I-

GOVERNOR'S COMMITTEE

, ON GOVERNMENT SPENDING REFORM

December 1991 TABLE OF CONTEhTS

SECTION I[ EXECUTIVESUbMARY

Chapter 1: Process and Achowledgements 1 Chapter 2: Key Findings 10 Chapter 3: Implementation Wenge 16

SECTION WI BACKGROUND Chapter 1: Economic Environment 25 Chapter 2: Current Budget Oveniew 33 Chapter 3: Specific Objectives 36 -.- irc SECTION I11 RECOMMENDATIONS

Chapter I: Top Opportunities 38 Chapter 2: Other Recommendations 106 Chapter 3: Near Term Guidelines 153 Chapter 4: Long Term Vision 155

SE-CTION IV APPENDICES Chapter 1: Citizen Input 158 Chapter 2: Opportunities to be Quantified 161 Chapter 3: Task Force Members 164 12 LL:

Section I

Chapter 1

Process and Acknowledgements

. Structural Deficit Requires Fundamental Changes

Iowa State government is facing a structural defiat of about $150 million for the 1993 fiscal year. When considering future Generally Accepted Accounting Prinaples (Gelstandards, the State's defiat is approhtely $300 million.

Governor Creates Committee on Spending Reform In Jdy 1991, Iowa Governor Terry E Branstad formed the Governor's Committee on Government Spending Reform, a Statewide committee to study and recommend permanent reforms in State government spending. Rather than increasing taxes, Iowa is working to put a stop to spending that exceeds revenues. The committee's mission was to develop and implement short and long-term strategies to reshape the future role and practices of Iowa governments with a focus on spending reductions.

LY The Governor's Comnuttee on Government Spending Reform is made up of 22 Iowans from the public and private sectors, including large and small business leaders, the State treasurer, county supervisors, mayors, legislators, and representatives from labor and agriculture organizations. Exhibit 1-1-1 provides the names and titles/companies of the committee members. Exhibit 1-1-1 GOVERNOR'S COMMITTEE on GOVERNMENT SPENDING REFORM

David Fisher, Chair onthank co. Des Moines, Iowa Loma Bumside Ferrychapin CountySupervisor South Central IA Fed. of Labor, AFLQO Storm Lake, Iowa Des Moines, Iowa Jim Cownie' Arlene Dayhoff New Heritage Associates HumanServicesCoundchair Des Moines, Iowa Cedar Rapids, Iowa Charles Edwards Michael Fitzgerald Des Mohes Register State Treasurer Des Moines, Iowa Des Moines, Iowa Tom Gould Joan Hest& I Younkers State Representative Des Moines, Iowa Honey Creek, Iowa +I &3 Jeanine Hettinga EmilHusak Hetbga Equipment, Inc. State Senator Clive, Iowa Toledo, Iowa Lee Liu' bpet LE.S. Industries Inc. Lopez & Heishman, Inc. Cedar Rapids, Iowa Iowa City, Iowa Anita Mandelbaum MikeMcCanille Coopers & Lybrand Mayor Des Moines, Iowa Fort Dodge, Iowa Delores Mertz Merlin Plagge' State Representative Farm Bureau o#osen, Iowa West Des Mobes, Iowa Joan Poe AlRenken Standard Distributing Co. ALCOA Waterloo, Iowa Davenport, Iowa Harry Slife Betty Snyder' State htor h4ayor Cedar Falls, Iowa Clinton, Iowa Charex Yanney Guarantee Roofing & Siding Co. Sioux City, Iowa 'ExecutiDe Committee Member

-2- The Committe met for the first time on July 23 and met monthly throughout the 20- week process. Shortly after the Committee's first meeting, an executive committee, consisting of the chair and five other mmmittee members, was established by the chair. The executive committee was responsible for directing and reviewing the work of task forces between the full Committee meetings. Each task force met approximately seven times between late August and mid-November when final task force reports were issued.

Exhibit 1-14

GOVERNORS COMMITEE ON GOVERNMENT SPENDING REFORM SCHEDULE

DATE

i.:.

I --T------I -T----- Several coordinators and analysts from various State departments also assisted the Governor's Committee on Spending Refom in this effort. Exhibit 1-14 provides the names and departments of the coordinators and analysts.

Exhibit 1-14

PROJECT STAFF

Steve MasIikowski Paul Carkon Project Manager Director of Analysis Department of Management Department of Management COORDINATORS ANALYSTS David Ancell -Collections Ron &nosson -Public Finance Dept of Elder Affairs Dept. OfManagement Dave blender -Technology David Ancell - Collections Enhancements Dept. of Elder Affairs Dept. of cultural Affairs, IPT Janet Galloway - Primtization Mary Jensen - PPiDatization Dept of commerce Dept of Transportation ---- Rich Jacobs - Public Finance Kathy Mabie - Executive Branch Mew Dept. of Revenue and Finance Dept. of Management Mike Lipsman - Executiue Brunch Lisa Oakley - Intergmmmtal Rtmku Relations Dept. of Revenue and Finance Dept. of Employment services Jo Page - Staiewide MceDelivoy rim Overland - Stattmi.de !%mice Dept. of Commerce, Insurance Division-7 Delivery Daniel Winegarden - Technology Enhan Dept Human services of Dept. of Commerce, Insurqce Division -.-I_...---- David Plazak - Public Finance Christine Van Meter - Public Finance/ Dept of Economic Development lntergmmental Relations Dept. of Management

1Q3rn.1 C/DL

-6- We also sought the help of outside consultants, Booz.AUen and Wton,to Serve a few key roles in helping the committee and the task forces in achieving OWobjective. The Booz*AU.en personnel assisted in the process by providing task force mrdination, issue management, meeting fadlitation, quantification of opportunities, and integration of final recommendations.

Exhibit 1-14 I BOOZ*ALLENTEAM GaryNeilson

John McCarter

Jay Marshall

Eric small

.. Mark Thut

-7- I'

Exhibit 1-1-7 provides the overall project team structure including the Governor's Committee, Executive Committee, Task Forces, coordinators, analySts and Booz.Men.

* Exhibit 1-1-7

ROLES AND REUTKWlSnlPS

mi--- In addition, we received hundreds of letters and ideas from people in State and local goverment and other State am. We gratefully acknowledge all those who have partiapated in the process, and we invite you and others to continue to be a part of the changes that are yet to come as a result of this groundwork. What Went Into the Process of Making Recommendations

We approached this effort aggresively, given the relatively brief time frame in which we had to work and the scope of our task. The task forces were given a framework of developing recommendations and identifying opportunities based on three alternative scenarios: 10 percent, 20 percent and 40 percent reductions. This framework helped to ensure that the task forces broke through conventional paradigms to think about fundamental changes.

We tried to generate a free flow of ideas, first considering ideas objectively, then looking at benefits and costs and finally implementation issues. In this process, the nature of the approach is as important as the steps taken. The Governor set the tone by giving us our charge and stating, 'There are no sacred cows." The spending reform process was done in a spirit of openness, involving as many people as possible. Our objectives were to:

-8- find the best ideas; communicate the importance of this effort; get ppleto buy into the process of change; reduce the number of surprises; instill a fact-based, hypothesis-driven orientation. We looked at opportunities in two ways: the near-term, action oriented, and the long- term vision of how govemment could be operated differently in Iowa. In this way we tried to establish a pattern of continuous improvement in the process of change. This effort does not end when we make our recommendations to the Governor on Ikcember 18,1991. This process will continue immediately as short-term recommendations are implemented, and will go on as further spending reforms are developed and longer- term action is taken to redefine government in Iowa.

Recommendations Include Continuous Improvement

We applied the prinaples of continuous quality improvement used for many years in Japan and, more recently, in American business, to OUT recommendations, apedally those reflecting long-term vision. The total quality prinaples first advocated by Dr. Edwards Deming, a native of Sioux City, Iowa, emphasize the importance of this ongoing, innmental process. Iowa is breaking new ground by applying prinaples of total quality management to the public sector.

Outcome of the Committee's Recommendations

Our recommendations provide options for bringing government in line with the demographics and the finanaal realities of the State. We established guiding prinaples and criteria for government spending reform. Thew will assist state and local government in making the restructuring transition.

If implemented, our recommendations will enable State govenunent to adequately fund ehitlements and standing appropriations; meet the fundamental needs of Iowans; allow for effective administration of State government; and maintain the State's top priorities in education and knomic development so progress can continue toward preparing Iowa's young people for quality jobs in Iowa's future.

The remainder of Section I-Executive Summary provides an overview of our findings and a plan for implementation. Section II provides an overview of the State's finanad position. section III provides detailed explanations of our recommendations and Section N provides a summary of input from athas, other opportunities for spending reform that have not yet been analyzed, and a list of the members of the seven task forces.

-9- Section I

Chapter 2

Key Findings

i. Economic Environment and Current Budget Iowa is not alone in facing fiscal difficulties. In the last two fiscal years, a majority of states have faced significant fiscal problems. According to the National Assodation of State Budget Officers, in fiscal year 1992,29 states cut $7.5 billion in spending. In order to bring Iowa's projected spending and revenues into balance for the fiscal year 1992, the Governor vetoed $42 million in spending and enacted a 325%across-the-board spending reduction.

The provisions of the Constitution of the State of Iowa require that the State's annual budget must be in balance. Iowa has met this requirement each year. However, in recent years the amount of the end of year balance in the State's General Fund has shrunk to zero. The General Fund budget is technically and legally in balance, but there is no margin for enor. Without a reserve fund, if revenues are below forecasts or if certain expenditures are above forecasts, immediate spending cuts have to be made to keep the budget in balance.

Although the budget is cunently legally balanced, we believe that it will not be balanced in coming fiscal years without spending reform. Growth in expenditures has ueated a sizable structural defiat for the State. The structural deficit will be in the neighborhood of $150 million in fiscal year 1993 and will grow larger over time.

Exhlbft I 2 - 1 IOWA STATE STRUCTURAL DERW

Besides a structural defiat, Iowa faces a defiat assaciated with a changeover to Generally Accepted Accounting Prinaples (GAAP).GAAP was introduced to government in response to the finanaal aises of several large aty governments during the 1970's. GAAP holds governments to a higher fiscal standard to guard L. -1 0- I -T------i V7mF i their finanad soundness. Under GAAP, governments are held to accounting standards similar to those which apply to businesses; receipts cannot be advanced prior to the date they are due, and expenses must be recognized when they are incurred. The Iowa Code requires that the State adopt GAAP standards and retire additional liabilities associated with adopting GAAP. The Code currently require the elimination of the GAAP defiat by fiscal year 1993.

Because of differences between the State's current budgetary accounting and current GAAP accounting rules, funding the GAAP defiat would require a onetime downward adjustment to the State's revenue account of $2% million. GAAP standard setting is a continuing process and several changes are antidpated which could reduce Iowa's GWdefiat. When we began our work in July, this "future" GAAP defiat was estimated to be about $150 million.

The GAAP defiat problem is a onetime problem which is in addition to the structural defidt. The total defidt problem faced by the State and the General Fund is approximately $300 million in fiscal year 1993, a result of the combination of bth the ongoing structural and onetime GAAP deficits (using GAAP after antiapated changes in 1993). This is slightly less than ten percent of the size of the General Fund budget.

.,- re The State's structural defiat can be traced to the fact that 60 percent of the State's budget is an "autopilot". This portion of the budget funds property tax assistance, school aid, entitlement programs and other statutory standing appropriations Exhibit I - 2 - 2 GENERAL FUND APPROPRIATIONS

$3,207 MM

Standing Appropriations

1982 1992

Souroes: Department of Management I #-357873G/DL -11- If Iowa t te government continues to take in revenues and spend at current levels, one estimate is that the deficit will be between $1.35 billion and $1.6 billion in the year 2007. Exhlbit I - 2-3 1992-2007 STATE OF IOWA PROJECTED DEFICIT

4.1g.L; 42 - 43 - 0.4 I 0.5 4.6 - 0.7 -

0.8 I 4.9 - -1.0 -

uodr -1.5 Trud Clawth -1.6 LaGK-ah

Spedfic Objectives

Simply stated, the State is experiencing fiscal difficulties, because spending has begun to exceed revenues. This has resulted in a need to restrain spending and examine the way in which government services are delivered. At the Committee retreat held at Drake University on September 17, we discussed the scope and objectives of the Spending Reform Project. We agreed that we would accomplish the following spedic objectives:

understand fundamentals, include issues 0 understand current situation develop a preliminary vision/mission for how functions could work differently quantify near-term improvement opportunities develop implementation plans identify long-term opportunities-quantifiable where possible-with issues to resolve identLfy the work remaining to be accomplished

-12- We felt it was necessary for the Spending Reform process to be aggressive, fact-driven and measurable. As mentioned earlier, the State has an estimated $300 million projected defiat for 1993. We felt it was necessary to iden* savings in excess of $300 million to allow the Governor and the legislature more flexibility in developing a balanced budget and to allow for contingenaes such as revisions in savings estimates.

To challenge the seven task forces to meet the objectives set forth, opportunities and recommendations were to be developed under three alternative scenarios: 10 percent, 20 percent and 40 percent reductions.

Ten percent reduction generally involve process improvement - doing things that are done today more eff iaently.

. Twenty percent reduction involve structural changes, for : instance privatizing services.

Forty percent reduction involve changing what is done, for example eliminating entire program or services.

Reductions of twenty and forty percent result from breakthrough thinking and point the way toward future restructuring of State government in Iowa. The overall result will be a downsized, more efficient government that better fits economic, demographic and technological realities.

Top Opportunities

After much analysis and debate, we offer "Top Opportunities" to refonn govemment spending. Exhibit 1-2-4 summarizes these " opportunities and the estimated savings potential. Please refer to Section ID, Chapter 1 - Top Opportunities for further details on these recommendations.

i

-13 Exhibit 1-2-4 SUMMARY OF TOP OPPORTUNITIES- SAVINGS PO-L OPPORTUNITY PAC1 (dl funds -$millions)-. - F" 1993 TY 1994 1. Centralize state collection efforts 39 $0.3 $9.0 2. Require payments of debts to the State prior to 41 $1.5 $1.5 Mptof licenses and expand the use of offsets 3. me of State owned fmland and the DNR 43 $6.7 so. nrpsery 4. Establish a youth correclional facility 45 $0.2 $0.2 5. Develop an Enterprise plan for technology 46 $1 .o $1.o 5. Knowledge based system for DHS eligibility 47 -0- (S 8.9 )* assesment 7. Common rrraMgement/mnsolidation of data 49 $0.6 $0.6 processingcarters 3. Comphensive K-12 education finance reform 52 $127.8 $178.0 ?. Use provider funds to leverage Medicaid dollars 63 $45 $45 LO. Adopt a mental health funding formula 64 $15 $35 11. Decategorize Foster Care/Change Spending 65 $4.8 54 .8 Mix/Cap Group Homes 12. Reallocate $50 million in motor vehicle use tax 67 $50 $50 revenues to the General Fund 13. Alternatives to the mental health institutes in 70 $1 $1 Oarinda and Mt. Pleasant 14. Elimi~tefunding provision for the Resource 71 $30 $30 Enhancement and Protection (REAP) fund 15. Reduce the number of driver's license Iocations 72 59.5 $9.5 from I41 to 19 and allow DOT to assume responsibility for motor vehicle registration and titling ,6. County administrative collaboation (30 centers) 74 -0- $27 > 7. Revise community college funding enhancements 77 $33.1 $47.2 ,8. Create a statewide assessment system 81 -0- $2.8 19. Improve the State's budgeting process a2 $4.5 $4.5 !O. Restmcture employee benefits 87 511.5 $11.5 !l. Restructure executive branch organization 91 $6.3 $6.3 2. Program eliminations, reductions, deferrals and 96 $39.6 $42.4 efficiencies - mAL - $4173- $498.4- 'Nofei Savings fiom knowledge based DHS system will be between $7.6 and $9.4 million annually beginning in 1995.

Other Recommendations

In addition, we identified over 40 "Other Recommendations" totaling over $90 million in fiscal year 1993 savings. Exhibit 1-2-5 summarizes these other recommendations and the estimated savings potential. Please refer to Section III, Chapter 2 - Other Recommendations for details on these recommendations.

-14 I

Exhibit 1-2-5 OTHER RECOMMEhVATIONS - Savings Potential (a11 fur ) Fiscal Year isul- Year RECOMMENDAnON S PAGE 1593 1994 1. Report past due obligations national credit bureaus. - - to 108 5140,000 5 200,000 2 Establish a state lien filing system. 1B 5270,000 5270,000 3. Create incentive for debtors to pay. 109 TBD TBD 4 Didore names of persons owing funds to the state. 110 TBD TBD 5. Study expansion of demonic funds transfer systems. 110 TBD TBD 6 Establish state collection standards and policy. 111 TBD TBD 7. wvee~gnizedreceivables. 111 5200,OOO s200,OOo 8 MOWforward with Iowa Communications Network. 113 TBD TBD 9. Rwiew pasom1 computer acquisitions. 115 TBD TBD 10. Initiate local government coordination of information systems. 116 TBD TBD 11. Expand use of voioe mail. 118 TBD TBD 12 Defer investment in Wallace Technology Foundation. 119 $l,o00,000 $1 ,OOO,OOo 13. Consolidate printing facilities. 119 5450,OOo -,oOo 14. Subcontract janitorial services. 122 5175,000 $175,000 15. Subconha nuning services at Iowa Veterans' Home. 123 SL240,000 sz240,000 16. Use prison industries to supplement printing 6ce. 123 s150,OOo s150,OOo 17. Sukontraa liquor warehousing and delivery fleet operations. 124 5930,oOo 18. Eliminate state haftpool, or consolidate with 1S.U. aircraft pool. 124 5619,Ooo SJ 9,OOo 19. Eliminate seed testing at Department of Agriculture. 125 S70,OOO 570,000 2Q. Partially eliminate Weights and Measures Div. in Dept. of Agri. 125 $758,000 5643,000 21. Reduce higher education assistance by the Iowa Student College Aid 126 U,9OO,OOO 53,900,000 Commission and study the Iowa Tuition Grant programs. 22. Reven savings from regents institutional restructuring to General Fund. 126 Sl2~,~,12000,000 23. Require regents institutions to obtain tort liability insurance. 128 TBD TBD 24. Incorporate interest earned by institutions into budget proass. 128 sw,ooo 52500,ooO 25. Review Universities Retirement Program. 129 TBD TBD 26. Use increase in tuition to offset need for General Funds. 129 7BD TBD 27. Run Board of Regents office with university appropriations. 130 Sl200,000 s1200,000 28. Revert SO% of Univ. of Iowa Hospitals & Clinics profit to General 130 WtOOo,~ )4,OOo,o0O Fund. 29. Adopt managed care statewide for Medicaid. 130 5325,Ooo S725,ooO 30. Cut optional Medicaid eligibility categories 131 u3,000,000 33,000,000 31. Cutoptional Medicaid services for mandatory eligibility catetories.. 132 515,000,000 ~15,oOo,o0O 32. Develop guidelines for the retention of investment earnings. 133 5500,~ 5500,OOo 33. Develop a uniform finandal repofling and accounting system. 134 TBD TBD 34. Review policies governing property exempt from property taxation. 134 TBD TBD 35. Reduce the State's CAAP deficit. 135 TBD TBD 36. Analyze tax expenditures. 136 " TBD TBD 37. Develop a statewide system for delivery of senices. 137 TBD TBD 38. Merge Community Based Corrections (CBC) boards into a central board 141 TBD TBD rysm. 39. lncrease use of intensive supervision at CBC facilities. 143 51,oO0,oO0 51,o0o,o0o a. Reduce the number of DOT maintenance garages. 143 TBD TBD 41. Modify distribution and administration of vaccines under TitIe XIX. 145 s289,Ooo 5289,000 42. Eliminate Regional Library System. 145 Sl200,000 Sl~00,OOo 43. Adopt "contractual LQYices- system for indigent deknw. 146 )65o,o00 s6K),o0o 44. Transfer Historical Sites to local govemmenb or organizations. 147 S173,000 s173,Ooo 45. Reduce the Agricultural Extension and/or fund education portion 148 55,800,OOo 55,~,~ thugh user fees. 46. Coordinate townships and counties to eliminate duplication of 148 s810,OOo s810,ooo WniCeS. 47. Implement Federal Funds Management System. -150 65,800,OOO 65,800,~ 'OfAL - $9~,l49,000 i94394,oOo 'BD = To Be Drimrnrd

-15- h . Section I

Chapter 3

Implementation Challenges Introduction

Our Committee realized early on that reaching recommendations would be the easy part. In our meetings, we consistently stressed three points: The Governor's Committee should be viewed as the beginning of the Spending reform process, not the end. In order for this first phase to be successful,we must put in place a structure to ensures that as many of the recommendations are turned into results as possible. We are working against two objectives - near term savings and long term continuous improvement.

