GOVERNING Magazine February 2011

Home , No Guns Allowed

CONNECTING AMERICA’S LEADERS February 2011 $4.50 MEET THE NEW BOSS The nation’s only health insurance commissioner takes on an industry.

Rhode Island’s Christopher Koller

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go VOL. 24, NO. 5 02.2011

FEATURES

22 THE COMMISSIONER IS IN How one regulator set out to transform the health-care system. By John Buntin 30 BUILDING BRIDGES Forget the border wall. U.S. cities see big bucks in opening new crossings to Mexico. By Ryan Holeywell 36 PIPE DREAMS With stormwater a major pollutant, cities are coming up with innovative ways to control the fl ow. By Linda Baker 40 WATER WORKS New York City’s fi rst—and only—water fi ltration plant is a marvel of engineering. By Tod Newcombe Photographs by David Kidd 42 BY THE BOARD For incoming governors like New York’s Andrew Cuomo, effi ciency commissions are more important now than ever before. Construction workers By Jonathan Walters inside the nearly complete water tunnel that will link New York City’s upstate reservoirs with its fi rst water fi ltration plant.

2 GOVERNING | February 2011

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4 In This Issue 6 Letters 8 Dispatch A list of priorities and issues helps us remember what really matters in tight ﬁ scal times.

POLITICS + POLICY 11 Observer Food safety regulations and the new GOP mood. 13 Ballot Box A review of the 2010 census ﬁ ndings and its implications. 14 Potomac Chronicle States don’t like the carrot that 18 comes with Medicaid, but they can’t stop eating it. JOANNA SCHROEDER 15 At Issue PROBLEM SOLVER More states are allowing patrons 44 Chicago Goes to Court to bring guns into bars, but what eff ect will the laws actually have? To cut costs and save face, police misconduct cases are

iSTOCKPHOTO.COM going to trial—all of them. 16 Health 46 Smart Management 50 The National Alzheimer’s Project Act incorporates Louisiana learns to use information about its students the state perspective in to create real-life benefi ts for them. implementation. 47 Idea Center 18 Green Government Quincy, Mass., pilots pay-for-performance snow Without a national clean-energy removal. standard, states fi nd new ways to grow green tech. 48 Tech Talk Colorado builds better e-government one micro-grant 20 Economic Engines at a time. When governors say no to infrastructure, is it fi scal 50 Public Money prudence or politics? With health care driving state spending, a focus on quality care could help cut costs. 21 Urban Notebook A certain fascination has developed 52 Player with places that have fallen on hard Mike Flood’s deft negotiation skills have made him a times—like the Rust Belt. successful speaker of the Nebraska Legislature.

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Publisher Fred Kuhn

Editor Tod Newcombe Executive Editor Jonathan Walters Editor-at-Large Paul W. Taylor Managing Editor Elizabeth Daigneau The IC’s Changing Role Senior Editor Zach Patton Associate Editor Jessica B. Mulholland ith the Aff ordable Care Act’s passage, the role Chief Copy Editor Miriam Jones Copy Editors Elaine Pittman, Sarah Rich of state insurance commissioners (IC) has been Staff Writers John Buntin, Ryan Holeywell, Andy Kim, Russell Nichols, transformed, thrusting them into the center of the Tina Trenkner national debate about how (or whether) to imple- W Correspondents Katherine Barrett, Richard Greene, Alan Greenblatt ment health-care reform. In some states, these regulators are work- Contributing Editors Penelope Lemov, Steve Towns ing on eff orts to control the growth rate of premiums. But one IC Columnists William Fulton, Peter A. Harkness, Donald F. Kettl, is taking a more direct approach, tackling rising health-care costs Alex Marshall, Girard Miller, John E. Petersen head on. Rhode Island’s Christopher Koller is the nation’s only Creative Director Kelly Martinelli health insurance commissioner. In this month’s cover story, John Design Director & Photo Editor David Kidd Buntin proﬁ les Koller’s unique role and his ﬁ ght to make insurance Senior Graphic Designer Crystal Hopson more aff ordable. Graphic Designer Michelle Hamm And in this month’s economic development feature, staff writer Illustrator Tom McKeith Ryan Holeywell looks at some communities that believe that toll Production Director Stephan Widmaier revenue, tourist dollars and industrial development associated with Production Manager Joei Heart U.S.-Mexico border crossings will breathe new life into their strug- Marketing Manager Jenna Alifante gling cities. One such example is Donna, Events & Program Manager Jennifer Carman Texas, where construction on the Alliance International Bridge is now complete and Founder & Publisher Emeritus Peter A. Harkness

offi cials see major potential. If all goes as Advertising planned, an industrial development sur- Associate Publisher Erin Waters [email protected] rounding the U.S. side of the bridge could West: Account Director Chris Hempel 818-445-4451 triple the city’s tax base. This bridge actu- South/Midwest: Account Director Jennifer Gladstone 281-888-4125 ally is one of three new crossings to open East: Account Director Erica Kraus 202-862-1458 along the U.S.-Mexico border within the VP Strategic Accounts Jon Fyff e jfyff [email protected] last year, and several other border com- Account Director Strategic Accounts Shelley Ballard [email protected] munities also are pushing for new or Online Production Manager Kori Kemble 202-862-1448 expanded crossings. Turn to page 30 for Advertising Coordinator Alina Grant 202-862-1450 Advertising Coordinator Nikki Bogopolskaya 202-862-1456 By Fred Kuhn, Publisher more details. Moving on to environmental issues, Marketing/Classifi ed [email protected] our Pipe Dreams story reviews the recent Environmental Protec- CEO Dennis McKenna tion Agency (EPA) policy that puts strong pressure on states and COO Paul Harney localities to enforce water pollution controls—especially with CAO Lisa Bernard regard to regulating stormwater and wastewater overfl ow. In this Executive Editor Steve Towns vein, Kansas City, Mo., and Philadelphia have proposed multiyear, Executive VP Cathilea Robinett billion-dollar green water infrastructure plans that will clean their VP Strategic Initiatives Marina Leight water and make sewer overfl ows a problem of the past. Contribut- Reprint Information ing writer Linda Baker examines these eff orts on page 36. Reprints of all articles in this issue and past issues are available Also this month, photographer David Kidd and editor Tod (500 minimum). Please direct inquiries for reprints and licensing to Newcombe traveled to New York’s Croton Water Filtration Plant Wright’s Media: (877) 652-5295, [email protected]

to illustrate the complexity of upgrading a core component of city Subscription/Circulation Service infrastructure to meet the needs of 21st-century society: drinking Eenie Yang, [email protected] water systems (which in the U.S. face an annual shortfall of $11 bil- http://www.governing.com/subscribe lion for replacing aging facilities and complying with existing and Governing (ISSN 0894-3842) is published monthly by e.Republic Inc., with offi ces future federal water regulations). Croton is in the midst of bringing at 1100 Connecticut Ave. N.W., Suite 1300, Washington, D.C. 20036 and at 100 Blue the new water ﬁ ltration plant online, and its water into compliance Ravine Road, Folsom, CA 95630. Telephone: 202-862-8802. Fax: 202-862-0032. E-mail: [email protected]. Web: Governing.com. Periodical postage paid in with EPA regulations. This is a prime example of the challenges Washington, D.C., and at additional mailing offi ces. Copyright 2011 e.Republic Inc. All municipalities face when building and upgrading water systems. rights reserved. Reproduction in whole or in part without written permission of the Enjoy our February issue, and let me know how we’re doing publisher is prohibited. Governing, Governing.com and City & State are registered trademarks of e.Republic Inc.; unauthorized use is strictly prohibited. U.S. by e-mailing me at [email protected]. subscription rates: Government employees—free; all others—$19.95 for one year. Foreign subscriptions: $74.95 in U.S. funds. Post-master: Send address changes to Governing, 100 Blue Ravine Road, Folsom, CA, 95630. Subscribers: Enclose mailing 4 GOVERNING | February 2011 label from past issue. Allow six weeks. Member: BPA International. Made in the U.S.A.

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Unrelated PPP Issues? One last point—“privatization” is But to see true evaluation of deadwood The recent story Selling Out by Russell when an asset’s ownership is transferred programs, or programs less eff ective than Nichols [December 2010] had several to the private sector, with minimal public the original or the intent, it seems few points of value, but unfortunately mixes control. When the public sector actively either know how to point them out, or in issues not related to “privatization.” monitors and participates in the deliv- are not willing to do so. There needs to be The discussion of the diffi culties of two ery of services, this is a public-private more serious attention to program audits California cities had nothing to do with partnership. at all levels, I would say. the provision of municipal services by —Richard Norment, It’s time for some experts to cut what is the private sector, and unfortunately set a executive director, National Council no longer most needed or most eff ective. negative tone for the balance of the article. for Public-Private Partnerships Where are these experts? They might not Public-private partnerships (PPPs) be a welcome group of professionals, kind can deliver substantial benefi ts for the Forced Cutbacks of like the tax collector, or worse. Who public—when and if they are developed I liked your article [Trickle-Down Cuts, wants the job? Where are the consultants and managed correctly. Given the cur- January 2011] in Governing. I have served out there to take it on? (As a temp job, rent challenges of budgets, deferred in county, city and state governments, and which makes more sense than permanent maintenance and expanding demands, worked for states under 100 percent fed- staff to do this type work.) PPPs should be examined as an option for eral contracts. many more government needs. It would I think legislators are much better Problem Solver | PUBLIC MONEY be much more benefi cial to readers of at seeking new grants than at making By John E. Petersen Trickle-Down Cuts Governing if the positives of PPPs were effi cient use of the resources already When the federal government starts reducing its deficit, watch out below!

he electorate made it clear in property, income and sales taxes ($51 treated with as much diligence as the neg- delivered to their respective states. In fact, November: Congress should cut billion), and the exemption of the inter- up the federal credit card and est on state and local bonds and interest restore fiscal sanity. Road maps from federal income taxation ($22 bil- T PHOTOSTOGO.COM on how to do that were seldom mentioned. lion). These preferences are on the chop- atives—decision-makers need clear and oversight and looking for duplication or And it’s no wonder, since getting to a bal- ping block, and their loss or reduction anced budget will be exceedingly painful. would prove costly to state and local gov- Right now, the federal deficit runs ernments whose citizens would find their around $1.4 trillion dollars. A big share tax burden increasing. accurate information. antiquated taxpayer programs is not done of that—$1 trillion—is cyclical and caused Finally, there are indirect cost-cutting by the Great Recession and accompany- or tax-increasing measures. Under fed- ing stimulus spending and tax cuts. The eral tax laws, homeowners now write remainder—$400 billion—is structural or off their mortgage interest costs. Over The story does include accurately the nearly often enough. It just might be the “built-in” to the budget. With the current the years, this favoritism has driven up economy recovering slowly, the federal housing prices. Real estate values, now government raises in current revenues in very bad shape, serve as the founda- about 57 cents to 63 cents for every dol- The billions in federal programs directed tion for local property taxes. But the feds lar it spends. Even in good times, it raises toward state and local governments—and lose $100 billion or so from the interest need for continuing public-sector involve- No. 1 problem in all of the U.S., especially only 90 cents for every dollar spent. Given the multitude of tax preferences that ben- deduction. That makes it an attractive the existing tax system and the way Med- efit them—will provide fertile grounds for target for reducing the federal deficit. icaid, Medicare and Social Security are filling the deficit hole. But such a step might permanently bend designed, that structural deficit is des- Let’s look at grants, one of which is down future growth in housing prices and ment in outsourcing contracts with the for federal government, and to some sub- tined to increase steadily. So we’ll have to Medicaid. More of the Medicaid load accordingly, the property tax base. cut spending, raise taxes or a combination might be shifted to states, which now And there’s more. Expanded use of of both. annually contribute $150 billion of their user charges and sales taxes to enhance But what programs do we cut and own funds to match federal grants of federal revenue would mean intense private sector. The National Council for stantial degree, perhaps for most state and what taxes do we raise? The answers $220 billion. The feds might save $35 intergovernmental competition for rev- unleash a political fight too large for this billion by making that cost match 50-50 enues. For example, raising the federal humble column to take on. But we know across the board. Meanwhile, federal motor fuel tax by 25 cents to reduce the one thing: State and local governments are grant programs for education send $80 deficit would mean $30 billion in added Public-Private Partnerships has long sup- local governments as well. deeply tied to federal finances, and they billion per year to the states; and another federal revenues. But that would curb the will feel the pain from federal cost cutting $200 billion to income security, trans- ability of states to raise such taxes, even and revenue increasing. portation and community development in the event of declining revenues. Ulti- In fiscal 2010, $654 billion in federal programs. If the feds reduce all grants by mately all tax collectors go to the same grants went to states and localities—an 20 percent, a $100 billion revenue hole well for water. ported government doing a full “life-cycle I once worked for the Oak Ridge amount that equaled 26 percent of all would be created in state budgets—but State and local officials must prepare state and local spending. A big chunk last only 25 percent of the federal structural for the fiscal Armageddon. This admoni- year represented funding from the Amer- budget gap would be closed. tion may come as a shock to newly elected ican Recovery and Reinvestment Act, That’s not even the major danger. governors and state legislators who rode costs analysis” (including all costs and not health services department—the only payments from which have peaked and Via their taxpayers, states and localities into office astride promises to cut back are rapidly phasing out, reducing annual receive indirect benefits through fed- government. They are likely to find that payments to state and local governments eral tax deductions and credits. These that job will be done in Washington. Over- to about $60 billion. But that reduction “tax expenditures” (foregone revenues night, they may have a lot less money to Tennessee city government asked to in temporary federal outlays does not fig- because of preferential tax treatments) spend and more needs to spend it on. G ure into reducing the “structural deficit.” amounted to $73 billion last year, includ- The $400 billion gap still must be closed. ing the deductibility of state and local E-mail [email protected]

run and pay for its own local health 46 GOVERNING | January 2011 services when it moved to incor- porate in 1959. I am not sure the Trickle-down cuts need to come to Tennessee state or county govern- reality. Duplication detection experts from ments where Oak Ridge is located private sector: Can they ﬁ ll the gap of work would readily admit to telling Oak not easily done from within government? Ridge to be the “sole payer” of Let the real critical consultants for today health, but for 25 years, the city please stand up. paid, funded and operated its own This is not easy work, and since those independent city health operation who perform it locally might sometimes where in all the other Tennessee have a risk, it might be best to consider cities, such service was from state/ contracting out. Outsiders do not know county government. the community as well, and thus there is I am not in a position to tell a downside to external contracting. But you or others who have cut internal audits have their own challenges. [about] the no longer needed Perhaps there is an argument for both supplemental or duplicate or simply approaches—but I am in favor of added just the obvious operation and mainte- wasteful spending by federal, state or dialog and added contracts. nance ﬁ gures) as a benchmark to evaluate local governments. The governments all Although I am a government employee, a private-sector off er. And once a contract seem almost unwilling to cut. It has to I only speak for myself. is awarded, the public sector needs to be be forced. I have seen our own governor —James D. Harless, environmental involved in oversight and direction of the apply a requested 5 percent cut in fund- manager, Tennessee Department of implementation of that contract. ing, or even a few targeted layoff eff orts. Environment and Conservations

6 GOVERNING | February 2011

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Keeping Short Lists A list of priorities and issues helps us remember what really matters in tight ﬁ scal times.

