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Texas Performance Review
Against the Grain
High-Quality, Low-Cost Government for Texas
January 1993

"State government can no longer afford to do business by stumbling from crisis to crisis. We need vision and fresh ideas that cut against the grain of business as usual. It is time to rededicate ourselves to giving Texans what they want and deserve - quality customer service at a reasonable price."


Building on the earlier experience of the Texas Performance Review, we've distilled five basic questions that should be asked of every government program and policy. This introductory volume of Against the Grain is organized according to these five goals, although many of our recommendations fulfill more than one.

VOLUME 1

Volume 2

Volume 2 is the compilation of all of the detailed recommendations that are summarized by Volume 1.

Introduction

It's 1993, and state policymakers have convened amid turmoil in Austin--again.

Public school finance awaits a lasting solution--again.

Prison authorities demand more space for more inmates--again.

Health and human services officials plead for new money to meet their clients' needs--again.

State agency chiefs and university heads fight against any cuts or changes in their programs--again.

Revenue over the next two years, although more than in preceding years, is still projected to fall billions short of maintaining even current service levels--again.

Everyone agrees that someone else's belt must be tightened--again.

And taxpayers can't be blamed if they suspect the really critical issues of the day will go unresolved--again.

The path of least resistance would be to leave the current system in place--again. After all, state government has reached an equilibrium of sorts, through years of political trade-offs and compromises. But these compromises are just what have made our current budget problems so difficult.

Finding solutions that go beyond poorly planned patchwork will require us to define a new set of priorities and make tough decisions that stick. It means breaking with old patterns of spending money and old patterns of doing business that have become comfortable. Comfortable for some, that is.

For the teacher in Tulia, the single mother in Sherman, the mechanic in Mexia, the small business owner in Brownsville and the carpenter in Cross Plains, the system seems far more complacent than comfortable. They and millions of Texans deserve fundamental reform. They want a state government that provides high-quality, low-cost service. They want to know that they'll receive full value when they shop at the government store. They want state government to have the courage to cut against the grain of business-as-usual.

This report, Against the Grain, is a call for Texas to embrace these principles by bringing genuine customer service to state government. Boosting public performance without boosting its cost will be essential to the future Texas.

Against the Grain follows on the heels of Breaking the Mold, the 1991 performance review that examined 195 areas of state government operations, made hundreds of sweeping recommendations to improve its effectiveness and efficiency, and ultimately saved Texas taxpayers some $2.4 billion.

This time we've studied another 192 areas of state government operations, in even greater detail, and made nearly 460 recommendations, many of which also will lead to substantial cost savings. About 85 percent of the proposals are brand new. The remainder are variations on ideas that were recommended in Breaking the Mold, but not adopted.

But Against the Grain has a broader message than our previous effort. Our scope has gone beyond simply streamlining state government and easing the financial burden on the taxpayers. Against the Grain aims to convert Texans in every corner of the state from disgruntled customers to eager advocates. And it proposes to do this by changing not only the way state government does business, but by restructuring the business state government does.

We believe Texans are unwilling to invest any more of their hard-earned paychecks until state government proves that it can provide a full measure of service for every dollar. Many Texans have come to expect that government will waste their money. They expect no accountability for the programs they fund. They expect problems in their communities to worsen. They expect an impersonal bureaucracy that shows little concern for their needs.

Too often, their expectations are justified. State government, after all, spends four times as much per dollar as the private sector to purchase its supplies. It maintains separate personnel departments, employee manuals and policies for each of its more than 300 agencies and commissions, forcing someone who applies for work with the state to trudge through scores of agencies--each with its own special application form to gather essentially the same information time and again. This year, state government will shell out more than $92 million to lease offices and other facilities, up from $35 million in 1983, while at least 1.2 million square feet of state-owned space gathers cobwebs in vacant buildings. It may spend another $162,000--nearly seven times the average working Texan's annual salary--just to insert the word "public" in the letterhead and other materials of a renamed agency.

Who's to blame? Well, it's not front-line state employees. Thousands of dedicated men and women work long hours, usually at lower pay than in the private sector, to give Texans the service they deserve. These employees care deeply about their jobs and their state, and it hurts them to see their efforts belittled.