The p-e of this section is to describe a game plan to proceed for both objectives.

Barriers to Change

The recommendations we presented in Section II represent a staggering amount of b ... change for all Iowans. While we recOgNzed this throughout the process, we also believe that given the ment budget situation and the kstestimates available to us for the future, these sorts of sigruficant changes are necessary to guarantee Iowa's long term fiscal stability.

We also realize that there are two critical pieces to the change process. The first is to fashion these recommendations into a padcage that can be supported by both the Governor and the Legislature. The second is to manage the change process for all Iowans, whether directly or indirectly affected by the recommendations. The process we will describe in this chapter is designed to manage both pieces. Part I: Setting the Direction The timing of this process was designed to coindde with the budget cycle for fiscal year 1993. As a result, the first priority is to turn these recommendations into actionable items for the Governor and Legislature to consider during the upcoming Session. In the spirit of finding real solutions to the budget problem, we used the "10/20/40" process to identify opportunities. That is, each task force challenged itself to find ways to cut 10 percent, 20 percent and 40 percent out of State General Fund spending. This process prevented people from protecting 'sacred cows' or from using "you can't do that" as an excuse for identifying opportunities. We feel that the process was sucessful in that we now have a wide variety of opportunities available that add up to more than the $300 million in near term spending cuts previously set as an objective. We knew that the budget process would sueen the universe of opportunities down to a package that would be acceptable to everyone involved and lead to SO0 million in I savings. However, we want to keep this issue visible to Iowans so that this report does not get lost in the budget process. We are committed to following the progress of these recommendations and continuing to report on successes and failures. Having said this, we encourage Govanor Branstad and the Demouatic and Republican leadership of both the House and Senate to continue the open, nonpartisan process of spending reform by working toward a mnsenw set of recommendations. This will be an important step in facilitating the implementation of significant spending reform and solving Iowa's budget problems.

At the same time, we recognize the need for a body of citizens, similar to the current Governor's committee, to play an important role in implementation: Keep up the attention and focus on spending reform Lead the development of the details supporting each recommendation

Continue the two-way communications with Iowans on the progress of spending reform

Develop a long term vision of government in Iowa and further spending reform :&-. ~,, recommendations to support that vision r

We also encourage the formation of a Spending Reform Council, similar to the current Governor's Committee. It would be supported by an implementation coordinator and analysts to continue the work on bth Current and future recommendations. We would ask the combined media in Iowa to continue to facilitate communication on spending reform as they have throughout the process with their coverage of the Council, the Legislature and the Governor.

Part 11: Managing the Change

Assuming that a package of rqommendations can be developed by the Governor and the Legislature and baked into the 1993 budget, the Council's work will then turn to the implementation of each of the initiatives. This implementation effort is critical not only to the benefits projected in this report, but also to future spending reform efforts. The reason: If the implementation is not successful, Iowans will note the missed opportunity and be very cynical about any future spending initiatives. We need to demonstrate commitment to the idea of spending reform while we have a chance.

-17-

._; I The actual implementation of agreed upon recommendations has nine steps:

Exhibtt t-3-1

IMPLEMENTATlON APPROACH

lczUmJ]fDL The remainder of ttus chapter describes each of these steps.

Step 1 - Establish Step-Level Target The first step is to tie the various initiatives together into an integrated program of spending reform. The package must also contain the "selling" message; that is, it must desaii both the rrmmmendations and the benefits to be gained by implementing them.. While this report represents a jumping off point for establishing the target, we suggest a brief report be put together once the recommendations are finalized. "This report should receive broad circulation to communicate the changes that are to mme.

The term "step-level" has been carefully selected. It is important to communicate the message to all Iowans that we are talking about significant change. These are not minor recommendations that will barely be noticed by the'majority of the State. Instead, these are fundamental changes in the way we provide and receive government services. The steplevel target we set out should also prepare Iowans for the long term changes that are being considered as spending reform continues. Finally, this first step should paint a picture for all Iowans of how the future could be different after a period of spending reform. By desmbing what the new vision could be and how it is different from today, it will help the buy-in process by eliminating any "fear of the unknom." It should also help facilitate the halog as the ZRg?slature considers the package.

-18- Step 2 -- Fine Tune the Vision III The second step clarifies the initiatives. Organizational implications of all of the proposed changes must be understood in detail. Our Committee completed its analysis within ii twelve week period. Because of this, the work was necessariiy broader than it I was deep. Before implementation can be completed, it will be necessary to work out the details of each of the recommendations. I This step is critical for two remns. First, full implementation is inherently a detailed process:. This means understanding how an initiative will affect: I fiocesses and procedures

Organization structure I i Fbple requirements, both numbers and capabilities 1 Information and systems requirements

Performance measures I Compensation I Training requirements *I Legal and regulatory requirements Etc. I Second, it is important from a credibility perspective to display understanding of the details. The people we are asldng to change as a result of these spending reforms have I been performing their jobs for some time and have developed a detailed understanding of the way things work today. In order to be credible in recommending a change, we must also understand the details so that we can describe credibly how the change will i be better than the status quo. This is why we enlisted the aid of so rriany State employees during ow process. I

We are recommending that the Spending Reform Council lead this effort, supported by a team of analysts as they see fit. It will be important to involve the targets of change - I those people whose jobs will actually change as a result of spending refom - in the process. I

I I

-19- Step 3 - Understand the Risks Our consultant during the Governor's Committee process, Booz.Allen and Hamilton, has identified several barriers to implementation through their experience with similar changes. These risks can be either internal.. .

Exhibtt C3-2 INTERNAL BARRIERSTO CHANGE

. . . or external: . ExhbftC3-3 MTrRNAL BARRIERS TO CHANGE

The effect that these risks will have on implementation must be understood x, that they can be spedficdly managed as part of the process going forward.

For our process, the Council, aided by State employees, should take the lead for understanding these risks. Methods could include:

-20- Interviews with managers and “customers”

Focus groups with affected parties Specific diagnostic tools to measure implementation risks

Setting up pilot tests of ideas before full implementation

At the end of this step, we should have a baseline understanding of the risks to be faced during implementation. It will be important to continue updating OUT understanding SO that we will not be surprised during implementation. Step 4 - Install Communications Processes As part of implementation, we must set up two way communications processes. One of the reasons that the Governor’s Committee was successful in generating so many ideas was the spirit of open communications that was fostered from the very beginnmg. Citizens and State employees alike shared many of their ideas with the task force, and this report has profited from their excellent suggestions. This must continue throughout implementation. The Implementation Council should be responsible for establishing lines of communication with all parties affected by the changes to come. We will also ask the combined media in Iowa to continue facilitating commurlications through their coverage of the spending reform process.

-21- I Step 5 - Define Implementation Tasks

The next step is to lay out the actual implementation tasks as an implementation plan. j Typical plan components are shown in Exhibit 1-3-4: i I

I Exhibit 1-39 ! . IMPLEMENTATION PLAN COMPONENTS j

I Missionlpurpose for the change

Change details

Steps (both implementation and specific 'risk management' steps)

Roles and responsibilities, both individual and group

Performance measures (milestone and completion as well as cost and other resources)

InlemaVextemal risk measures to be monitored

Resou rce s requi red

Isues to be resolved during implementation

Pilots, as appropriate

Communications processes and events

Contingency plans

The Implementation Coordinator, working with the Coundl, would be responsible for developing the plan. This plan should be considered a living document, subject to modification as events unfold and risks are better understood.

A key element of the plan is the assignment of true accountability for implementation of specific opportunities. Just as the Committee has recommended increasing State employees' authority and accountability for making certain dedsions, we are also recommending strict accountability for implementing the Committee's recommendations. The plan should speafy which managers are responsible for implementing recommendations and give them reasonable deadlines for completion. This responsibility should be a major part of their annual performance appraisal as well. -22- Timirig will be a special concern. The Committee has been aggressive in setting forth reconmendations that can be implemented in fiscal 1993. It will be critical to get the implementation process launched as soon as possible after December 18th in order to realize those savings and relieve the budget pressures. Step 6 - Establish Contingency Plans Another part of the implementation planning, related to timing, is the establishment of contingency plans. By this, we mean that we should be prepared for as many different scenarios as possible based on drfferent implementation risks. Far spending refonn, the targeted reductions are the critical factor. This report contains reammendations for spending cuts well in excess of the $300 million that is the COIWXLSUS requirement for spending reduction. Still, understanding that certain recommendations may not make it through the legislative process means that we should start with more than $300 million worth. Also, as the details of possible benefits become better understood, we may have to adjust our estimates accordingly.

Still mother contingency to plan for: Implementation may take longer than antiapated. For all these reasons, the Council should make sure to develop a contingency plan of extra spending refonn opportunities that could become recommendations if we find ourseXves short of the $300 million objective.

Steps 718 - Execute Plans/Monitor Progress The actual execution of the implementation plan must be monitored carefully - and publicly - so that all Iowans will be able to follow the progress of spending refonn. As mentioned previously, we believe that identifying the responsible parties and holding them (accountablefor results is a critical part of this monitoring. Their performance should be measured on: Schedule - "on-time' implementation Cost - Getting recommendations implemented within budget Benefits - Capturing the benefits projected by the recommendations Ongoing improvement - Identifying further spending reforms as pa. of the process

As the execution and monitoring goes on, the Council may want to suggest changes in the implementation plan based on progress made and lessons learned during implementation.

-23-

i, j I Step 9 - Assess Results As the final step, we recommend that the Council conduct a post implementation audit to communicate to Iowans exactly what has taken place in spending refom. This will also be a valuable aid in learning how to approach the development and implementation of future spending reform initiatives. A comprehensive Process

We understand that the process we have ouhed above is time consuming and complex. Successlkrl implementation of change is difficultand will consume a great deal of time and resources. However, we also feel that the critical nature of Iowa's financial health justifm an intensive process to ensure that these recommendations are implemented and that we relieve some of the budget pressure.

AU Iowans will be touched in some way by spending reform. We were heartened by the positive response the Governor's Committee received from all across Iowa. We hope that you will be just as involved in the implementation of recommendations that will save the State hundreds of millions of dollars.

Getting Started

The publication date of this report is December 18th. We suggest that the immediate next steps, to be completed by mid-January, indude:

Meetings between the Governor and the legislative leadership to work toward a consensus package of spending refom Formation of the Spending Reform Council

Naming of an Implementation Cmrdmator

Development of speufic budget initiatives that encompass the recQmmendations Establishment of communication mechanisms to deliver the messages from this report and subsequent actions to all Iowans, as well as giving them channels for feedback.

-24- i i Section I1 !

Chapter 1

Economic Environment

! Current Fiscal Difficulties

Iowa is not alone in facing fiscal difficulties. In the last two fiscal years, a majority of states have faced sigruficant fiscal problems. According to the National Association of State Budget Officers, in fiscal year 1992,29 states cut $7.5 billion in spending. In order to bring Iowa's projected spending and revenues into balance for the fiscal year 1992, the Governor vetoed $42 million in spending and enacted a 3.25%aaoss-theboard spending reduction. The Governor chose to bring the budget into balance by cutting expenditures rather than raising taxes, because a tax increase would drive people, investments and jobs out of the State.

Constitutional Requirement for a Balanced Budget

The provisions of the Constitution of the State of Iowa require that the State's annual budget must be in balance. Iowa has met this requirement each year. However, in recent years the amount Qf the adof year balance in the State's General Fund has shrunk to zero. The General Fund budget is technically and legally in balance, but there is no margin for error. Without a reserve fund, if revenues are below forecasts or if Certain expenditures are above forecasts, immediak spending cuts have to be made to keep the - budget in balance

Although the budget is currently legally balanced, we believe that it will not be .. balanced in coming fiscal years without spending reform. Revenues are expected to grow at a 5 to 6 percent per year rate while spending growth in certain State program areas is expected to grow much more quickly, resulting in a long-term structural defiat

Shchual Deficit

In recent years, growth in the State's expenditures have consistently exceeded growth in its revenues. The budget has grown "automatically"faster than have revenues, creating a structural defidt. This disparity is not due to a lack of revenue growth; revenues have growm from $1.9 billion in fiscal year 1982 to $3.2 billion in fiscal year 1991, or approximately Seven percent per year.

-25- Exhibit 11-1 -1 GENERAL FUND RECEIPTS

OL w1 M 1982 M 1991

S0~:DepanmentofManagemenl 167-S%03]/DL

The State's structural defiat can be traced to the fact that 60 percent of the State's "-A. &? budget is on "autopilot". This portion of the budget funds property tax assistance, school aid, entitlement programs and other statutory standing appropriations.

Exhibit 11-1-2 GENERAL FUND APPROPRIATIONS

1082 1992

-26- i i.. i.. 1' ! I The growth in spending for "standing appropriations" which provide property tax relief to local taxpayers is worth highlighting. Property tax relief has been accomphhed in several ways, induding:

Provision of credits and exemptions to local taxpayers. State assumption of entire governmeni functions, such as the judicial system.

The propsd assumption of mental health financing by the State.

A doubling of district school aid since fiscal year 1982.

State aid to local governments (including schools and tax credits) increased from $912.5 million in fidyear 1982 to $1.5 billion in fiscal year 1991, an inuease of seventy percent. Nearly half of all local government budgets now come from State aid. The remainder comes mostly from local tax revenues.

Exhibit 11-14 LOCAL GOVERNMENT FUNDING

i- . $3.552

$2,359 $1,967 -Fvdnoswc+s 55.4% To W Governments me. I3.5% 47% st ,447 61 3%

stlu Aid To Local Crmmts- 6.3%

1982 1991

-27- The rtrult for the atizens of Iowa has been growth in per capita spending of nearly fie permt annually from 1980 to 1990.

Exhibit 11-14 GENERAL FUND EXPENDITURES PER CAPilA (ACTUAL)

mm0 1 1400.

1200 -

1003 -

mo-

w.

-1200

This growth in expenditures has created a sizable structural d&at for the State. The structxual defiat will be in the neighborhood of $150 million in fiscal year 1993 and will grow larger over time.

Exhibit 11-14 IOWA STATE STRUCTURAL DEFIUT

-2% GAAP Deficit

Besides a structural defiat, Iowa faces a defiot associated with a changeover to Generally Accepted Accounting Prinaples (GAAP). GAAP was introduced to government in response to the finanaal crises of several large aty governments during the 1970's.GAAP holds governments to a higher fiscal standard to guard their finanaal soundness. Under (;AAP,governments are held to accounting standards similar to those which apply to businesses; receipts cannot te advanced prior to the date they are due, and expenses must be recognized when they are incurred. The Iowa Code requires that the State adopt GAAP standards and retire additional liabilities assodated with adopting GAAP. The Code currently requires the elimination of the GAAP defiat by fiscal year 1993.

Because of differencesbetween the State's current budgetary accounting and current GAAP accounting des, funding the GAAP defiat would require a onetime downward adjustment to the State's revenue account of $296 million. GAAP standard setting is a continuing process and several changes are anticipated which could reduce Iowa's GAAP defiat. When we began our work in July, this "future" GAAP defiat was estimated to be about $150 million. The GAAP defiat problem is a onetime problem which is in addition to the structural defiat. The total defiat problem faced by the State and the General Fund is L *< approximately $300 million in fiscal year 1993, a result of the combination of both the ongoing structural and onetime GAAP deficits (using GAAP after antiapated changes in 1993). This is slightly less than ten percent of the size of the General Fund budget.

333p Iowa Gro Ecomic Dev- The Iowa Group for Economic Development is a non-partisan group of 50 business leaders from across Iowa. Since its founding in 1987, the Iowa Group's mission has been to inform Iowans and involve them in building a consensus for the State's future direction.

The Iowa Group cornmissioned KPMG Peat Marwick's Policy Economics Group to project revenues and expenditures for years 1997,2002 and 2007 and to translate those into antiapated budget deficits and also the tax burden to Iowa taxpayers. The study consists of three scenarios: Long Term Trend Growth, Moderate Growth and Low Growth. Revenues, expenditures and their impact on family tax obligations are reflected throughout the study in all three scenarios. Lonn- TmTrend Growth Assmes long-term economic trends continue throughout the period 1992-2007. Assumes the national recession ends in 1991. Anticipates inflation and productivity gowth to be moderate throughout period, 1992-2007.

-29- Moderate Growth This is the most positive of the three scenarios and assumes a sustained, moderate economic expansion throughout the period 1992-2007.Assumes the national recession ends in 1991. Real economic growth is highest in this scenario and occurs without significant inflation. LowGrowth Assumes "stagflation" in the economy-high inflation, low economic growth. Assumes the current recession extends through 1992 Antidpates low economic growth, slow productivity and higher rates of inflation throughout the period, 1992-2007. We appreciate the Iowa Group's cooperation in our process. The remainder of this section highlights their findings. It is important to note the analysis is based on: 1) GAAP accounting prinaples where all bills are recopzed in the year they are incurred; 2) 1992 as the base year, and therefore it does not take into amunt the currently projected GAAP defiat; 3) assumes the 3.25% across-theboard cut is maintained from 1992-2007. If these were factored into the calculations the defiat would be much more. If the currently projected GAAP defiat for 1992 and a reversal of the 3.25% across-the- board cut were included in the calculations, the projected budget defiat would be much worse. The Key Finding

If Iowa state $0vemment continues to take in revenues and me nd at current leVnls, -we cann,

Exhibit 11-16 1992.2007 STATE OF IOWA PROJECTED DEFICIT

03 - 0.4 - 0.5 -

0.6 .I 0.7 L BlLuoNs - 08 .I

09 .I

-1.0 .I

-1.1 .I -12 . -1.3 I -GtuMh -1.4 - -1.5 - TfUldOrowrth LOWOrwth -1.6 I I lo92 1997 xxn 2x7

-30-

7- -,---- I -T Bill for Iowa Tax&?-

As the magnitude of the defiat increases from 1992-2007, so do increases in fdytax payments to offset the defiat. The higher irdation seatedwith the Low Growth Scenario increases the average family tax bill in the ''personal"tax category from $1,961 in 1992 to $4,700 in 2007, fwo and a half times the taxes they are paying today. In the Trend Growth ScenariQ(average growth) the average family in Iowa would find its tax bill increasing from $1,994 in 1992 to $3,816 in 2007, or almost doubling ova that 15 year period.

In the Moderate Growth Scenario, the most positive of the three ~OS,under the Current tiax structure, the average tax bill will increase 7l96 in 15 years.

Exhibit 11-1-7 1992-2007 AVERAGE TAX BILL FOR CITRENS OF IOWA

5,000 $4,700

4,000 TrendGmwib D ModerateGlowth

3,000 $

2,000

1,000

C 1992 2007

Sourn: The bwa Group for Economic Devekpment 167-3S695.1L/DL

A few examples of tax increases for spedfic family earnings are: - A family earning $20,000 a year can eXpea a 37%greater tax bite. - A family earning $40,000 a year can expect a 32% increase. - A family eaming $60,000 a year will get a 44%jump in taxes.