he nation’s 28 new governors assume offi ce at what appears to be the bottom of the Great T Recession, following budget shortfalls of $110 billion and $191 billion across 48 states in 2009 and 2010, respectively. They are beginning to dig out, but estimates from the Center on Budget and Policy Priorities suggest states face equally steep shortfalls in the next two years— $160 billion in fi scal 2011 and another $140 billion in 2012 . Taking $600 billion out of state coff ers in four years forces unprecedented scru- tiny on how increasingly scarce taxpayer TOM McKEITH dollars are spent. The legislative monitor- to a single defi ning characteristic of was in the sweet spot, where our core ing fi rm State Net estimates that legisla- the incoming class of governors, being mission, core competencies and greatest tive hoppers will fi ll with 164,600 bills this “resigned to eliminating programs people opportunity for growth intersected? What session, including almost 9,500 carried want.” He expects a year of “shedding and needed to be moved so we hit all three over from 2010 . transferring” even valuable programs to objectives, and how would we do that? It There is no single proven formula to balance budgets and protect a very short brought focus to the programs that were making sense of the complexity of the list of priorities. either mandated or could be justifi ed by issues or the mass of legislative pro- There are proposals to close or privatize a legislative or federal requirement, and posals. That helps explain the cottage state prisons, printers and liquor stores, those things that were simply at risk. It industry in the making of short lists of along with deep cuts to state subsidies for also helped us hone our story and focused priorities and issues to watch during the education, public transportation and health how we thought, spoke and wrote about session. Governing synthesized a num- care for the poor. These are in addition to the value of our agency’s work in doing the ber of them in the January issue (see ongoing eff orts to reduce the operating public’s business. Issues to Watch). costs of government through agency con- There were no consultants, coaches or For its part, the National Conference solidation and across-the-board cuts. forms to fi ll in. But it did bring the syner- of State Legislatures bookended its Top 11 Despite the enormous problems facing gies between the governor’s priorities and of 2011 list with balancing budgets in the states, short lists can help. On inauguration the agency’s core competencies into bold lead position and infrastructure invest- day 1997 in Washington state, then-Gov. relief. It did the same for its vulnerabilities. ments bringing up the rear. In between are Gary Locke (now U.S. Commerce secre- Moreover, it gave us lead time to realign, what the organization calls “deep, contro- tary) had just been sworn in as the state’s mitigate and make surgical cuts inter- versial and painful” budget cuts that will 21st governor when his chief of staff faxed nally—rather than always being subject to inform policy choices around reforming a short list of Locke’s priorities to all exec- the blunt instrument of outside forces. state pensions and higher education, job utive branch agencies. At the Department Granted, those were gentler times in creation, unemployment assistance and of Information Services—where I served many ways. That said, as the intensity and health-care reform. Add to the mix the at the time—the list was used as a cata- urgency about state government grows, complexity and potential distractions of lyst for a quick, dirty but intense internal it helps to have a short list of priorities to redistricting and immigration. review of everything the agency did. remember what really matters in these John Thomasian, director of the The central question was: How did times of fi scal austerity. G National Governors Association Cen- the agency’s work fi t with the governor’s ter for Best Practices, narrows his list priorities? It led to other questions: What E-mail [email protected]

8 GOVERNING | February 2011

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go Politics+Policy A look at the people, events and ideas that shape state and local government.

OBSERVER By Zach Patton and Ryan Holeywell

Food (Safety) Fight iSTOCKPHOTO.COM

mid the fl urry of bills passed in the waning hours of try. “If the idea was that the federal food-safety bill would help 2010’s lame-duck Congress, the revamp of the federal hard-hit state and local health departments anytime soon, that’s food safety system was of particular interest to states not going to happen.” A and localities. In the fi rst major change to the nation’s The new Republican mood in the states could have a similar food safety policies since 1938, lawmakers gave great new author- eff ect on food safety measures. Last year, several states enacted ity to the Food and Drug Administration (FDA), shifting the agen- tighter regulations. New York and Washington state banned the cy’s focus from reacting to national outbreaks of food-borne ill- use of bisphenol-a, a hardening agent used in plastic food con- nesses, to preventing them from occurring in the fi rst place. tainers that’s been linked to cancer, heart disease and diabetes. But now that Republicans control the House, provisions of A new measure in California mandates that each of the state’s the measure—such as adding 2,000 new FDA inspectors—may approximately 1 million food and beverage workers take courses be in jeopardy. President Barack Obama hadn’t even signed the in safe food handling, and a new law in Pennsylvania standardizes bill yet when Georgia Rep. Jack Kingston, the ranking Republican and consolidates restaurant inspections statewide. member of the appropriations subcommittee that oversees FDA But this year, Republican-led legislatures likely will focus on funding, said the price tag of the overhaul—an estimated $1.4 bil- more business-friendly measures, such as carving out inspection lion over fi ve years—was too high. “No one wants anybody to get exemptions for small farms and other low-volume producers, and sick, and we should always strive to make sure food is safe,” he allowing sales of more products like raw, unpasteurized milk. Last told reporters in December. “But the case for a $1.4 billion expen- year, for example, Democratic Wisconsin Gov. Jim Doyle vetoed diture isn’t there.” a bill to allow sales of raw milk. Now that both houses of the Wis- The law was designed to be phased in slowly; many of its major consin Legislature, as well as the governorship, are in Republican provisions don’t take eff ect for 18 months. But congressional fund- hands, the raw milk bill may be taken up again. ing debates could threaten to push the changes back even further. More than a thousand food-borne illnesses break out in the That’s bad news for states, says Dan Flynn, the editor of Food U.S. every year. A high-profi le outbreak this year could convince Safety News, a website that tracks safety policies across the coun- new lawmakers to pursue and fund tougher standards. G

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Making the Case for Regional Taxes

or some time now, Americans have been blurring the The idea of regional tax-base sharing isn’t exactly new. The lines between cities and suburbs. We sleep in one Twin Cities metropolitan area in Minnesota has had a seven- place, work in another, and shop and socialize in still county agreement in place since 1971. Under that statute, each F other locales. Local tax struc- community contributes 40 percent of tures don’t refl ect this shift: Regions the growth of its commercial and indus- have supplanted cities as the nation’s trial property tax base into a regional economic centers. That disconnect is pool. Those funds are then redistributed making it harder for cities to recover based on a formula that looks at a juris- from the recent recession. “It’s not just diction’s population and fi scal needs. For that the economy is in a downturn,” says decades in Ohio, local communities have Michael Pagano, dean of the College of had the home-rule right to tax income Urban Planning and Public Aff airs at the based on citizens’ place of residence as University of Illinois at Chicago. “Our well as their place of employment. fi scal architecture no longer matches the More recently, small communities

economic growth engines of regions.” across the country have become more PHOTOSTOGO.COM It’s time to re-examine the way amenable to the idea of shared govern- people fund municipal services, Pagano says. “This is one of ment services, in which a handful of towns may contract to those rare opportunities that regional local governments are “buy” services, like police and fi re protection, from a neigh- confronted with—the chance to step back and think about boring city. Although shared services agreements are gaining whether they should restructure the way we pay for public- in popularity, according to Pagano, it’s hard to get a handle on sector services.” just how many places are engaged in them. “We’re limited to As an example, Pagano points to his own city, Chicago, anecdotal, place-specifi c information,” he says. “We know it’s where thousands of workers stream downtown every day, con- pervasive; we don’t know how pervasive.” suming services such as road maintenance and fi re and police What communities need to think about now, Pagano says, protection. Indeed, according to census estimates, Chicago’s is taking all of those disparate ideas—regional tax-base pools, population swells by about 5 percent during the workday. In shared services and more fl exible income-tax structures— other cities, that disparity is greater. San Diego’s daytime pop- and combining them into a truly unifi ed, regional approach ulation jumps nearly 12 percent, and Dallas and Houston each for taxing and providing services. “Local governments need see their populations rise by about 20 percent during the day. to engage in a broader conversation about rethinking the way That added population benefi ts from city services, but other we price the services that government provides. We have the than local sales taxes, they don’t really pay for them. opportunity for a new social compact to be worked out.” G Who Pays for Roads?

o roads pay for themselves? and maintaining the country’s roads. The That’s the question posed by a rest is ﬁ nanced with other taxes and bonds. new report from the nonproﬁ t Beyond the numbers, the report DU.S. Public Interest Research further discredits highway advocates’ Groups (PIRG). The organization’s con- oft-repeated claim that, from a budget- clusion? A resounding no. Since 1947, ing standpoint, roads are self-suffi cient. researchers have found that the amount The problem isn’t really that roads don’t of money spent on highways, roads and pay for themselves. Rather, it’s that their streets has exceeded the funds raised from advocates sometimes wrongly insist that gas taxes and other user fees by $600 bil- they do, all in an eff ort to justify roadway lion, “representing a massive transfer of construction at the expense of other forms general government funds to highways.” In of transportation like mass transit. “People fact, as of 2007, fees charged to motorists want to keep this myth of user fees and

PHOTOSTOGO.COM covered only about half the cost of building self-supporting roads,” says Phineas Bax-

12 GOVERNING | February 2011

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andall, a senior analyst at U.S. PIRG who co-wrote the report. “It sort of privileges The Congressional Map Glows Red roads as a spending item.” A review of the 2010 census fi ndings and its implications. That’s a dangerous claim to perpetuate, especially at a time when budgets are tight. But it’s been an eff ective way to ensure he Sun Belt wins again. In the once-every-decade process of reapportioning that roads and highways get preferential congressional seats, the Sun Belt gained 10 seats while the Midwest and access to funding. “Often when people Northeast lost a combined 10. come up with proposals on how to change T In recent decades, the U.S. population has shifted from the north and transportation spending,” Baxandall says, east to the south and west. As a result, the Sun Belt, including Florida, has gained “a big ending of conversation about reform infl uence in Congress. is to say, ‘You can’t do that. The gas tax The winners from the 2010 census are Texas (gaining four seats) and Florida money is a user fee, which is dedicated for (two), with one additional seat each for Arizona, Georgia, Nevada, South Carolina, a particular purpose.’” Utah and Washington. The states losing seats are New York and Ohio (two each) That line of reasoning makes even less and one each for Illinois, Iowa, Louisiana, Massachusetts, Michigan, Missouri, New sense considering that the Highway Trust Jersey and Pennsylvania. Fund—which gets its money from the gas The last time a state north of the Mason- tax—has been supplemented with more Dixon Line and east of the Continental Divide than $34 billion in federal general fund gained a House seat was 1960. Meanwhile, revenue since 2008. this represents the fi rst time the West has had The report is something of a shot more seats than the Midwest. across the bow at groups like the Ameri- California retains the biggest state delega- can Road & Transportation Builders Asso- tion at 53 seats, but it did not gain any for the ciation (ARTBA) and others that advocate fi rst time since the 1930 census. Texas remains for highway spending—though that’s not second biggest, with its delegation growing how they see it. “It’s like taking a shot at from 32 to 36. Florida’s two-seat gain and New an aircraft carrier with a pea shooter,” says York’s two-seat decline moves them into a tie Jeff Solsby, a spokesman for ARTBA. “The for third at 27 seats each. reality is these guys live on another planet.” Over the next year or so, state legislators Solsby takes particular issue with a part of (or in some cases, bipartisan commissions) will the report that notes that the nonmon- redraw congressional district lines, often with Texas retains the second biggest etary cost of highway expansion—such as a partisan edge in mind. Republicans will have state delegation, growing from 32 environmental damage, the proliferation a free hand in drawing 210 of the 435 congres- to 36 seats. of sprawl and a heightened dependence sional seats, with Democrats controlling just on fossil fuels—is absent from their sup- one-quarter of that number, according to the political demographic fi rm Election Data porters’ calculations of cost. “It’s creating Services. “The Republicans are better placed than they have been in decades [to draw a new mathematical model nobody else their own maps],” says Clark Bensen, a political demographer with the fi rm Polidata. uses,” Solsby says. “It’s trying to create a If the census had only used citizens to calculate the reapportionment, rather than new set of rules to the game.” all “inhabitants” as the Constitution requires, several states would have fared worse ISTOCKPHOTO.COM But in some ways, that’s exactly U.S. than they did, especially a handful of large states with large Hispanic populations. PIRG’s point: The game is broken. “One Texas would have gained only two new seats rather than four, New York would of the reasons our voice is very diff erent have lost three seats rather than two, Florida would have gained one seat rather than is we don’t have a dog in the fi ght of how two and California would have lost fi ve seats rather than staying even, according to big aggregate transportation spending a Polidata estimate. should be,” Baxandall says. The existing States that would have fared better under a citizens-only count are Iowa, Louisiana, model ensures that highway projects have Missouri and Pennsylvania, which would have stayed even rather than losing a seat; a guaranteed funding source, regardless Ohio, which would have lost one seat rather than two; and Indiana, Montana, North of whether there are priorities elsewhere. Carolina and Oklahoma, which would have gained a seat rather than staying even. “The bottom line is we should spend the Meanwhile, the outfl ow of people after Hurricane Katrina not only cost Lou- dollars where they’re going to get the best isiana a seat—the only southern state to shrink this decade—but likely made bang for our buck,” Baxandall says. “From possible one of the four seats Texas Get your state and that standpoint, it doesn’t really matter local politics fi x at is gaining. where the dollar originated.” G governing.com/ballotbox —Louis Jacobson

February 2011 | GOVERNING 13

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go Politics+Policy | POTOMAC CHRONICLE

By Donald F. Kettl

Vegetarian Federalism States don’t like the carrot that comes with Medicaid, but they can’t stop eating it.

hat do Texas Gov. Rick Perry, the produce aisle at eral government merely created the mandate, set the basic rules the grocery store and federal district court judge and put the states in the tough position of having to build and Henry E. Hudson have in common? Together, manage the exchanges where uninsured individuals would buy W they’re a trio framing a hot and inescapable battle their coverage. The states, in subtle but critical ways, moved out not only over health reform, but also over the future of federalism. of the produce aisle of carrots to the hardware aisle of sticks. In a move that reverberated in state capitols across the country, That takes us to Hudson, the federal district court judge in Perry stunned political watchers when he threatened to pull his Virginia who ruled against one of the reform’s core elements. state out of the Medicaid program. Perry told Fox News Sunday The mandate, he said, would “invite unbridled exercise of the that the feds ought to turn the biggest federal health-care program federal police powers,” and thus was unconstitutional. If the for the poor into a block grant. End the federal program and give U.S. Supreme Court strikes down this keystone of the program, the states the money, he urged, because, “We think we can save and if the states keep their promise to withdraw from Medicaid, substantial dollars for the federal government and for the states it’s no exaggeration to say that the nation’s health-care system if they’ll allow us to implement that program.” How much? A would collapse. December 2009 Heritage Foundation report suggested states would save $1 trillion over the next decade, with Texas reducing its Medicaid budget by about $60 billion to $64 billion between 2013 and 2019. Until the passage of President Obama’s health-care reform, the federal government’s health-care programs were largely voluntary. Com- panies aren’t required to off er health insurance. However, they’re encour- aged to do so through tax deductions—and many employees would ﬂ ee if their company dropped coverage. No hospital has to accept Medi- care patients, though few could stay in business if they didn’t. And no state has to provide Medicaid coverage for their poorer citizens. In fact, Medicaid is not one program. It’s 51 programs, iSTOCKPHOTO.COM with varying options in each state, layered atop the core federal If the carrots aren’t working and the sticks might be uncon- program. As health-care costs have spiraled upward, and as the stitutional, where does that leave us? This is a much bigger issue program has funded more seniors in nursing home beds, Medic- than the mega-issue of health care. A huge swath of federal aid has become a budgetary Death Star, gobbling up ever more programs—from enforcement of environmental regulations to scarce dollars. highway speed limits—build on vegetarian federalism, and car- That gets us to the produce aisle: Federal health-care pro- rots draw the states into conformance with policies shaped in grams have been carrots, with inducements to encourage Washington, D.C. everyone to play. Obama’s health-care reform was built on the Not long after Perry made national headlines with his threat to premise that this vegetarian federalism wasn’t working well opt out of Medicaid, a report by the Texas Department of Insur- enough—too many Americans were left without health insurance and the state’s Health and Human Services Commission ance—so the program requires individuals to buy insurance. It caused him to backpedal. The report found that bailing out of was never a government takeover of health care. Rather, the fed- the program would leave 2.6 million Texans without health insur-