The problem lies in the system these workers are forced to cope with--a massive array of outdated and counterproductive policies that stifle creativity. Layer upon layer of bureaucracy hinder their efforts to meet the needs of those who foot the bills--Texas taxpayers.

The spirit of Against the Grain is not anti-government, nor does the evidence suggest that most Texans are. We believe that government exists to help people achieve as a community what they can't as individuals, to strengthen the links that bring us together and provide for our basic needs as a society. Government is the method we've chosen to find the best answers to a wide range of questions, from how to educate our children to how to fight crime. When it functions fairly, efficiently and with an eye toward serving its customers, government plays a vital role in our social and economic lives.

But in Texas, state government regularly disappoints taxpayers and customers. They invest a great deal of their money--and a bit of faith, even now--in their government. But they get back little more than a product whose price tag far outweighs its quality.

Texans certainly don't want bigger government. They don't necessarily want smaller government. What Texans want is better government.

Wanted: Innovation

State government is strapped for cash--again. But its policies and practices are also bankrupt, locked into a two-pronged approach to each new challenge: cut services or raise taxes.

Too often, attempts to cut services have been random, slashing away muscle as well as fat. The fact is, government waste is rarely isolated in a single program. It's "marbled" throughout the whole structure, bound up not in what government does but how it does it. And raising taxes is obviously out of the question to the great majority of Texans, who can't understand why they ought to pay even more for a government that has failed them in so many important ways.

There's a better course, and it lies along the path the private sector has taken to remain alive and competitive as the contours of the 21st Century create a global economy. It's called innovation.

Out of self-defense, private companies and public corporations are forced to adopt new ideas and unconventional wisdom to reshape the business landscape. The best industries have radically changed their practices, and more and more consumers are recognizing that they're better off for it. Companies like Wal-Mart, to name one well-known example, have offered their customers higher-quality goods at lower costs, forcing other retailers to follow suit. Detroit's automobile companies have trimmed their operations and improved their cars in the face of foreign competition. Lean computer companies have outstripped the giants of high-tech by producing more powerful products for less.

Private industry has learned from its mistakes and has begun moving quickly from the drawing board to the marketplace to the bottom line.

But when was the last time government even admitted a mistake, let alone learned from it?

Breaking the Mold

There are signs, however, that government may be stirring from its slumber. In recent years, there have been a number of successful attempts across the country to bring innovative practices to government. Cities, counties and states have found themselves scrambling to find ways to infuse their operations with some of the ingenuity and effectiveness of the private sector.

In Texas, the first ambitious assault on the so-called "sacred cows" came with the formation of the Texas Performance Review, or TPR.

TPR's July 1991 report, Breaking the Mold, sparked the process of looking at government programs with fresh eyes--"challenging the basic assumptions" about government, to quote the statute that created the review. In a legislative session faced with a nearly $5 billion budget deficit, Breaking the Mold's goal was to eliminate most of the shortfall, as well as to add another $1 billion in new federal funds.

But TPR was never intended to be a simple budget-cutting exercise. Breaking the Mold offered the basic outline for a new state government--one dedicated to customer service, not programs, rulemaking and turf battles, a government that was lean, competitive, and focused beyond the next budget cycle to the long-term challenges and opportunities facing Texas.

Breaking the Mold's reception was mixed. While the report's broad goal of reinventing government was applauded--and, indeed, nationally recognized--specific recommendations to change, curtail, cut or combine programs met with predictable opposition from vested interests. Worst-case scenarios abounded. Although they usually had no basis in fact, horror stories about massive layoffs and wholesale cutbacks enjoyed wide circulation. A number of proposals vanished in a fierce tug-of-war among competing special interests.

In the end, the Legislature adopted nearly two-thirds of Breaking the Mold's recommendations, shaving about $2.4 billion from the 1992-93 budget shortfall. Some recommendations were adopted as proposed, others in somewhat different form, while still others inspired separate but related legislation. TPR's efforts scored many heartening successes, including the creation of a consolidated Texas Natural Resources Conservation Commission from five independent agencies and an ongoing interagency project to revise the state's telecommunications system for the next century.