-31- Iowa':; ComDehti..ve Pos ition

An attractive living and competitive personal and corporate taxes encourage companies '4 to grow and/or locate in Iowa. This creates more jobs in the State which, in turn, , generates a healthier economy. This should be a key goal in making budget I adjustments. However, Iowa's future competitive position versus other states may be in j"PardY* I Iowa's individual income tax, at $413 per capita, was also higher than the national average and most other states. I' Only Iowa's per capita collections for general sales taxes and alcoholic beverage taxes were lower than the national average and most neighboring and comparison states. I

Eliminating projected defiats through revenues auld have a negative impact on ! Iowa's Competitiveness. I

Tax increases could also erode Iowa's competitive position. In 1989 Iowa's per capita state tax collections ($1,112) were lower than the national average, but I higher than all neighboring states except Minnesota, Wisconsin and Michigan. 1 Iowa is cunently at a critical crossroads. Expenditures are growing faster than our I ability to pay. The State's competitiveness and future prosperity hinge on decisive and . , I c: responsible actions through government spending refonns. I I I I' I t

I

-32- !

'1 . Overall Portrait of Government Finances in Iowa Government is an approximately a $10.7 billion annual activity in the State of Iowa. ?his includes all federal, State and local government expenditures made through a government agency in Iowa. The majority of these dollars (about $7.1 billion, or 66 percent) flow through the State government via the State General Fund or some other State fund. The remainder, about $3.6 billion or 34 percent, are raised and spent by local governments-school distrjcts, counties and atis. The vast majority of locally- raised funds come from property taxes.

Exhlbtt I!-2-1 1991 TOTAL GOVERNMENT MPENDWRES IN IOWA (t BILLIONS)

~QuBmlfurdr llolrr Uw la Fund

The State General Fund The State General Fhd is the main operating fund for State government in Iowa. Most of the functions one thinks of when discussing State government are financed by the General Fund. The main exceptions are unemployment benefits, road maintenance, the lottery, state fair, and employee r&ement programs. The General Fund is mainIy supported through a few major taxes on economic activity, while the other funds tend to be supported through more specialized taxes and fees- gasoline taxes, vehicle registration fees, university tuition, federal funds, user fees and employee retirement contributions. Sources of Funds Sources of funds for the General Fund are mainly broad-based taxes. Of the $32 billion in receipts to the General Fund in fiscal year 1991, nearly 75% came from individual personal income taxes and sales taxes. Most of the remainder came from other taxes; for example, corporate income, inheritance, tobacco products and alcoholic beverages.

-33- Exhibit IC2-2 STATE GENERAL FUND REVENUES 1991 (r Millions)

Uses of Funds In fiscal year 1991, only about 24 percent of the General Fund ($743 million) was spent directly by State agenaes within the Executive Branch. More than 45 percent ($1.44 A #**.i. billion) was spent by local governments, in particular by school districts via the K-12 scha31 funding formula. Another 15 percent ($502 million) went to support higher education at the three Regents' universities. Another $375 million (12 percent) went to support individuals, families, health care providers and other agenaes through various soda1 services entitlements.

*h

a

€mwm buh nu

-34- Section I1

Chapter 2

Current Budget Oveniew

I--”--T Recent patterns of change in the State General Fund

Growth in General Fund receipts has been uneven over the past decade due to fluctuations in the economy and changes in tax rates and provisions. Between fiscal year 1982 and fiscal year 1991, appropriable receipts increased an average of seven percent per year. During this time, the composition of tax sources going into the General Fund has shifted; revenues from personal income and sales taxes has grown from 66 percent of' total receipts in fiscal year 1982 to 73 percent in fiscal year 1991. Exhibit 11-24 GENERAL FUND RECEIPTS -1 VI

$MILLIONS 173% a Total

N 1962 M 1991

Source: Dtipamnent 01h4nagemenr 167a5Q.4J/DL

Most of the growth in spending from the General Fund is now in two program areas- education and human senices. These two program areas accounted for almost 80 percent of total General Fund spending in fiscal year 1991. Virtually 100 percent of all - growth in General Fund expenditures during the next several fiscal years will be in these two categories.

-35- Section 11

Chapter 3

Specific Objectives Specific Objectives

Simply stated, the State is experienang fiscal difficulties, because spending has begun to exceed revenues. This has resulted in a need to restrain spending and examine the way in which government services are delivered. At the Committee retreat held at Drake University on September 17, we discussed the scope and objectives of the Spending Reform Project. We agreed that we would accomplish the following specific obyxtives:

understand fundamentals, including issues understand current situation develop a preliminary vision/mission for how functions could work differently quantify near-term improvement opportunities develop implementation plans identify long-term opportunities-quantifiable where possible-with issues to resolve identdy the work remaining to be accomplished

We felt it was necessary for the Spending Reform process to be aggressive, fact- driven and measurable. As mentioned earlier, the State has an estimated $300 million projected defidt for 1993. We felt it was necessary to identify savings in excess of $300 million to allow the Governor and the legislature more flexibility in developing a balanced budget and to allow for contingencies such as revisions in savings estimates.

To challenge the seven task forces to meet the objectives set forth, opportunities and recommendations were to be developed under three alternative scenarios: 10 percent, 20 percent and 40 percent reductions. Ten percent reductions generally involve process improvements - doing things that are done today more efficiently. Twenty percent reductions involve structural changes, for instance privatizing services. Forty percent reductions involve changing what is done, for example eliminating entire programs or services.

Reductions of twenty and forty percent result from breakthrough thinking and point the way toward future restructuring of State government in Iowa. The overall result will be a downsized, more effjaent government that better fits emnomic, demographic and technological realities. Short Term Ob jeckives In the short-term -- the next one to two fiscal years - the challenge faang the State is to bring its level of spending into line with its revenues. Therefore, a key short- term objective of the Committee is to make recommendations that will allow the State to eliminate its $150 million structural deficit. The structural defiat is caused by the fact that spending is increasing faster than revenue growth. -36- 4 A second short-term objective is to continue to move the State into compliance 4 with Generally Accepted Accounting Prinaple (GAAP) and retire liabilities assodated with GAAP compliance. Because GAAP standards are currently being revised, it is not possible to firmly estimate the "GAAP defiat" at this he. However, when we began our work in July the GAAP defiat was estimated to be approximately $150 million in fiscal year 1993.

Therefore, we felt that the minimum responsible targets for spending reduction 1 should be as follows: TO reduce General Fund spending for government services by $300 million per year by fiscal year 1993. This would represent a downsizing of approximately ten percent in State government spending from the $3 billion- plus General Fund. To achieve as large a cost saving as possible in fiscal year 1992 to get the spending reduction process undenvay. To bring the rate of spending growth down to match the rate of antiapated 1 revenue growth.

Longer term objectives .fi $2-

We idso expressed a need to keep long-term objectives in mind even while addressing the immediate need for defiat reduction. Iowa's situation has changed dramatically in recent years in several respects. The population has aged and shifted from rural areas to urban and suburban areas. The economic base has diversified and shifted from agriculture to services. Global competition has intensified. New technologies have been developed and adopted. New threats to the environment and families have arisen.

Even though these changes have occuned, the way the State of Iowa delivers semces has not changed greatly. If the State is to position itself. for long-term growth, it must rethink both its mission and strategies for carrying out the missioq. I This involves challenging basic assumptions about how senices are delivered and what things the State should do.

State government cannot be redesigned in 20 weeks. However, the Committee I agreed that the long-term objective for the spending reform process must be to be@ the tiiscussion of how State government does business. Establishing a vision statement for State government and new plans for canying out that plan will take time, perhaps th~eeto five years. We have begun the process of setting the future course for State government in Iowa by contributing a set of long-term opportunities for restructuring the system.

-37-

7----T--- Section 111

Chapter 1

Top Opportunities

.L-

--T-----'-" -T -. We consider the opportunities presented in this chapter of the report to be our top opportuniti€5because:

They represent the greatest savings over the next two years There was a high degree of c~nsensusamong the Committee members on the proposed action

Exhibit III-1-1 summ- our top opportunities.

ExKTBrr m-1-1 SUMMARY OF TOP OPPORTU I SAVKNGS Pol€". OPPORTUNITY (111 funds -5millions) PAGI I1 FY 1993 FY 1994 1. central^^ state collecbon efforts I 39 $03 $9.0 2. Require papents of debts to the State prior to 41 S15 S15 dptof kcenses and expand thew of offsets 3. Sale of State owned farm land and the DNR nurSery 43 $6.7 w. 4. Estabhsh a youth comonal fadty 45 $02 $02 5. Develop an Enterprise plan for t~chnology 46 $1.o $1.0 6. Knowledge based system for DHS ebgbility 47 4- ($8.9)' b5SSeSSment 7. Common managemmt/consohdanon of dab 49 $06 p-rngmters 8. Comprehensive K-12 educabon finance reform 52 5127.8 5178.0 9. Use pronder funds to leverage Mediczud doh 63 $45 $45 10. Adopt a mental health fundmg formula 64 $15 $35 11. Decategorix Foster Care/- S-g 65 $48 $48 Mlx/Cap Graup Homes 12. Realloate $50 milLon m mtor vtlude use tax 67 $50 revenues to the General Fund 13. Alternatives to the mental health mbtutes m 70 $1 $1 clknnda and Mt Pleasant 14. EluruMte fundrng promion for the Resource 71 530 Enhanmnent and Protecbon (REAP) fund 15. Reduce the number of dnvefs hcaw locations 72 59s $95 from 141 to 19 and allow DOT to assume responsibihty for mtor vhderegstrahon and bmg I 16. County administrahve collabxabon (30 centen) ~ 74 -0 $27 17. Revise community college fimdmg enhancements 77 $33.1 $472 18. Create a stakwide aSSe5sment system 81 -0 $2.8 19. Lmprovv the State's budgetmg process 82 s45 $445 20. Restructure employee benefits a7 5115 $115 21. Restructure execubve branch organuation 91 $63 $63 22 hp~~eliminations, reductio&, and deferrals 96 $28.7 s3.4 TOTAL $4173 -$498.4

'Note: Sa~ngsfrom knowledge based DHS system will be between 57.6 and $9.4 million annually beginning in 1995. -38- tl Centralize State Collection Activitv

Recommendation:

We recommend that the function of collecting moneys owed to the State of Iowa, hduding accounts which are currently handled by private collection firms, be centralized in a single state agency. We expect that payment of moneys owed to the State will increase by over $300 thousand in fiscal year 1993, and nearly $9 million in fiscal year 1994 if this recommendation is implemented. Additionally, effiaendes gained from the establishment of a centralized coUection function will allow the State to implement collection strategies which are currently beyond the capacity of most state agenaes to implement independently. We further I recommend that initial plans for the consolidation of collections functions be to locate collection activity in the Department of Revenue and Finance, and that the State consider the implementation of an incentive pay system for collections staff.

Background: Currently, each state agency is responsible for the coLlection of its om 1 accounts Methods which are used to collect debts and accounts receivable vary horn agency to agenq. %me have highly speaalized c0lIection.s staff. Many other agenaes either utilize existing staff, who may not be trained in collections strategies, or amtract with private collection firms to handle their accounts. Furthermore, state agenaes have not adequately maintained records which track the mount and age of debts owed to the State of Iowa. Exhibit III-1-2 on the following page summarizes the State's receivables.

-39- b I

Exhibit nI-1-2 ACCOUNTS RECEIVABLE SUMMARY I AGING (months) STATE AGENCY 0-6 6.12 12-18 Collqe Aid Commission $9,844350 S10,045,7L5 W270251 courts (1) I FmeS so 57m26? NP court costs 0 $3w26? NP sufihargs 0 13680? Np Attorney Fees 0 3229,018 NA Victim Restitution 0 2941s NA other 0 329355 NA TOTAL $0 $18,213,887 NA Employment services: Uxmplg?nent Ins. $91034 021,100 $1,11726! Contrbtion 3%,ll34 II a ern OSHA Penalties 41293 19,417 22 LNoections - Misc I S1,180~ TOTAi

Child Support Recovery (2) ADC I $298,988,191 $334237224 State Foster Care 0 m364 823661C 8,963,974 Foster Care IV-E 0 187,203 978,331 1,165$34 owed to Famills Q 31,414..017 147231382 lrSW3aS TOTAL 517,223 73Ji?$ SB* 1,118,796 $475,961,397 5544,130,927 $21$52D97 521561,797 $59365395 $168,959255

Personal Inclorrte Tax 517391,482 $8,173m 538,070617 $63,635,108 Corporate Lncome Tax '12m275 559,947 41359,131 54321353 t Wes and Use Tax 8618877 9,M3P18 &%0,156 . 44#&42Jm Motor Futrl Tax 555,458 274.786 4,919397 5,749,641 hhxllmlous Taxes 1,182D45 298m 251,084 1,731,929 $111560385

0)Indvda~~lrsonlyundnIyerrrou Q) ~rr~rmdaly~r,I-5~,120~,~2O+y~m. Rationale: Increases in the collection of moneys will be possible, because the mnsolidation of wllection activity will increase the State's ability to locate debtors, provide additional enforcement capaaty by reallocating edsting enforcement agents and hiring additional agents, reduce expenditures for private collection services, and generally improve the dfiaency of mliection activities by establishing uniform polides and standards. The estabhhment of a centralized collection function will: I Accelerate the rate at which debts are paid to the State, R hprove the flow of revenue into the State Treasury, 0 Enhance the ability of the State to meet its 0v.m hadobligations to local governments, program managers, and vendors, . Maintain a reaxd of all outstanding accounts in a single data base, Provide uniform collecfions polides and standards, . Improve ability to locate debtors, and Provide a focal point for the development and implementation of collections systems such as credit bureau reporting, offsets of payments, lien filing, and automated cash handling. Timing The implementation of collections polides and standards can occur in early 1 i 1992, and the system can be operational by March, 1993. I centralized collections

with applicable state and federal laws, including providing for confidentiality requirements, and providing resources for the purchase of computer equipment and software and for staff training. Weexpendit~a for these activities dl reduce the amount of expected savings in fiscal year 1993, we believe that this investment will pay

The collection of moneys owed to the State could improve by relying less on private allection firms. In 1990, the Department of Revenue and Finance conducted a test to ampare its collections abilities to those of a private collection firm. During this six month test, every fifth account was assigned to a private collection firm. The results of the test showed that the state collection staff collected the accounts faster and at approximately half the cost of the private collection h.While it is possible that refmals to private collection firms will be diminished, we believe that there will be opportunities for private collection firms to work with State when internal collection procedures have been exhausted.

2 Implement Conditional License Issuance and Expand Payment Offset

Recommendation: We recommend that all applications for licenses issued by the State of Iowa be reviewed to determine whether the individual, company, or other entity applying for the Iicerw has paid all appropriate fees, charges, and tax obligations. If payment has not been made, then the State should not issue a license until the applicant's financial obligation to the State has been paid. We also recommend that the practice of withholding certain payments to individuals and companies which owe money to the State of Iowa be expanded tc indude the Courts and the Board of Regents. Background. Nearly six million licenses are issued by the State of Iowa annually. Assuming that onetenth of one percent of the indwiduds seeking licenses owe money to the State in an amount equal to the average tax refund offset (5170), the payment of -41- B P to will $1 million in Fiscal 1993. I moneys owed the State increase by approximately Tax refund offsets are currently applied to debts owed to the Iowa Department of Re'i-enue and the Iowa Department of Employment serrices. Tax refund offsetsapplied to individual tqayers has recovered between 1.4 percent and 1.8 percent of the total oufsstanding debts which are covered by the offset program. b Fhtionale: We believe that requiring the payment of moneys owed to the State as a condition for issuing licenses will provide a direct and mmmgincentive to individuals and organizations. The conditional licensing requirement will also have the effect of targeting groups that should have the ability to pay, because they are making payment for a license issued by the State of Iowa.

Exhibit III-1-3 UCENSEE PAYMENT OFFSET SAVINGS POTENTIAL

I lo 1

POTEKT'IAL RECOViERY (SMIUKIN)

0.0 0.1 0.2 0.3 0.4 05 0.6 0.7 0.8 0.9 1

LICENSE APPLICANTS THAT OWE THE STATE (%) !

-42- Implementation Issues: The State's abhty to implement this proposd depends upOn ~ the consolidation of collection activities in a single state agency. If the proposal to consolidate collection fundons is implemented, then the proposal for conditional I licensing may binitiated with minimal start-up costs. Other states which have initiated similar programs have been successful. For example, the State of h?lssoui established a requirement that moneys owed to the State be paid prior to issuing limes to establishments which Serve or sell liquor, whch resulted in the collection ofci sigruficant amount of overdue obligations in the first year. I Rationale: The expansion of the offset program to include the withholding of paymars to vendors could increase payments to the Courts by as much as $150,000, assumin that the Courts experience a recovery rate which is similar to the experience of the Iow8 Department of Revenue and Finance (1.5 percent). Savings to the Board of Regents muld be as much as $375,OOO, if the vendor offset recovery rate of payment to vendors is similar to the recovery rate of the Department of Revenue and Finance (twe-tenths c one percent). Vendor offsetting means that the Board of Regents and other state agenaes would reduce payments to applicable vendors by the amount which those vendors owe moneys to the State of Iowa.

Implementation Issues: While implementation of this recommendation is complicated by the present incompatibility of computer data and the independent vendor payment functions operated by the Board of Regents, we believe that the establishment of a consolidated collection program, as well as the data management recommendations made by the Technology Enhancement Task Force will make it possible.

d 13 Divestiture Of Certain State Assets C Recommendation: We recommend that the State of Iowa consider divesting itself of any assets whit are not used in performing an essential and primary government service. Specifically, we recommend the sale of State-omed Farmland and the Department of Natural Resources Nursery in Ames.

Other propedes which the PPivahtion Task Force recommended be reviewed for possible sale are:

WOI-Tv University Golf Courses Iowa Public Television University dormitories University Alumni Centers Department of Transportation Maintenance Garages, and Iowa House at the University of Iowa t. Background: The estimated value of farmland owned by the State which the Privatization Task Force has recommended be sold ranges from $3.9 miLon to $5.96 t million, although a formal appraisal has not been conducted. In addition, if the land were sold, the land would be returned to the tax rolls.

-43 The Department of Natural Resources owns 95 acres of land near Ames and operates a seedling nursery on the property. The nursery is adjacent to quality commercial dme'opments Nearly all of the seedlings gr0v.m at the Nwery are sold on the open market. The Department asserts that the seedlrngs which are produced at the nursery are generally not available from private nurseries in the quantities necessary to meet the demand for reforestation of idled land. However, private nurseries claim that the Department has an unfair competitive advantage which makes it impossible for private nurseries tc) partidpate in the market. Rationale: Although we question whether the seedling service is an essential government Service or whether it could be provided by the private sector, our focus has been on the value of the land on which the nursery is currently located. As commercial property, the land alone would have a mid-range value of $7500 per acre, or a total valuation of $712,500.Suitable land muld be purchased in another part of the State at a much lower cost and the production fadlity could be transferred to that location. Net savings to the State which would result from transferring the operation to another location could be as much as 9500,000. miitHI-14 Criteria for Evaluating the Sale of Assets

Cm RATIONALE 1. There is a market for the asset. For example, thm certaidy is a market for WOI-TV, but it LS highly doubtful that the same is true for Kinnick Stadium. Most football stadiums are owned by schools, development I groups, or muniapalities. 2. The asse't ism an essential part 1 If an asset is generating enough outside income to be self- of an enterprise which is seli- supporting, then it probably is not putting my strain on the supporting through fees or other state general fund. Horn,if the Hceprovided by the nongovernmental rwenues. asset is one which isnot a p- and essential service of government, then why keep it? For exaxiple, it would appear that the university golf courses are self-supporting, but we question whether they provide a primary and essential I gOV"n€!Tlt &ice. i 3. An ad&ha.l investment in I For example, it could be that such an investment would capital or equipment would not produce iong-berm cost savings with regard to the prison farms produce a rate of return and the correctional and mental health institutions. suffiaent to wanant retaining the asset. 4. Thereaninohidden For example, if all but one of the remaining prison farms were compensatmg costs that might sold, what costs are created by virtue of b-&g to find a OMh short-term and, PLOW different activity, housing, etc for the inmates cwrently importantly, the long-term assigned to the farm? benefit to the state. I 5. Thewenisnotusedin I Welist this last because, if after all the other criteria are providing a primary and explored it is still a close call, we believe this factor should tip essential government service. the scale one way or the other. If it is an essentiaI servlce, do not sell the asset. if it is not an essential senice, sell it. Implementation Issues: We suggest that the sale of assets be considered with caution and prudence. While the sale of an asset might bring cash to the treasury in 1992, it is quite possible the compensating hidden costs could outstrip the gain in future years.

