. And all three are in desperate need of increased funding to meet the needs of their respective constituencies--not to mention the terms of their federal court orders. If a case is going to be made for more revenue in Alabama, these agencies are going to have to be part of it.

In choosing three commissioners to make that case, it's hard to see how Siegelman could have chosen better. For mental health commissioner, he reached into the ranks of his career employees and plucked out Kathy Sawyer, an African-American with a clear idea of what the problems in her department are and have been: Sawyer's previous job was as internal advocate for the agency's clientele. Her welcome to the office was a federal contempt of court citation, delivered to her during her first week on the job.

The citation was just one more salvo in a federal court case dealing with mental health services that had been dragging on for an astounding 30 years. But Sawyer's response was unlike that of any other commissioner in the history of the case. With the governor's backing, she admitted the feds were right and moved to settle on the contempt issue. "It's always been the mindset in Alabama," Sawyer explains, "that when the federal courts tell you to do something, you roll up your sleeves and you fight." Her choice was to roll up her sleeves and comply.

Now the entire Mental Health Department is engaged in a strategic- planning process underpinned by performance data, with the clear aim of eventually escaping the scrutiny of the federal courts once and for all by proving that conditions have changed. The plan is going to cost "significantly more money" than what the agency now receives, says Sawyer. She is confident she can get it. "When we're done, we're going to be able to say to the legislature, `You give us this much money and here's what you're going to get in return.'"

Walter Wood, recruited by Siegelman from Mississippi, is doing similar groundwork on the juvenile justice front. As commissioner of Youth Services, Wood began by renegotiating contracts with private providers, saving his agency millions of dollars. But even those savings aren't going to be enough to offset future costs. Like Sawyer, Wood is in the process of developing a department-wide strategic plan, including specific ways to measure performance. Then he wants to take the plan to the legislature to argue for more resources.

But if legislative budgeteers are going to have their hands full with anyone, it will be with Bill Fuller, commissioner of the Department of Human Resources, and an 18-year veteran of the legislature, whose department is also currently under a federal court order involving quality and scope of services. Fuller's erudition, dry sense of humor and knowledge of Alabama budgeting make him a formidable force in any budget debate. And his philosophy on spending in Alabama is straightforward. "People complain about the federal court orders and those pointy-headed liberals in Washington telling us what to do all the time," he says. But if Alabamians want Washington out of their business, he insists, Alabama is going to have to get down to the business of delivering high-quality services to all eligible citizens.

Fuller's near-term plan is to come at the legislature with the kind of full-court lobbying press that legislators have never seen from any state agency. "We look forward to the opportunity to present our budget needs," he understates. In fact, Fuller is planning not only to deliver to legislators a sheaf of information on performance and results but also to bring in families and children who represent social services success stories statewide. The effort, he says, will be geared to giving the legislature the opportunity to see that his department can "do more with more."

It's easy to see where performance measurement is leading in Alabama. But it is going to take much more than a lobbying juggernaut such as Fuller to convince the legislature that performance-based budgeting is a good thing. Before the drive can succeed, it will require some cooperation from an influential party that so far has proved cool to the whole idea: the Alabama Senate.

Siegelman has his allies in the Senate. In 1998, in his waning days as lieutenant governor, he used the parliamentary weapons of that position to install a leadership team sympathetic to his views, and to reduce the power of his incoming and unsympathetic Republican lieutenant governor, Steve Windham.

It was a daring and successful move, but it also left bruised feelings in the chamber that will not be helpful to Siegelman's current reform campaign. In the end, though, there is something that will be even less helpful: the determination of influential senators not to change the way the legislature and the state have done budgeting business through the ages.

It's no surprise that a significant part of the way business has been done over the years involves the time-honored tradition of directing a little money from Montgomery back to the senators' home districts. But it's not just the mere fact of a little pork-barrel politics that hurts the credibility of the budget process; it's the way Alabama legislators have to go about carving and distributing the bacon.

While many state legislatures don't try very hard to hide the cash that members are allotted to spread around their districts--in New York state, for example, the money is openly distributed, and clearly labeled "member items"--the game in the Alabama legislature is much trickier. It's trickier out of necessity. Almost all of the money flowing into Montgomery is earmarked. For example, revenues from income taxes are earmarked for teacher salaries, and most sales-tax revenues must be spent on education. In fact, around 90 percent of the money that the state government receives is, at least theoretically, spoken for. This leaves very little to pass around for members' pet projects--worthy or otherwise.