By and large, however, the TPR recommendations enacted were the easiest--those that represented the least threat to the status quo. And some that were enacted were subsequently ignored. One proposal that became law called for state agencies to make a total of $300 million in voluntary budget reductions. But the law was ignored by most agencies, and the Legislative Budget Board was ultimately forced to make selective budget changes to fill the gap left by the agencies.

Everyone wants the budget balanced. Everyone wants to reinvent government. Everyone wants to avoid higher costs.

Everyone wants to go to Heaven--but no one wants to die.

Against the Grain

Breaking the Mold was nevertheless a valuable starting point on the road to real reform, if for no other reason than that it proved change is possible. It was a comprehensive attempt to tear the lid off state government and get at its inner workings. And now, armed with that knowledge, the 1993 Legislature faces a unique opportunity.

The fiscal terrain is familiar: too many needs and too few dollars. Resistance to tax hikes is still strong, and the easy-money solutions are all behind us. We can no longer push problems into the next quarter, the next legislative session, the next generation. It's time--now--to tackle the tough and tangled task of building a brand-new Texas government, one that will truly be a low-cost provider of high-quality services.

Breaking the Mold and the subsequent legislative actions on its recommendations were a beginning. Against the Grain proposes another important stride forward.

The report is based on a single guiding premise: Government programs, policies and initiatives all represent an investment of public resources. No government action should be taken unless it furthers the public good.

Building on the earlier experience of the Texas Performance Review, we've distilled five basic questions that should be asked of every government program and policy. They aren't complicated or beyond the comprehension of the people who pick up the tab. In fact, Texans understand them well. And they know that they are fundamental to building a better state government--at a price they can afford.

This introductory volume of Against the Grain is organized according to these five goals, although many of our recommendations fulfill more than one. It's certainly possible, for instance, to improve customer service while saving money, and a number of our proposals will do just that. But all of TPR's recommendations will achieve at least one of these ends.

There isn't space enough in this brief introduction to discuss every proposal in detail. That is done in the accompanying volume.

What follows here is a selection of innovative policies that will move Texas against the grain of cumbersome, bloated bureaucracy toward a state government that provides Texans with the services they demand and deserve.

Fiscal Impacts

The fiscal impacts of Against the Grain's recommendations come in many shapes and sizes.

Some will make a dramatic difference in state government's efficiency, but their costs or savings can't be estimated. Others will produce straightforward savings right away.

Some put forth one-time bookkeeping measures and close loopholes in the state's revenue system. These will yield gains in available revenue.

Still others will increase Texas' federal assistance.

A number of good recommendations have no immediate fiscal impact. They're not about dollars but sense.

They just make for good government.

Finally, there are proposals that would increase costs in the short-term, but always with an eye toward creating future savings.

All in all, Against the Grain's recommendations will, if enacted, produce an additional $4.5 billion in available general revenue over the fiscal 1994-95 budget period, and just under $8 billion more during the next five years. They will reduce the state's work force by almost 3,700 full-time positions by the end of 1995.

Table 1 shows the fiscal impact of the Against the Grain proposals based on the functional areas of the state budget as they are organized in the detailed discussion of the recommendations in Volume 2. Each recommendation is described separately in Volume 2.

The five-year fiscal impact of each of the issues in Against the Grain is also summarized in the appendix to this volume.

TABLE 1

Impact of the Performance Review Recommendations

General Other Total: Impact on

Revenue Funds All State State

Impact Impact Funds
Education and Work - Force Development $649.4 -14.4 $635.0 -87
Health and Human Services 1,797.1 -148.8 1,648.3 -1,755
Transportation 4.9 -5.4 -0.5 0
Employee Benefits 722.5 -44.7 677.8 -1,340
Public Safety and Criminal Justice 86.2 9.5 95.7 -168
General Government 1,209.8 -302.2 907.5 -20
Natural Resources 12.1 -0.6 11.5 -11
Cross Government 30.0 39.8 69.8 -318
Total, All Categories 4,511.9 -466.9 4,045.1 -3,699

NOTE: Totals may not add due to rounding.