----._ -7-I -I---- 4 Establish Youth Correctional Facility

Recommendation: We recommend that a Youth Correctional Facility be established in an unused wing of the Clarinda Mental Health Institute. The Privatization Task Force four that 145 youths who are currently being placed out-of-state could be served at the Clarinda Facility, saving the State up to $2OOflOO annually. Savings would be prinapally derived from payments made by a private provider to lease the fadlit and reduced travel expenses.

Background: At the present time, the State is fordto send axrt adjudicated juvenile delinquents out-of-state for correctional assistance because of a number of factors, including lack of appropriate correctional assistance in-State. Of the 330 youngsters placed out-of-state (as of August 31,1991), it appears that at least, 92 of the youngsters (boys) would be candidates for in-State placement. Average daily costs to the State for youngsters placed in correctiona~facilities outsfstate are approxiinatdy $7per youngster; and out-of-state costs can range from a low of $46 per day to a high of $187 per day. In addition, there are travel costs asso6ated with probation officer visits to the placement location, as well as transporting the youngster to and from the facility. The Department of Human Senices is currently discussing this proposal with Youth Services International, Inc. (YSI), an organization dedicated to the prinaples of youth correction established by the founders of Glen Mills Schools in Pennsylvania. (As of August 31,1991, Iowa had 26 conduct disordered youngsters placed at Glen Mills Schools.) YSI proposes to lease sufficient space from the State at the Clarinda facility f initially establish a 145 bed youth correctional facility for boys primarily ktween the ages of 14 - 18, and to purchase services such as laundry arrd meals from existing programs at Clarinda.

Rationale: The annual cost to YSI for the leased space and purchased Services would b $750,000. YSI proposes to charge $87 per day per youngster for all services including rmm and board, counseling, education, athletic;, medical treatment, and vocational education. Additionally, YSI would have approximately 1.8 million dollars in other expenses,at least $750,000 of which would be the lease of the facility the and purchas of services from the State. The net savings to the State of Iowa is estimated to be $212,000 if this proposal is implemented. Additionally, it is antiapated that Youth Services International would create 116 jobs by establishing such a facility at the Clarinda Mental Health fadlity wit) an annual payroll of approximately 22 million dollars. We concur with the Privatization Task Force that ttuS proposal appears to be a promising public-private I partnership in the area of youth correctional senim.

-45 Exhibit III-1-5

YOUTH CORRECTIONAL FACILJTY PROPOSAL

DAILYCOST PER PUCEMENT m 44

0 AVERAGE COST m .. OVTQF-STA?E PLACEMENT

5 Develop a Technology Enterprise Plan

Recommendation: 1. We recommend that the State of Iowa move forward with the development of a Technology Ertterpxise Plan. Essentially, this means that the entire enterprise of state government in Iowa would develop a comprehensive coordinated plan to integrate new technologies into the delivery of services to Iowans. The Enterprise Plan, as described by the Technology Enhancement Task Force, would provide for planned adoption of highaehun emerging technologies that would improve the ability of gove.rmnent to deliver quality sedces to Iowans with easier access, in less time and at a lower cost, First steps toward the implementation of an .. Enterprise Plan are to develop a business plan for govemment so that we know what services are to be addressed by the enterprise of governments in Iowa and to .. establish common standards for state information systems and other technologies.

L, -46- -- 7---I I I‘ Exhibit III-1-6 4 Technology Enterprise Plan i Key Elements to Serve the Customer More Effiaently and Cost Effedively I 1. Create a Business Plan for State Government 2. Integrate Local Government Services in the Business Plan 3. Statewide Platform for Sharing Momation Electronically Among Governments I and Iowa Citizens 4 4. Establish Common Technology Standards to Facilitate Communications 5. Systematic Research & Development For the Application of New Technologies I$ 6. Commitment to Invest in Technology Development 7. Modify Budget System to Reflect Future Savings Obtained From Investments in I Technology 8. Coordinate Development of New Tedutologies Among State Agencies and Othe units of Government I 9. Develop an Inventory of Technology Applications .I 10. Set Priorities For the Implementation of Technologies 11. Train and educate government agencies and employees about the application of I ted.mology to their functions I

Background: Government in Iowa has not taken steps to systematically develop and

apply new technologies to deliver services to Iowans or to sene governmental t infrastructure. State Government has not made the up-front investments in technology development, because short term budget issues have taken priority. Advances in the W?of technology too often occur in isolation from the rest of government, either withir, single agenaes or even within individual office areas. Furthermore, funding for the implementation of new technologies is too often considered an “extd’,and is among 4 the first to be cut when budget constraints exist. In short, govment in Iowa has lacked the capaaty to invest in itself, and has been willing to retreat to familiar, less cost effective practices. For example, the State of Iowa deferred expenditures for the implementation of the Department of Human service’s $9 million dollar X-pert System, despite the estimated $46 millon in savings during the first 5 years. 4 I Rationale: The Technology Enhancement Task Force estimates that savings derived from the implementation of an Enterprise Plan could approach $1 million in fiscal year 1993 and significantly more in succeeding years. -I (6 Computerize Etigibility Detennination for Human WcesPrograms i ! Recommendation: We recommend that the State of Iowa allocate sufficient resouTces to implement the Knowledge Based X-PERTSystem to support initial and ongoing eligibility determination in the Economic Assistance and Medicaid programs. The implementation of this system could significantly improve program administration and sewe as a prototype to be expanded or replicated as a part of the Enterprise Plan

-47- Background: The mission of the Departmat of Human Senices is to provide timely and accurate hiefits to eligible clients, in a dient-centered environment that promotes self-suffiaency. Eligibility determination has become a challenging task for employees in the Department of Human Services. Recently, 654 updates were made to the workers' manual in one yeas, and there have been 14 new programs added during the past five years. 'There are more than 30 Medicaid programs, many with different procedures and eligibility requirements. The X-PERTsystem, a computerized database of eligibility information, would be centrally updated, and provide immediate access to current eligibility information to DHS employees. Exhibit III-1-7 KNOWLEDGE BASED EUGlBlLrrY ASSESSMENT SYSTEM

AI COST/BENEFIT LU

iji12 10

SM ILL ON

-10 L

YEAR 1 YEAR 2 YEAR3 ' Sourn: Depament of Human SeM'ces, Technokgy Enhancement Task Fwce 167-35759.1c;DL Rationale: Over five years, the estimated savings accrued from the implementation of the X-PERTsystem is $46.9 million, with average annual savings of between $7.6 million and $9.38 million. In about one year, the X-PERTsystem would pay for itself. Antiapated results underline the need for X-PERT. In the first 5 years of operation $46.9 million would be realized in redirected resources, such as shorter learning mrves, and in savings, such as paper and mailing reductions. Accompanying changes in the way policy is devdoped and communicated to staff adds results of at least $514,100 in additional savings and redirected resources. ImpIementation kmes: Including development costs of $4.3 million, the total estimated cost of implementation would be $8.9 million.

&+ -48- (7 Lmurove Data Processhe Manaeement

Recommends tion: We recommend that the State of Iowa take appropriate steps to improve the management of computer systems and management information miit III-1-8 DATA PROCESSING EXPENDITURES - A DEPARTMENT/ HARDWARY - AGENCY SOFTWARE PERSONNEL TOTAL HumanServicg $976,449 51m235 Education 90300 814,028 Employmerrt services 2,967,903 2259,494 GenealservicesIsD 4320,827 4,910,724 Judicial Dept 165,078 748840 hgi.5.comp. support 470,000 324,130 Natural Resources 163,970 520,455 PerX,nnel/IpERS 208,759 518,873 mlicDefense 6731 1 73H9 Public Health 386879 506622 Pubhc safety 1,172343 374J64 Revenue /Fmance 8Wl900 1,226,000 Tmsportation 8,741 676 2322.647 Regents: Iowa St. ADP Center 1363589 4,832,111 Iowa St. Con Center 1,441,444 3298rn Uruv. of IA ADP 2,4695OC 6D55N Uruv. of IA - Weeg 2,776,176 5320,027t UNI 618,493 2P1632C -univ. Hosp./ainic 7mm 10,76533 - TOTAL $37,U6&69

Background: State government data processing capacity currently exists in four primary centers: Department of General Services, Information Services Division (EX)), Department of Transportation, Department of Employment Services,and the Board of Regents and their institutions. However, opaations and equipment among the data cen~ersare not fully compatible, and the collective capacity of the separate systems are not shared or coordinated. Changes or expansions are planned for each of these systa during the next 28-24 months.

-49- The total amount budgeted for data processing in fiscal year 1992 is $73.2 million, including Judiciary,Legislative, and Executive Branches, and the Regents' institutions. Of that amount, $i3.1 million is for information systems operated by the three primary executive branch agency data centers (not including applications), with $6 million in General Fund dollars. If applications and local area networks (LANs) are included, the total is $33.8 million. The Technology Enhancement Task Force identified four possible models for restructuring the slate data processing system. Projected savings to the general fund in fiscal year 1993 range from S%,OOO to $542,000, depending on the model chosen. Additional savings; would accrue as the new data processing system reaches full implementation. E:stimates prepared by the Task Fore do not incorporate information about data processing operated by the Board of Regents. The four data processing models explored by the Technology Enhancement Task Force are: Data Center Common Management. Existing mainframe computers would remain in present locations, but operations would be harmonized through a common management system and networking of disbiuted mainframes to allow remote operations and sharing of capacity. The primary benefit of this model is that it would provide immediate savings through the consolidation of staff and elimination of duplicated software licenses, positions, and actions. This model could be implemented through an intergovernmental agreement under Iowa Code Clhapter BE. The wentmanagerial budget for data processing is $12 million (27 full time equivalent positions). Common management should

I lead to only one operating system software package supported by a central service sourc~,and would preserve multiple "competency centers" for client agencies' applications software. For instance, spedalized engineering applications software would continue to be run and supported by the DOT, evs though it would run on the operating system under common management The estimated fiscal year 1993 General Fund savings that could be achieved with this model is $900,000 (13.9 percent), which includes an estimated managerial staff cost reduction of between 20-25 percent. Consolidated Data Centers. The management, staff, and mainframe computer

1..1 operations would be consolidated into a single operation senring client agendes. The Technolcgy Enhancement Task Force estimates that long-term savings of up .. to 25 percent could be achieved through consolidation. Implementation would have to be phased in, With some operating savings available immediately, at the cost of capital invesstment in a new, larger mainframe, perhaps phased in as .. current leases expire. New CapitaI investment will be necessary to achieve ,, . operational siavings. The Task Force identified several possible disadvantages to this model. Centralization increases the magnitude of a major computer disaster. There is also a perceived danger of lower quality service from an outside agency. This model transfers the support function outside of the user agency.

-50- * Out-sourdng. The existing state data processing system would be replaced with 4 a centralized system operated by an outside vendor. Economies of scale could be I achieved with this model through coordinated purchase of data processing and computer support services from the private sector. The quality of service can be maintained or improved for aU dient agenaes. The estimated Savings of 14 percent-20 percent reflects the range of opinion by non-vendors, and espeaally members of the Task Force with experience with out-sourdng. sagsof 20 percent-25 percent have been re- in the short-run by private industry. Some possible problems associated with this model are:

1. E>dShgequipment to be replaced by out-sourcing may not be fully amortized. 2 Maintenance of service standards and preservation of savings requires exceptionally thorough definition of services being contracted, othenivise "add- ON" or change orders can seriously diminish benefits. 3. Reduced flexibility because the State would lose the ability to handle its own data processing. The loss of internal control makes for a risky, costly and difficult decision to dissolve the contract. 4. The evaluation of emerging technology remains an in-house management function of the client enterprise (with reduced experh and experience.) 5. There is a potential for business disruptions with commeraal vendor (badmptcy, mergers and acquisitions). 6. Confidentiality issues. In-sourcing. Current state mainframe data processing operations would be replaced and mnsolidated in a single state agency. A contract for services wodi be awarded on a competitive user fee basis to a State entity utilizing the staff and equipment of existing agenaes' data center operations. The in-sourdng options a refinement of either the common management option or the consolidated data center option. The State's data processing operation addbe organized to 4 operate on a fee for senice basis within state government. Savings estimated between 15 percent-25 percent. This option has not been fully explored and is dependent upon information derived horn the other models. Further review is recommended before proceeding with this option. , 4 Rationale: Because of the potentid magnitude of savings, the greatest opportunity for long-term savings are Consolidation and Insourcing. Outsourcing's long-term desirability was seriously questioned by Task Force members. Out-sourcing has greatc risks than Consolidation or In-sourdng, and must demonstrate greater potential savings I to be viable. The State may choose to implement a combination of the suggested models, such as selective outsourcing and common management with some consolidated staff.

Tinzing: The Data Center Common Management Model could be implemented within 18 months. The Consolidated Data Center Model will require a longer transition time which makes it difficult to fully realize savings in fiscal year 1993, but could be implemented in 2 to 3 years.

-51 - Implementation Issues: Each existing Executive Branch data center has some growth capaaty, but none has the ability to take on the work of any of the others. Each center has a capaaty plan that projects upgrades in differentfiscal years, but over the next 18 months to two years. This has made assessing transitional cats difficult to assess. Even with no action, additional investments will be required to handle antiapated growth in demand for services and storage. The estimated fiscal year 1993 operational savings is $1.3 million (20 percent). As an interim step, we recommend that offiaals from the Department of General Services, Departnient of Transportation, Department of Employment Senices, and the Board of Regents work together to develop plans to facilitate communication and information access among the primary data processing centers in state government. Further, we reconmend that these agendes be asked to jointly develop appropriate Spedfications and criteria for the capaaty and management of the data processing system to assure that the system components are compatible, that there is a strong orientation toward responsive and high quality semice to Iowa atizens and state agenaes, and that the state data processing system enhances the objectives which we have outlined for coordinating and integrating the delivery of prDgrams and services to Iowans at the state, regional and local levels. In order to cany out this task, it may be appropriate for the State to seek additional consulting assistance. Legislative and Judicial computer centers have been excluded, because of potential conflicts over separation of powers between the branches of State Government. While separation of powers prevents a ford consolidation, the Task Force advises all branches to considler the benefits of voluntary cooperation in future planning.

We concur with the Technology Enhancement Task Force that if any immediate action is taken, the most feasible alternative is the adoption of common management model in fiscal year 1993.

1ComprehensiveK - l2 Education Finance Reform

Recommendation: We believe that funding for elementary and secondary education must be included in the review of state spending, and must contribute to the solution of the state budget problems. The Public Finance Task Force has identified a number of opportunities for consideration by state policy makers In most cases, the Task Force has recommended straightfornard changes in the school foundation funding fornula. We believe that these options must be considered if the previously discussed budget goals presented to us are to be achieved. The Task Force has also made recommendations whjch are focused on improving the effiaency and productivity of the public schools in Iowa. These proposals will require significant changes in the structure of OUT education system, and we recOgnize that they will be controversial. However, we believe that these proposals, or alternative variations of these ideas must be considered if the schools of Iowa are to achieve world- dass status with existing resourcs.

h -52-

-7-I ---'-I-. Background: Iowa's 425 school districts are funded through a mechanism called the Iowa State Foundation Program and is commonly referred to as the state foundation formula. The formula g& are "toequalize educational opportunity, to provide a good education for all the children of Iowa, to provide property tax relief, to deaease the percentage of costs paid from property taxes, and to provide reasonable control of - school costs" The state foundation formula is "pupil driven." School districts' spending authority and funding are determined by multiplying a cost per pupil by the appropriate enrollment.

A review of the previous ten years in I<-12 education reveals some important trends. Although school enrollment has dropped 13 percent horn 550,000 in 1980 to 480,000 in 1990.. . Exhibit III-1-9

-53-

-7-I ---l--- ...funding has continued to escalate from $1.18 billion to $1.92 billion. Exhibit III-1-10

IOWA PUBLIC SCHOOL (K-12) FUNDING

Utmr. 1% hd.rJ. 3%

lolee0 1~~ SCCKXXYUR

socsrP *MU Simw Rgal mgFYrJ), kwa mrn ot Ederbon lU.)Lp(I IKn. These trends have resulted in the average per student axt rising from approximately $2000 in 1980 to approximately $4000 in 1990; a 7.2 percent compounded annual growth rate. Exhibit III-1-11

IOWA K-12 MPENDKURES (Per Studant Basis)

-54-

*.

~ 7---I -----r--- Thi growth in funding is well above Iowa's red growth rate, and is driven by the education funding formula. & a standing unlimited appropriation, the mount of funding calculated through the formula is automatically budgeted. While meeting its obyxtivs of statewide equity, this formula results in appropriations which are not necessarily consistent with the state's resources.

A number of andyses were completed to assess the potential magnitude of savings in education. When K-12 education costs are broken out by function, it shows that instru&on related scpenses account for almost two-thirds of the total.

Exhibit In-1-12

IOWA K-I2 MPENDrrURES BY COST CATEGORY (Prr student Bulr) COuPOUNOEDAHJUK GmuiuIE u.oo0 - U.lW PER K.12 SNDBST

4.000 .I 5.7%

5.7% SPENDING 3,030 PER K.12 1.3% STUDWT

6.4%

1,000.

0 1-1. 100990 solooL MAR

It appears that Iowa's low student-to-teacher ratio contributes siguficantly to these rapidly increasing instruction related expenses. The remaining support costs also wkant examination, with potential savings achievable from consolidation as well as emulating a model best practice district. Ow estimated potential savings from uh'liring best practices in educational support areas amss all schools is approximately $32 million. This estimate is based on redudnp the cost of schwls that are currently above average cost to the average cost. Exhibit lII- 1-3 provides a summary of the analysis of best practice savings in educational support costs.

-55 Exhibit 111-1-13 BENCHMARK COMPARISON OF SCHOOL DISTRlm SUPPORT COSTS (Per Student)

ABC 0 E FG HI J v POTENTlAl- BEST PRACTICE SAVINGS Mo. d pd+ol - Par Bwl in UPDC, Bm in ->mi* -ct.r, -xvrilc -QIII A 3,871 to - so 0 1175 29 - 34 C 4924 n - 373 . . .* i) 3595 31 3 $118 1125 1(#1 321 126 341 I E F 1lW 325 130 rn G 1782 325 130 579 * .0 .e . . L il 1142 667 4n '761 I p59 675 #3 1592 J -2853 851 656 242Q

%-

It is helpful to compare Iowa's student to teacher ratio to the average of the rest of the d nation. h 1990, Iowa had the 13th lowest student-teteacher ratio in the nation, 15.4 students to one teacher. Iowa's student-teteacher ratio has been Mow the national r' average for at least ten years.

L -56- K-12 nuD€ms 10 PER TUCMR 6

6 6

4 4

This low ratio appears to be the result of a large number of small classes in the nual districts, as well as the ever increasing number of sped4 education classified students (which require smaller classes). Exhibit 111-1-15 PROPOSED SCHOOL FOUNDATION PROGR rJGES

SAVINGS_..- -~ OPPORNh" 1992 1993 1991 - 92 OPPORTLMTES: Eliminate Advances of Lnaeased Enrollment. $152 $10.0 $10.' ' L992 - 93 0PPOR"TIES: Eliminate the Budget Guarantees .6 Resmcture Phase m 41.O 4l.nI Reduce AUowable Growth by 1% (Eachone Percent is Worth Approx. $155 Million for a Total of $62 Milhon): K-12 148 AEAS .7 Elimi~tePhtom Students b K-12 23 .C AEAS 1.c Grry Forward the 325%Across-The Board Budget Reduction: K-12 345 AEAS 2s l993 - 94 OPPORTUNITIES: Student-eTmher Ratio mn Education Excellence lncentive Package (120 Administration Consolidation lir Amlication of Best PraCtices 32c &&ce AEAS from 15 to 9 TOTAL ANNUAL OPPOR'IUhTITES 1992 - 1994 --71

-57- -ormula Changes

8.U Eliminate Budget Guarantees The regular education program and the special education program have budget guarantees which would generate regular education program and spedal education mrpport budgets in iiscal year 1993 that were atleast equal to 100 percent of their fiscal year 1992 budgets. IElimination of these guarantees would save about $6OO,OOO in fiscal year 1993. However, if fiscal year 1993 costs are to be achieved from the implementation of other formula changes, these provisions must be eliminated in order to ensure that potentid reductions are not recaptured by schools through the operation of the guarantee.