14 GOVERNING | February 2011

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go AT ISSUE: Gun Control

By Andy Kim

For nearly a Packing Pistols and Pulling Pints “ century, we’ve built a More states are allowing patrons to bring guns into remarkable array of bars, but what effect will the laws actually have?

federal-state-local For years, many states have allowed citizens to carry fi rearms into places that sell alcohol. But a series of gun laws passed last year raised new questions about programs premised on where gun-toting citizens are allowed to go. The controversy centered mostly on the defi nition of “bars” versus “restaurants.” In the past, most states banned guns vegetarian federalism. in establishments that earned more than half their money from alcohol (although what counts as a “bar” can vary state to state). Now that’s changing, as a handful ance and dump billions of dollars of care of states have recently expanded gun rights to include bars as well as restaurants. for indigent citizens onto fi scally strapped That’s a risky move, according to gun control advocates. Alcohol and fi rearms state and county budgets. Medicaid, the make for a bad combination, they say, and allowing guns in bars puts principle above report revealed, pays for two-thirds of personal safety. “The issue here seems to be more symbolic, and also very danger- those in Texas nursing homes and half of ous,” says Laura Cutilletta, senior staff attorney for the Legal Community Against Vio- all births in the state. lence, a legal-aid group focused on preventing gun violence. Cutilletta and her peers The carrots have drawn states in so say that permitting handguns in bars creates a potentially deep that there’s no getting out—but hazardous environment for patrons and workers. they’re chafi ng under their share of these Gun rights advocates say these laws are merely an programs’ costs. Minnesota Gov. Tim extension of their existing Second Amendment rights— Pawlenty and New Jersey Gov. Chris that they should be able to protect themselves no mat- Christie have joined the rebellion calling ter where they are. Furthermore, they say, forcing bar- for a re-evaluation of the states’ role in going gun owners to leave their fi rearms in their cars health reform. The program is not only could potentially be dangerous. putting the states in a central role with For years, the only state where bar patrons could the exchanges, but it’s also bringing many carry fi rearms was Maine, which has allowed fi rearms more individuals into Medicaid—almost in bars since 1989. Other states, however, have been 16 million by 2019, according to the Henry hesitant to adopt similar legislation—until recently. In J. Kaiser Family Foundation—which will 2009, Arizona Gov. Jan Brewer signed legislation allow- cost states $21 billion. They don’t have to ing guns in bars and restaurants that serve alcohol. opt in, they can’t aff ord to opt out, and they Last year, Virginia Gov. Bob McDonnell and Georgia don’t think they can aff ord the program Gov. Sonny Perdue supported similar legislation in their either way. That poses huge risks for the states, signing the bills into law after their state legislatures approved them. And fate of health reform—and federalism. although Tennessee Gov. Phil Bredesen vetoed his state’s legislation, saying that For nearly a century, we’ve built a “guns and alcohol don’t mix,” the state House overrode his veto. remarkable array of federal-state-local South Carolina and Ohio also debated guns-in-bars bills last year, and are programs premised on vegetarian feder- expected to reintroduce legislation this year. Many states, however, have remained iSTOCKPHOTO.COM alism: If the feds supply carrots, state and neutral on the issue, while others—including Connecticut, Massachusetts, New local governments will eagerly devour Jersey and New York—simply let local jurisdictions regulate these policies. them. Like many of us, they have often But will the new laws really make much of a difference? In the fi ve states that complained about eating their veggies, but now allow fi rearms in drinking establishments, individual bar owners still reserve they’ve found them irresistible nonethe- the right to ban guns in their bars. Even Cutilletta, who opposes these laws, says less. With state fi nancial crises dragging they probably won’t have much of an effect. “I think in the end, the laws won’t on long past the fi rst stages of economic have that much of an impact, because property owners want to protect their recovery, and with the crises sure to be customers and make good business decisions.” stoked by unsupportable pension costs, A simple “No guns allowed” sign, however, doesn’t always suffi ce. “As a busi- this vast legacy of vegetarian federalism ness owner, you must now take a prohibitive step to prevent guns in bars,” says could be in very deep trouble. G Cutilletta. Arizona’s law, for example, requires the establishment owner to put up a sign that is in a visible location, contains a crossed-out fi rearm image and reads, E-mail [email protected] “No fi rearms allowed pursuant to A.R.S. section 4-229.”

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go Politics+Policy | HEALTH

By Jessica B. Mulholland

Taking Action on Alzheimer’s The National Alzheimer’s Project Act incorporates the state perspective in implementation.

n a Phoenix nursing home, a 96-year-old Alzheimer’s patient onslaught of Alzheimer’s cases, particularly because of the aging who was previously agitated, combative and reluctant to eat has baby boomers.” completely changed—she’s now calm and peaceful, and even Those states with plans already in place won’t have to do any- Iwilling to eat. thing diff erently. For states that don’t have plans, however, the The diff erence in her behavior stems from a nontraditional passage of NAPA will help them begin to address the issue. method of care, according to The New York Times. In her new So far, 17 states have fi nished the planning process and are nursing home, the patient is allowed to sleep, be bathed and eat moving into implementation, according to Matthew Baumgart, whenever she wants—even if it’s at 2 a.m. She also can eat what- senior director of government aff airs at the Alzheimer’s Asso- ever she wants, regardless of how healthful it may or may not be, ciation, noting that each plan is somewhat diff erent because it’s like unlimited chocolate. tailored to meet each state’s needs. Most plans, he says, address the need for home- and community-based services, long-term care fi nances, education and training, and some public health surveil- lance. “But some have some innovative things,” Baumgart says. “Texas has a very strong public health component in its plan to educate, to promote early detection, to conduct brain health promotion. And North Dakota had a very innovative care consulta- tion part of its plan where it divided the state into fi ve regions, and each region has a care consultant specifi cally iSTOCKPHOTO.COM for people with Alzheimer’s.” Expect to see stepped-up treatment, traditional and nontra- As the federal government focuses on the law’s imple- ditional, of this debilitating illness, thanks to the recent passage mentation, it will work closely with the states to align policy of the National Alzheimer’s Project Act (NAPA), which Presi- and coordinate a strategic national plan, according to Rob- dent Obama signed into law on Jan. 4. ert Egge, vice president of public policy at the Alzheimer’s NAPA has a goal of accelerating the development of a vari- Association. There will be formal discussions as part of ety of treatments that would prevent, halt or reverse Alzheimer’s NAPA that will include federal offi cials and two representa- while improving early diagnosis. Federal involvement relies on tives from state health departments. “There’s recognition an advisory council of representatives from all federal agencies in the legislation that interplay between the federal and state concerned with health, science and aging to address Alzheimer’s issues in Alzheimer’s is critical and it has to be dealt with explic- in a coordinated fashion with states, some of whom have been itly,” adds Egge. paying attention to the illness for some time. Will they discuss letting Alzheimer’s patients eat as much In fact, early planning by a number of states is what drove chocolate as their hearts desire? That may be getting a bit too nitty NAPA into existence—many either are in the process of develop- gritty for NAPA, according to Baumgart. But the new, combined ing plans or have plans on the books, says Toni Williams, associ- federal and state focus on the problem bodes well for Alzheimer’s ate director of public relations for the Alzheimer’s Association treatment overall. G Public Policy Offi ce. “There’s been a trend in several states where they’re rising to the challenge of Alzheimer’s and preparing for an E-mail [email protected]

16 GOVERNING | February 2011

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go You Can Ignore The Elephant In The Room… Until It Falls Through The Floor

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go Politics+Policy | GREEN GOVERNMENT

By Russell Nichols

Pushing Ahead on Clean Energy Without a national clean energy standard, states ﬁ nd new ways to grow green tech.

or years now, states have far surpassed the federal govern- Last fall, Iowa conducted its fi rst biomass harvest in ment in implementing clean Emmetsburg, which included nearly 85 local farmers F energy technologies. That and nearly 60,000 tons of biomass. balance isn’t likely to change anytime soon, however, since neither climate change nor green energy will be high priorities in the Republican Congress this spring. Still, even without a nationwide clean energy standard—and in spite of dwindling American Recovery and Reinvestment Act funds—states continue to move ahead. “Federal action would drive change more powerfully across the nation as opposed to what can be done on an individual stage,” says Robert Keough, assistant secretary for communications and public aff airs at the Massachusetts JOANNA SCHROEDER Executive Offi ce of Energy and Environmental Aff airs. “But I think Kauff man Foundation. Based on outcomes from three clean states are showing that it is possible and even desirable from an energy summits, the report highlights fi ve ways states can help economic standpoint to make real progress in substituting dirty accelerate the national green agenda: energy with clean energy.” • Cooperate. Through smart collaboration, governments In many ways, the federal delays have given some states time to can create interstate policies that spur the economic experiment with renewable energy alternatives beyond traditional development on a regional level. options like wind and solar. Iowa, for instance, recently had its fi rst • Standardize. With consistent energy policies, states can biomass harvest in which it converted biomass into ethanol, and reduce uncertainty in the market and establish viability the state is planning to build its fi rst commercially viable plant that for utility companies. converts algae into biofuel. “I think that diversifying our energy • Democratize. By opening up access to the power grid, portfolio in this country is arguably the most important thing we utility companies can bypass operational requirements, can do,” says former Iowa Gov. Chet Culver, who lost his seat to and customers can potentially generate and store their Republican Terry Branstad this past November. own energy. But states can go only so far. Without a federal energy policy, • Expand. Cross-sector collaboration can help states cre- energy companies can’t really gauge the stability of the U.S. mar- ate regional energy innovation clusters that promote ket, which can hamper clean energy expansion on the state and job creation and accelerate clean tech in the market. local levels, according to Patrick Quinton, business and indus- • Support. With so many universities at the forefront of try division manager at the Portland Development Commission innovation, states should encourage the development of in Oregon. “We have made big bets around these companies, products and processes, and make investments in com- and they’re here because they’re looking at the potential of the mercially viable projects. U.S. market,” he says. “But they’re not really sure of what the States can’t aff ord to wait, Culver says, because an eff ective landscape is. Their growth rate would be diff erent if they had national clean energy policy must start at the state level. “We certainty around how the U.S. will be treating renewable energy still need the states to push the limits of what’s possible,” he says, sources in the next 20 years.” “and then shape state and federal policies necessary to help new In the meantime, states can still push clean energy innovation innovations grow to the next level.” G through key policy strategies, according to A Clean Energy Road- map: Forging the Path Ahead, a report from the Ewing Marion E-mail [email protected]

18 GOVERNING | February 2011

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go CONSERVE GAS THIS WINTER AND SAVE TWO WAYS: SAVE ON GET UP TO A 1 MONTHLY 2 20% GAS COSTS BONUS CREDIT

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go Politics+Policy | ECONOMIC ENGINES

By Alex Marshall

The Cohesion Factor When governors say no to infrastructure, is it ﬁ scal prudence or politics?

n December, Virginia Gov. Bob McDon- the project—20 years in the making— diff erent states, but also diff erent reali- nell, a rising Republican star, announced was already under construction, and ties. The governors’ actions are a sign of a plan to borrow $4 billion to build more the federal government and a bi-state how political infrastructure building has Iroads, saying, “Right now is the best agency, the Port Authority of New York become. While there was a time when time in modern Virginia history to get new and New Jersey, were paying most of the infrastructure eff orts were in large part roads and bridges built,” because of “low $8.7 billion cost. bipartisan, much of it now, particularly construction costs and interest rates in Although Christie campaigned in sup- when the word “train” is involved, has an economy struggling to rebound.” The port of the tunnel, he now says the state become tied up with partisan battles about state, he says, needs to “put people back cannot aff ord it, given the potential for the state’s role in lean economic times. to work.” cost overruns. Little mention was made These lines were in evidence when A few weeks before McDonnell of jobs, lower construction costs and the Ohio and Wisconsin governors-elect, John made his announcement, another rising project’s long-term benefi t. Kasich and Scott Walker, respectively, Republican star, New Jersey Gov. Chris What is going on here? Two Republican pledged to throw more than $1 billion in Christie, announced that his state could governors, of similar ideological hues, both federal funding back to Washington, D.C., not commit $2.7 billion to a new com- elected in 2009, give diff erent rationales for for intercity rail service. Such projects, muter rail tunnel under the Hudson starting and stopping big infrastructure championed by President Barack Obama, River to New York City, even though eff orts. It’s as if the two lived not only in would waste the state’s money in frugal times, they said. For leaders in state and municipal governments, when it comes to infrastructure DAVID KIDD DAVID spending, the choices are about who to believe and follow. While distinguished economists back defi cit spending, angry citizens advocate fi scal restraint. And while China, Western Europe and much of the world build high-speed train lines, they are still unproven in the U.S. Yet McDonnell makes quite rational arguments about why infrastructure development is good to do right now. These arguments apply equally to train lines as to roads. Given this, it’s hard not to see actions like Christie’s as particularly shortsighted by the very values espoused by his col- league in Virginia. The additional set of tunnels under the Hudson River were A commuter train pulls to supplement century-old tubes packed into New York’s Penn with hundreds of thousands of commut- Station. Ridership from ers every day. New Jersey Transit’s train New Jersey has qua- ridership into Manhattan has grown from drupled in 25 years, 10 million in 1980 to 45 million in 2008, raising the need for a according to the agency. There was no second rail tunnel. question the new tunnels were needed. “Every year that goes by increases New Jersey’s need for this sort of tunnel,”

20 GOVERNING | February 2011

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go | URBAN NOTEBOOK

By Tod Newcombe

according to The Economist. “The exist- Burnishing That Rust Belt Look ing infrastructure serving rail commuters Step aside Boston, New York City, San Francisco and Seattle. Sorry, but you’re just is already under heavy strain. If a natural not cool anymore. These days, you need to have crumbling roads, triple-decker disaster or terrorist attack knocks out the apartment buildings, old-fashioned neighborhood bars and lots of rust to gain any current tunnel, there’s no backup. That hipster cred. When Anthony Bourdain, host of the trendy travel and food show No would be devastating for the region’s Reservations, passes up Tuscany, Provence and Barcelona to visit Baltimore, Buff alo economy.” and Detroit, you know the Rust Belt has arrived. It is widely believed that Christie’s main The “rust is chic” movement has been around for a while, but thanks to blogs and motivation was to take the tunnel’s billions online magazines, such as RustWire.com, a certain fascination with places that have of dollars and replenish the state’s impov- fallen on hard times like the Rust Belt—which stretches from the Midwest through erished highway trust fund, thus avoiding politically damaging gas tax increases. By canceling the project now, however, Christie is missing out on the lowest interest rates for construction costs in decades, condemning his citizens to a future of overcrowded trains and putting a ceiling on the growth potential of his state. For the moment though, Christie has won accol- daes for his fi scal austerity rather than condemnation for short-changing his state’s economic future. Still, even with prominent leaders the mid-Atlantic and up into the Northeast—has taken hold. Part of it is the scruff y, receiving praise for canceling projects industrial look. It may also be a rejection of cities with gleaming condo towers, bis- and rejecting federal billions, other major tros and boutiques that were once so trendy yet now seem so frothy and fake in the infrastructure projects remain intact, even wake of the economic meltdown. those involving trains and federal money. But the other fascination is the defi ance these Rust Belt cities have shown. iSTOCKPHOTO.COM In Los Angeles, Mayor Antonio Many of them, such as the gritty cities Bourdain visits, refl ect a rebellious attitude. Villaraigosa is pushing his 30/10 Initia- Youngstown, Ohio, has to be the poster child of this stance. Once part of America’s tive, which proposes to build 12 essen- steel manufacturing hub, Youngstown went into a death spiral as the industry col- tial transit projects in the region in 10 lapsed in the mid-1970s. Today, Youngstown’s population is 75,000, less than half of years rather than a projected 30, using its original size, and is 43 percent vacant. an already referendum-approved half- Yet nearly 10 years ago, the city made the bold decision to embrace its new cent sales tax as leverage to seek federal shrunken state rather than put time and money into trying to grow back. Public loans. He’s taking a page from Denver’s offi cials created a master plan, called Youngstown 2010, that envisioned a smaller, FasTracks expansion program, which but thriving city with a more diversifi ed economy. Indeed by 2010, certain elements sought a similar rapid enlargement of of what Youngstown could become were falling into place. its transit system. The downtown area has come back to life, and more importantly, economic How all these eff orts fare in the next development has begun to take hold, delivering an interesting range of jobs to the few years will say a lot about the state of area. The Youngstown Business Incubator (YBI) has played a key role, providing the economy and the political climate free or reduced rent and equipment to startup software companies. Ohio provides a intimately associated with it. The U.S. is large chunk of the YBI’s funding, and the payoff so far is about 300 technology jobs. typically said to suff er from an infrastruc- Recently, software fi rm Reserve Data in Silicon Valley, Calif., pulled up stakes ture defi cit, which is true; we’re certainly from pricey San Francisco and opened shop in inexpensive Youngstown, trading spending far less than China or even West- California’s Bay Area chic for Rust Belt grit. The number of jobs that follow may be ern Europe as a percentage of our econ- modest—50 to 100—but the staff will be able to enjoy Youngstown’s unique social omy. It would help us gain cohesion as a scene, which includes the Rust Belt Brewing Co., located in an old train station. society to return to essential conceptions Meanwhile, Youngstown’s manufacturing tradition isn’t over yet. French com- of infrastructure, as necessary investments pany Vallourec announced plans to invest $650 million in a steel manufacturing for a strong future, when such projects are facility that will put another 350 people back on the payroll. How chic—sorry, well conceived and well executed. G “gritty”—is that? G