Source: Texas Performance Review.

A note on fiscal impacts
Despite recent attempts to simplify it, the state's fund accounting system is still an unwieldly mechanism. Its complexity affected how the Texas Performance Review developed the fiscal impact estimates contained in Against the Grain. A word about the estimates shown in this report and, particularly, in the accompanying Volume 2 is needed.

To estimate the fiscal impact of a given proposal, it's usually important to have a basic budget and a set of revenue projections on which to base the estimates. In our earlier report, Breaking the Mold, the estimates were tied to two documents: the Comptroller's biennial revenue estimate and the Legislative Budget Office's projections of a current services budget for the state--that is, the budget amounts that would maintain existing services with adjustments for changes in client populations, school enrollment and similar factors.

For Against the Grain, the basis for our estimates had to be changed. The state leadership's commitment to delivering a budget within available revenue means no current services budget estimates were prepared. At the time this report was written, there also were no projections of what an available revenue budget would look like (although, too late for inclusion here, the budget subsequently became available).

Our proposals are based strictly on the funding levels set by the Comptroller's biennial revenue estimate and the requirements of current state law. Any changes in the law proposed by the Legislature or the Governor are not assumed in Against the Grain.

All proposals reflect valid methods of saving general revenue or increasing the amount available for certification under the Comptroller's revenue estimate. Any subsequent changes in the proposals--changes in due dates, for example, or the removal of agency appropriation reductions--could change the fiscal impact of the proposals.

The Comptroller will revise all estimates of fiscal impact of all budget and revenue proposals based on legislation finally enacted by the Legislature.

Seeds of Change

Most government officials and employees want to do a good job. They want to do their jobs in effective organizations that can deliver high-quality services on time and under budget.

Despite these good intentions, waste and inefficiency persist. Why? Sometimes, it's because no one realizes anything's wrong. In other cases, the staff is so overworked that the standard operating procedure seems to be to cross their fingers and pray that no disaster occurs, at least until tomorrow.

In certain offices, no one will take a chance on innovation because no one has any faith that things can be better. There are managers who actively discourage employee suggestions, perpetuating the philosophy that "If it ain't broke, don't fix it." And sometimes, the chaos builds because, while everyone knows that problems exist, no one has yet found a workable and affordable solution.

Yet, despite all these obstacles, there are exciting examples of Texas state agencies and institutions going against the grain to develop better ways to serve the public with fewer tax dollars.

The Texas Performance Review has identified a number of examples of excellence and summarized as many as space permits throughout this report. We offer these seeds of change* for two reasons. First, other agencies can profit from their experience and, perhaps, adapt new approaches to their own situations. And secondly, they may help to convince those who--not surprisingly--have become steeped in skepticism through the years that positive change may indeed be possible.

Austin Community College (ACC) found that 15 to 20 percent of those registering for classes with touch-tone phones failed to pay their fees. A survey showed that many attributed their delinquency to the lack of convenient walk-in payment locations. To solve the problem, ACC has contracted with the H.E.B. grocery chain to provide--at no cost to the college or taxpayers--18 payment stations throughout the area.

This community-based approach has already paid dividends. H.E.B. welcomes the additional business and ACC has expanded its services at no additional cost. About 20 percent of ACC's students now use the H.E.B. payment option. And the college's payment percentage for touch-tone registrations has increased to 92 percent.

Since September 1990, the Texas Department of Transportation's Dallas District has contracted with a private company that cleans used air filters from their vehicle fleet and heavy equipment. The filters are returned to "like-new" condition and reused, reducing the agency's need to buy new ones. Since the program began, the cleaning process has saved the state some $5,800 and eliminated 3.3 tons of solid waste that would otherwise have been buried in Texas landfills.

To increase savings and efficiency, the University of Texas Health Science Center at Houston has identified its high- and low-priority programs and reallocated resources accordingly. The university is reducing its reliance on state funding for administrative services and has increased the portion of faculty salaries that come from research grants, patient fees and other non-state funds.


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