8.l.B Eliminate Advances for Increased Enrollment Eliminating the advimce for increasing enrollments will result in savings of $152 million in fiscal year 1992 and additional savings in subsequent years. The marginal qtof absorbing students into existing dassrooms is usually not substantial. In those cases where a major idlw of students occufs, schools may appeal to the School Budget Review Committee for relief. 8.LC Revise Allowable Growth Percentage for fiscal year 1993 Allowable growth is based upon percentage changes in state general fund revenue and ._ inflation. The permit of allowable growth is used to establish the amount by which per pupil costs inuease each year. The allowable growth percentage calculated for fiscal year 1993 is just over 4 percent The allowable growth percentage is established by fonnula, but can be changed by legislative action. Each percentage point reduction in the allowable growth would save approximately $15 million in state aid and approximately $3 million in property taxes. If allowable growth for fiscal year 1993 were set at 0 percent, the state aid savings would be about $62 million.

8.1.D Make Pemment the State Aid Savings from the 3.25 percent Across-the- Board Reduction The state aid savings from the fiscal year 1992 across-the-board reduction was about $36.7 million. The state aid savings from the reduction should be made permanent by a reduction in per pupil costs and the formula should be modified so that savings cannot be replaced with property taxes.

8.L.E Eliminate Phantom Students The State Foundation Formula provides additional funding to school districts in order to cushion the financial impact of declining enrollment. The supplemental funds are provided by adjusting the enrollment figure which is used to calculate a school district's budget The amount of the enrollment adjustment depends upon the percentage loss in actual enrohent over a six-year period. If enrollments stabilize or increase in a school, .. . this adjustment is phased out over a six year period. By eliminating this enrollment adjustment in fiscal year 1993, state aid to school districts would be reduced by $24 million. Savings in fiscal year 1993 would be less if the adjustment is phased out over a period of years.

- 58-

i i i 8.1s Elimination of Allowable Growth Formula Cturently, the appropriation for school aid is a "standing unlimited" appropriation. In other words, the state appropriates whatever amount the school aid formula generates. The school aid formula should continue to be the mecharusm' to determine the amount of school aid but the Governor and the legislature should annually establish the percentage of allowable growth. The percentage needs to be set early enough to allow sclmol districts to plan their budgets. This will pennit greater control of the size of the state aid appropriation for schools to more nearly reflect the state's ability to pay.

If ithe Governor and legislature do not set the allowable growth percentage, the amputation for allowable growth in the schml aid formula should be revised to make the computation more nearly reflect the state's real economic tax growth. This should be done by adjusting the general fund revenues for changes in rates Or bases. Put Simply, school budgets should not automatically benefit if State revenues increase as a mnlt of changes in tax rates or additional revenue enhancements are enacted. E. Changes to Restructure Education -11 1 82.A Increase PupiVTeacher Ratio Funding for Iowa school districts should be based on the average pupil/teacher ratio i. 1970, approximately 20.4,instead of the wentratio of 15.4. This will result in savings of $202 million. Exhibit IIC1-16 AGGREGATE TEACHER COMPENSATION COSTS AS A FUNCTION OF STUDENTEACHER RATIO

AVERAGE AVERAGE SNDENfmACHER RATIO STUDENTITEACHER wno 15.4 20.4

krwmptions: Reduction of 6600 Tucher FEs . Average Tear-c;rtw = E28,oOO AmpTeacher Benefits = $5.600 167-M.5i..- Source: Openling Fund Experorihaed Compnarion (8y Prognm), Depamm of Edueation

-59-

------i ----I--- The implementation of this proposal will require school districts to achieve the same effiaencies as they did when the School Foundation Formula was created. The plan would also be designed to allow school districts to increase their finanad resources (i.e. property taxes) and budget, but only after a referendum.

In realidng these savings other issues may emerge which will need to be addressed. One such issue may be transportation. As school districts restructure themselves to achieve these &cienaes, the cost of transportation may change. Issues such as this will have to be identified and addressed as educational financing reform takes place In addition, other additional financing mechanisms would need to be developed for spedal education, area education agenaes, talented and gifted students, and dropouts.

UB Create a New Education Excellence Incentive Package Of the savings identified in this report, approximately $120 million should be utilized for incentives to create within Iowa a World Class Educational System. These avings could be used in the early years as a source of funding for early teacher retirement to ease the transition into a more realistic student/teacher ratio. Potentially, a bonus program should be put in place on a district by district basis which would reward the teachers in those districts based on measured scholastic improvement of the students. Moving to this system will not only generate significant savings in the current budget but will also serve to improve the overall quality of the system and, in turn,the students within the system. An additional benefit of the pupil/teacher ratio formula will be additional sharing agreements and a reduction in the number of school districts to a more optimal level. The School Budget Review Committee should have flexibility to direct funds to help school districts cope with above average trwrtation cats when consolidations occur.

82C Restructure Phase III Funding The $120 million teacher compensation reinvestment is intended to accomplish the same goaI as the cunent Phase III teacher compensation package, therefore, the Phase XU package would be superseded by the proposed compensation package. Restructuring the Phase III fundling will result in savings of $41 million in fiscal years 1993 and 1994. A part of the teacher compensation package muld be a bonus based on the measurable scholastic improvement of a particular teacher's students.

8.2.D Administrative Restructuring An examination of the emnomis of-scale show that support costs, and in particular administrative costs, are conelated to school district size. The economies of scale apply to school districts with up to lo00 students.

-60- Exhibit 111-1-17 SCALE ECONOMICS IN ADMlNiSTRATlON FOR DISTRICTS = lo00 STUDENTS 650 I

I I I I I I

NUMBER ff STUDENTS PER DISTRICT Mar@ economies of scale are achieved by school districts with more than loo0 students. If the 325 school districts with fewer than 1000 students were restructured to 1 create 154 school districts of appro>dmately 1000 students each, $12 million would , become available from administrative savings alone.

Exhibit In-1-18 SAVJNGS IN ADMINISTRATION FROM CONSOUDAnON

325 Schod Disticts $639 At Avenge Size Of 474 Shdenls

SUFWCOSTS At TqetSize 01 PELR STUDENT $368 I I I I I I I I I I I 1 1KO NUMBER OF STUDENTS PER DISTRICT

-61-

7- , ----l--- In addition, restructuring of schools enables Iowa to achieve a higher student-teteacher ratio.

82.E Reduce Area Education Agencies (Am)from 15 to 9 AEAS provide special education support, media, and educational senices to school districts. Reducing the number of AEAS from 15 to 9 as recommended by the Department of Education, would result in savings in administrative costs of approhately $1 million.

8.2.F Modify Special Education Funding Formula Recommendatian: We recommend that the State of Iowa provide funding for spededucation instructional services based on a percentage of a school district's mgular program budget.

Background. Ccurently special education instructional sexvices are funded through the School Foundation Formula based upon the number of children who are eligible for spedal educatiori services. Additional funding is provided to school districts for each eligible student, and the amount of funding is based upon the additional costs 1 :, assodated with the type of special education program which is provided to each eligible student.

The percentage of Iowa students identified as requiring special education instructional program has grown from 5.4 percent in fiscal year 1976 to 9.64 percent in fiscal year 1991. The increw& number of special education students has been accompanied by a corresponding increase in expenditures. Funding for special education has increased from $59 million in fiscal year 1976 to approximately $245 million in fiscal year 1990. Earlier this year, Iowa Department of Education Task Force reviewed the system for financing special education. That Task Force submitted its final report in August, and recommended that special education funding be based on a percentage of regular program budgets, with provisions to prevent significant reductions in funding for any schml district that would be adversely affected by the new funding mechanism. Rationale: Iowa school districts will no longer have a finanad incentive to identify additional students as being eligible for spedal education services, if funding is based upon the regular program budgets and not the number of students identified. It .. has been estimated by the Department of Education that a &ximum $30.1 million can be saved over the next 10 years by changing the funding formula, when compared with projected expenditures under cunent law. Implementation: Implementation of this recommendation requires approval by the General Assembly and the Governor. We concur with the principal thrust of the Speaal Education Task Force recommendations. However, current fiscal circumstances preclude the possibility of inaeasing special education funding by $9.8 million in fiscal .!. year 1993, as recommended by the Task Force. hychanges in spedal education

*. funding must be made within the constraints of &sting resources. t Timing: These opportunities will take time to implement. Son- of the Opportunities I may be implemented yet this fiscal year (eliminating the advances for increased 4 enrollments) while most may be started in the 1992-93school yeax. haeasing the student-to-teacher ratio from 15.4 to 20.4 should be fully implemented by the 1993-94 school year.

Use Health Care Provider Funds to Match Federal Medicaid Funds 19 I Recommendstion: We recommend that the State of Iowa utilize resources from health care providers in order to obtain additional matching funds Erom the federal government , Background: Tlurty-eight states now utilize this form of financing to match federal Medicaid funds. Under this approach, hospitals and other health care providers such a. i, nursing homes would either voluntarily lend funds to the states or be taxed to help meet program costs or other health areneeds. These funds are then used to obtain federal Medicaid funds. Since Medicaid funds match state funds at a two to one ratio, provider contributions or taxes are more than recovered through increased matching funds. Iowa is one of only 12 states that have not adopted such a plan. In effect; Iowa I has lost federal funds it might have had as a result of not having adopted such a fhincing plan. 1 I

Among Iowa's neighbors, Illinois, Minnesota and Wisconsin all have provider tax C-- 1 systems in place. These programs generated $275 million, $52 million and $16 million respectively in fiscal year 1991, according to the Northwest Midwest Institute.

Rationale: Under the legislation recently approved by Congress, the State of Iowa could save up to $45 million without reducing services to Medicaid patients.

Imlplementation Issues: The State of Iowa should take advantage of the opportunity while it is available. An Iowa Medicaid provider voluntary contribution or taxation plan should be established. Since Iowa health care providers have shown little interest in a voluntary contribution program in the past, we recommend that .a tax approach would need to be used in Iowa. This will take some time to implepent; tax administration would best be handled by the Department of Revenue.

I I

!

-63 ! I )10-!nt )10-!nt Mental Health Funding Formula a Recommendation: We recommend that the State of Iowa implement a mental health funding formula. We concur with the recommendation of the Public Finance Task Force that the State of Iowa adopt a formula t3iat funds county mental health activities at the fiscal yeiu 1992 Iwel, with no provisions for increases in fiscal year 1993 and beyond.

Background: The fiscal year 1992 appropriation for this purpose was $10.4 million Savings to the General Fund are estimated to be $15 to 20 million in fiscal year 1993 and $35 to $42 million in fiscal year 1994. This proposal will require legislation in the upcoming Legislative session to appropriate funds and provide a distribution formula. Funding for mental health activities in Iowa has traditionally been the responsibility of the counties. (This is unusual. Iowa is the only state in which counties bear this responsibility). In recent years, mental health costs borne by the counties (this indudes mental retardation and developmental disabilities) have increased rapidly. These costs are financed through property taxes. During the 1990 session of the 73rd General Assembly, an appropriation of $10.5 million for fiscal year 92 property tax relief was approved. Induded in this Act was a provision that all county increased costs above the fiscal year 92 level would be reimbursed by the state unless a funding formula was developed by the Legislature. This was intended as a means of property tax relief. (Eventually, a pidud transition was to have been made to a higher level of state funding for mental health.)

This $105 million appropriation was reduced 1percent by the subsequent Legislature and an across the board reduction by the Governor bringing the total available to $10.1 million. Additionally, during the 1991 legislative session, the General Assembly earmarked $5.4 ndlion of this amount to previous programs of assistance to counties including Commimity Mental Health and Mental Retardation Fund ($3.1 million) and Enhand Mental Health/Mental Retardation/Developmental Disabilities Sen$- appropriation ($2.3 million). Actual new funds going to the counties for fiscal year 1992 are $4.7 million plus an increase of $1.5 million in the current programs for a total increase of $6.2 million. .- A growing portion of county mental health mts is for patients in intermediate care facilities (ICF/MM's). Daily patient costs for ICF/MR's in Iowa (an average of $176) are much higher than those for facilities in Illinois ($841, Minnesota ($88) and Wiscnnsin

.. ($116). These differences should be investigated to determine if facilities are comparable and how to contain these costs. The state of Iowa should take action to contain these costs even if they continue to be borne by the counties.

-64- ! - Exhibit 111-1-19 PROJECTED MENTAL HEALTH EXPENDITURES 100

Annual Growth t 195% 80 Rate

60

~MILIWS

40

I I I i 1992 1993 ' 1994 1995 1996

'Note: Menralhedh funding began in 1992rrt$10.6mNbn . IQ-J5804.1C/DL - Swm: wentof Management I!

*&A t Rationale: Estimated savings to the State for fiscal year 1994 will be between $35 to $42 million. There will be no loss in federal matching funds. Property tax levies in counties would need to be higher than would be the case if the state covered all cost increases, but there will be no actual decrease in state aid to counties. There is no impact on client I ser\rices if counties fund increased costs. 4 In Decategorize Foster CareKhange Spending Mix/Cap Group Homes Reeommenda tion: We recompend that the State of Iowa modify the delivery of foster care services 4 to promote the use of family care and needs based services ai alternatives to morc I (costlygroup home placements. Significant savings can be achieved by more iextensive use of these alternatives. I

Background The Foster Care Program provides temporary substitute care for children I who are unable to remain in their own homes. The program also assists with the plamnent of children in alternative living arrangements. Foster care services are provided directly by the Department of Human Services or are purchased from private 4 providers or families. The major source of funding for foster care is State General Func I although some federal wuces are also involved.

The total foster care population and expenditures for the prDgram continue to grow despite the declining number of children in Iowa. The foster care population increased over 11 percent from fiscal year 1990 to fiscal year 1991. State expenditures for foster -65 cafe have grown at a rate of $5-$8 million per year over the past several fiscal years - a percentage increase of 10% or more each year. Between fiscal year 1981 and fiscal year 1991, State foster aue expenditures have increased from approximately $20 million per year to host$60 million annually. Foster care expenditures will be almost $66 million in fiscal year 1993.

Senices for children and families are provided in three settings. The lease restrictive is referred to as Wome Based" services where the child remains with the family and services are provided by social swim workers, "Out-of-Home" services are provided in family foster care settings, shelter care, group foster care, and independent living situations. The third and most restrictive setting is institutional living. Institutional fadlities are located in Toledo and Eldora.

The following illustrates the number of children and the percentage of the total funds appropriated for each setting.

I Exhibit 111-1-20 Iowa Foster Care Expenditures 1993 Estimate 20% a Appropriated

67% Of Approprialed HOME-BASED Funding 4,831 ChiMren

% 13% 01 ApQroQrirted 1NSTITUTK)NAL Funding 21 1 Chiidren Served

1Q-356961C/DL Solncc Dcprrtmrnt ofHuman Scroiccs. W The foster care system tends to utilize higher levels of treatment than may be necessary * because State funds are "pigeonholed" into care categories. Institutions, group homes, families and other types of providers are funded through separate funding mehnisms which do not allowp transfer of funds from one category of care to another. Recent pilot projects in Scott County and Polk County demonstrate the system is capable of operating more efficiently if funds for the various settings are "decategorized". Under the pilot projects, use of institutional care has decreased approximately 20 percent. t Although the "decategorization"projects were not designed to save money, but instead to provide improved service, a 10 percent savings appears to have been realized.

L -66 Payment rates for family foster meand in-home based services are Currently "capped*i . at levels which result in an insuffiaent number of appropriate foster care families, thus creating the need to place children in group care. It is estimated that 14-15 percent of the tMdren in group care could be served in family foster care if appropriate support services were available.

"Capped"payment rates have also made it difficult to serve children with more complex I' problems. As a result, many of these children are placed in out-of-state group care fadlities. Statistics indicate that approximately 17 percent of the group Chfe population I was placed outside of Iowa each month in fiscal year 1991. 1 Implementation: I 'I We spcifically recommend the following be implemented: 1: 1. Decategorize current funding and establish a single Child Welfare Fund by 1 pooling federal and State funds appropriated for foster care, adoption, family t preservation and family entered seryices with flexibility in the spending of these 1 &ds so senices can b;r tailored to the individual neediof the fdyan> children.

2. Target out-of-home services for youth over age 18 on their transition to independence by expanding independent living services. By reducing group care, family foster care for youth between the ages of 1820 and increasing funding for independent living sexvices for that population, a savings of $3.3 million can be realized.

3. Expand in-home services for families whose children have mental retardation and require that all foster care placements exceeding 30 days be murt ordered. By providing increased in-home services as an alternative to foster care for approximately 50 percent of the children with mental retardation who are currently in foster care settings, a savings of $470,000 can be realized.

4. Eliminate the capped payment rates and increase the payment rate for basic maintenance for family foster care, independent living and subsidized adoption and the independent living allowance and expand alternatives to group foster care. This will require a net increase in spending for these services of $220,000. )r Defer Motor Vehicle Use Tax Expenditures f'i ' Reconunenda tion: We recommend that the State of Iowa reallocate a portion of the use tax on motor vehicles to the state General Fund, subject to the limitations described below. 4 Revenues reallocated from the use tax would be used to retire the state's GAAP I budget defiat or build an Emergency Reserve Fund. i Background: The Motor Vehicle Use Tax is made up by revenues generated through a I four percent tax levied on the purchase of new and used motor vehicles used in Iowa. It is the equivalent of a sales tax, but also covers new and used vehicles purchased outside I -67-

I I --.-l--- of Iowa but brought into Iowa for use. Motor vehicle w tax revenues were approximately $124 million in fiscal year 1991. Approximately $97.5 million of that was transferred into the Road Use Tax Fund. These funds were distributed 47.5 percent to the state, 32.5 percent to the counties and 20 percent to the aties. The remainder was used to fund the Underground Storage Tank Fund, the state public transit program and other transportation related programs.

The existing policy of the state is to maximize the amount of federal highway dollars attracted to Iowa and to minimk the need to borrow funds for the p- of highway construction. Due to the fact that federal highway legislation is still pending, estimates of federal highway funds that will be available to Iowa are preliminary. However, given currently available information, Department of Transportation offidals project Iowa's federal fund allocation will increase from $153 million for fiscal ye& 1992 to $276 million by fiscal year 1996 under the new Surface Transportation Act.

Iowa is one of approximately 10 states that allocates or a portion of the or all use tax i similar taxes to its road fund. Unlike fuel taxes and vehicle registration fees, the use tax on motor vehicles is not considered to be constitutionally dedicated for highway purposes in Iowa.

According to preliminary estimates by the Department of Transportation, aties and counties will receive in excess of $30 million of additional federal funds between fiscal 1992 and fiscal 1996. I

Approximately $355 million in estimated expenditures were made by counties in fiscal 1991 for construction,maintenance and administration of roads. Similarly, aties expended in excess of $239 million. The annual reductions of $16 million and $10 million are less than 5 percent of these amounts. In thrw recent years counties reported unobligated balances in their secondary road funds averaging in acesof $81 million as of June 30. While there are sigruficant differences in the amount of unobligated balances between munties, the balances suggest a basis to compare the impact of the proposed $16 million annual reducti-ohSee Attachment 1 & 2 The Motor Use Tax contributes appro-tely $975 million to the Road Use Tax Fund. The fund operates to support a strong and extensive transportation system. The level of cOmmitment is demonstrated by the following facts: While ranking 25th in land area among the states, Iowa's ranks loth nationally in xniles of roads. Iowa's road system contains an extensive bridge network which ranks 3rd in the countrv.