E-mail [email protected] E-mail [email protected]

February 2011 | GOVERNING 21

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go THE COMMISSIONER How one regulator set out to transform the health-care system. By John Buntin

PHOTOGRAPHS BY DAVID KIDD

If proximity were a reliable guide to power, you would think Blue Cross & Blue Shield of Rhode Island has it and that Christopher Koller, the state’s health insurance commissioner, does not. Blue Cross & Blue Shield (BCBS) occupies space in a $125 million offi ce tower that sits at the foot of Capitol Hill in Providence. Koller’s offi ces are in Cranston, nine miles south of the capital. His desk is in a building that used to be the old state alms- house, next to what was once the state house of correction and the asylum for the incur- ably insane. “The joke goes,” Koller says of the occupants of the Cranston buildings, “that it used to be criminals, the mentally ill and poor people—and now it’s state employees.” If size were another guide to power, you’d have to give it to BCBS again. The insur- Ifance giant employs some 1,100 people in Rhode Island. Until recently, Koller had a staff of just three dedicated employees—an executive assistant, an attorney and himself—but a federal grant has allowed him to double his workforce to six. Yet sit down with BCBS of Rhode Island CEO James Purcell, and you’ll hear a very diff erent assessment of the balance of power between Koller’s offi ce and the state’s $3 billion commercial health insurance industry. “We are probably the most heavily regulated insurance industry in the country,” Purcell says. And that, he adds, is largely a function of Koller’s unique job: He is the nation’s only health insurance commissioner. “In the old days, when there was just an insurance commissioner,” Purcell says, “he or she had a lot more to do, which from my old-school perspective was a good thing.” But now, he continues, “what does Chris think about every day? He thinks about us.” And in Koller’s case, thought has given rise to radical action. In the winter of 2007, Koller made a decision that took him well beyond the scope of activities common among even the most aggressive state insurance commissioners. Instead of reviewing rate increases, preventing plan insolvency and ﬁ elding the com-

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Rhode Island’s Christopher Koller

February 2011 | GOVERNING 23

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plaints of policyholders, Koller addressed the aff ordability of the but another big California insurer, Blue Shield of California, health-care delivery system as a whole. recently announced a third round of rate hikes for individual poli- His admirers see his approach as nothing less than ground- cyholders that will bring total rate increases for some individual breaking. “He is the person in government who can have an insurance policies to 59 percent. At the current growth rates, the impact on the private delivery system,” says Lt. Gov. Elizabeth cost of the average family policy, which was $13,027 in 2009, will Roberts, who as a state senator sponsored the legislation that cre- top $23,000 by 2020. ated Koller’s offi ce. State regulators have watched these increases with mounting But to insurers and some providers, Koller’s approach has dismay, and several have been in the forefront of taking action to been deeply unsettling. “There is a very uneasy line between who reign in rising premiums. A particular focus of concern has been manages Blue Cross Blue Shield,” Purcell says. “That’s really my health insurers’ reserves, particularly the building up of surpluses job, not his.” Some critics have gone even further. In late 2010, the beyond what is necessary to meet solvency requirements. “We state’s most powerful hospital group, Care New England, went to are now saying,” says Mike Kreidler, Washington state’s insur- court to stop Koller, charging that the health insurance commis- ance commissioner, “‘Wait a minute. Why are they continuing to sioner had become “a rogue operator.” build surpluses when they are not-for-profi t insurers, and I am Surprisingly, behind these very diff erent assessments of continuing to get double-digit rate increases?’” Koller’s actions, there is an underlying agreement about what Kreidler’s offi ce is now working with the state Legislature he has sought to do. Koller, says Roberts, “has tried to use it as to gain authority to take insurers’ reserves into account when an offi ce that could reform the system, not just regulate it.” In making rate approval decisions. In Maine, Insurance Superin- the process, what started as a seemingly quixotic eff ort may well tendent Mila Kofman also has sought permission to consider emerge as a model for health insurance regulation, if Koller’s health insurers’ overall fi nancial position when reviewing rate attempt to take on two of Rhode Island’s most powerful indus- increases rather than focusing only on narrow actuarial analyses tries—hospitals and health insurers—doesn’t do him in fi rst. of the plans at hand. Despite such attempts to control the rate of premium growth, nsurance regulation is one of state government’s oldest func- even the most aggressive regulators say that there’s simply not tions. Most states have insurance departments that date back very much they can do about rising health-care costs. “Even with to the late 19th century. Their purpose today is strikingly pretty comprehensive rate reviews, we can’t do magic,” Kofman Isimilar to what it was back then: insuring that the policies says. “I don’t think any insurance regulator can control medical purchased by consumers are backed up by real companies with costs. That’s just the reality.” real fi nancial assets. It’s a sentiment most insurance commissioners agree with. But “Every insurance commissioner, regardless of their political over in Rhode Island, Koller isn’t one of them. party, has a duty to ensure solvency of the marketplace and to protect consumers,” says North Carolina insurance commissioner oller’s unusual attitude refl ects his unusual posi- Wayne Goodwin. That means not only ensuring that the rate is tion as not just insurance commissioner, but as not discriminatory or excessive, but also that it’s adequate enough health insurance commissioner. No other state for the company to maintain solvency and not breach its policy- K (with the partial exception of California, which holder obligations. Setting the right rate, says West Virginia insur- has the Department of Managed Health Care) has broken out ance commissioner Jane Cline, is “a balancing act.” health insurance as the responsibility of a distinct and separate Historically, being an insurance commissioner hasn’t been offi ce. Rhode Island did so back in 2004. The decision to create an unduly demanding job. Only about half of the states require such an offi ce came from the realization that the state did not commercial insurers to seek prior approval for rate increases, and have the information, much less the authority, to aff ect—or even until recently, insurance commissioners spent only a small por- understand—the relationship between insurers and providers tion of their time focused on health insurance. That has changed, in the large- and small-group insurance markets. The legisla- thanks to rapidly rising health insurance premiums and to the tion that Lt. Gov. Roberts sponsored as a state senator sought to passage of President Obama’s health-care reform legislation, the change that by creating an offi ce with broad powers to improve Aff ordable Care Act. the health-care system’s quality, accessibility and aff ordability. Although rising premiums and health-care reform are often What this would mean in practice, however, remained somewhat linked in the public mind, the fi rst development preceded the pas- unclear—until Koller took offi ce in 2005. sage of the second. A recent Commonwealth Fund study tells the Since then, Koller has engaged in what resembles, at least story. Between 2003 and 2009, health insurances premiums for in some ways, a game of health reform “chicken,” invoking his businesses and their employees nationwide jumped by 41 percent, powers to demand changes while trying to avoid putting them while per-person deductibles rose by 77 percent. Some states to the test. It’s a high-wire act that causes even admirers to hold have seen even more dramatic increases or proposed increases. their breath. “The commissioner is moving ever closer to the Last spring, Anthem Blue Cross shocked California regulators precipice,” says William Martin, the co-chair of the Offi ce of the by announcing plans to increase premiums for individual health Health Insurance Commissioner’s advisory committee and the insurance policies by more than 30 percent. Outside actuaries chief operation offi cer of a biotech company. “I don’t know how found problems with their assumptions, and Anthem retreated, much longer he can do that.”

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Rhode Island Blue Cross & Blue Shield CEO James Purcell says his state has “the most heavily regulated insurance industry in the country.”

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he fi rst thing that strikes you about Koller is his height— ing the state’s major insurers to send proposed rate increases— he’s 6’ 7”. The second is his wonkiness. Koller, age 49, fi rst and the assumptions of medical infl ation and utilization that got interested in health-care policy as a junior at Dart- undergirded them—to his offi ce at the same time so they could T mouth College. His undergraduate thesis compared and be posted online. This step has allowed policymakers to examine contrasted the case mix indices of for-profi t and nonprofi t hospitals. diff erences in assumptions and has created pressure among insur- After graduating, Koller, a native of Rochester, N.Y., worked for a ers to avoid being seen as proposing the highest price increases. year with the Jesuit Volunteer Corps in Washington, D.C. Then it As satisfying as these achievements were, Koller’s primary was on to Yale University to get masters degrees in management and goal—promoting quality, accessibility and aff ordability—remained religion. After working in various positions at an HMO in Buff alo, elusive. When he pushed the state’s two primary insurers to report N.Y. , Koller was off ered a position as the CEO of the Providence- on what they were doing, he got what he describes as “a laundry based Neighborhood Health Plan, a network of health clinics serv- list” of initiatives. Some seemed substantial. Others did not. “I had seen at Neighborhood Health Plan how one health insurer comes in with one plan, and another comes in with another plan,” Koller says. “Doctors do not want to diff erentiate how they provide care based on who’s paying the bill. Having health plans send them diff erent instructions was tremendously counterproductive.” So in the fall of 2007, Koller convened an advisory panel to help him develop a different approach—one that sought to defi ne priorities for the state’s commercial health insurance sector as a whole.

mong academic researchers and health-care policy experts, there are certain areas of agree- A ment about how the health- care delivery system could be changed and improved: A better functioning system would spend more on primary care. Care for people with diabetes and other chronic illnesses would be managed to prevent expensive and dangerous rounds of hospitalization. Providers would utilize electronic medical records to prevent redundant testing and to identify patients who need extra attention. Payments systems would move away from Lt. Gov. Elizabeth Roberts created the commissioner’s offi ce as a state senator. paying providers for the volume of services provided and instead pay for quality. ing primarily low-income Rhode Islanders. By 2005, Neighborhood Citing the broad statutory language that created his offi ce, Health Plan had grown from 40 employees to 175; its budget was Koller decided in the spring of 2009 to require insurers to do $174 million and it served 75,000 Rhode Islanders a year. all four. Koller put forward four principles that he expected the “It was a great experience,” he says now. However, after nine state’s three leading insurers to embrace. First, he asked insurers years of running what had essentially become a Medicaid man- to increase the portion of their medical expenses that went to aged care plan, Koller was eager to return to the health-care primary care by 1 percentage point for fi ve consecutive years. The policy world. So when Gov. Donald Carcieri off ered him a posi- goal was to raise Rhode Island’s primary care expenditures from tion as the head of the newly created Offi ce of the Health Insur- a substandard 5.9 percent to something approaching such high ance Commissioner, as well as assurances that he’d be a primary performance systems as Pennsylvania’s Geisinger Health Plan. health-care adviser, he leapt at it. Koller’s second requirement was that state insurers support Koller’s early steps were fairly traditional. At fi rst, he focused the expansion of the Rhode Island Chronic Care Sustainability on the politically volatile issue of BCBS’s $300 million-plus Initiative, which seeks to pair providers with case managers who reserves. A study commissioned by Koller but paid for by BCBS can direct care for patients with chronic conditions. Providers found that the insurer was, if anything, slightly undercapitalized. would agree to meet a level of accreditation in keeping with the Koller also pushed such modest but eff ective measures as requir- Continued on page 28

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Leaner, Better Government A lean approach is the most effective way to improve service despite limited resources.

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go 80 percent increase in processing times. In Iowa, Maine, Georgia and other states, government agencies have increased their speed, reduced citizen wait times by 50 percent, doubled capacity, cut costs and seen other significant improvements.

Lean Today In today’s economic climate, a lean approach is more valuable than ever. It can help government get its work done faster, and with fewer people. W. Edwards Deming showed Japan how to do it after World War II. Later, U.S. manufacturers adopted those same lean principles, which were aimed at more efficiency, less waste and fewer errors. Today, limited capacity is a huge issue for government. There’s simply too much work to do and not enough people to do it. Ken Miller — founder of the Change and Innovation Agency, a firm dedicated to helping its clients increase their capacity to do more good — has worked with numerous state, county and local governments to increase their efficiency. According to Miller, capacity is the key issue. “All of the symptoms of what government is facing right now — the high costs, the budget constraints, customer service issues, morale issues — they’re all symptoms of one big cause, which is capacity,” Miller said.

EAN GOVERNMENT IS ABSOLUTELY CRITICAL “The demands on government in today’s environment, in which budgets are shrinking L and citizen demands are growing. The recession has hit are not going down, but the everyone hard. And while unwieldy government processes have been satisfactory for decades, the world we live in today is much resources are.” less forgiving. — Ken Miller, founder, Change and Innovation Agency A lean approach is what’s needed. It saved post-war Japan, and propelled forward and differentiated giants like Toyota in the automotive industry. Fast-forward to 2011, and it can also help He pointed to some grim statistics for social service government. Lean is a waste-reduction technique that initiates organizations, thanks to the worsening economy: a 40 percent organizational change, examines current processes and improves increase in demand for services, coupled with a 20 percent operational efficiency by decreasing process time — all while decrease in staffing. producing a product or service that meets the demands of internal “The demands on government are not going down, but and external customers. the resources are,” said Miller, who is also a speaker, author and The key element is looking at how things are done today, former deputy director of the Missouri Department of Revenue. breaking a process down and examining where the actual work He uses an analogy of pipes to describe the problem affecting is being done — and where inefficiencies are holding everything government agencies. “There’s a bunch of water coming in one up. Many government agencies have taken a lean approach and side and a little trickle coming out the other side, and the water found that in some processes, about 5 percent of the time is just keeps flooding in and it’s just creating more and more pressure spent doing actual work, and the other 95 percent is inefficiency on everybody.” slowing things down. That’s why processing a tax return takes just Miller helped Missouri make big strides in efficiency — but only a few minutes of actual work, but citizens must wait months to after finding that the pipes, or government processes, can be awfully get their refunds. Or why social service benefits take so long. Or twisted out of shape. Instead of water flowing smoothly through why citizens stand in line at the DMV for a painfully long time. the pipes, it’s bent and choked and delivered long after it’s needed. By taking a lean approach and removing the wasteful parts For example, many of these kinks, Miller notes in his book We of a process, government can see operational efficiencies that Don’t Make Widgets, are due to “safeguards” that have been installed dramatically speed up the work. Some governments have seen an in government processes to avoid being blamed when things go

CONTINUED ON PAGE 4

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Multiple Savings Georgia saves large amounts of time and money with automated workforce management.

he State Personnel Administration (SPA) of Georgia is on a issues, because the auditing keeps track of all changes and who Tmission to recruit, develop and retain a strong and diverse made them. Considering that the number of labor compliance workforce. SPA is also working as efficiently as possible, using lawsuits has increased rapidly for government entities in the last Kronos to automate timesheet management across several few years, the pre-configured pay rule features and the audit- agencies — saving huge sums of money in the process. In fact, ing capabilities that the Kronos system provides are extremely SPA’s return on investment has been so significant that other important. state government organizations are taking note. Ron Shultis, assistant commissioner of Workforce More Savings Soon Development and HR Shared Services for SPA, said the agency To save more money and work even more efficiently, the state is using a suite of Kronos products for greater efficiency and is aggregating the use of Kronos among other state agencies lower costs. Automated timesheets alone are saving SPA hours that had already been using it. Those agencies had set it up of payroll processing time. The savings add up quickly. “We’re individually, with their own licenses and using their own servers putting back into the business almost a million dollars’ worth to host it. The state is now working with Kronos on an overall of employee hours per year,” Shultis said. “That gets the focus solution over the next few years, which will result in lower costs away from administrative work and back into the core business.” for the state. SPA is using a shared services model, in which it handles human resource transactional work for numerous agencies. Shultis works on getting the most efficiency possible out of the payroll system. He recently brought 15 more agencies into the shared services arrangement. Those 15 were using a manual, paper system for timesheets of about 900 employees. That meant the processing center had to handle 3,600 pieces of paper each month. They all came in during a six-day crunch period, and had to be processed quickly. That was a big burden on the payroll staff, but it’s much easier now with Kronos. There are other benefits too. Before implementing the Kronos Workforce Management solution, there were 36 critical payroll errors in just six months. Aside from the legal risks this posed for the organization, it meant reissuing numerous checks, which meant additional work to an already overtaxed payroll staff. “With Kronos, the errors are down to zero, from my processing side,” said Shultis. “Before, I had a lot of errors, manual processes and paper. Now I have zero errors on the processing side, and I have no sheets of paper coming in for time and attendance.” Shultis is Shultis said automation is more helpful than ever with today’s also impressed with the reporting and auditing features Kronos economy. “Before the recession hit, I would have had problems provides, as they too help the state work more efficiently. Kronos getting agencies to join shared services,” he said. “Now that provides more than 300 different reports, so an agency can agency leaders are looking at budget reduction, they see this as quickly find the type of information it’s looking for, and auditing a win-win for them. We always look for opportunities to gain features allow an agency to look up — even years later if nec- efficiency and provide employees a better system, and that’s essary — information on any timesheet changes, approvals or what this is doing.”

