Lighting a Fuse to Blow Up Boxes

Report offers more than 1,000 ways to improve state government

Gov. Arnold Schwarzenegger lit the fuse on his promise to blow up the boxes of state government with the release last week of the massive, 2,500-page California Performance Review report. Many Sacramento insiders, including legislators and advocacy groups opposed to the reforms, are already frantically trying to stamp out that fuse.

They say it won’t work, reforms can’t be made. Others say the report, like so many reports before, will simply end up in the dustbin of failed government reform efforts. But there’s a difference this time: Schwarzenegger himself.

“Of course there will be the special interests that will be screaming, that will be complaining, that will be squawking about the recommendations, calling them unfair and impractical and maybe even worse,” Schwarzenegger said. “But this is because their agenda is not the people’s agenda.”

Embedded in the 7-inch-thick report is a blueprint for a new model of government – a complete overhaul of the executive branch – as well as 1,000 concrete recommendations on improving the way the state operates. These recommendations range from the mundane – like ordering all state forms to be written in plain, understandable language – to the very large – like selling state assets, using more toll roads and putting more state functions out to competition.

Comparing this reorganization proposal to others in history, the executive director of the Little Hoover Commission, the state watchdog that reviews reorganization plans, said this is the most far-reaching reform effort “by a magnitude of thousands.”

In 1918, the Taxpayers Association of California issued a report demanding a complete reorganization of government, criticizing the current structure for duplication, too many independent offices, boards and commissions, significant inefficiency and a general lack of accountability. Today, 86 years later, we are sounding the same alarm.

In Washington, reform efforts have been regularly abandoned, watered down or ignored. Lyndon Johnson’s “planning-programming-budgeting system,” Nixon’s “management by objective,” and Jimmy Carter’s “zero-based budgeting” were all largely scuttled under very predictable resistance from Congress. Even President George W. Bush’s current “President’s Management Agenda” has achieved only modest success over the past three years.

So why will this plan succeed where others failed? In what may be characterized as a perfect storm, three powerful forces – severe fiscal crisis, a looming human capital crisis and “The Terminator” – have collided, making this reform effort viable.

Fiscal Crisis

In recent years, California has suffered record-setting deficits and a river of red ink. As Finance Director Donna Arduin reported in January, state government has accumulated more than $20 billion in deficits since 2002. Looking into the future, the state faces an ongoing structural disconnect between revenues and spending that may be more than $6 billion next year alone.

Absent reform, there are few appealing choices. Government spending can be slashed, causing the poorly organized system to serve taxpayers even worse. Or taxes can be hiked, driving businesses and families out of the state. And each year the number of available accounting and budget gimmicks dwindles.

The California Performance Review proposal, including consolidating overlapping departments, eliminating 118 of 339 boards and commissions in state government and moving more services onto the Internet, represents a third, better option.

Critics of government reform argue that “efficiency reforms” amount to pennies on the dollar. But consider that the 17 state boards and commissions whose members are the highest paid cost the state more than $9 million in board member salaries alone.

The CPR report identified more than $32 billion in savings that could be achieved over the next five years.

Debate will center on that figure, but it is undeniable that there are more than enough realistic reforms in the report to reinvigorate the state and transform its financial outlook.

Human Capital Crisis

Aggravating California’s woes is the fact that 34 percent of the state work force is likely to retire over the next five years. California state government is a very labor-intensive organization that does not leverage technology effectively. The Internet can make transactions like DMV renewals simple and cost-effective (the review suggests allowing drivers to renew their driver’s license online and to register vehicles every two years). Currently, the state favors “brick and mortar” operations and the resulting long lines at the DMV.

Imagine what happens to the already slow system when tens of thousands of workers retire? Values like job security, pensions and stability – keys to state employment recruitment – are now far less important to people entering the work force than equity (ownership), flexibility and independence – things that state service offers little of.

The CPR proposal makes a strong case that state government must change to rely less on bodies and more on brains. Over the next five years, reducing projected growth in the state’s payroll by 12,000 workers would save more than $4 billion. By eliminating duplication that wastes manpower and leveraging technology to improve the productivity of the state work force, the human capital crisis can be absorbed and taxpayers can enjoy significant savings as well.

Terminator as Governor

Maybe most important to this performance review is the fact that no previous reform-minded governor had the luxury of limo-black sunglasses and red-carpet appeal to immediately turn an otherwise mundane government event into a media spectacle. Sacramento Bee columnist Daniel Weintraub once pointed out that Arnold, unlike other politicians, actually has to worry about too many people coming to his events.

Couple Schwarzenegger’s star powers with his willingness to take issues directly to the people and you have the setting for serious reforms. Already, we have seen Schwarzenegger flex his media muscle with success: his workers’ compensation reform succeeded, despite line-in-the-sand opposition, because of his willingness to go straight to the ballot if the Legislature balked.

Feeling the pressure, legislators worked out a deal. Applied to the cause of “reforming Sacramento,” the threat of populist revolt has immense potential.

To be sure, the California Performance Review will encounter stiff opposition from special interests. But the pressures of a fiscal crisis and a dwindling supply of new workers are not going away.

Ultimately, the success of blowing up the boxes rests on the broad shoulders of Gov. Schwarzenegger. If he pursues the recommendations with the same fervor that he injected them into the public discussion, the effort will succeed. His legacy then would be that of the modern-day Hiram Johnson who willingly took on entrenched special interests and redefined governance in California.

George Passantino is director of government affairs at Reason Foundation. He served as a director on Gov. Arnold Schwarzenegger’s California Performance Review.