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i." I -68- 'I :iI ------.- I I T I1 Exhibit 111-1-21 ALLOCATION OF USE TAX DEPOSlTED - TO THE ROAD USE TAX FUND f I

Municipal Roads / S19.5MM I

State Roads W.3MM 1 47.1 0%

i4 County Roads $31.7MM 33.06%

t I I

Total = $97.5 Million 167-35806. S /DL

4 Rationale: The Public Finance Task Force considered alternative options for I reallocating use tax funds, and recommended that $50 million be reallocated for four years to retire the GAAP defiat and to start building an Emergency Reserve Fund. The 1 Task Force recommends that beginning in the 5th year that the use tax funds after meeting emergency fund obligations be reallocated to the Road Use Tax Fund. It is also suggested that during the 4 year period the state independently examine the highway 1 funding requirements of the state and local governments and the priority they should be given in the context of total state and local government funding requirements. This , examination will ultimately determine the allocation of the total motor vehicle use tax funds to the Road Use Tax Fund or the General Fund. I This recommendation will reallocate $24 million annually from the state road funds. The remaining $26 million will be a reallocation of funds which would have been received by counties and aties. I i

-69- Alternatives to Mental Health Institutes

Recommendation: We recommend that the State of Iowa no longer provide mental health services at the mental health institutes (MHI) at Clarinda and Mount Pleasant and that a portion of the savings be reallocated to counties who would lose access to the MHI'S. ,

Background: Iowa's four mental health institue were built before the turn of the century. The institutes reached their peak population of 6,700 in 1936. Since that time Werent practices have been developed to methe mentally ill which have resulted in a tremendous drop in the number of people served by the institutions. Portions of the mental health institutes at Clarinda and Mount Pleasant have been eonverted into mectional fadlities. During the wentfiscal year, the four institutions have undergone a restructuring of their mental health services which has resulted in a combined capacity of 650. The discontinuation of mental health services currently provided through the Clarinda and Mount Pleasant fadlities will create the need to provide alternative Senices at the community level. These services would include: Adult Psychiatric Care, Geriatric Medical and Substance Abuse.

Adult Psychiatric Care It has been demonstrated throughout the country that many persons who are institutionalized for Adult Psychiatric Care can be successfully treated in a community based setting. It is imperative, however, that the community based Adult Psychiatric Care be properly organized and contain a minimum of elements including the following: 24-hour emergency phone sentice; 24-hour emergency mobile response capability; short term non-acute crisis/residential treatment; and acute non-hospital based crisis/residential.

Geriatiic Medical Geriatric medical provides specialized services to an elderly population afflicted with physical as well as mental illnesses. These senices may be obtained through contractual arrangements which provide for three &bed fMDs pintly funded by State and county governments. Substance Abuse Substance abuse services funded by the Department of Public Health should receive $2 million in additional funds to be distributed across the state for additional out-patient substance abuse services. It is also important to note that the state would still be the fall-back position for thse services if local providers were unwilling or unable to respond adequately.

Rationale: The closing of Claxinda and Mount Pleasant MHI's would save $5.8 M in one fiscal year. The cost of providing alternative senices for adult psychiatric care, geriatric medical, and substance abuse at the community level is estimated to be $3.1 M annually. Additional overhead costs estimated at $1.7 M in general fund dollars must be assumed by the correctional operations at the Clarinda and Mount Pleasant facilities, The estimated net savings to Iowa would be $1.0 M tor nscitl yea 1~~3.JJ~IUKUC pas the dollars would be adjusted for inflation/cost increases and would be a cost avoidance. The cost to the counties for transporting clients to the mental health institutes and obtaining court commitments has not been ktduded as it is an unknown 1 savings. This would, thou&, offset some of the added costs to the COUties for closing the MHI's and putting services in the local communities.

=14 Defer Funding For Resource Enhancement and Protection (REAP) I Emenditures

Recommendstion: We recommend that the appropriation for the Resource Enhancement and Protection Program be deferred indefinitely. Badcground: The Resource Enhancement and Protection (REAP) fund was established" in 1990, in response to a growing concern about Iowa's natural resources. The progran is administered by the Department of Natural Resources, and is intended to be a long- term effort to wisely use and protect Iowa's Natural resources through: The acquisition and management public land; of 1 The upgrading of public park and preserve facilities; Environmental education, monitoring, and research; and

made to the REAP fund. Fund proceeds are then alfocated to the following sources: 1

i

-71- Exhibit 111-1-22 1993 RESOURCE ENHANCEMENT AND PROTECTION FUND ANALYSIS Living Roadway Trust Fund Comaton Education Board $350,000 $880,500 \ 1 ,Administratian Fund $300,000 Historical Resource Grant and Loan Fund $1,467,500 State Land Management Trust bunt $26441,500

\/I-$4.402.500 Soil 6 Water WntV \ EnEtnmt 1 Conservationkount / 55,870,000 $5,870.Oo0 / \ I /

Total = $30 Million 167-3Sn3 s /DL

Rationale: The estimated annual savings achieved will be $30 million, a total savings of $223 million over the next 8 years by defening the REAP appropriations.

15 Restructure Driver Licensing Centers

Recommendation: We recommend that the State of Iowa establish 19 regional drivers license centers. This change would reduce the number of drivers license stations by 122, from 141 to 19, and consolidate licensing staff at these locations (see attachment 6 for a listing of the 19 service center sites). We also recommend that the Department of Transportation (DOT)assume responsibility for all motor vehicle titling and registatio~~These services are cunently provided by County Treasurers offices. Background: There are currently 141 different sites (operating at different times) where Iowans go to receive or renew their drivers license. This is more than the state of California has for over ten times the population and almost three times the area. There are over 100 sites where people must go to register or title a vehicle. Currently 40 states have central issuance of titles and 47 states have registration renewal at branch or regional offices.

-72- Nineteen senice centers were devised so no person would have to drhmore than 50 miles (one way) to obtain drivers license services. These offices would also operate 6 days a week from 8 AM till 43PM plus one early morning time and One late evening time at each site. These offices would also provide access points around the state for other DOT services, e.g. oversize and other permits. This option would require a law change that would allow for mail renewal of drivers licenses every four year cycle for a broad age group (estimated that over 20 percent of all licenses will be processed by mail). By staffing only 19 centers, more staff will be at each site. Multiple service windows would be available to process drivers license with the ability to call up more help from "back room" operations to open more windows in pehk periods. Employees would be cross-trained in processing drivers licenses, certifying recmk, campking vehicle registrations, handling work pennits and SR22 filings.

Currently the level of service each county provides in relation to vehicle titling and registration varies across a very wide spectrum. The larger the county population base, the more sophisticated the level of senice. The Department of Transportation proposal ' of centralizing this responsibility within DOT would ensure that all of Iowa's atizens would have the same level of service. Though the convenience of going to the county treasurer would be lost, it is expected that over 90 percent of all vehicle registrations will be processed by mail and thus not require an office visit. For the 10 perm-t that do, they can use any of the 19 senice centers.

Rationale: The dosing of 122 drivers license stations and the assumption of motor vehicle registration/ti-~gwould result in the reduction of appro&ately 316 pbs and -(c I generate an annual savings of approximately $9.5 million in the Road Use Tax Fund. It I would take twelve months once the change is fully operational. I

4

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-73- Exhibit 111-1-23 DRIVER'S LICENSING REGISTRATION AND TITLING CENTER CONSOLIDATION

ADVANTAGES DISADVANTAGES

~~ 1. Greater uniformity in applying title 1. Loss of local officefor in-person and registration laws amtact

2 Greater protection from title fraud 2. Postage costs would increase as bulk of business would be by mail 3. Greater capability to implemmt enhancements to improve 3. More mail loss opportunity becabe of convenience the larger mail flow

4. Lower costs 4. Additional phone costs

5. Lesstraining 5. Greater risk/quantity of "insufficient funds"ch& 5. No transferring of records from County to County

7. Earlier depositing of funds into the Road Use Tax Fund and thus earning more interest 3. Cost savings by elimination of monthly data reports and microfiche to 99 counties P. Motor vehicle enforcement officers no longer stopping at county treasurers for requests for service 0. Longerhoursofservice -

16 Encourage Coordination of County Functions

Recommendstion: We recommend that the State of Iowa take action to facilitate and encourage coordination and collaboration among county governments. Spedfic steps to encourage coordination and collaboration include:

Codify a requirement for each county to establish charter commission by June 1,1992 and repeal the requirement for a petition with twenty-five percent of the electorate. -74- Change the configuration of the charter commission SO that each elected county official and each state representative appoints one member and an 1 equal number of people are appointed from community organizations, I business and industry, etc For example the Chamber of Commerce, Council n Governments, Farm Bureau, Taxpayers Associations, largest employers of tht county, etc

Require the reports submitted by charter commissions show cost analysis of t the different alternatives detailing any savings or additional costs between the existing form and proposed foxn. Require details of the benefits and draw backs of each alternative form. Also require the commission submit the repc f within six months of being established. 4 Mow a special election to be held if the next general election is more than nine months away from the date of the commission's report or, alternatively, { mend the code so that no vote of the people is required but that a series of public hearings are held to get public input on the proposed form of government but the final decision rests with the coxnuhion. 4 elected Background: Counties are currently governed by eight or ten offices. These I elected offices are: the County Board of Supervisors (three to five members), the 4 County Auditor, the County Treasurer, the County Recorder, the County Attorney, m* I the County Sheriff. These elected offices are required in Chapter 39 and have duties prescribed in Chapter 331 of the Code of Iowa. These dutis are required of the el& , bffiaa~sin all couities.

Each elected official, with the exception of the sheriff, can have two deputies compensated at eighty percent of the offiaal'ssalary and additional deputies compensated at seventy-five percent of the elected official's salary. In addition, the Treasurer may have a third deputy at eighty percent to run the motor vehicle department. The Sheriff can have two deputies at eighty-five percent of the Sheriff's salary and additional deputies at seventy-five percent.

The Board of Supervisors is responsible for the county budget, general county policy, and levying taxes for all political subdivisions. The Board appropriates spending authority to the elected offiaals'after the budget has been adopted. The board may decrease these appropriationsby ten percent or $5,000 which ever is greater without public hearing, however, except for these limitations, the elected officials are authork to spend the moneys appropriated to them as they deem appropriate. In some cases the duties among the Auditor, Treasurer, and Recorder in the property tax system are overlapping . The Recorder's office is responsible for recording deeds and land transactions which in turn are relayed to the Auditor's office to update the t rolls, which are then relayed to the Treasurer's office for tax collection purposes.

Approximately 24 percent of the nearly $2.0 billion in property twes levied in the sta are levied by county govenunents. Similarly, approximately 27 percent of nearly $24; million in state hded local assistance will be provided to mmty governments in fisc; 1993. -75 .. Rationke: By establishing collaborative relationships among county governments, savings could be achieved in the administration of county services. The Intergovernmental Relations Task Force estimated that potential savings range from $U million to $34 million annually based on the number of administrative units which are operational. Savings increase as the number of administrative units decrease.

30 Administrative Units $27 million 19 Administrative Units 31 &on 14 Administrative Units 34 million The amounts calculated represent -le amount of salaries, *al Security taxes, IPERS, and health insurance benefits saved by the reduction of eleaed officials and one deputy (where applicable). They do not take into effect all the other possible savings that may be realized from overhead expenses, greater purchasing power, greater investment potential, and other issues. They also do not incorporate implementation associated with merging computer systems and filing systems, higher salaries for remaining offiaals, and other items.

Additional savings could be attained if the regional administrations were administered I by a County Finance Officer (in lieu of the Auditor, Treasurer, and Recorder) under the purview of the Board of Supervisors. This could result in increased efficiencies by reducing layers of administration while eliminating overlapping responsibilities. Additional savings of $2 to $4 million could be attained as follows:

30 Administrative Units $4 million 19 Administrative Units 3 million 14 Administrative Units 2 million The effiaenaes proposed provide opportunities in three areas: Insuring the savings are passed on to property taxpayers in the fonn of lower property taxes. Incentives for local governments to increase funding for other programs if a portion of savings achieved by local governments are retained by these governments. A reduction in state funding of various assistance programs. Savings achieved by consolidation or restructuring under the proposal would be estimated and reprted to a board mmprised of state and local officials established to review the implementation of the effiaenaes. The estimated savings would be used to reduce property taxes and reduce state funding. Fifty percent would be requird to be reflected in reduced property tax levies, twenty-five percent would be used to reduce state aid to county services, and twenty-five percent would be retained by the counties as an incentive to maximize the level of savings.

The reduction in state aid to counties should be accomplished by redudng the amount of the the tax credits paid by the state to the counties in fiscal year 1994, and by preventing county governments from retaining spending authority through property tax increases.

-76- Exhibit 111-1-24

ECONOMIES OF SCALE IN COUNTY ADMINISTRATION K

x

w

10

0

17 Revise Community College Funding Enhancements 71 Recommendation: We believe that funding for higher education must be included in the review of state spending, and must contribute to the solution of the state budget problems. The Intergovernmental Relations Task Force and the Public Finance Task Force have identified a number of opportunities for consideration by state policy makers. As with the funding formula for elementary and secondary education, we believe that these options must be considered if budget goals are to be achieved.

Background: Community colleges in Iowa are a state wide system of public tweyear post-secondary educational institutions. Each of the hfteen community colleges serves a multi-county merged area and all counties in the state are included in one of these merged areas. Fourteen of the community colleges are approved as comprehensive community colleges and one is a technical college which is aurently amsidering applying for community college status.

Community colleges are governed by locally elected boards of directors that consist of from five to nine members who are elected for terms ofthree years. A local board has the responsibility for developing and enforcing polides and ntles for the operations of their community colleges, determining the curriculum to be offered, and appointing th president of the college.

-77- At the state level, the regulation and coordination of community colleges is the responsibility of the State Board of Education. The State Board has specific responsibilities for approval of community college instructional programs, college budgets, and facilities. In addition to coxrununity colleges, the state board of education is responsible for the regulation and coordination of elementary education, area area education agenaes, and vocational rehabilitation services.

The community colleges are funded by a fomula based on student contact hours, and cost centers for square footage, libraries, etc. A total of five instructional cost centers and four non-instructional cost centers are the primary components of the formula. Funding for the coxnmunity coIIeges in- each year based on a allowable growth amount which is similar to the allowable growth used to calculate budget growth for elementary and semndary schools. During the 1990 legislative session, the Higher Education Act was approved by the General Assembly and the Governor. Unless repealed, this legislation provides substantial funding increases for the Community colleges during the decade. These increases are cumulative and will increase each year. State aid to community colleges is $104.4 million, less the amount of the auoss-the-board budget reduction in fiscal year 1992 Aid to community colleges is scheduled to increase by almost $25 million in fiscal year 1993, and will reach $214 M in fiscal year 2000. This is a projected $110 M increase in eight years.

Rationale: While the increased funding provided by the Higher Education Act would enhance the ability of the community colleges to provide post-secondary education and training programs to Iowans, the scheduled increases cannot be justified when funding for state universities and elementary and secondary education is being restricted.

Exhibit In-1-25 COMMUNITY COLLEGE TRENDS

1992-2000

AnntJ Growth

FALL ENROLLMENT

100

i i 0 Eliminate the allowable growth increases created by senate file 2430. The revisions of SF2430, unless repealed, will result in increases Of $7.7 million in 1993 and an additional $14.1 million in 1994. 1 Eliminate Allowable Growth for fiscal year 1993. Allowable growth for t community colleges is set at 4.2 percent and, unless modified, will generate a $4.8 million increase in funding.

Make the 3.25 percent Across-thehd Reduction Permanent. carrying the 325 percent across-the-board reduction forward into fiscal year 1993 will result in savings of $3.4 million.

Eliminate Growth in Cost Centers. No growth in cost centers such as contact 1 hours, square footage, and libraries, should be allowed to occur in fiscal year 4 1993. The elimination of these cost mters will result in savings of $9.1 million dollars in fiscal year 1993. i Establish a Standard Tuition Rate. The axt per credit hour varies from a low of $31.00 at Hawkeye Technology in Waterloo to a high of $50.00 at Iowa Lakes, Iowa Central, and Iowa Valley Community Colleges. The difference is affected by three colleges out of the fifteen still being on quarter hours. By factoring in 4 the conversion of quarters to semesters and the number of credit hours generab the average cost per credit hour is approximately $40.00 Tuition at community colleges in Iowa should be uniform and should be established by the General i Assembly. .... $

The three community colleges still on quarters should be converted to semesters and all 1 the colleges should have a standard tuition rate established. The tuition rate would be , established by legislature during the appropriation process. For example, if the tuition f rate was established at $45.00 per credit hour (semesters) and 867,521 credit hours in 1 arts and sciences and 7l5,939 credit hours in vocational education (total of 1,583,455), a 1 additional $7.9 M in tuition revenue would be generated. This was arrived at by taking the difference between $45.00 and $40.00 (or $5.00) times the total number of credit how (1$83,455) generated. Additional revenue for credit hours that are not vocation; or liberal arts would be generated but are not factored into the $7.9 M estimate. The additional revenue could be deducted in whole or in part from the state general fund 1 Aid. ,

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-79-

L. 1 Exhibit 111-1-26

COMMUNITY COLLEGE TUITION COST

40

30

20

10

.. .

2- . ow 167-35820.1C/DL Change Gmtact Hours to Credit Hours. The currekt fonnula for funding community colleges is based, in part, on student contact hours. Generally, a contact hour is fifty minutes of instruction. However, many different factors affect the determination of a contact hour and the factors are not consistently applied throughout the fifteen community colleges. For example, the exact same class at two different community colleges with the same amount of enrollment can generate vastly different contact hours.

Eliminate Supplemental Funding for Merged Areas 4 & 14. Currently, the community colleges based in Sheldon and Creston receive additional funds because they have less than 1,000,OOO student contact hours. By eliminating this inequity, approximately $213,000 in savings could be achieved. Place Community Colleges under Chapter 8, Code of Iowa. Chapter 8 of the Code of Iowa prescribes the preparation of the state budget. State departments are required to submit budgets to the Department of Management for inclusion in the Governor's budget recommendation. State agency budgets are scmtinized by the Department of Management, the Governor's Office, and the General Assembly. By presaibing that community colleges are budgeted for in the same manner as all other departments (induding the hdof Regents), they will be subject to the same scrutiny and resource limitations as all of state government. By becoming part of the standard appropriation process, funding formula increases would not be automatic

Implement State Roperty Assessment System [18 1 Recommendation: We recommend that the State of Iowa establish a statewide property assessment system Savings of approximately $2.8 million codd be attained by creating regional assessor jurisdictions. This savings is calculated as follows:

Exhibit 111-1-27 STATE PROPERTY ASSESSMENT PROPOSAL

OPPORTUNITY POTENTIAL SAVINGS

Eliminate 30 County Assessors $900,000

Eliminate I1 City Assessors $385,000

Eliminate 110 office staff $1320,000

. 10%reduction in other adxlinistration $220,000

TOTAL $2,825,000

Background: There are 110 assessing prkdictions (99 county 11 city) in the State of Iowa. Each assessing jurisdiction has a conference board which appoints the msorto a six-year term. The conference board consists of three units, each with one vote. For County Assessors, the units are the Board of Supervisors, the Mayors of all aties within the County, and one board number from each school district within the County. For City Asssors, the units are the Board of Supervisors,the City Council, and the Board of Directors from each school district in the aty.

-81 - Rationale: Economies of scale could be reached by the local assssor's current hrnctions being performed by the State and transferred from the county level to a regional level. Reduction of assessing jurisdictions and a single administration would provide a greater oppixtunity for uniform assessments. Reorganization of the personnel would.result in the work force being better utilized and in some cases reduced or eliminated. The need fox equalization orders perfomed at the state level would eliminated.

Implementation: All duties relating to the County/City Assessors, Conference Board, and Board of Review prescribed in Chapter 441, Code of Iowa, would be transferred to the State Department of Revenue and Finance. The Department of Revenue and Finance would administer the assessment process regionally and would eliminate duplication of reassessment and equalization orders. "he state wide assessment system would be financed by a state wide property tax, levied and collected by the counties and paid to the State. The Board of Review would remain a local board appointed by the Department of Revenue and Finance based on input of the county boards of supenisors and aty councils within the region.