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“Because lean has a measurable impact on time, capacity and customer satisfaction, lean projects can produce amazing results.”

— Christine Carmichael, director of government industry marketing, Kronos

wrong, resulting in arduous signoffs and approvals that add an enormous amount of time to just about every government process. The lean approach is about taking the kinks out, and straightening the pipes so systems work faster. Greater speed improves capacity, and government agencies can get more work done. They can serve more people in a given time period. And Miller pointed out that government employees want to serve more people. It’s the systems that are broken, not the employees. and so on. Ultimately that paperwork is being shuffled all over the city or county. And if the mountain of paper isn’t a big enough Lean Workforce Management concern, the legal requirements around labor compliance laws While the employees are not broken, public servants play and things like overtime tracking are important considerations for a crucial role in the service production line, and the processes government leaders.” involved in managing the workforce can be as kinked and Manual workforce processes are slow and inefficient — and inefficient as other government processes, adding time and expense can be greatly sped up with electronic automation. Automation to any agency’s operations. More efficiency and less waste can helps straighten the pipes of government. Automated workforce make a big difference, and lean principles can work very well when processes bring fewer errors and lower costs. Automation also applied to workforce management. Most governments spend provides a documentation trail, and it gives managers a real-time 45 to 50 percent of their operational budgets on payroll. While look at workforce data, so better decisions can be made. the workforce is often the largest expenditure, it also presents a “Because lean has a measurable impact on time, capacity and big opportunity to become more efficient and reduce costs with customer satisfaction, lean projects can produce amazing results,” a lean approach. Carmichael said. The Kronos philosophy is all about lean — helping “It stands to reason that labor would be one of the first areas government work more efficiently. Kronos helps with time and you should focus on, in terms of operational efficiency gain,” said attendance, scheduling, absence management, HR, payroll, hiring Christine Carmichael, director of government industry marketing and labor analytics. It can handle complex rules, regulations, company for Kronos, a leader in automated workforce management. “If policies, collective bargaining agreements, overtime issues and more. you’re managing your workforce in a manual environment, you’re And it’s all done much more efficiently than with manual processes. undoubtedly dealing with mountains of paper. Things like your Today’s government must find every opportunity to make timesheets, schedules, vacation requests and leave requests are all operations more efficient and reduce costs, and Kronos helps being managed by trails of paper that get shuffled between the government manage its costliest — and most valuable — asset: employee, the supervisor, human resources, payroll, legal advisers, its workforce.

For more information visit www.kronos.com/ stategov or call us at 800-225-1561.

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GOVERNING is pleased to announce our new series of Leadership Forums.

Today, governing has become more complicated than ever. With fewer resources, government executives need policy and implementation strategies for healthcare reform, infrastructure planning, budgeting, HR, workforce development and more. Each forum off ers leaders an opportunity to share best practices in a highly interactive format tailored to the speciﬁ c issues of the host jurisdictions.

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Continued from page 26 premiums. A study of insurer contracts with hospitals produced National Committee for Quality Assurance’s patient-centered by Koller’s offi ce in January 2010 came to a conclusion already medical home. Insurers would agree to pay a case management supported by the literature: Consolidation of hospitals makes fee and fund nurse-case managers. cost containment diffi cult. In Rhode Island, that was particularly Koller’s third condition was that insurers implement meaning- true for insurers dealing with Care New England, a local hospital ful incentive programs for physicians to adopt electronic medical group that included Women & Infants Hospital in Providence, records. Finally, he asked insurers to commit to a serious discus- where 80 percent of the babies in the state are born. As Purcell sion aimed at overhauling the payment system as a whole. notes, “It is essentially unthinkable not to have Women & Infants The reaction to Koller’s demands was euphoric from certain in your network.” And that made negotiations with Women & sectors, notably primary care providers. From insurers, however, Infants diffi cult. the reaction was mixed. Ultimately, insurers like BCBS’s Purcell And so in early 2010, Koller extended his delivery overhaul agreed that “directionally this was correct.” After all, many of eff orts to the state’s hospitals as well. In doing so, William Martin, who chaired Koller’s advisory board, knew that the health insurance commissioner would be “poking the bear a little bit.” But Martin agreed that such actions were necessary, given the structure of Rhode Island’s health-care system. “There is no competi- tive force in the marketplace,” Martin says, adding that Koller’s offi ce “has to come in and put that force in through regulation.” Although Koller has no oversight authority over hospitals, he and his counsel decided that he did have the authority to present “contracting principles” that would guide insurers in their dealings with hospitals. In July 2010, he put forward six of them, among them provisions requiring quality incentives and standards for care coordination and simplicity. Perhaps the most controversial of all, however, was a provision that would cap the guaranteed rate of hospital cost increase at the level of the Medi- care consumer price index, which in 2009 amounted to a mere 2.7 percent increase. In doing so, Koller was engaging in the kind of high-stakes bluffi ng he had perfected in dealing with insurers. “As a regulator, you have a variety of choices about how you communicate,” notes Koller. At one end are formal regulations. Health adviser William Martin says Koller’s offi ce brings At the other end is oral advice. In between there can be bulletins, much-needed competition to the insurance marketplace. guidance and information sheets. “I have specifi cally chosen to communicate this guidance as written guidance coming from Koller’s ideas were inspired by projects that BCBS had already the offi ce, not as formal regulations—although that may change begun. But there was another consideration as well. In addition going forward—with the understanding that failure to comply to pressuring insurers, Koller was preparing to take on one of with this guidance will be taken into consideration during the the biggest cost drivers in health care—rising hospital costs and annual rate review. So it is very important to have the rate review utilization. process in place and functioning.” But this time, Koller apparently overstepped. Care New Eng- he situation in 2009 crystallized the issue. That year, land fi led a lawsuit against Koller’s offi ce, seeking to block the the state’s three major commercial health insurers fi led insurance commissioner’s new conditions, saying they were an for double-digit rate increases. As Purcell remembers impediment to negotiations with UnitedHealthcare of New Eng- Tit, “We were in the depths of the recession, and a num- land. In December, Koller settled part of the lawsuit—a setback ber of community leaders, including the governor, asked if there for now. was any way to skip an increase. I said, ‘Governor, if I were you, The health insurance commissioner has not, however, given I would be asking that too, but to agree to inadequate rates does up on his goals. Despite all the tools and pressures he’s put in nobody any favors.’” Purcell argued that if the state made BCBS place, premium increases in Rhode Island are not signifi cantly rates inadequate by 5 percent, then “next year it will be whatever lower than in surrounding states. All of his actions, he points out, it is next year plus that 5 percent.’” are consistent with what it takes to keep a lid on rates of increase. Rhode Island’s public offi cials disagreed. That year, Koller “Communities that are good at this are ones that have an empha- approved a much smaller rate increase. His decision cost BCBS sis on primary care, payment reform and systems measure, and approximately $100 million dollars. However, Koller and the have delivery system leadership,” Koller says. And he remains business community took to heart one of insurers’ primary argu- determined to ensure that Rhode Island is one of them. G ments—that hospital costs, primarily increases in outpatient utilization but also prices, were one of the major drivers behind rising E-mail [email protected]

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Discover which states are the leaders in digital government innovation.

See an interactive map here: governing.com/innovationnation

Underwriting provided by

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The Gateway to the Americas International Bridge in Laredo, Texas, is one of four crossings operated by the city, which has beneﬁ ted economically from its role as the closest American entry port to Mexico’s industrial center of Monterrey.

30 GOVERNING | February 2011

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Forget the border wall. U.S. cities see big bucks in opening new crossings to Mexico. By Ryan Holeywell

Donna, Texas, a sleepy farming town of about 18,000 people, is perhaps best known for its corn maze. The eight-acre agricultural attraction draws families from across the region. But without it, most drivers along U.S. Route 83—the highway that snakes the U.S.-Mexico border in Texas—would likely speed past the community without a second thought. DCity leaders here hope that will soon change, thanks to the new multimillion dollar, eight-lane Alliance International Bridge across the Rio Grande, which opened in December. If the bridge is as popular as city leaders anticipate, it could transform Donna into an industrial center, bringing much-needed jobs and money along the way. For Donna—whose leaders initially began discuss- ing a bridge 50 years ago—the linkage across the water to Rio Bravo, Mexico, could be a game changer. Offi cials envision Donna becoming a hub for warehousing and shipping businesses servicing companies that transport goods north across the border. Those hopes are based largely on a proposal by Rhodes Enterprises, a company that plans to invest, through the Alliance River Crossing Project, more than $950 million to develop 900 acres of land surrounding the bridge. Ernesto Silva, a consultant hired by the city, says the development could nearly triple the city’s tax base. Meanwhile, Ken DeJarnett, director of development at Rhodes Enterprises, says the project could boost Donna’s annual sales tax revenue to $36 million annually—it’s currently around $1.5 million—and create 7,000 new jobs. That’s nearly the

number of working age adults currently living in the city. BOB DAEMMRICH

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If that happens, the fortunes of Donna, whose poverty rate means tolls. The bridge in Pharr, for example, which connects is 40 percent, could be forever changed. “It would be a whole to the manufacturing center of Reynosa, Mexico, is expected to new town,” says Silva, a former assistant city manager of nearby generate $9.5 million in tolls this year. That’s almost as much as Pharr, Texas, which has an international bridge of its own. “These Pharr’s property tax revenue and even more than its sales tax rev- bridges are economic engines.” enue. Only half those funds are needed to operate the crossing; At a time when politicians in Washington and state capitals are the rest goes to city coff ers. hotly debating the topic of immigration, and the federal govern- Retail spending is another revenue driver. Shopping is the pri- ment has literally built walls between the U.S. and Mexico, leaders mary reason Mexican nationals visit the U.S., largely due to the in border cities and counties are increasingly making it easier to lower prices, higher quality and a greater variety of stores. Mexi- enter the country. By becoming host to a land port linking the U.S. can shoppers spent nearly $8 billion in Arizona, California and and Mexico, a locality hopes to create a valuable hub for busi- Texas border counties in 2004, one of the busiest years ever for nesses that facilitate the international transport of goods—and crossings, according to a study from the University of Texas-Pan in the process yield revenue from tolls and taxes on businesses, American. In shopping center parking lots in U.S. border com- property and sales. munities, it’s typical to see just as many Mexican license plates The gamble is risky. Although federal and state money paid for as American ones. much of the project, Donna is still on the hook for about $28 mil- The real revenue hope, though, is that a new crossing will lion . And the bridge, which opened with a ceremony that included spur industrial development. American companies use low-cost Mexican President Felipe Calderón, is coming on line when fewer laborers in Mexican factories called “maquilas” to manufacture people are making the trip between the two countries, amid fears textiles, electronics and vehicle components. Companies with of drug cartel violence. Commercial traffi c—a prerequisite of any industrial development—is not yet allowed on the bridge, because U.S. Customs and Border Protection has not yet committed to staff commercial inspection stations. DELCIA LOPEZ Still, despite the obstacles, it’s a chance Donna is willing to take, says DeJarnett. “You’ve got to risk a little to gain a lot.”

hen the Anzalduas International Bridge near McAllen, Texas, opened a little over a year ago, it became the ﬁ rst new U.S.-Mexico border W crossing in more than 10 years. The 3.4-mile bridge, which passes over a wall built in 2008, in part, to keep undocumented workers from entering the country, creates a strik- ing visual juxtaposition between two diff erent attitudes toward Mexico. Proponents of border crossings say it’s not inconsistent to encourage Mexican tourists to visit the U.S. while opposing undocumented Mexicans living here, since there’s a distinction between legal and illegal visitors. Now, a bevy of communities across the Southwest are planning new and expanded border crossings. A new bridge in El Paso County, Texas, could open in 2015. The project is demolishing an existing crossing and incorporating it into the new structure—the Guadalupe Tornillo International Bridge. In Nogales, Ariz., the Mariposa Land Port of Entry—the main port of entry for produce entering the U.S. from Mexico—is undergoing a massive $184 million reconﬁ gura- tion that’s scheduled for completion in 2014. And leaders in the San Diego area are planning a new freeway and port, the Otay Mesa East project, for 2015 that could cost as much as $700 million. In most cases, the funding for the crossings—which typically include widened roads, expanded infrastructure and new inspection facilities—comes from a combination of local, state and federal money. But in all cases, local leaders play an integral role in lobbying federal offi cials for the projects by trying to persuade the State Department to grant the necessary permits and convince U.S. Customs and Border Protection to staff the sites. Stores in downtown McAllen, Texas, are a favorite shopping These communities believe the investment and energy will be destination of Mexican nationals, who account for more worth it: New crossings bring new money. In some cases, that than a third of retail sales in the city.

