|
July/August 2009 — Vol. 87, No. 6
Reforming state government
Systemic changes needed to prevent future budget
crises and ensure Connecticut’s competitiveness
By Bill DeRosa
Crafting a biennial state budget that erases $8 billion in red ink without harming our economy will be a major achievement for the governor and the General Assembly. To get the job done, they will rely on several one-time revenue sources: borrowing, the state’s Rainy Day Fund, federal stimulus dollars, and transfers of monies from outside the General Fund.
That strategy, of course, provides only a temporary solution to Connecticut’s fiscal troubles; those revenue sources will be exhausted when a new budget is negotiated in 2011. It does, however, buy policymakers time—a two-year window of opportunity to make fundamental changes to state government and the way it spends taxpayer dollars. If during those two years they conduct a systematic review of all agencies, their effectiveness, and their costs—and make the necessary changes to streamline and improve state government—the state will be much better positioned to deliver key services efficiently and less expensively and absorb future economic downturns without incurring massive budget deficits.
Swift, decisive action is critical, however, because a turnaround in the state’s economy alone will not be enough to avoid a future fiscal crisis. Even if our recovery is faster and more robust than economists predict, and income, business, and sales tax revenues rebound, the state’s enormous unfunded liabilities (including nearly $22 billion for state employee retiree health and other benefits and nearly $15 billion for pensions1) will put tremendous pressure on future budgets.
In addition, Connecticut’s aging population and the exodus of workers in the 25-to-34-year-old demographic—faster here than in any other state2—means that while more people will be needing government services in the future, fewer people will be available to pay for those services. That’s borne out in a U.S. Census Bureau projection based on a metric known as the dependency ratio—the combined number of youth under 20 and elderly 65 and older for every 100 people of working age, 20 to 64. According to the Census Bureau, Connecticut’s dependency ratio could rise from 69.2 in 1995 to 76.4 in 2025. Because the under-20 population is expected to decrease, the rise in the dependency ratio is a direct result of the growing elderly population.
A new model for government
Budget crises—and the threat of harmful tax increases they bring—will continue to plague the state unless the General Assembly works with the governor to create a smaller, less expensive, more effective state government. That means thoroughly analyzing the effectiveness of all state agencies and programs, with an eye to reducing spending and with particular emphasis on major cost drivers in the state budget—including health care, corrections, social services, and state employee benefits. It means using lean techniques, best practices, and performance-based budgeting to achieve improvements and drive down costs in state agencies.
Recently, there has been a glimmer of progress toward those goals. Gov. Rell’s two budget submissions—the first released in February, the second in late May—reflected a clear recognition that the time has come for reducing the size and cost of state government. Her budgets called for eliminating some state agencies, consolidating others, and providing municipal mandate relief for cities and towns, including suspension of binding arbitration for the next two years.
In March, the General Assembly created the Commission on Enhancing Agency Outcomes, cochaired by Sen. Gayle Slossberg (D-Milford) and Rep. James Spallone (D-Essex), to reduce redundancy and waste in state government. And in May, the governor and state employee unions came to an agreement that includes nearly $700 million in wage and benefit concessions to help the state close its budget gaps over the next two years.
As positive as they are, however, those initiatives merely hint at the work that lies ahead.
“We have to develop a new model for government organization and efficiency,” argues John Rathgeber, CBIA president and CEO. “And that will require major structural changes. We need to eliminate outdated or poorly functioning departments and determine if some governmental functions might be better managed by the private sector. We also need to encourage municipal mandate reform and regionalization of municipal services to allow cities and towns to deliver services more efficiently, reduce the pressure on their budgets, and stem rising property taxes. And we need to engage in more negotiations with unions representing state and municipal workers in order to reduce soaring health care and pension costs.
“The agreement between the governor and the state employees’ collective bargaining unit sets us in the right direction,” adds Rathgeber, “but much more comprehensive reforms are necessary. Regardless of the economic situation, we’re going to be facing the same fiscal problems down the road if we don’t give state and municipal governments the ability to deliver services less expensively and more effectively.”
Building a public-private partnership
Identifying ways the state can deliver services more effectively is a key objective of the Connecticut Regional Institute for the 21st Century. An independent, nonpartisan coalition of business and government leaders, the group is chaired by James P. Torgerson, president and CEO of UIL Holdings Corp. and CEO of The United Illuminating Company. The Institute, says Torgerson, “is dedicated to creating thoughtful, candid dialogues that identify ways the public and private sectors can work together to build a prosperous and sustainable future for the state’s citizens.”
Torgerson believes that Connecticut’s economic and fiscal troubles make this a crucial time to be considering ways to improve the performance of state government.
“Every resident of Connecticut has experienced loss during this sweeping economic crisis,” he says. “As a result, we now have unprecedented interest across all sectors in finding a viable, long-term solution to our problems.”
What are those problems? Torgerson cites the state’s massive budget deficits, growing unemployment, the high number of foreclosures and personal bankruptcies, huge unfunded liabilities for state employee retiree pensions and health care benefits, and a steep increase in the need for public services.
“The Institute hopes to work with state leaders to produce a credible and thoughtful analysis that identifies creative, innovative ways to change how we deliver services to the residents of Connecticut,” says Torgerson. “We would like to examine how other states have successfully addressed some of the same issues we face and create a dialogue between businesses, nonprofit organizations, our elected leaders, and employees in all sectors of the economy about how to change Connecticut to create a prosperous future for as many people as possible.”
Under Torgerson’s leadership, the Institute is advocating a comprehensive approach to reforming state government. The strategy, he says, “has been to learn about an issue, study the opportunities, and identify potential solutions. This leads us not to look at agencies or entities in isolation, but to solutions that engage multiple stakeholders.”
For example, Torgerson suggests asking questions such as, “Is there a way to allow elderly individuals who wish to stay at home to access health care services traditionally provided only in institutional settings? Can we reduce recidivism among non-violent felons through intensive supervised alternatives to incarceration? Does having 107 public safety answering points in the state enable first responders to provide the highest quality emergency services to residents?
“There are opportunities for change throughout Connecticut,” says Torgerson, “and we need to agree on an approach to identifying and prioritizing this work.”
Reform overdue
In less than 10 years, the size of the state budget has grown by nearly 50%, while Connecticut’s population has increased by less than 3%3. “What that tells me,” says Rathgeber, “is that state government needs to become much more efficient in the way it spends resources.”
He adds that in nearly every budget cycle, the notion that we ought to reorganize state government comes up, but the outcome is never systemic reform.
“In the 1970s, we had the Filer Commission and the Gengras Commission, followed by the Thomas Commission in the early ‘80s and the Harper-Hull Commission in the early ‘90s—all studying ways to streamline state government. I don’t know any other $18 billion organization or business that could survive without seeking to modernize and improve its operations on a regular basis. We’re long overdue here in Connecticut.”
Speaking in May to John Dankosky on WNPR’s Where We Live program, Rathgeber noted that when it comes to improving state government, the main barrier is that so many activists prefer the status quo and that the short-term cost reductions are not big enough to give policymakers the reason to move forward.
“In the first two years, you’re not going to get a lot of savings out of a reorganization effort,” he said. “[But] we think it’s important to start that, to do it now—put in place a structure so that we really seriously look at reorganizing state government, so it can be leaner, smarter, and more efficient.”
next
|