119 Reform State Budget Procedures

Recommendation: We recommend that the State of Iowa convert to a performance and program based budgeting system, return to a biennial budget cycle, establish and fund an emergency reserve fund, and implement an incentive program which encourages departments to economize and to invest in productivity, technology and training. Rationale: The primary focus of our work has been to place the State on a sound fiscal footing on a long-term basis. In doing so, we have attempted to idenbfy ways to encourage public administrators to economize, without saaifidng the wty of the services they provide to the public. Out review lead us to examine the processes which are used to prepare the State budget, and we find those budget practices can be improved by using, incentives and providing mire responsibility to department managers to achieve results. Our proposals are mutually supportive and should be viewed as an integrated package. To be able to convert to a performance and program based budgeting system, management and staff of the executive branch departments must be freed up from the time consuming task of preparing and reviewing annual budgets. To achieve fiscal stability, improvement of the revenue estimating process and funding of the emergency reserve fund are needed. Finally, if we are to avoid future budget dilemmas, managers of departments of state government need to be given the means and the incentive to improve their effectiveness in the delivery of senices to the public, and be held accountable for adueving these results.

-82- w 1191 Move toward a Derformance and Dromam based budget svstem.

Background: The State of Iowa currently uses a modified =*based budgeting system Under this system, departments submit a request each year which takes 75 percent of the previous year's budget as a base. State agenaes can then add additional requests for funds through the submittal of decision packages. However, this process which is typical of public sector budgeting provides few incentives for departments to economize, nor does it provide for a regular review of the effectivenessof programs or the efficiency with which senices are delivered. Performance and program based budgeting focuses on results rather than wt on outputs and costs. This type of budgeting system requires the estabiishment of both.. effectivenessand effiaency measures for each mapr program and activity adrmrusterec by ,a department. This type of budget system also generally incorporates quarterly dqmrtmental reviews and lends itself to the establishment of a performance based conipensation system for top government executives. Adoption of this type of budget system would result in a reduction in the oversight of day-today dedsions of department managers by the Departments of Management, General Services,Persome and Revenue and Fmance. On the other hand, department managers would be Scpectec to shoulder a higher degTee of accountability for their actions and their comvtion would be based on their performance. Rationale: Government entities which have adopted performance and program based budget systems have generally experienced f~om10 ti 20 percent budget r&uctions during the first three years following implementation. Such savings generally result %-, . from a better understanding of what services constituents value most highly and from 1 idenmgways to improve the government's productivity in the provision of public 1 services. , 1 Timing: Consultants that have helped other government agenaes implement I performance based budgeting systems estimate it would take about 2 to 3 years to put this, budget system in place in a state the size of Iowa. Adoption of a prformance and program based budgeting system could begin on a pilot basis with fiscal year 1994. FU implementation would take 2 to 4 years. 1 Implementation: In order to be able to adopt this system of budgeting, the state woulc 1 have to improve its cost accounting and management information systems. When this type of budget system is implemented costs were recovered in less than a year. Also, t~ 1 fadlitate the implementation of this type of budget system without requiring the I addition of staff, the recommendation should be accompanied with a return to biennial budgeting for the state. i 1

-83- 7biennial budget cycle.

Background: The existing annual budget cycle does not allow adequate time for either the legislature or the executive branch to engage in planning, program evaluation or the improvement of management systems. The General Assembly began de fact0 annual budgeting during the recessions of 1981 and 1982 The existing biennial budget cycle was inadequate to deal with the budget uncertainties due to the poor condition of the state's economy. hnnual budgeting was institutionalized with the reorganization of state government in 1986. CurrentIy, 19 states budget on a biennial basis. Rationale: Reparbg budgets on a biennial basis wiU allow the Department of Management, other administrative departments and the General Assembly to have more time to focus on the implementation of a performance and program based budgeting system. In addition, by reducing the amount of time required to deal with budgeting during the off year, both executive department and legislative staffs will have more time to dedicate to: prcpam evaluation,

improvement of management information systems,

the development of revenue and expenditure forecasting capabilities, Y.L. long-ran,geplanning and policy analysis, and organizational development activities.

Timing Implementation addbegin with the fiscal year 1994 budget. Implementation: For biennial budgeting to be practical, confidence in revenue and expenditure estimates needs to be improved so that only a limited number of supplemental appropriations need to be considered during the second year of the biennium. Therefore, adoption of procedures that reduce the uncertainty assodated with revenue forecasts and expenditures wiU be required in order to facilitate a return to biennial budgeting. Implementation of this recommendation will require the concurrence of both the Governor and the General Assembly.

-,

-84- -4 E.3 RevenueEsbate and Emergency Reserve Fund 4 I Background: Currently, Revenue Estimating Conferences are held quarterly. As a result, the General Assembly uses both the December and March revenue estimates when making appropriations decisions. In addition, if the revenue estimate is expected to increase between December and March the General Assembly typidy waits until after the March estimate is prepared to finalize budget action This results in a bVc&ld problem. First, appropriations are often delayed to the last part of the legislative session which limits the amount of time available to give serious consideration to all programs. Second, when the March revenue estimate exceeds the December estimate, m7ent year appropriations are often increased without taking into consideration that 4 the increased revenue estimate will result in higher school aid appropriations the next year. Furthermore, although cunent law provides for a "rainy day" fund, no emergency I resente mently exists. As a consequence, the state has little capability at the present time to deal with revenue shortfa and expenditure increases resulting from downturns in the economy. Rationale: The National Conference of State Legislatures recommends that states maintain emergency resene funds equal to 3 to 5 percent of their General Fund. This pe~nitsstates to budget with a greater degree of certainty, and lessens the impact of emmnic downturns on the ability of stat= to provide needed services. As a result, tht I state would be less likely to have to resort to either emergency revenue increases or prclgram cuts. Establishment of this fund would also provide the state with the means

to diminate the GAAP d&at and reduce the need for short-term tarrowing. h.\J I Adoption of this recommendation would reduce the likelihood that unantiapated revenue increases would be overspent, and it would act to reduce the growth of standing appropriations. Also, it would provide the basis for eliminating the GAAP 1 defiat, and it would reduce the state's short-term bonowing needs, which in fiscal yea^ 1991 resulted in a net interest cost of about $5OO,OOO. Thing: Adoption of this recommendation could begin on a pilot basis with the 1992 legislative session. If it proves workable then bepmng with the December 1992 Revenue Estimating Conference it can be implemented on a biennial basis. I Implementation: A two year revenue estimate should be made x December of the ye preceding the begmung of a new General Assembly. This estimate should be used as the basis for making appropriations during the biennium. If subsequent revenue forcxasts indicate additional revenues will be available these should be appropriated tc 1 an emergency reserve fund. If revenue estimates subsequent to the December estimate indicate a decrease in expected receipts, budget shortfalls which are less than or equal 1 1.5 percent of the general fund budget should be dealt with through spending 4 reductions. If revenue shortfalls are expected to exceed 1.5 percent of the general fund budget, then the General Assembly should have access to the emergency reserve fund 1 upon a two-thirds vote of both chambers of the legislature. Accumulations in the emergency reserve fund should te restricted to a an amount no greater than 5 percent Of the general fund budget. Additionally, funds appropriated to the emergency reserve fund should be removed from the revenue base upon which standing appropriations are computed. -85 Given the present finanad condition of the state, the argument may be made that the reSOurCeS needed to establish such a fund do not exist. However, more than half the time over the past five years March revenue estimates have exceeded the preceding December estimates. Furthermore, given this history, if the proposed system for building the reserve were in place the state would today have accumulated in excess of $100 million in such a fund.

Another argument against establishment of an emergency reserve is that it would result in increased pressure for the expansion of government senices. The provision that a super majority vote of the legislature be required to appropriate moneys from this fund, as well as the veto power of the Governor, should provide adequate checks against this potential problem.

1-ncentives to Increase Budget Reversions

Background: The existing budget process provides no incentive for departments to revert excess funds at the end of the fiscal year. Rather, since next year's budget uses the existing year's budget as a base, the incentive is to spend every dollar appropriated. Typically, about 40 percent of government budgets are spent during the last wer of the fiscal year.

Rationale: Expenence in other states indicates that an incentive system which encourages department managers to economize can yield an increase in reversions equal to about 0.5 percent of the General Fund. Discussions with departmental budget officers indicate such an incentive program could also work in Iowa during the transition from the current budget system to a perfomce and program based budget system.T%e administrative departments account for approximately $900 million of the General Fund budget. An increase of reversions could yield from $2 to $4 million dollars in savings for the state during each of the next two fiscal years. Also, this would provide departments with resources to invest in productivity-enhandng technology and employee training.

Timing These recmunendations should be implemented over tlie next two years. ' Implementation: To provide such an incentive, departments should be allowed to acuue a credit eqdd to 50% of above nodreversions for use in future years for such expenditures as investment in technology, training, facility improvements and staff recognition awards.

In addition, to provide a further incentive for departments to economize, grant those reverting in excess of one and onehalf percent of their budgets an exemption from restrictions on travel, hiring and purchasing. Atso, allow those departments which make extraordinary efforts to increase their reversions to adjust lineitems in their budgets as necessary during the year without having to Secufe prior Department of Management approval.

ai -86- It k; uncertain how long such an incentive system would work. Among the concerns assoaated with this recommendation are: 1 An adequate reseme cushion is needed to prevent the "savings account" from being used to address future defiats.

0 The need to assume that existing budgets are appropriate,-and That for the program to work the legislature must permit departments to holc on to some of their savings. 4 Restructure EmDlovee Benefits I L--120 ,

Workers' Compensation

Rec:ommenda tion: We recommend that the Iowa Department of Personnel continue its employee safety programs, and contract with an Administrative Services Organization for the administration of worker's compensation claims. A fixed amount should be 1 negotiated that is up to 30 percent below current cost experience. 1 I 1 We also recommend that the funding of worker's compensation change from a

standing unlimited appropriation to specific amounts within the operating .a * I budgets of individd agenaes. In this way, the accountability will retun to the 1 agency level, with a corresponding incentive to promote safety and keep costs I down. 1 1 Backpund: Currently, the state is self-insuredfor worker's compensation, and the program is administered by the Iowa Department of Personnel WP). Prior to I reorganization, some agenaes, particularly institutions, had staff assigned to worker's compensation administration. In fiscal year 1991, a total of $8,73O,OOO was spent for workers' compensation, of which $5,500,000 was paid from the General Fund. f Budgets of agenaes that are funded with other than general funds, such as the Iowa I Department of Transportation, include an amount for worker's compensation. These funds are used to reimburse IDOP for workers' compensation 6xpemes incurred by that I agency. f Agenaes that are financed by the General Fund, however, are covered by the worker's ampensation fund, which is a "standing unlimited" appropriation in DOP. The expenses incurred by these agenaes are paid from the workers' compensation fund, anu 1 never charged back against the individual agency where the claim originated. There is no accountability at the agency level. 4

One of the reasons why workers' compensation costs have been rising in state government may have to do with the manner in which they are funded. Because an individual agency currently has no finandal responsibility for worker's compensation, no incentive &sts at the agency level to keep costs down. While IDOP has recently

-07- expanded its safety training efforts, it can never be in a position to adequately promote safety on a day-t&day basis. This can only be done at the agency or institutional level. Rationale: Worker's compensation expenses have been growing dramatically over the past several years. Nationally, between 1980 and 1987, worker's ampensation costs rose over 150.5 pent,while other medical costs rose 101.7 percent, according to the Worker's Compensation Research Institute in Boston.

Sveral central Iowa employers have recently begun contracting for the administration of worker's cornpensation and have achieved significant savings. For example, the Farm Bureau is saving about 50 percent on every claim.

For fiscal year 1992, a total of $6 million is budgeted from the general fund for worker's compensation. Assuming a conservative 20 percent savings (as compared with the 30 percent average savings achievable through amtracting with an administrative bees organization), this would amount to $1.7 million all funds and $1.1 million in savings to the General Fund.

Timing IDOP should immediately begin negotiations with an administrative services organization.

Implementation: IKistoric information on claims experience by agency and institutions should be used to establish an appropriation amount to indude in the fiscal year 1993 operating budgets for each agency, and the standing unlimited appropriation should be repealed.

Recommendation: We recommend that the State of Iowa provide just one health plan design, with features that are comparable to most contracts provided in the private sector. All state employees would be included in the plan coverage. Background: The state will spend an estimated $82 million in fiscal year 1992 for health insurance coverage through a variety of plans. The state offers Blue Cross and Blue Shield (BCBS) Plans 1, 2 and 3, as well as Iowa United Professionals 2 (KJP 2). (Ivp 2 is open to only Np members and BCBS Plan 1 is closed to new enrollments). In addition, there are five Health Maintenance Organizations (HMOs). Board of Regents employees are clovered under a separate health plan. Twethirds of all non-Regents state employees are enroUed in BCBS Plan 2 The state pays approximately two-thirds of the premium under Plan 2 for family coverage, and 100 percent of the inmiurn for single coverage. Most of the remaining employees are in Plan 3, which differs from Plan 2 primarily in texms of the co-insurance percentage (90/10for Plan 2 xi. W/20 for Plan 3). The Iowa Assodation of Business and Industry (ABI) analyzed the state's Plan 2 features as compared with most private sector health insurance contracts, noting major differences and changes that could be made to achieve comparability. The ABI analysis -08 highhghted four major areas that distinguish Plan 2 from most other insurance contracts: Deductible are based on a two-day hospital stay and $100 for other expenses under Plan 2, while most plans have a much higher deductible; I Out-of-pocket maximum under Plan 2 is relatively low; I Nervous/mental health and substance abuse coverage is unlimited under Plan 2. while most others limit coverage to 30 days; Routine physicals have no dollar chp under PIan 2, while most other plans cap the amount. I The "wPlan" (Comprehensive Major Medical) contains the features that most I clctsely approximate a typical plan in a private sector business. This plan has been cost- 4 mmputd by the Iowa Department of Personnel, and was offered but rejected during the last round of collective bargaining negotiations. ! 4 Rationale: It is estimated that health insurance costs could be lowered by $12.5 millioi per year (all funds) by providing just one health insurance plan with the features i identified by the Executive Branch Review Task Force. Of this total, about $9.6 million would be savings to the employer (the state), while the remainder would be saved by the employees. Of the $9.6 savings to the state, approximately $5.5 million would be general fund savings. 4

Timing. A revised health care plan cannot be impIemented untiI fiscal year 1994. t Implementation: Adopting a new plan design would require acceptance by the unior through the collective bargaining process. 4

-1 E.3 Sid

Baldcground: Currently, state employees nxeive 18 days of sick leave per year. The 1 number of days of sick leave is substantially more generous than is provided by otha I employers in Iowa. The rationale for the large number of sick days provided to state employees is that the state does not offer its employees any short-term disability coverage, and to quahfy for long-term disability there a 90 day waiting is minimum 4 period. Also, while many private employers provide their employees with personal days to cover absences assodated with attending funerals, staying home with sick dqendents and doctor's appointments such leave is covered by the state employee sil leave allotment. t 4 Rationale: The state does not currently budget funds to cover accrued sick leave, so t - proposal will have no direct General Fund impact. However, this proposal will bring the state's sick leave benefit more in line with that of the private sector.

-89-

... Timing A change in sick leave policy cannot be implemented until fiscal year 1994. Lmplementation: Implementation of this program would require changes in both the state's labor ageentents and in the Code of Iowa

Recommendation: We recommend that employees no longer be reimbursed for lunch expenses when the employee {is not staying overnight on official business.

Background: Currently, employees who travel but are not out overnight are allowed to be reimbursed for meal expenses. For fiscal year 1991, a total of $1.9 million was expended to reimburse employees who were traveling, but not in an overnight status. Of this amount, W4,OOO was charged to the General Fund. It is estimated that the breakdown of the above expenditure for meal reimbursements is approximately 25 percent for breakfist, 50 percent for lunch and 25 percent for dinner. Rationale: During the 197Os, the comptroller eliminated the reimbursement for noon lunch when an employee was traveling, but not in an overnight status. When implemented the cnncxpt was strongly resisted. The lunch reimbursement was later reinstated and made retroactive to July 1 of the year it was eliminated.

An employee is away from home and therefore must make provision for the noon meal whether he or she is at the office or in a travel status. As long as the employee is not traveling overnighLt, the opportunity dtsto pa& a lunch from home. Therefore, it makes little sense to reimburse for lunch. For example, an employee living in Des Moines can be reimbursed for lunch in Ames.

The estimated savings to the General Fund in fiscal year 1994 is $417,000. Savings to other funds is estimated to be $497,000. Implementatiox Meal reimbursement is a subject of collective bargaining, with the current contract allowing for meal reimbursement. It is recommended the state exclude noon meal reimbursement from its proposal during the 1993 bargaining process. A change in meal reimbursement polides cannot be implemented until fixal year 1994.

I-andBenefit Comparability !I Recommendation: We recommend that the State use the wages and benefits paid by the private sector in Iowa as the basis for detexmining the wages and benefits for State employees..

Background: Currently, state law (Code chapter 20, section 20.22 (9) (b)) requires that state employees' clompensation be based on comparison with other public employers rather than the private sector employees.

-90- 121 Restructure Executive Branch Oreanization 9

Recommendation: We recommend that the organizational structure of state govement be significantly changed by reducing layers of middle management, shplifvinn the jab classification system, and implementing a management incentive progam. Background: During the past several years businesses throughout the United States have been forced to streamline management in order to cut costs and bemme more effiaent. Given the current fiscal problems confronting the public sector, many state governments are also finding it necessary to reduce excessive layers of management. We have examined two issues related to the number of managers in state government. These issues are the number of subordinates supervised by each manager and the number of layers of management that exists between department directors and front line service delivery personnel. Assodated with this analysis has been the desire to identify means for improving the efficiency of state government through the delegation of decision making responsibility to as close to the point of seryice delivery as possible.

21.1 Reduce Middle Management

Background: Like many large organizations, Iowa state government has grown and

changed over the years and it reflectr a diversity of management philosophy and :*A org&tional structure. Today, it is primarilya control&ven, kerar&cd orgation with from two to eight layers bebeen the customer and the department director. The number of supenisors has multiplied, partly as a result of the pb classification system which limits higher level jobs to those involving supenision. Often, giving an employee supervisory responsibilities has been one of the few means available to provide career advancement for a star employee.

One of the recent steps Iowa government has taken to make state services a "better buy" for Iowans is the decision to adopt a total quality management philosophy. Now in its infancy, the goal of this effort is to increase confidence in government by making continuous improvement in the delivery of services. The approach +valves a greater customer orientation and the involvement of employees at all levels in the organization to identifv how improvements can be made in processes to yield better results. Changing the organizational structure itself is another way to inuease the focus on customers, and to increase productivity by making sure that dedsions are made at the lowest possible level in the organization. Many organizations in the private sector have reduced the number of layers of managemexit, or "flattened the organizational structure" in order to enhance these objectives, and there is opportunity in Iowa government to do likewise.

Rationale: A methodology was developed for tabulating and analyzing the levels of management and supervision for each agency in state government As a starting point the analysis involved identifying every instance where a supervisor has six or fewer employees reporting directly to the supervisor, then calculating the number of managers or supervisors that could be reduced if remaining supervisors were to have -91 - no fewer than 5even employees reporting directly to each supenisor. The method allowed for the determination of the desired number of Ievels of management in the organization based on its new average span of control.

1 DCAMPLE 1 Exhibit 111-1-28 FLATTENING THE ORGANIZQTIONAL STRUmE

MANAGEMENTLAYERS I SPAN OF CONTROL I DEPARTMENT CURRENT

A 3 6.1

B 3 5.1

C 3 4.5

According to the Iowa Department of Personnel,on the average supemhrs in state government spend only onethird of their time on supMisory activities. The remainder of their time is spent on other activities such as planning, project management, report writing, high level technical work and dealing with the public It is assumed those activities would still have to be performed even if all supervisory duties were to be removed. Therefore, in estimating astsavings, it has been assumed that one third of the excess supervisory positions could be eliminated, while the remaining twc+thirds would be reclassified to the highest level held by their subordinates in order to continue their nonsupenisory duties.

Using the scenario and method described above, the maximum number of levels of management would be reduced from 8 to 4. The potential cost savings from moving to an organizational stntcture with these dimensions would be $6.3 million, all funds.

Reducing the number of management layers in state government can improve the responsiveness to the people it sews and increase the overall productivity of the workforce.