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maquilas often have nearby corporate offi ces on the U.S. side, ven as many border towns are racing to build new and warehousing and trucking industries serve the fl ow of goods crossings, however, the economics are already start- coming north. Laredo, Texas—the closest U.S. crossing to Mexi- ing to shift. For one thing, personal travel across the co’s industrial center of Monterrey—is home to more than 1,000 Eborder has fallen sharply over the past few years, in logistics companies. large part due to concerns over drug-related violence in northern For these fi rms, congestion at border crossings is a major Mexico. Noncommercial crossings, such as tourists and shoppers, issue. Heightened post-9/11 security measures have dramatically are down by almost 30 percent since their peak in 2005. That’s a increased wait times, and as more manufacturers have shifted to problem that’s here to stay, says Xochitl Mora Garcia, a spokes- a just-in-time delivery model, backup on the highway can be a big woman for Laredo, which has shelved plans to build what would problem. “That’s why I think you’re seeing so many bridges open have been its fi fth border crossing. “It’s not temporary,” Garcia up and border crossings open up,” says Keith Patridge, president says of the decline. “It’s not a fl uke. [The violence in Mexico] and CEO of the McAllen Economic Development Corp., whose doesn’t seem to be subsiding anytime soon.” organization is under contract with the city to encourage busi- Fears of violence could begin to aff ect commercial transport nesses to locate to McAllen and Reynosa. “It’s really being driven as well, although that traffi c is relatively stable for now. Just last not necessarily by volumes of traffi c but the speed at which the month, the manager of a Black & Decker maquila in Reynosa— traffi c needs to move.” who lived on the American side of the border—was found stran- Border cities are more than happy to help alleviate that con- gled, his body left in a vacant Reynosa lot. Although the circum- gestion by building new crossings that bring truck traffi c their stances of his death are unclear, local offi cials worry those types of way and may in turn encourage new companies to locate nearby. incidents could deter companies from locating there in the future. Among the most ambitious new border crossings in the works “What we have to do,” says McAllen City Manager Mike Perez, is San Diego’s Otay Mesa East project. Traffi c at the area’s three “is work with the Mexican government to ensure that the people existing bridges has skyrocketed since the North American Free setting up manufacturing operations in Mexico feel comfortable Trade Agreement took eff ect in 1994, says Marney Cox, chief and safe for the managers to cross back and forth.” DELCIA LOPEZ economist with the San Diego Association of Governments (SAN- Violence aside, some critics of the renewed zeal for building DAG), a regional group of 18 cities and counties. Today, Cox says, bridges question just how benefi cial they actually are to the local traffi c can take up to four hours to move through the crossings. community. One of the persistent ironies of border towns is their (Actual border-crossing times are much higher than those offi - sky-high poverty rates. While the increased number of cross- cially reported by U.S. Customs and Border Protection, because ings has helped the northern Mexico economy, poverty remains federal stats don’t include congestion on the roads leading up to a “hallmark” of U.S. border communities, according to a paper the crossing.) published by the Federal Reserve Bank of Dallas. Border cities That means very few trucks can make multiple crossings in a such as San Luis, Pharr and Brownsville, Texas—which all have day, slowing down and increasing the cost of shipping goods from international crossings—also have poverty rates in excess of 32 Mexico. A 2006 study commissioned by SANDAG found that long percent, more than double the national rate. And the McAllen and wait times caused travelers to skip as many as 8.4 million trips Brownsville regions have among the lowest median household annually, resulting in a loss of $1.28 billion to the San Diego area incomes in the country. and preventing the creation of about 31,000 jobs. The federal gov- Ports of entry used to be reliable cash cows for any city or ernment has been reluctant to put money toward the project, Cox county fortunate enough to have one, but that’s not always the says, but SANDAG has projected that demand for a faster crossing case anymore, says Nelson Balido, president of the Border Trade is so high that it can fi nance nearly the entire project with tolls. Alliance, a nonprofi t group of government and private-sector “Of all the things discussed in the region here,” Cox says, “I can’t representatives advocating for improved trade relations. A new think of another that has as big an impact as facilitating traffi c crossing still almost always yields some benefi t to the local econ- across the border.” omy, even if it’s just a small boost. But cities can no longer count Other cities have similar hopes for easier border crossings— on bridges being the moneymakers they once were, says Balido. even in the state with the nation’s toughest immigration laws. In “A lot of municipalities automatically think a bridge equals big December, San Luis, Ariz., celebrated the opening of its second bucks. That’s not necessarily true.” border crossing, designed to ease congestion at an existing cross- Those concerns haven’t dimmed hope for the new bridge in ing downtown. “We have over 1,000 acres of developmental land Donna, however. While the newly opened crossing is currently around the new port of entry,” says Julie Engel, president and surrounded by little more than fi elds of cotton, sorghum and corn, CEO of the Greater Yuma Economic Development Corp. “We’re offi cials envision a future building boom. Silva, the bridge consul- hoping it will kick-start and generate a major economic impact, tant in Donna, is confi dent that the project will be a hit. “We’ve not only for the city but the whole region.” heard, ‘Why are you going to build the bridge? There’s an eco- It’s easy to imagine an almost endless loop of returns: More nomic downturn,’” he says. “I don’t think they fully understand crossings mean more businesses, which mean added congestion, that people still have to live. People still have to buy products. which calls for more crossings. “Is there a point where you say, You’re still going to need bridges.” G ‘We don’t need any more bridges?’” says Patridge. “I guess there probably is, but I don’t know what that is.” E-mail [email protected]

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go Case Study | SAP

MOVING AHEAD Transportation agencies gain needed efficiencies with software.

Departments of transportation agencies can collect and analyze data, performance measurement, HR, report- (DOT), turnpike authorities, and other helping them keep construction proj- ing, analysis, and other functions. transportation entities have extremely ects on schedule and within budget. Whether it’s making back-office opera- important work to do. People must get They can recognize issues more quickly tions more efficient or helping agencies from place to place and they need and respond to them immediately. And track and manage construction projects, dependable roads, bridges, and other they can share data across numerous SAP solutions improve the process. And infrastructure to help them reach their agencies or divisions. SAP software helps governments man- destinations. And despite tough eco- Road and bridge development, age bidding, cash flow, data analysis, nomic times and smaller budgets for contract-bidding processes, strategic and more. transportation departments, people still planning, auditing, reporting, and more expect quality services from state and can be done more cost-effectively with Success Stories local transportation agencies. the right software. Cash flow forecast- The Colorado Department of To remain productive despite smaller ing can now be more accurate than Transportation (CDOT) depends on SAP budgets and workforces, transportation it was in the past. Performance can software to make business run more agencies often employ technology. Today, be measured and factored into future effectively for several major areas — transportation organizations increasingly plans. And with limited budgets requir- financial, HR, operations, budget formu- depend on software to plan budgets, ing agencies to work more efficiently, lation, and business intelligence. SAP track bridge safety, evaluate progress, the need to measure performance is solutions make the department more manage day-to-day operations, and mea- greater than ever. efficient in numerous ways, with the sure their own performance against Many agencies have used SAP® soft- greatest improvement occurring in pay- their goals. ware for years to streamline and opti- roll processing and financial reporting. As a result, they have more informed mize productivity in enterprise resource “We wanted a more expeditious way and efficient operations. Government planning (ERP), business intelligence, for our CFO and executive management

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go ADVERTISEMENT

Following the implementation of SAP of NCDOT. “We don’t want to display software, there have been fewer payroll items that just look interesting; we errors, Ekberg says, and the depart- want items that we can take action on. ment saw many improvements when it If you have a project that’s in the red, consolidated numerous systems onto you want to pick up the phone and take one platform with SAP software. “We action to fix it,” he adds. went from 50 or 60 disparate systems to The dashboards give executives a this one enterprise system. There is less high-level view of how projects are per- duplication of data, greater access to forming. But the dashboards also can data, and good security around it. From go deeper. “They also allow executives the IT perspective, one enterprise appli- to drill down into more detail as to why cation is easier to support than several something is going well or not so well,” different systems,” she states. says Thomas. “It allows them to get into SAP software also helped CDOT whatever level of detail they deem nec- secure funding from the American essary. It helps us make decisions on a Recovery and Reinvestment Act. daily basis,” he states. “Because we have SAP, we got our Thomas says that NCDOT also uses grants very quickly — and not all states SAP tools to analyze the various finan- were able to do that,” says Ekberg. “So cial scenarios that could result from it did benefit us in that way. And we choosing certain projects. “When you to be able to pull reports and find the data are able to be more transparent when start moving your data around your they are looking for,” says Olga Ekberg, legislators want information about our dashboard, it shows the financial IT agency services director of CDOT. “We financials, HR, or anything they might impact of your decisions,” he adds. now have executive-level reports, includ- want to see. In this vein also, with SAP The strategic planning that the ing dashboards, which play a key role as the source of record, the depart- department needs to do is greatly aided in providing the information necessary ment’s financial audits have gone more by SAP software and the data it collects. to make both strategic and operational smoothly than in the past,” she says. “It’s a way to rank and select your proj- decisions,” she continues. ects based on pure facts,” Thomas says. The department uses data from Better Performance “You’re trying, as much as possible, to reporting to make better decisions. The North Carolina Department of remove the politics. Instead of going by “There is now more of a single source, a Transportation (NCDOT) has been using who is asking for it or what area it’s in, single truth on the data,” Ekberg adds. business-intelligence software from SAP we base it on data. We base it on facts “It is easier to say with confidence that to ensure that projects are completed on and pure need,” he says. your data — and thus your reports — is time and on budget and to ensure that With all the pressure on transporta- accurate now that the data is stored in projects meet necessary goals. tion agencies to do more with less, one location, in contrast to the compila- “Our biggest objective is present- the potential of software can’t be over- tion of data from different locations and ing things in a dashboard form that stated. It’s already making a big impact different data sets formerly required for will help our executives make deci- for numerous DOTs — helping travelers these reports,” she states. sions,” says Gary Thomas, IT director get to where they’re going.

To learn how SAP can help your agency achieve its strategic objectives, contact an SAP representative at 1-877-727-1127 extension 12000.

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go PIPE BY LINDA BAKER DREAMS WITH STORMWATER A MAJOR POLLUTANT, CITIES ARE COMING UP WITH INNOVATIVE WAYS TO CONTROL THE FLOW.

ortland, Ore.’s “Big Pipe” will soon be ready for action. Portland isn’t the only city investing hundreds of millions Much of the untreated sewer and stormwater that spills of dollars to manage sewer overfl ows. Under federal man- into the Willamette River will begin fl owing into the $430 date, dozens of municipalities are proceeding with mitigation Pmillion underground tunnel—22 feet wide and six miles projects, including “gray solutions,” such as massive tunnels, as long. The Big Pipe will greatly reduce the amount of raw sewage well as “green solutions,” like eco-roofs and landscaped curb that sloshes into the river, fi xing an older system. extensions that absorb stormwater before it ever enters the As in many cities, Portland’s older neighborhoods were being sewer system. served by a series of pipes that collect both sewage and stormwa- Triggered by environmental degradation (Portland’s Big Pipe ter, the latter being water that fl ows over impervious surfaces into grew out of a lawsuit fi led by a clean water organization), the the storm drain. When rain comes pouring down, these pipes are combined sewer initiatives spotlight the problems associated designed to overfl ow, sending millions of gallons of raw sewage with stormwater, which is becoming a leading cause nation- straight into the river. Under this system, Portland has about 100 wide of water pollution. Regulators are taking note. The U.S. combined sewer overfl ows per year. With the help of the Big Pipe, Environmental Protection Agency (EPA) is expected to enact which will store and divert overfl ows to a treatment plant, the new national stormwater regulations by 2012—and the agency number should drop to fewer than fi ve. “It is,” says Dean Marriott, already is beginning to issue specifi c pollution criteria for states, director of the city’s Bureau of Environmental Services, “a 94 to 95 cities and developers. The rules could cost municipalities mil- percent improvement.” lions of dollars. Florida, for one, puts a number on that cost.

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go ike sewage, stormwater is something of a dirty little secret, channeled out of sight through a network of underground pipes, only to emerge to contaminate lakes, rivers and L streams. Combined sewer systems, which exist in about 700 cities, are only one part of the stormwater conundrum, which as Devine puts it, is “a multi-headed beast.” To understand what he means, consider the myriad problems urban rainwater creates. In a natural environment, rainwater is slowly absorbed into the ground. But in the concrete-covered city, the water has nowhere to go but into the sewer system, which discharges high volumes into streams, eroding banks and fi lling waterways with sediment. There are other adverse impacts. As stormwater fl ows across asphalt and fertilized lawns, the runoff picks up oil, metal, pesti- cides and other contaminants, with toxic results for wildlife, habi- tat and people. About 13 percent of U.S. rivers, 18 percent of lakes and 32 percent of estuaries are classifi ed as impaired by stormwater, which means they’re unsafe for swimming or fi shing. Under the current permitting system, the EPA issues guidelines for cities and states on how to manage stormwater impacts. But environmental groups have criticized those standards, which tell builders to reduce runoff to the “maximum extent practicable,” as vague and ineff ective. Monitoring of sewer overfl ow systems has also been weak, clean water advocates say. Responding to those criticisms, the EPA is beginning to defi ne its requirements more precisely. “The mechanisms in the Clean Water Act that deal with stormwater and overfl ows are beginning to be implemented in keeping with how other pollutants are regulated under the law,” Devine says. As oversight becomes more rigorous, states and localities are Portland, Ore.’s responding with varying degrees of compliance and resistance. “Big Pipe” will Kansas City, Mo., for example, partnered with the EPA to craft store and divert a $2.4 billion agreement to reduce combined overfl ows, which sewer overfl ows to results in annual discharges of 7 billion gallons of raw sewage a treatment plant. into the Missouri, Blue and other rivers. “We are on this path because we knew intervention was coming,” says Francis Reddy,

MOTOYA NAKAMURA/THE OREGONIAN MOTOYA project manager for the Kansas City Water Services Department. “Instead of having the feds fi le a suit, we contacted them.” The In a lawsuit it fi led against the EPA, it claims that new EPA plan features a combination of tunnels, sewer rehabilitation, standards, which, for the fi rst time, set statewide limits on the water treatment technologies and green infrastructure, includ- amount of allowable nutrient pollution (from wastewater and ing curbside gardens and rain barrels to sequester stormwater. stormwater), will cost Florida governments and industry up to Staking a claim to innovation, Philadelphia aims to bypass the $200 billion. typical storage tunnels entirely. Instead, the city’s $1.5 billion plan But if the costs—and federal controls—are sparking local focuses almost exclusively on eco-friendly solutions—bioswales, pushback, the stricter regulations also are expected to create permeable pavement, street trees—as a way of reducing the city’s a more sustainable urban landscape, giving cities an economic 15 billion gallons of annual overfl ow. According to Howard Neu- boost in the process. As urbanization increases, so does the krug, director of the Philadelphia Water Department’s Offi ce of amount of stormwater runoff , explains Jon Devine, a senior Watersheds, the city is “wrestling with the EPA” on details of the attorney for the National Resources Defense Council water proposal, including the timeline and metrics for success. program. The obvious solution is to return the landscape to a For their part, EPA offi cials say the scale of Philadelphia’s commit- more natural, permeable state—an approach that will require ment to green infrastructure for wet-weather control is impressive. an army of eco-friendly landscape architects and urban design “We are working closely,” says David Sternberg, a press offi cer for professionals. “We think there is going to be an industry boom the EPA’s Region 3 offi ce. The EPA, he notes, wants “to ensure that in meeting the new requirements,” Devine says. “We’re going to this is an iron-clad model that advances green techniques while also see a renaissance in urban and suburban green infrastructure.” ensuring full compliance with our combined sewer overfl ow policy.”

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go expected to reach $69 by 2016. The Kansas City overfl ow plan will increase sewer bills by 15 percent for fi ve years and 13 percent for the following eight years. To help mitigate the expense to residents and diff use opposition to new stormwater initiatives, a few cities off er fi nancial incentives for property owners who manage runoff onsite. Ensuring aff ordability is one of the main reasons Philadelphia is embarking on its “green fi rst” stormwater and overfl ow strategy. In a budget- stressed and shrinking city—Philadelphia’s population has declined by about 70,000 people in the past decade—it makes little sense to invest $8 billion in a massive overfl ow tunnel, says Neukrug. Instead, he prefers taking a lower-cost, street-by-street approach to reducing stormwater, especially since it creates jobs, beautifi es the city and increases property values.

Like sewage, stormwater “ is a dirty little secret, channeled out of sight through a network Philadelphia’s green stormwater strategy calls for rain barrels, curbside gardens and permeable pavement. of underground pipes.

