I suggested that transit subsidies would be reduced; school and municipal aid would be significantly reduced; and, although it poses a moral dilemma, Medicaid and other social services programs would be reduced. Unfortunately -- but inevitably -- most of these reductions are in the budget, and I am certain they will remain standing...Personally, I might have made some choices different from those the governor made, but, basically, he had few options -- otherwise, the state would be headed for massive disaster."

What ought to be next on governor's to-do list

Sunday, June 06, 2010

SPECIAL TO THE TIMES

Richard F. Keevey - Richard F. Keevey is the director of the Policy Research Institute for the Region at Princeton University.  He was state budget director and comptroller under two New Jersey governors (under both Democratic and Republican administrations).

Several weeks after the governor's election, I suggested in several venues that, given the state's finances, the governor would have no choice but to make significant reductions.

I suggested that transit subsidies would be reduced; school and municipal aid would be significantly reduced; and, although it poses a moral dilemma, Medicaid and other social services programs would be reduced.

Unfortunately -- but inevitably -- most of these reductions are in the budget, and I am certain they will remain standing when the Legislature finishes its review, as there is nothing in the economy that would suggest differently. In fact, because of lagging tax collections, it is quite likely that more reductions will be necessary

Personally, I might have made some choices different from those the governor made, but, basically, he had few options -- otherwise, the state would be headed for massive disaster.

The governor made the controversial but correct decision. In my judgment, even if the economy improves, we will never return to previous spending patterns. We will have more years of school and municipal aid reductions and other program cuts, due to the many albatrosses that past decisions have hung around our neck. But there are items the governor should consider next, related to managing the government. They will not solve the current situation, but they could help in the future.

Develop a management agenda. Critical areas such as human capital, information technology and performance metrics have long been neglected. Consider the need to manage with fewer employees -- including how to replace critical people who retire -- and how best to move employees from lower-priority programs to more critical areas. There is also a need for better metrics so one can measure program performance. Without good metrics, it is impossible to say which programs are performing well and which programs need assistance.

Review the state's organizational structure. Not since 1984 has there been a thorough review of the state's departments and agencies. Given the present fiscal constraints, a good organizational analysis is necessary -- not with an eye toward dismantling programs and staff, but rather to discern how best to organize and deliver service. Through attrition, the state has shed 6,000 positions in the past few years, so now is the time to re-evaluate how best to use its managers and staff.

Change the state's pension and retirement health-care commitments. This is the largest albatross. Unless the existing structure is changed, the future will not be a welcoming one for state, local or school district employees. The governor and the Legislature have begun tweaking at the edges, but everyone knows more drastic changes are necessary.

Establish a nonpartisan (not bipartisan) tax and spending commission. At some point, our economy will recover. Many people would argue that our tax structure needs to be altered -- as do our spending priorities. We need to analyze what needs to be changed to encourage economic development and growth, and just as important, raise sufficient dollars to fund our core commitments at all levels of government. Concomitantly, we need a better consensus of what programs are our highest priority.

Develop a strategic plan. Many a mistake was made because governors and legislatures committed to programs when a strategic plan would have suggested we could not possibly have funded those commitments. A comprehensive and long-range strategic plan would have dissuaded such decisions. Likewise, each agency needs to develop a strategic plan so that agencies are addressing what is critical and affordable.

Prepare a current service budget projection. By definition, this will show the fiscal commitments of the state for the next five to 10 years, given existing statutes and commitments. This is a natural corollary to the strategic plan, as it will graphically show, each year, what our fiscal commitments are and what needs to be altered to fund what is critical in the future within projected resources.

Contrary to popular myth, the state cannot be managed exactly as a business. It is much more complicated, diverse and demanding. The state cannot automatically remove prison guards, nor diminish staff for veterans' facilities, nor cease making payments to Medicaid providers, nor significantly alter the mission of the State Police or the case worker. But it can certainly improve its management, and demand better program performance and cease committing to expenditures that are impossible to fund. The governor has begun these difficult but very necessary management processes. More will be necessary.