And so legislators in Alabama have developed a creative, if slightly cumbersome way to peel off a little as the wallet goes by. The vehicle is known as "pass-through" funding. Legislators will agree, for example, to add money to some earmarked program in the education budget. But the additional money is added in with the implicit understanding that some of it will be remitted back to specific legislators by authority of the school superintendent for uses that may have very little to do with education.

In good times, when copious amounts of sales-tax money are flowing into the earmarked education trust fund, the pressure to practice the pass-through can be very intense. It is intense because there is no way other than the pass-through to use such surplus funds outside education.

It is a system that many influential members have employed to the tangible benefit of their districts, and of their own political security. But it also is a system that drives reform-minded legislators crazy. Howard Hawk, chairman of the House Ways and Means Education Fund Committee, is one of the leading proponents for trying to get colleagues--and the budget process--focused less on goodies for the home front and more on what's good for the whole state. A proliferation of legislative "special projects," says Hawk, has badly undermined not only the credibility of the process but the inclination of state government to respond to broader public needs. "The process and the mindset both have to change," says Hawk. "You can't view your only job as a legislator as getting lights for your hometown high school football field." Legislators, Hawk says, need to start budgeting for all of Alabama, and the budgeting needs to be based on measurable results.

In the last go-round, Hawk insisted that all new money added to the education budget come with specific goals and results attached. That, of course, makes pass-through dollars a bit awkward to account for-- inasmuch as the money could be going toward a program or project with no connection to education whatsoever. The Senate balked at the Hawk initiative. Budget talks deadlocked.

What it ultimately took to jump-start budget negotiations was an extra $2.5 million in pass-through money. The Senate agreed to peg increased education expenditures to specific goals and objectives in the budget language. The House agreed to give senators $2.5 million in more-or-less-camouflaged cash. "They compromised," says Paul Hubbert, of the education association. "They ended up with a little bit of both worlds."

But for performance-based budgeting to do what it's supposed to, Alabama can't continue to live in two worlds. Which makes the 35 members of the Alabama Senate the potentially fatal variable in the Siegelman-Hammett calculation that performance-based budgeting will succeed--and ultimately force the tax issue to the political surface.

House members aren't immune to the pass-through addiction, but by and large, it is the Senate that has refined the practice to an art. "The Senate is much more special interest-dominated," says former Governor Albert Brewer, who now teaches law at Samford University in Birmingham. "And you have senatorial districts that are so poverty stricken that they count on pass-through money for their survival." So it is the Senate that remains most reluctant to put state government and its budget process on a performance-measurement footing.

Still, there has been a clear change in fiscal attitude and approach in Montgomery in the past two years, with the arrival of Siegelman as governor and Hammett as house speaker. In working with Hammett to tighten up state management and budgeting, Siegelman seems to have won the confidence of voters. Not only are his approval ratings high with citizens in general, but an informal poll this summer among members of the Alabama Business Council--a heavily Republican organization--found that 76 percent thought the state was headed in the right direction.

There are still those who criticize Siegelman, and fairly harshly, for being too timid on tax reform. Some longtime students of Alabama gubernatorial politics argue that he won't ultimately win his credentials as a breakthrough governor--or a true leader--until he tackles head-on the big job of changing the state Constitution, which dictates the state's current tax structure.

And in the end, Siegelman may have no choice. Like one more circus clown clambering out of a compact car, there is yet another federal court ruling looming over Alabama. In March 1999, the state's practice of hitting out-of-state business with a much higher franchise tax than in-state business was invalidated by the U.S. Supreme Court. What hasn't yet been worked out is how much Alabama will have to remit to the out-of-state plaintiffs in illegally collected taxes. It will certainly be hundreds of millions of dollars. In the face of such a huge fiscal obligation, Siegelman may have no choice but to lead the parade on new taxes, and on a new constitution that will make those taxes court-proof.

But ultimately the issue isn't whether or not Don Siegelman can succeed in persuading Alabamians to ante up. The question is what sort of future citizens themselves want for their state. Lots of players will be involved in that decision: legislators, lobbyists and the press, as well as the governor and his administration. But ultimately, voters will have to decide.

If history is any guide, they may well opt for a continuation of government on the cheap. In that case, then the latest major construction project in Montgomery represents money well spent: A dozen or so blocks below the Capitol rises a new black granite-clad monolith of a building. It is a $40 million addition to the federal courthouse. How much time Alabama state officials spend there may largely be determined by whether their ambitious performance-based budgeting experiment lives up to its promise.