On the subject of nutrient pollution—one head of the stormwater beast—Florida isn’t working quite as companionably with It’s a compelling argument. No other city, however, has tried federal regulators. Although the attorney general’s offi ce declined to use green strategies alone to combat combined overﬂ ows. comment on the pending lawsuit the state ﬁ led against the EPA, Such tactics are considered ideal for new buildings but more Florida claims that states are responsible for water quality control diffi cult to apply in older urban areas with miles of impervious

PHILLLYWATERSHEDS.ORG and that the new rules, which stemmed from a settlement with pavement. Portland, considered a leader in sustainable storm- environmental groups, infringe on Florida’s clean water program. water solutions, uses various infi ltration techniques—discon- David Guest, an attorney with Earthjustice, a legal defense nected downspouts (they allow roof water to drain to gardens group that represented fi ve environmental groups in the original instead of sewers), vegetated curb extensions and porous pave- case, notes that the federal clean water standards aim to reduce ment—to sequester 35 percent of the total annual stormwater phosphorus and nitrogen deposits. These toxic deposits, he says, runoff in the combined sewer area; 39 percent is managed by have created a “thick green slime” in Florida’s waterways. the pipe system. Initially, local governments in Florida seemed more likely to The green portion of the Kansas City plan targets a 100-acre embrace the new regulations. About 40 cities and counties have residential neighborhood that has less asphalt than downtown. If already taken steps to restrict use of urban fertilizer—which con- that pilot project proves successful, the city will expand the use tributes to the nutrient pollution. Nevertheless, in January, the of natural stormwater management techniques to other parts of Florida League of Cities, along with Pinellas County, also fi led suit the city. to stop the EPA limits. For their part, state legislators aim to pass a law this session that would roll back the local fertilizer ordinances. s local, state and federal offi cials debate the effi cacy of diff erent stormwater solutions, a few things seem cer- he EPA has issued a statement that refutes Florida’s tain. First, managing stormwater is becoming one of the “exaggerated doomsday claims” regarding the high costs A most important environmental issues facing cities today. that Florida municipalities and residents will assume as a Second, new urban development policies will leapfrog oceans of T result of the new rules. Instead of $200 billion, the agency concrete in favor of landscaping that is green, grassy and water puts the cost at about $130 million. Nevertheless, as more cities absorbent. And fi nally, tighter regulations are expected every- embark on stormwater and wastewater control projects, utility where—in the stormwater discharge permit process, as well as customers nationwide can expect higher utility bills. In Portland, standards governing sewers and treatment facilities. “We are,” one of the fi rst cities to build a large tunnel—the Big Pipe is actu- says Marriott, “seeing more and more attention to these issues— ally one of two overfl ow tunnels the city built—residents now pay by EPA and the state.” G among the highest sewer rates in the country. Average monthly rates that were $30 in 2001 clock in at about $55 today and are E-mail [email protected]

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The Chesapeake Bay spans over 200 miles, and its and wastewater treatment technologies are helping communities are home to millions of people. Every day, municipalities big and small improve the health of their Siemens is helping improve the waters they depend on. waterways. Somewhere in America, our team of more That’s why, after years of neglect, the bay is starting than 60,000 employees spends every day creating answers to come back. And it’s just one example of the work that will last for years to come. Siemens is doing from coast to coast. Siemens purification

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go WATER WORKS New York City’s ﬁ rst–and only–water ﬁ ltration plant is a marvel of engineering.

By Tod Newcombe Photographs by David Kidd

ew York City’s water is so fresh and clean that it remains one of only fi ve large cities in the nation that isn’t required to fi lter its drinking water. That will change slightly in N2012, however, when the Croton Water Filtration Plant goes online and starts fi ltering about 10 percent of the city’s drinking water. Back in 1993, the U.S. Environmental Protection Agency ruled that the Croton Watershed—one of three operated by the city— required fi ltering, launching an initiative that has become one of the largest, most expensive water fi ltration projects in the country. Located on a golf course in the Bronx, the plant was required to fi t on a footprint smaller than 10 acres, forcing engineers to blast down more than 90 feet into bedrock, and then stack the various fi ltration components on top of each other. Today, the estimated $2.8 billion project is a construction bee- hive, with workers installing massive pumps and pipes, huge holding pens, enormous tanks and miles of electrical wiring. On a cold, winter day complete with falling snow, men and women in hardhats work steadily underground in the massive 600-foot-long caverns of concrete, their radios blasting Jimi Hendrix or Lady Gaga as they bolt and weld the fi ltration plant to life. At the very bottom of the site is the 9-foot-diameter, 8,000-foot- long tunnel that will connect the plant with the aqueduct that deliv- ers water from reservoirs more than 60 miles away. Bernard Daly, the site’s executive construction manager , stands in the middle of the tunnel and tries to explain the immensity of the project he oversees. Talking in a clipped Irish accent, Daly explains that the tunnel is about to be sealed off , the fi rst of the fi nal stages of construction that will end in another 24 months or so, if all goes according to plan. “Above, we’re going to build a golf driving range over the entire site. You won’t know you’re standing on a fi ltration plant,” he says, knowing that the public will never see what he and his workers have created. G

See more photographs of the Croton Water Filtration Plant construction project at: governing.com/Croton

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go Left: Work continues on the installa- tion of massive ultraviolet units that will disinfect drinking water pumped in from the Croton Watershed. Top left: A worker uses a machine to fi t pipes. The multilevel plant is laced with more than 66 miles of pipe, some of which are more than 5 feet in diameter. Top center: Several of the plant’s 48 fi ltration tanks. Top right: One of the 1,300 workers who have been building the $2.8 billion fi ltration plant, which is scheduled to go online in 2012. Above: The nearly complete tunnel, which will link water fl owing from the reservoirs to the plant, is 9 feet in diameter.

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go For incoming governors like New York’s Andrew Cuomo, efﬁ ciency commissions are more important now than ever before. By Jonathan Walters BoardBy the t’s perennial. A new governor is elected on promises of ﬁ rst reinvention commission, which was convened in 1916, was making government more effi cient—eliminating waste and followed by 13 more, the latest under current Virginia Gov. Bob rethinking programs. After inauguration, the new adminis- McDonnell. That’s an average of one every 6.5 years.

tration convenes a group of well-respected citizens—often Practiced or not, these exercises have always had a tough time APIMAGES.COM from the business world—to scour state government for when it comes to implementation. “It’s like trying to coax 100 duplication, obsolescence and ineffi ciency. This group, or feudal kingdoms into seeking nation-state status,” Leighty says. As Icommission, is charged with creating a blueprint for setting gov- he sees it, every department is a feudal kingdom, and no nation- ernment on the road to high performance. state ever came about because all these kingdoms wanted to join The rhetoric is grand. So are the promises as numerous rookie together voluntarily. “It’s invariably the result of a strong outside governors—28 newly elected this year—try to wrestle their bureau- force,” he says. That strong outside force is the commission. cracies into smooth-running machines that also, by the way, save the general fund a bundle of taxpayer dollars. he modern-day model for government performance study It’s a safe bet that a dozen or so such commissions will be in commissions may have been set by the Texas Performance action this year. Those commissions will be asked to review every- Review (TPR). Launched in 1991 by then-Texas Comptroller thing from services states should deliver to the way government T John Sharp and the late, legendary Lt. Gov. Bob Bullock, the should be structured—including taking a hard look at the authori- review was a top-to-bottom scrub of state government for effi ciency ties, commissions, boards and agencies that have accreted over and eff ectiveness. It was inspired by a looming state budget crisis and the decades. The work will refocus state government on its core a primal fear that some in the Legislature might fi nally and credibly responsibilities and suggest ways to restructure government so that push for a state income tax to solve the state’s fi scal problems. The it meets those responsibilities in the most effi cient manner possible. TPR unleashed 100 auditors on Texas government to fi nd savings, What’s questionable is whether these blue ribbon commissions identify cuts and look for potential alternative revenue streams. will—or can—make a diff erence. Recent eff orts show mixed results: According to a study by the University of Texas’ Lyndon B. Some reports achieve almost immediate paper-shredder-ready sta- Johnson (LBJ) School of Public Aff airs, the TPR had some posi- tus, while others actually gain traction. Why are some helpful and tive—although clearly mixed—results. Auditors identifi ed nearly others an expensive waste of time? 975 ways the state could save $5 billion . Those ideas included con- Bill Leighty, former chief of staff to Virginia Govs. Mark War- solidating 12 human services departments into one and expanding ner and Tim Kaine, and a veteran of two state government rein- experiments with privatized prisons. In the end, the state enacted vention commissions, is one of the nation’s more accomplished, about two-thirds of the TPR’s recommendations, adding up to self-taught scholars on the subject. He notes that Virginia’s $4.2 billion, $2 billion of which came from tax and fee increases.

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go If Texas’ attempt at using a top-to-bottom government review cabinet secretaries is there,” Leighty says, “he should walk right to eff ect change was credible, then California’s recent eff ort to rein- up to them and ask, ‘How are you doing on recommendation X?’” vent government was a real stinker. The 2004 California Perfor- A more recent and well regarded example of how to set up mance Review pretty much represents a master list of don’ts when and run an eff ective commission was in Georgia, where Republi- creating a reinvention commission and trying to peddle its wares. can Gov. Sonny Perdue’s Commission for a New Georgia modeled Gov. Arnold Schwarzenegger started the process by saying he many of the Bacon/Leighty keys to success, and it included a wide was going to “blow up the boxes,” says Mark Baldassare, president variety of players: business people, bipartisan lawmakers, govern- of the nonpartisan Public Policy Institute of California. “Naturally, ment insiders, members of various advocacy groups and informed the people in the boxes are all going to be very nervous.” Instead citizens. Instead of immediately tackling proposals that had built-in of bringing all the parties together to begin a long, hard eff ort to or dug-in opposition, the commission pursued issues that everyone actually restructure, it had an antagonistic quality from the start. could agree on, such as improving state contracting procedures and And that, Baldassare notes, made it hard to implement. more effi cient disposal of surplus government property. Nor did it help that the Performance Review’s fi nal report was Observers think another characteristic made the Georgia more than 2,500 pages and contained 1,200-plus recommenda- commission successful: It set itself up as a transparent, standing, tions. In other words, there was something in it for everyone not consulting group that made recommendations for improving pro- to like—and for everyone to resist. According to the LBJ School cesses and reorganizing functions as it found things to fi x. analysis, the Schwarzenegger version of War and Peace ended up Still, there will always be some unavoidable tension in setting mostly being about war. It picked fi ghts with unions, the Legisla- up and operating one of these commissions. Often the impetus ture, dozens of boards and commissions—along with their mem- for a commission is that a state is in deep and immediate fi scal bers, staff s and constituents—and just about every other special trouble. Yet many commissions recommend signifi cant structural interest native to the Golden State. And it simultaneously sought reform, which takes time. “You’re redoing the machinery of gov- to beef up executive oversight in a lot more of California govern- ernment,” says Bacon. “The problem is, you need savings right ment, a notion that the California Legislature didn’t care for at all. now, like a payday loan. As a result, real reform oftentimes gets So it wasn’t much of a surprise when then-Senate President pushed aside due to the immediate demand for savings.” John Burton characterized the governor’s game plan for Califor- The most immediate and interesting test of how that point of nia’s salvation as “dead on arrival,” which it certainly proved to be. tension plays out is in New York, where new Gov. Andrew Cuomo This, in its way, was tragic, given the amount of sincere and hard launched not one, but three commissions: One to tackle Medicaid; work that went into producing the report, not to mention that it another mandates; and the third, called the Spending and Govern- included some sensible—and even vitally necessary—recommenda- ment Effi ciency (SAGE) Commission, to pore over state govern- tions on how to get some control over the behemoth that Califor- ment for duplication, ineffi ciency and obsolescence. According nia’s state government had become. Among other things, the report to Cuomo’s pre-election agenda, “The SAGE Commission will suggested tackling the state’s notoriously bureaucratic personnel be directed by business leaders with experience in restructuring system and eliminating 88 state boards and commissions. complex organizations, and its charge will be simple: Reduce the number of agencies, authorities, commissions and the like by 20 ow might Schwarzenegger have done it diff erently? percent.” While the charge might be simple, execution will not. Kevin Bacon, one of the professors who managed the With a $10 billion defi cit this year, the Empire State will be LBJ government transformation research project, off ers the latest—and easily one of the highest stake—proving grounds H a pretty succinct list on what a commission should be: for whether the magic of reinvention commissions is real or just • bipartisan and inclusive; rhetorical. Not since the California Performance Review debacle • transparent in its operations and dealings; has a state restructuring commission been handed such a com- • succinct in its recommendations; and plicated and starkly diffi cult job. The government in Albany has • clear in its ultimate goal of improving government in the been famously described as perennially “dysfunctional,” with a interest of all citizens. fractious Legislature that seems to love battling governors just for After that, it’s all about execution, including two absolutely recreation’s sake. Public employee unions, meanwhile, are sure to necessary ingredients for success. First, there must be a staff and fi nd nothing to like in any restructuring plan that involves cutting plans in place to implement recommendations. Second, there state jobs. They’re already spoiling for fi ghts over Cuomo’s pro- must be unstinting executive follow-up. posed state employee pay freeze and statewide property tax cap. “Most commissions’ greatest downfall is they don’t allocate That doesn’t mean that anyone should give up on New York the right level of resources to getting things done,” says Leighty. state’s ability to reform. There is hope. The key will be commit- He admits that it sounds contradictory since many of these comment, says William Eggers, author of numerous government missions are about saving money. But the staff and resources must transformation books. “People know they can outlast these things be in place to follow up on commission recommendations. if they’re just one-off s,” he says. “To be successful, a commission Meanwhile, governors who launch reinvention eff orts must needs to be serious—and serious over the long haul.” G signal that they mean business, and they need to signal it constantly. “Every time the governor walks into a room and one of his E-mail [email protected]

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go Problem Solver Real-world solutions and ideas for government managers. WIKIPEDIA/DANIEL SCHWEN Chicago Goes to Court To cut costs and save face, police misconduct cases are going to trial—all of them. By Heather Kerrigan

n 2009, Chicago’s court system was Court for the Northern District of Illinois, reputation for settling out of court, and hopelessly clogged by cases alleging to notify him that the city would be chang- the Police Department thought the law- police misconduct. For years, the city’s ing its strategy for dealing with lawsuits yers had come to view misconduct cases IDepartment of Law had watched as the fi led against police offi cers. Rather than as easy wins. number of misconduct allegations crept settling these cases out of court, the city After reviewing the city’s settlement upward. With the increasing strain on would take them to trial. strategy, the Law Department came to municipal resources, Chicago’s attorneys “I have asked the Department of Law the same conclusion that the police had. were forced to settle many cases out of to litigate those cases which would have But there was a problem: Taking every court, which refl ected poorly on the city’s been settled [as] a matter of fi nancial con- case to court would require resources well bottom line and police force. cern,” Weis wrote. “If plaintiff s know their beyond what the city could aff ord. Given But Chicago found a somewhat coun- complaint will in fact be litigated, more the available staff , there simply was no terintuitive way to save money and save focus and concern will be given to the fac- practical, in-house way to try every case face—by taking every single police mis- tual validity of the complaints signed.” brought against an offi cer. conduct case to court. In other words, if plaintiff s knew So the city turned to private-sector In July 2009, Chicago Superintendent they’d have to go before a jury, they’d be fi rms to fi nd defense attorneys. The of Police Jody Weis wrote to James F. less likely to fi le frivolous misconduct move wound up saving money. Thanks Holderman, chief judge of the U.S. District cases. Plaintiff attorneys knew the city’s to the recession, the fi rms weren’t picky

