In good years, government agencies can plod along with their inefficiencies, secure in the knowledge that they can pass that added cost onto taxpayers. That option, however, is no longer available for Nevada. Coronavirus-induced shutdowns have caused tax revenues to plummet, and it will likely be many years before they fully rebound.
Consequently, Governor Sisolak and the Legislature will have to make significant cuts during the upcoming legislative session. But cuts alone will not lead to a sustainable recovery.
Instead, fundamental reforms that require state agencies to embrace innovation and improve performance are needed. Nowhere is this need clearer than at DETR, the state agency responsible for making unemployment benefit payments.
Far too many Nevadans have had their lives upended as they have been forced to wait six months or longer for DETR to process their unemployment claims. Countless residents fell behind on rent and car payments while struggling to put food on the table because DETR failed to perform its primary function of processing unemployment payments in a timely fashion.
This colossal failure is a reminder of the harm that comes from allowing state agencies to remain structurally inefficient. While some might be tempted to excuse this failure by citing the massive increase in unemployment claims, it is important to remember that times of crisis are precisely when Nevadans need a functioning government the most. In other words, citing increased demand as an excuse for failure is itself an admission of a poorly run system.
Thankfully, there is a legislative fix that can simultaneously address the state’s budget shortfall while helping to ensure another DETR-like disaster never happens again. Last legislative session, former state controller Ron Knecht introduced Senate Bill 70, which sought to replicate Iowa’s enormously successful Charter Agencies program here in Nevada. The program incentivizes cost savings and performance improvements by empowering agency directors to sidestep much of the bureaucratic red tape that currently stifles innovation.
Under the Charter Agency model, the Legislature establishes only broad policy objectives, with the director responsible for determining how best to achieve them. In exchange, the director receives dramatically more flexibility and authority, making it easier to, for example, hire and fire employees, outsource various services, purchase capital equipment, and so forth.
Accountability and efficiency are promoted through performance contracts. While failure can lead to the director’s dismissal, successful directors retain half of any savings they generate, which can be used to reward employees with bonuses or to purchase new equipment for the agency. This creates a sense of long-term ownership for the director and employees. Employees are incentivized to identify areas of improvement, knowing that the savings generated would likely lead to larger bonuses. In this way, Charter Agencies better utilize state government’s most valuable asset — the specialized knowledge of its employees.
When Iowa embraced this model in the early 2000s, it led to more than just tens of millions of dollars in savings, it also dramatically improved performance across a variety of state agencies. The Department of Natural Resources, for example, dramatically sped up the process for approving permits and implementing necessary corrective actions. At the Department of Corrections, 50 percent more female inmates were afforded the opportunity to develop work-related skills and experience. Thanks to the Charter Agencies model, this was accomplished even as operating costs were reduced $700,000 per year. The Iowa Veterans Home, meanwhile, streamlined the patient admission process, which in turn led to faster treatment and, consequently, a reduction in the number of veterans suffering from persistent pain.
In total, six different Iowa state agencies adopted the Charter Agency model, and all six experienced remarkable improvements in service and efficiency. The results were so impressive that Harvard University’s Kennedy School of Government awarded Iowa with its “Innovations in American Government Award.”
Implementing the Charter Agency model in Nevada will not only help the Legislature solve its current budget shortfall, it will also ensure that state agencies can provide the level of service Nevadans expect and deserve, particularly during those times when those services are needed the most.