Taxes & Government Spending

Solution of the week: Charter Agencies

Geoffrey Lawrence

Nevada’s state government, like those of most other states, has over time turned into a collection of rigid bureaucracies conditioned to emphasize strict adherence to legislatively prescribed processes, rather than achieving quantifiable results.

The new performance‐based budgeting process, now required as a result of 2011 legislation, will finally begin to change this culture. This new accountability, however, will be meaningless if agency directors do not gain the flexibility needed to determine the best way to accomplish the Legislature’s objectives.

Lawmakers should recognize that those with the greatest knowledge and insight into how public services can most effectively be delivered are often the employees of the state agencies. The top‐down approach to governance that lawmakers have historically imposed fails to take advantage of the state’s most valuable asset — the specialized knowledge of its employees.

The task of lawmakers should be restricted to setting broad policy goals, while specific decisions over the means for achieving those goals should be left to the agencies themselves.

Key Points

Extend school principals’ “empowerment” model to agency directors. In Iowa, lawmakers looking to increase the cost‐effectiveness of government experimented by highlighting broad policy objectives and allowing agency directors to determine the best means of achieving those objectives.

To ensure accountability, annual contracts were signed by agency directors, specifying the performance metrics they would be responsible for meeting at the risk of dismissal. They further agreed to reduced general fund allocations.

In exchange, directors gained the freedom to hire and fire employees, upgrade their agencies’ technology infrastructure, purchase equipment and outsource certain agency functions as they saw fit — without going through the state’s central purchasing or personnel departments.

Further, agencies that met their goals, below budget, retained half the savings with the remainder reverting to the state’s general fund. Agency directors could use these savings to reward employees with bonuses or to purchase efficiency‐enhancing capital equipment.

The results have been phenomenal. Even as Iowans saved millions of dollars, they saw remarkable improvements in the quality of public services. Iowa’s “charter agency” approach has since been recognized with an Innovations in American Government Award from Harvard University’s Kennedy School of Government.

Recommendations

Clarify the goals and metrics. Nevada’s new performance‐based budgeting approach will place agency directors before lawmakers, reporting on the progress made toward specific objectives. It will be up to lawmakers to clearly outline the policy objectives they most highly value and to identify appropriate metrics for evaluating progress toward those goals.

Create a “charter agency” framework and allow agency directors to opt in. The charter agency framework can be modeled after the 2003 enabling legislation from Iowa, SF 453 and HF 837. Agency directors who opt in should be signed to performance contracts that outline their responsibilities for meeting legislatively defined goals. These contracts should reward each increase in agency excellence with more and more agency discretion.

Charter agency successes in Iowa:

Department of Natural Resources

  • Reduced turnaround time for air‐quality construction permits from 62 days to six days and eliminated a backlog of 600 applications in six months.
  • Reduced turnaround time for wastewater construction permits from 28 months to 4.5 months.
  • Reduced turnaround time for landfill permits from 187 days to 30 days.
  • Reduced time for processing corrective‐action decisions on leaking underground storage tanks from 1,124 days to 90 days.
  • Accomplished all reductions without compromising environmental standards or quality.

Department of Corrections

  • Reduced the probation failure rate by 17 percent.
  • Increased the number of female inmates receiving meaningful work experience by 50 percent while reducing operating costs by $700,000 per year.
  • Increased the number of parole recommendations by 5 percent in one year.

Department of Revenue

  • Raised the rate of income‐tax returns filed electronically from 55 percent to 67 percent.
  • Increased the number of personal income‐tax filings completed within 45 days from 75 percent to 94 percent.

Department of Human Services

  • Reduced the average child‐welfare stay in shelter care by 10 days.
  • Increased the number of children with health care coverage by 12 percent in FY05 alone.

Iowa Veterans Home

  • Reduced the number of residents experiencing moderate to severe pain by 50 percent.
  • Reduced admission waiting times by increasing the rate of admissions processed within
  • 30 days from 69 percent in FY04 to 90 percent in FY05.

Alcoholic Beverages Division

  • Increased general fund revenue by $9.7 million in FY04 and $11.6 million in FY05.

Geoffrey Lawrence is deputy policy director at the Nevada Policy Research Institute. For more visit http://npri.org.

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Geoffrey Lawrence

Geoffrey Lawrence

Director of Research

Geoffrey Lawrence is director of research at Nevada Policy.

Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association.

From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation.

Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.