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Editorial Prepress $ZBO .BHFOUB :FMMPX #MBDL m PAGE Other OK to go with how they got paid. Rather than pay- almost 50 percent. In addition, cases would have been willing to settle out of ing the lawyers an hourly rate, the city brought against offi cers are being volun- court for less than what was awarded to a developed a bulk-case program. Any eli- tarily dismissed at higher rates. In 2009, plaintiff at trial. Add to this attorneys’ fees gible law fi rm chosen by the city would about 18 percent of plaintiff s voluntarily and trial costs, and some have argued that receive a fl at fee per case, plus a bonus if dropped their case. By October 2010, the city loses money. However, the declin- the city won the case. Firms hired by Chi- nearly 46 percent of plaintiff s dropped ing number of cases still leads to overall cago were required to build up each case their case. The Department of Law told savings for Chicago. and take it to trial—they were prohibited the city that the results are “nothing short The feedback from those most closely from settling cases out of court. “By pay- of astonishing.” aff ected—law enforcement offi cers—has ing them that fl at fee, that actually made Even when the city takes a case to also been positive. They had long advocated this much more cost-eff ective for us,” says trial, it’s still paying less money than it for small federal civil rights cases to go to Jennifer Hoyle, public aff airs director for had when it settled out of court. In 2010, trial, in some instances arguing that settling the Law Department. the city was projected to pay approxi- the cases refl ected poorly on individual offi - The standing contract, which currently mately $1.7 million in case settlements. cers’ performance, especially if a trial would involves 14 diff erent law fi rms, pays the In 2008, it was $9 million. Farming out have proven that the offi cer had acted fi rms $35,000 per case in monthly install- every single case to private counsel would appropriately. As Weis stated in his 2009 ments over two years, plus a $15,000 bonus still cost only about $5 million per year in letter to Holderman, offi cers had raised for each win. Not every case goes to outfl at fees and bonuses, so the city comes “concerns that their reputation is being side attorneys. The private fi rms mostly out ahead. The Law Department attri- tarnished, they are not allowed to clear handle small-exposure cases—those seek- butes the overall savings to the decreased their names, and, that criminal defendants ing damages of less than $100,000—which number of lawsuits fi led—and it expects are using civil litigation to either assist their the city considers defensible. that downward trend to continue. If the criminal defense or to intimidate the offi - The move is working better than any- number of cases continues to fall, so will cers from conducting lawful enforcement one had anticipated. In the fi rst year after the legal expenses. activity.” Thanks to the new strategy, that the city began taking every case to court, The savings presented by the city have mentality is changing. G the number of federal civil rights cases in some cases drawn criticism from plain- fi led against police offi cers dropped by tiff s’ lawyers. The lawyers argue that they E-mail [email protected]

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By Katherine Barrett and Richard Greene

Data Lesson Louisiana learns to use information about its students to create real-life beneﬁ ts for them.

ne of the most contentious But data by itself gets you nowhere. sands of man hours on data cleanup, data topics in the public sector Questions about how this information merging, data organizing,” says George these days—at local, state and should be put to use are the ones begging Noell, executive director of the Offi ce O federal levels alike—focuses for good answers. It’s our tendency in of Strategic Research and Analysis for on K-12 education. Many agree that this column to stay away from topics for the Louisiana Department of Educa- something must be done. You would have which we can’t provide time-tested and tion. What Noell and other researchers to be a hermit to avoid running across a proven models. Given the critical nature were fi nding is that they could get tons of depressing multi-hued chart that shows of this issue, however, it seemed more snapshots about individual years, but they the U.S. lagging other nations on this than worthwhile to look at the work that’s couldn’t see the moving picture—which front. When it comes to fi guring out what being done in Louisiana, a state that’s would require easily tracking the infor- actions should be taken—and how we can clearly further along than many others in mation they wanted across years. best evaluate their worth, success and using educational data and off ers at least But the times and technology have failure—the academic fur begins to fl y. a hint of benefi ts to come. changed. With better use of new tools, One potent trend has emerged: More Louisiana’s education system began data now is collected and stored in a way educational data is being gathered now using individual student identifi ers back that makes access much easier. Perhaps than ever before. This is partly driven by in the mid-1990s. The point was to track more important, computers now allow $250 million in American Recovery and student progress as boys and girls moved the information to be accessed in close Reinvestment Act funding and reforms through the education system. Having the to real time. Faculty can use data about pushed by the Obama administration. data identifi ers was a great start, but for this year’s ninth graders to help students It’s also been spurred by improvements some time it was really tough to make use while they’re still in ninth grade. In the in technology. of this material. “I literally spent thou- past, information about the ninth-grade class could not be accessed in a timely fashion, which meant it could only be used to help inform decisions about future ninth graders.

iSTOCKPHOTO.COM Some readers are doubtless waiting for us to get to the question of standardized tests—one of the most vigorously debated topics in education. But we’re going to skip right over that. Louisiana’s data goes far beyond big standardized tests: It is focusing on attendance data, capturing information on a weekly basis so educators can look for shifts in attendance patterns at the district, school and individual levels. When unexcused school absences accelerate, administrators can deal with them right away. This is important, says Noell, because “dropping out is not an event, it’s a journey.” Statistically, it’s apparent that the journey leading up to that catastrophic life event is an increasing rate of absences. With attendance data, Louisiana can target high-risk students before they become

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By Andy Kim

a dropout statistic. (They can also blend information to focus on individuals who Pay-for-Performance Snow Removal most fi t the dropout portrait—students Some services—no matter how dire the budget—just can’t be cut at certain times who are behind their age group in school, of the year. One such service is snow removal in the winter. In 2009, the city of for instance.) Quincy, Mass., initiated a pilot program that lowered snow-removal expenses by Louisiana also gets immediate feed- revamping payment methods. The city’s Department of Public Works awarded back on new programs it introduces. a contract to a snow removal company that pays per inches of snow plowed, Consider the Ninth Grade Academy, rather than the standard pay scheme of number of hours worked. It eliminates a kind of school within a school that costly idling time charged by most contractors, holds the company accountable allows students to interact in smaller for plowing certain parts of the city and pays based on the amount of snow each high school communities with more snowstorm produces, with larger payments for larger storms. Mayor Thomas direct teacher attention. The theory is Koch is expanding the program this winter by enlisting another snow-removal that students will be more successful in company to cover other parts of the city. Half of the city’s six wards will be cov- their high school careers if they get more ered in this expanded pilot, with the remaining areas plowed by a combination help in the transition to high school. of private companies and city trucks—paid hourly. But as with most programs, success is often determined by how the program is implemented, and that varies from school to school. Louisiana’s data systems have enabled it to look for schools that seem to have better results on this iSTOCKPHOTO.COM initiative and those that aren’t doing as well. Educators can then investigate what the diff erences are. The data also points more quickly to extant programs that aren’t successful. For example, the Options Program for ninth graders helped students work toward a GED diploma. A review of the longitudinal data demonstrates that it hasn’t worked well, and a working group is in place to fi gure out how to change or replace it. Louisiana’s intense use of educational data has come with numerous lessons. One key lesson is that data has a price, so you need to know the reason you’re collecting information and who will be able to use it. Another is that you must understand what data systems can and Teaching Teen Parents can’t do, and who they will benefi t. “It’s Texas has the third highest teen birthrate in the country, according to the Centers not all going to be relevant to teachers for Disease Control and Prevention. For every 1,000 Texas females age 15 to 19, and some that’s relevant to teachers 63 will be teen mothers. In an effort to lower the state’s teen birthrate, state offi cials won’t be relevant to policymakers,” use two programs to teach teens the realities and responsibilities of teen parent- says Noell. “There are defi nitely good ing. Parenting and Paternity Awareness is a 14-session curriculum focusing on people who get this, but certainly our topics that include the fi nancial challenges of single parenting, the importance of popular discourse at the federal level father involvement and the inner workings of child support. High schools receive is not getting that diff erent consumers training on implementing the program, and use it to fulfi ll a 2008 mandate in the need diff erent levels of granularity in state’s health curriculum requirement. The other program, No Kidding, is a series of the data. The same data won’t be useful presentations where young parents talk about their fi rst-hand experiences as teen to everybody.” G parents. Both programs were developed with Find more ideas for creative programs at help from the Texas Attorney General’s Child E-mail [email protected] governing.com/ideas Support Division.

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By Steve Towns

Tackling a Catch-22 Colorado builds better e-government one micro-grant at a time.

s the fi nancial vice tightens on of $100,000. Another 40 applicants were town won $8,000 to buy video gear to local governments, there’s a off ered free services from SIPA—things conduct telemedicine appointments. And widespread assumption that like website development, payment pro- $1,350 will help launch online class regis- A technology can help agen- cessing and Google applications. In all, trations in another rural village. cies maintain critical services with less 89 eligible government entities applied All awardees were chosen with an eye money and fewer employees. It’s true and 64 went away with something. toward incenting further e-government that automation done correctly can John Conley, SIPA’s executive director, innovation, but pressure for results was help, but there’s no avoiding the fact says applicants tended to be small cities kept intentionally low. Grant applicants that it usually takes upfront investment and counties in rural parts of the state— needed their elected offi cial’s blessing to implement what ultimately may be many of which are struggling to meet to apply—local leaders must sign off on money-saving technology. For local gov- basic technology needs. For instance, one what’s called an “eligible governmental ernments mired in the depths of a reces- applicant received $549 to buy an account- entity” agreement—but the SIPA money sion, that’s a tough proposition. ing program that will let the city post gov- comes with lower expectations than funds carved painfully from city or county bud- In January, Castle Rock, Colo., gets. Indeed, some of the projects may won a $6,400 SIPA micro-grant fail—and that’s OK, Conley says. for an open data initiative. “We want every applicant to succeed, but if two or three or fi ve of them don’t, we’re still getting people to think cre- atively,” he says. “We’re going to accept a level of failure, because we want them to take those lessons learned and use them on their next project. This is intended to be an incubator of innovative thought in local, rural governments.” Befi tting the small grant amounts, SIPA kept the application process as simple as possible, asking just 13 questions designed to be answered in less than an hour. The cash comes from leftover budget money the self-funded authority has amassed over the past fi ve years. SIPA, which sup- ports itself through fees on electronic BILLY HATHORN BILLY driver’s license renewals and other Web Colorado’s Statewide Internet Portal ernment spending information online. transactions, intends to plow that money Authority (SIPA)—a quasi-governmental Another will receive cash to purchase GIS back into communities through the grant organization that runs the state web- software to support 911 dispatchers. program over the next few years. site—is addressing this Catch-22 through “The average citizen would think these “I grow weary when people think gov- a new program that gives micro-grants to are fundamental services that govern- ernment doesn’t work anymore,” Conley the state’s cities and counties. The idea ments already are supplying and funding,” says. “This is a way to show that this stuff is to give away small, but vital, amounts Conley says. “But if you’re doing zero-sum does work if you put some resources in of money to fund technical innovation budgeting, even small amounts of tech- the right hands.” through a very simple grant process. So nology spending mean a city council may In other words, a little bit of help from far, it appears to be working. need to cut somewhere else.” SIPA might go a long way. G In January, SIPA announced cash Other projects go beyond meat-and- awards for 24 applicants totaling just shy potatoes software purchases. One small E-mail [email protected]

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By Girard Miller

Curing a Cost Curve With health care driving state spending, a focus on quality care could help cut costs.

any of us—and I am one of their potential exposure to punitive them—have been skeptical damages in a future case of alleged mal- of promises made during the practice. Even with a spotless record and Mhealth-care debate, namely consistently improving quality scores, the claim that the health-care reform such providers would still be liable for law could bend the medical-cost curve. I malpractice awards for actual damages, continue to have my doubts. That said, I including lost income. But their risk of strongly support the Obama administra- multimillion dollar punitive damages tion’s new eff orts to focus on quality of would be curtailed, and the plaintiff ’s care. It has real potential to cut costs. attorneys would know that. Insurance The new 10-year, $10 billion initia- rates should directly refl ect the lower tive that Obama announced in November risk of litigation costs. seeks to boost the quality of medical care This arrangement would provide by eliminating mistakes, improving effi - iSTOCKPHOTO.COM strong incentive for providers to clean ciency and transferring the proven tech- partisan strategies to participate in it. up their act and become quality fanatics. niques of quality control management The challenge is to fi nd a way for the Mistakes would decline, patients would from the factories and service-processing state and local governmental health-care get better care and redundant procedures industries to the health-care sector. IBM, purchasers to exercise their collective would fall off . Meanwhile, the perenni- the American Nurses Association, insur- bargaining power to insist on quality ally incompetent would pay higher insurance giant WellPoint, the National Busi- improvements and control. This can’t ance premiums and suff er the wrath ness Coalition on Health and consumer be done from Washington, D.C. State- of juries when their track records are advocates have come out in support of this level eff orts and policy coordination will exposed in court. nonpartisan eff ort. ultimately make or break this quality There could be a fi scal “penalty” for 10 There’s no guarantee that improv- initiative from the demand side, while states, including California. These states ing quality will necessarily lead to lower the White House seeks solutions on the secretly siphon off a chunk of punitive costs. But health-care expenses could supply side. damages awards and use them as a hidden actually decline if providers bungle fewer There’s an opportunity to use another revenue source through so-called “split cases, and if there is someone around to hot-button medical-care issue to lever- award” statutes. These states would col- remind chronically ill seniors to take their age the quality-care initiative. By pushing lect less. However, that should be a drop medications. for state-level tort reform (such as limits in the bucket compared to the statewide Unlike the $1 trillion health-care on punitive damages) as an incentive to gains in quality, reliable care and the dam- reform plan, this program has a modest improve quality, a win-win solution could ages that are avoided. budget and humbler aspirations. Even so, reward conscientious health-care provid- The business community would have $1 billion per year is enough to get indus- ers with reduced litigation risks and costs. preferred to achieve tort reform by federal try attention if deployed strategically. The This is where meetings with industry action, which is understandable because president’s more realistic expectations leaders at the state level could prove most it would simplify the rules for multistate could be readily met if the central players productive. The insurance companies, fi rms. But they might be wiser now to pur- work together. Let’s give this one a chance. medical associations and hospitals that sue state-level actions and let the “labo- Anyone who remembers the medical mal- constantly complain about tort reform ratories of democracy” in our federalist practice and ineptitude in the movie The have an opportunity here to “put up or system provide some tangible examples Hospital (starring George C. Scott) should shut up.” of what can work. With large Republican urge support of this initiative. State-level medical tort reform, for victories in state legislatures last year, Governors, state insurance com- instance, could enable a doctor or hos- they might fi nd plenty of opportunities missioners, county commissioners and pital to accumulate “consistent qual- to achieve success in the state capitals. G mayors should follow this eff ort closely, ity control” points over time. Superior and craft their own bipartisan and non- scores when aggregated would reduce E-mail [email protected]

50 GOVERNING | February 2011

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Mike Flood

Position: Speaker, Nebraska Legislature Age: 35 Education: B.A., University of Notre Dame; J.D., University of Nebraska-Lincoln Occupations: Lawyer; radio broadcaster

n a Time magazine profi le, the 35-year-old speaker of Nebraska’s unicameral Legislature likened his life in his hometown of Norfolk, Neb., to the old TV show Ed. In the show, the main character was a lawyer and bowling alley owner. In Mike Flood’s case, replace the bowling alley with a radio station. I Flood has worked in radio since he was 15. As a student, he ran the Uni- versity of Notre Dame’s radio station and started his fi rst station during his fi rst year of law school. Today he helps run two radio stations: one classic rock and the other country. As a broadcaster, Flood became aware of and active in the issues facing his state, so he ran for state senator and was elected in 2004. Three years later, Flood was elected speaker of the Nebraska Legislature. At the time, almost half of the senators were term-limited, providing Flood the opportunity to take on a leadership position without having any experience as a committee chair. As speaker, he sets the legislative agenda for the 50 senators in the nation’s only state unicameral Legislature. Flood acknowledges that his fast rise was due to favorable circumstances. But fellow senators claim Flood’s success as speaker should be credited to his deft negotiation skills and the ability to fi nd common ground on issues that include education and water use. Those skills will be useful when the Legisla- ture meets over the next two years to address the state’s $986 million defi cit. “The speaker really has a role in our Legislature [in] trying to bring people

together, trying to fi nd solutions to confl ict,” Flood says. —Tina Trenkner ERVIN ROBERT

52 GOVERNING | February 2011

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