Members of the Arkansas Policy Foundation and the Murphy Commission are sensing some bipartisan support of the commission’s recently released report on improving state government.
After two years of research, the Murphy Commission issued the 90-page report last month.
Four areas of improvement for state government are recommended:
o Restructure the state’s budgeting process using performance-based budgeting in all agencies. Performance-based budgeting would require defining what constitutes good performance in each agency and then allocating money on how effectively those goals are achieved. Incremental budgeting – allocating funds primarily at the agencies’ requests – is currently used, the report says.
o Define and implement performance-based pay for all state employees, including teachers.
o Begin activity-based cost accounting, which allocates money as it’s spent in the agencies. Expenditures would be tied to costs and to measurable performance standards.
o Do an independent audit of state government overseen by a bipartisan audit committee with most members outside state government and the Legislature.
“I have discerned quite a bit of bipartisan support for these kinds of measures,” says Michael Watson, president of the Arkansas Policy Foundation, who wrote a majority of the report. “I know that Sen. [Mike] Beebe [D-Searcy] has been discussing performance-based budgeting. I know that the whole issue of cost-accounting is very much on the minds of the people at [the Department of Finance and Administration].
“I know the recommendation to upgrade the [state’s] computer system is important on both sides of the aisle because it’s very difficult to get reliable fiscal information on the performance of government out of the antiquated, fractured system we have. So I think that there is going to be a lot of common ground on these kinds of issues. I think there’ll be a serious effort.”
A number of legislators have supported the plan, says Madison Murphy, chairman of Murphy Oil Corp. in El Dorado and the namesake for the commission tapped in July 1996 by Huckabee to study inefficiencies in state government
“This is pretty basic stuff, but in fact you have to start with the basics,” Murphy says. “This has the governor’s full support. This has the support of many of the people in the Legislature. It has the full support of many of the candidates. This stuff is just a no-brainer. It’s not political. It has everything to do with sound accounting practices.”
Jim Harris, a spokesman for Gov. Mike Huckabee, says Huckabee and his staff are studying the report.
“The governor’s legislative package is being drawn up,” Harris says. “I can’t tell you for sure right now exactly what we’re going to be working with. But the governor really did like the look of that report.”
The report itself, though, is candid in projecting that it may not be simple to put the ideas into practice.
It notes that until 1997 Arkansas did have one agency, higher education, using a performance-based allocation system. But in the 1997 legislative session, the report says, “a powerful state senator with an ax to grind over college funding” deliberately eliminated the system. That senator was Nick Wilson, D-Pocahontas, Watson says.
It also admits that “legislators, in some cases, may tend to have more influence over executive offices than the governor.” It says that concerns over budgetary reprisals by certain legislators deter many state agency personnel from challenging the practice of excessive legislative micro-management in the affairs of the agencies.
“The governor’s behind [the recommendations],” Watson says. “We’ve talked to the people at DFA. They liked a lot of it. They know there’ll be some resistance, of course. But I’m not discounting our ability to get something done on these measures in Arkansas. It’s not one of these things that I think that’s going to go away.”
Business Support
Watson says he believes the business community will strongly support the ideas and push government to put them into practice.
Leading that business support will be Murphy. Other business supporters of the commission’s suggestions include Charles Morgan, chairman of Acxiom Corp. in Conway; Jackson T. Stephens Jr., co-chairman of the commission; Jim Walton, son of the late Sam Walton and chairman and chief executive officer of the Arvest Bank Group Inc. in Bentonville; Mark Simmons, chairman of Simmons Foods Inc. in Siloam Springs; and J. French Hill, an executive with Regions Bank in Little Rock.
Jim Lynch, chairman of the Arkansas Public Policy Panel, hasn’t read the Murphy Commission’s report, but, after hearing the four major recommendations, he says the ideas are nothing new.
“Generally speaking, Arkansas is not a wealthy state,” Lynch says. “We have lots of trouble financing basic public services the way it is.”
Lynch, though, did agree that the primary recommendations of the report make “good management sense.”
“I agree that all of government needs to try to identify where they need direction, their targets for a period of time, and reward people who get them to their targets,” Lynch says. “But the Murphy Commission is not the first group of people to complain that bureaucracy seeks a mediocre level of importance rather than an outstanding level of performance.
“But government is not business and business is not government. When it comes to government power and the ability of government to tell us what to do, most people are very conservative. They don’t want a government that is so lean and mean that it takes over our lives and muscles us around. The truth is we don’t want bureaucracy moving too fast.”
No Performance Standards
Arkansas is one of only 12 states that has no performance measures developed for major governmental agencies, according to the National Association of State Budget Officers. Arkansas and eight other states don’t publish any performance results for residents informing them whether tax dollars produce the intended results, the association says.
One reason Arkansas has no performance guidelines in state government, Watson says, is because people get comfortable in how they do things. Or possibly agency personnel or legislators don’t want to change.
“They may be comfortable with the system and how to work the system,” Watson says. “But I don’t want to categorically generalize that there is resistance to change. There is some resistance to change, but many legislators and in the agencies we’ve also detected some real openness in doing these kinds of things.”
Another sign of governmental inefficiency highlighted in the report is the fact that there is no uniformity in accounting in state agencies – each one uses its own accounting system.
“The fundamental facts are that you have about 54 different accounting systems in state government and you cannot make valid comparisons across agencies,” Murphy says. “You have people managing agencies with less than adequate management tools that you would normally expect them to have. They don’t communicate well with one another on accounting information.”
Watson says the state has one outdated accounting system used on a centralized mainframe computer requiring special coding.
“But there’s a mistrust of that system so [each agency] also maintains their own, PC-based accounting system,” he says. “Every one is different; there’s no uniformity from agency to agency. To get just basic fiscal information so you can make informed decisions about making the agencies more efficient is very difficult. They don’t track inventory in many cases. It’s amazing how convoluted and fragmented this accounting system is.
“To give DFA credit, they recognize this. I think they’d like to do something about it, but there are some costs involved.”
Watson says it’s difficult to estimate how much money the ideas, if implemented, could save the state.
“I can only say it could be millions and millions of dollars,” he says.
“But this is money the state cannot afford not to spend,” Murphy says of the costs to implement the plan.
Six-Year Timetable
Watson says he hopes that many of the ideas suggested in the report can be implemented within 4-6 years, or 2-3 legislative sessions. Murphy hopes it can be put in place within two legislative sessions.
Some suggestions such as merit pay may require getting input by holding many hearings to reach conclusions everyone agrees on, Watson says. That process by itself could take 12-18 months, Watson says.
Murphy says the incentive-based and merit-based pay likely will be the most difficult to have implemented.
“I don’t think you can implement those until you have implemented a performance-based budget and a uniform system of cost-accounting,” Murphy says. “The incentive pay, in a real and meaningful way, comes last. You’re also dealing with peoples’ compensation.”
“But it’s got to have a champion,” Watson says. “Someone in the political arena, like the governor, or a coalition of legislators. Unless it has a political champion I don’t think it will happen.
“But I think the Murphy Commission and many people who have gotten behind these initiatives want it to happen – and they do – it will happen. We’re committed to making it happen. Having the legislative support we’ve gotten so far shows us there’s a great chance it’s going to happen. I don’t think this is a report that will end up on a shelf and be ignored.”
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