Just as in the private sector, where companies have kenford by international mmpetition to become more productive, customer-oriented and quality conscious, today the public sector is caught in a squeeze to deliver better Services without raising taxes. In this environment, it is essential for state government in Iowa to adopt management methods that have proven their effectiveness in improving quality and productivity.

Timing: Phase in implementation over a two-year period.

.u -92- Implementation: Based on the methodology used and the experience of the Iowa Department of Personnel, the following factors have been idatdied influencing the proper span of control for a particular supervisor or manager:

0 Number of locations to manage Percent of supervisory responsibility 0 Complexity of work of subordinates 0 Numberofshifts Court orders and accreditation requirements * Statutoryrequirements

The next step is to work with individual agenaes to determine the appropriate spans of control using the factors identified above and to idenhfy special circumstances and aonditions in those agencies that may make the baseline assumption^ invalid. The me methodology can then be applied to determine the actual target for each agency, and the associated dollar savings that is reasonable to expect can be achieved. The actual restructuring decisions must be made by the agenaes themselves and can begin to be implemented in fiscal year 1993.

This process must be accompanied by a thorough review of the pb classification system in order tp assure a career track for professional advancement, independent of supenisory responsibilities.

Guidelines concerning the number of management levels for each state agency should be established and phased in over a two year period. The number of management K. lev& allowed for each state agency would be accomplished by increasing the number of employees reporting to each supervisor. The actual number of employees who would report directly to a supervisor would be determined by the number of physical locations to be managed, the proportion of time devoted to supervisory responsibilities, the number of shifts, the complexity of work perfonned by employees supervised, and other requirements established by law or contract. - 521.2 Sim~lifvlob Classifications

Background: The existing job classification system used by the state includes 1254 different job titles. Of these 364 apply to a single position, and an additional 136 have only two occupants. On the other hand, only 382 of these job titles apply to positions occupied by 10 or more individuals.

In addition, the existing job classification system only provides limited opportunity for employees in professional and technical jobs to advance without having to pursue management positions. This situation has resulted in approximately half of the state's employees being at the top of their pay scale while still being only in their 30s or early 40s. 'xhis situation results in low motivation among those employees who remain in technical and professional pbs, or the loss of the skills of the best of these individuals if they choose to leave state government to pursue opportunities elsewhere.

-93

.. ' An analysis of the job titles and number of personnel in each job class reveals there are a large number of jobs in state government that are designed speafically for a single department. Also, this analysis reveals a sometimes inconsistent use of job classes among departments. Comments from interviews with perx>nnel in various departments revealed it is often difficult to idenhfy the jobs for which one is qualified, and that a signifcant effort is required to fill vacanaes or determine the appropriate classification for a particular job.

In addition, the current system provides little incentive for employees to pursue advanced education or to volunteer for lateral reassignments in order to broaden their knowledge and skills because the large number of job classes limits opportunities for advancement. Exhibit 111-1-29 STATE JOB CLASSlFlCATlONS 25ooo

15OOO bl CUMULATIVE NUMBER OF EMPLOYEES loo00

SO00

0 200 400 600 800 lo00

NUMBER OF JOB CUSSlFiCATtONS 147-3562l. 5 /DL

Rationale: Simplifying the job classification system should result in a reduction in the amount of effort required by both Department of Personnel staff and other department staff in the filling of positions and in the evaluation of employee qualifications. Also, the broadening of professional and technical job series and making advancement of personnel dependent on the attainment of advanced training and increased knowledge should improve employee motivation, as well as the quality of service provided by state government. These changes in the job Classification system should also increase the ability of the state to keep its most talented professionals and techniaans, and to restructure by reducing the number of layers of management. hplementatjon: The job classification system should be simplified in order to reduce the amount of effort required to evaluate the qualdxations of job applicants and to !I make it easier for state employees to iden@ career opportunities within state government. SingIe occupant management positions should be converted to the Public ! sentice Executive series to increase opportunities for the cross training of managers. i Similar professional and technjcal job classes should be combined into a minimum number of series, such as financial analysts, policy and planning analysts, program j administrators, etc, and unnecessary quahfications should be eliminated in order to fadlitate cross training. Furthermore, to encourage cross training, finanad or other incentives should be offered to employees for volunteering for lateral reassignments. Also, the number of levels in professional and technical job series should be slcpanded 1 to provide opportunities for upward mobility. Finally, positions Within professional and technical pb series should be convertible as employees attain higher levels of SU I and knowledge in their field. I The Department of Personnel can implement the recommended changes administratively. However, consultation with employee unions will be required for changes in the classification of jobs covered by collective bargaining agreements. Also, to insure that changes in the system satisfy the objectives of this recommendation it may be advisable to establish an advisory committee of both management and non- management employees to work with the Department of Personnel on implementation of this recommendation.

21.3 Implement Management Incentive Program

We recommend that the State of Iowa raise the limit on pay for department directots and division directors within departments to that of managers with comparable responsibilities in the private sector. Also, provide a bonus element to top management compensation which is tied to performance objectives set during the annual budget review. To eliminate possible claims of favoritism or p artisanship establish a bipartisan executive compensation mmmittee consisting of members appointed by the Governor and confinned by the Senate.

Currently, there is little flexibility to reward managers monetarily for improving the productivity of their work force or improving the effectiveness and responsiveness of the programs of their departments. In fact, according to some managersl the current budget and compensation systems discourage such initiative. Also, in recent years the level of compensation offered to top level managers in state government has fallen behind that of managers in the private sector which has made it Micult to attract top talent to state government.

Background: Discussions with several cunent and former public sector budget offiaals, as well as a consultant s-g in performance based budgeting systems, revealed that the public sector is begxuung to borrow the concept of performance based pay for top executives. Employing a compensation committee to establish annual lev& of pay for top executives is consistent with good business practice. This compensation proposal should make it possible for state government to better attract high quality management talent without it appearing to the public or other state employees as an unwarranted give away.

-95 Rationale: Tying top management compensation to performance should result in both an improvement in the effectiveness of government in meeting the needs of the public and in the effiaency with which services are provided to the public. Also, tying top management compensation to a performance based budgeting system will introduce the element of accountability that is necessary to make such a system effective.

Implementation: Implementation of this system should hgm in Fiscal Year 1994 along with a change to performance and prDgram based budgeting.

122 Reduce, Eliminate, or Defer State Pronrams and ADDroDriations

Recommendation: We recommend the elimination or deferral of the State programs shown in the tables on the pages which follow. A mapr focus of the Executive Branch Review Task Force has been the identification of opportunities for reducing the General Fund defiat through either the elimination or deferral of various state government programs and activities. Although a mmprfrhensive review of every state government program and activity was not possible given the limited time dowed for this study, a variety of means were LE~to develop as comprehensive a list of candidates as possible. We believe that the Governor and the General Assembly should review each of these recommendations. We have learned from our partiapation in this process that it will not be possible to solve the state's budget problems without making some fundamental decisions about what and how much government should do.

Suggestions were obtained from department directors, from interviews with mid-level managers and non-management staff, from Department of Management staff, from atizen suggestions, and from legislators and legislative staff.

A twostage process was established for the screening of program and activity

elimination and deferral candidates. Stage one consisted of the categorization of I candidates on the basis of the number of people served and on whether any alternative means for funding or providing the service eisted. This initial screening, which was devised with the assistance of Booz.AUen personnel and completed by the Task Force's analysts, resulted in each candidate being assigned to one of four categories:

-96- Exhibit 111-1-30 PROGRAM SCREENING

Candidates for Elimination Competing Programs

those programs or activities Those programs or activities YeS which serve a small number of which serve a relatively large people and for which afternative number of people and for which edso rhmsrives oxis

Alternatives Discretionary Programs Public GooduSewices

NO fhose program or auivities Those PrOQrams or actbitis which LBNO a number ofpeople Which servo a relatively large urd tor which no of very Cmited cumber of people and for which ahematjvos edst rm or very Cmited alternatives axtn

Few Many Constituents

The second stage of the screening consisted of the review of the four categories of programs by the members of the Task Force. During this second stage screening Task b3 Force members rwewed the four lists of programs and activities and they were provided with supplementary information on those about which they had questions by budget specialists from the Department of Management. This second stage of Screening resulted in two groupings of program and activity elimination and defend candidates which are being fomwded on to the Governor's Spending Reform Committee for final consideration.

Exhibit IU-1-31provides a summary of programs that we recommend eliminating, reducing or deferring along with opportunities for savings from effiaenaes.

-97- Exhibit In-1-31

EXECUTNE BRANCH REVIEW ?A!% FORCE 0PPOR"TIES FOR PROGRAM ELIMINATIONS

PR0GRAMIACI.Ml-Y lVP2 N92 Future FTES comments G.F. Other Years (if different) Attorney General

FumersMediation sloopoo 0.00 This pmpm was established during the . service farm recession of the early to mid-1980s. Useofthis pphas dencased by over Win recent years. Although the revice isvlewed as good, it c~mwmost likely k made self supporting thrwgh M increase in kes. 0.00 Useofthisservioehasdeaeasedin ptars.Thistypeofraviccisnotprwided to other rypes of business.

200 This activity could be paformed my. Direst mstsmayincl.ease,butthis would be at least parhally OMby elimination of the cost associated in having to =me to ksMoines for this testing. 1.oo This could be done locally. Sheriff depamnents in the southeastern part of the state m hdyproposing to do this

0.00 This program should be trans- to the A.C.'s office and funded with Weral dollars. They mtlydve approximately WpoO from the Federal govment to adminirter programs such u this. There would be no impact on service. Brain and Spinal Cord Sllpoo 0.00 This should be transferred to the Dept of lniury Reglstr). Public Health. they have Federal money available to fund this program. This would help reduce the burden on the General Fund and mudmize thew of available federal dollars. There wodd be no impact on services. Public Health

GpitolNurse 1.oo The position is currently MCML Volunteer service is prwided by Cenaal Hospital staff.

-98- Related G?nkc h&se Rogtam fund ihis without special state suppon, or maybe could be funded through the Speaahed Child kprogiam CommunityNutrition 1.00 The necessity of this program is prosram questionable. ElderAffah

s120,oOo 0.00 Nursing home inspeaion programs M in plad in ocher departments.

Tmnspmtion

StlteCadeGxsing 6700,000 0.00 Thisexpenseauldbeassuznedby Safety Fund CRVrn thenilroads. rrXrrprevMlsly proped ending this ptogram. lorn Railway Fvrance s4,ooo 0.00 IRFA was established in order to Authority provide the state the capability to issue bonds for the p~vposesof funding mil acquisition and rehabilitation projecb. This program could be magad with the Iowa Rail Assistance Program. LPcalDewdopment 57,000,000 0.00 This pmpmprovides fuuncial poMn of the RISE support to local gownments to pzogram(Rm make road improvements to industria2 parks. This is the speculative pmof the RISE progna Funds come from the RUF. RWportion of Living 0.00 hdsare available from utility Roadway Ropm easements on highway right-of-way; CRm educational materials are aMilable through Ag. Extension Senice. EcoaomK Development

SmallBusiness 580,oOo 0.00 Program Cdn be optedthrough innovative Reseaxh Wallace Technology Transfer Rogram Foundation. Private funding may be rvlilabe. Funding for the Pea= S%,iTjg 0.00 Pmvides no diRa dcetom for institute the state. May not be fundamental to the state Eovemment's mission. InternationalNetwork 0.00 on Tzade RcrOa,Pqram 0.00 !Statewide inframuctum assessment must k e~mpleted. Funding for Councils of 0.00 Small mount of dollars spread Government among 15 regions.

-99- PROGRAM AmN 2 -92 Other FutweYears FITS Comments (if different) Fundinn of Labor- 5195,745 1.05 Counals were to have MaM&ent councils become self-rupporting by now. FundingforRED 5743,040 200 Senicesprovided are Ccners and RCG dupbutive of other sonomic development pf~grams.Savimcould be provided through SBDCs. $77,400 The program shows no dgnifunt impact on new businasrtares.

Education

Texthks Non-public 0.00 This program provides rdmbrrrrement to nonpublic Khools for tatbooks. Thermge cost pershdent fr 516. Transportation Non- 0.00 ThiSprogamreimburses public (aonsider making parents for transporting rreeds he?$ their chithto priMte Echook, fee ud k& of edonomic d.Lsst year 262 schools filed daims. The family must live more than 2milesfrom the SChOOl. U7,732 0.00 This appropriation mppom the office of the Future Farmers of America. !

Instructionalsupport ajo0,OOo 0.00 Thispmpmincrasesthe (growth) money rvailable to #hook for openting expnses. The SZS million is the estimated growthfrom R(92 to FY93. utzmlm

ArtrCoUndl-MSBasic m121 150 ThirPIOpXnWinithted . Education to improve teaching ofthe uts in schools. ArtsCound-Artist J170.oO0 OM) "he Endowment prognm Endowment did not restive an appropriation for Fy 92, howevu, thm is $184,660 rvlilable from past 8ppm+ns and interest cuned, Which hw not baen matched by private money. (6170p30 appropriation. and 914, OOO interest earned) EnrichmentCmts 5200,000 0.00 Auwded to mapr muladisdphry organizations

-1 00-

T--7------I I PROCRAM / AmFY92 C.F. N92 Other Future FEs comments Yean (if different) HrmunSrrvices -

Papent for Foster 3.00 Moves youth towards Goup and Shelter Care independence prior to age 21. for Youth Age 18 and This relates to the proposal in the Older Public FwTask Force repon which redesigns the Foster & delivery system. Limitvoluntary 150 Maintains more youth in th& Pkmcnt of Children in own home with supportive Foffer Cue to No More dce~.This relates to the thn3oDays proposal in the Public Finance Task Force report which redesigns the Foster Care dclivaysystem. SeweAdditional sb18,lxK) s138poo 03 Serves individual needs of Children in Needs children rather than puthg Based Fo* care ratha them in a structured setting. thrn Croup Care This relate to the proposalinthe Public Finance Task Force rrport which redesigns the Foster Cue delivayryrtem. . MentalHdthand 541,390 0.00 Reduce number of boards and Mental Retardation councils involved in this area. Commission and Responsibilities could be Revention of reassigned to the Human Disabilities Board senices Council. Save expense (Assign duties to Human of three bards or councils. ,‘2 savicscouncil) 4 CamblasAssistance $387,000 0.00 Numkof people saved is Ropm (Fund through small, 362 in €3’91. Prpgram was 4 user kes) reduced by 50% inFY92 4 I CaIltgc Aid Commission

CoDege Aid Repayment 0.00 Affects a small number of programs (phase out students. over4years) OrteopathicMedidne 0.00 prosams narted in the early and Health sdences 19705 to attnct doctors to d Assistanceprograms Communities. otherprograms 1 (phast out over 4 yean) have been established to accomplish this. #

llgridture and knd Stewardship I RivatizeGxain 23.00 Office audit of private CPA Warehow Inspections inspeaions Sheephmotion 576,064 200 Would put this program on an &yeaU equal footing with Other inspection programs.

-1 01-

------r7--,--.-I I I PROGRAM/ACI-MIY FY92G.F. FY92 FuhupYears ms Comments other Apkylnspeaion Sll837 320 Elinunate Apiary hpertion Bureau Bureau Soil Consewation 5286,167 0.00 One time savings estimated Rrvolving Loan Fund balance to General Fund.

ELIMINATION SUBTOTAL 516,413,639 S8~ooO $4,614,000 4275

OPPORTUNMES FOR PROCRAM REDUCTIONS PROGRAM/ACTNIP( FY92G.F. M92Other Future FITS Comments Yean (if different) Public Hdth

WellElderRogmnStaff- WPoo 1.00 Havesbtingrttffabsorb Raduction this+ HealthData 0.00 Saterhouldprovlde Commission (Fund suppart dmilar to that through user fees) provided by pri~teLeCtDr brrsines&?s.

Education

Child kelopment (No 51,144,000 0.00 Keep program but eliminate growth + N91 funding increase 1.1, mion)

Economic Development

IFAHousingProgram 51,000,000 0.03 HOMEpropmwill provide appx$9 million in new Federal funding for housing in N 1993. REDUCTION SUBTOTALS 52394,000 -0. -0- 1.00

-1 02- 1 OPPORTUNITIES FOR PROGRAM DEFERRALS PROCRAM /ACnVTIY N92 G.F. N92 Other FutureYears(if FITS different ) LODOmiC Dtvelopmrnt

NationalMarketingand a,ooo,ooo Tourism Advatising RecreationalTails s1,ooo,ooo .SisterStateRogram %?so s12j,OoO Youth colp Roglam Sl07poO 072500 Welcome Ctr. Rog. s33spoo 5463,625 Nihml Ruourte

WatprResourrrs- sZsoopoo LandfillAltanative Grants WatprRexwCes- s1,oeom County Gnnts for Water Testing & Well Plugging mLSUBTOTAL 51341,750 ww,m s661,125 0.00

CONSENSUS TOTAL 520,349,389 S13,182,Wl $5,275,125 43.75

-1 03- OPPORTUNITIES FOR EFFICENCY IMPROVEMEh7S IN STATE GOVERNMENT PROGRAM /ACTlVlTY N92 N92 Other FutureYears(if RES G 1. different) CombineDepartments 5674,660 ns is one component of the of Human Riihts and proposal to &te the civil Rights Dept. of Hunw Rights. This would consolidate aiminalplsticcrcscarth &Its. Eliminate the Executive Position could be Council downgraded to dezt raponslbilitics, eliminate redundancy of apprpval process; cwcmor is charged with admininaing I brknad budget -not other four member. CombinedlHealth This would omdidate the ApfessioAal Boards in piokssionrlliccnsing the Dep. and Public function into one division Health and tmnsfer to fur ease of administntion k the Dept. of commerce inddfidency. Have Dep. of Public Provide economy of de SIfetyrssumeall uciliringodstingfiscalstaff Administrative Support from the Dept. of Public Functions for the Iowa sakty. kwMrrrment Academy MwetheDPS Rindpal function is to Communications support the Highway PatroL Wonto the Iowa Highway Patrol aarifyrppointment of To make consistent with all the Direaor of the Iowa other department heads’ Law mrcement appointments. Amdemy by the Governor Plao?~m~ty~sed To provide uniform Corrertjons (CBQ under coordination, conml and the Administrative amuntability between all Conml of the Dept. of facets of correaional Corrections senices.

L -1 04- PROGRAM / Am N92 N92 Other FutwpYears(if GI. different) Reviewneedsfor 528,647 Only one staff pason to - Records Management perform the responsibility and evaluate for evaluations of what merits for saving Thispersoncouldremainindocuments should be saved. documents coordinator position and opaate on task force b;lsis. The position would k modto printing & nuil division as well as staff to microfilm documents tok raved. wposj6on would be elimiruted ud rerponS1mties usumed by printins . M. Establish a fee for daims 527,945 The impozition- of a blu\gfae fiJcd with the Appeal isvtoprwide Board 65 for general, funding to mathe ax& of s25 for tort) handling, passing and investigatingclaims. Due to the inapare in the volume of daims (doubled) wihthe past two years, more time is spent pmxssing the claims. Based upon an analogy of a s.00 filing ke compensatory to the US. Distria court,we feel it only appropiate to offset the enomous rdmrrustrah.. 'wapenseto similarly chage a fee for tort daims.

EFFICIENCIES TOTAL !%,186,357

-1 05- Section III

Chapter 2

Other Recommendations

w This chapter consists of desaiptions of recommendations other than the "Top Opportunities"presented in the previous chapter. The recommendations are organized by the task force that offered the recommendations as follows: Collection Task Force Technology Enhancement Task Force Prioritization Task Force Public Finance Task Force Statewide Service Delivery Task Force Intergovemmental Relations Task Force Executive Branch Review Task Force (all recommendations from this task force are listed in the 'Top Opportunities" section) These recommendations generally represent smaller savings potential than the Top Opportuhities". However, in some cases a recommendation is listed in this chapter because there was less support for this recommendation than the others. For example, while elimination of optional Medicaid expenditure represents a $48 million annual savings, the Committee was unable to reach consensus on the recommendation. Exhibit m-I summarizes the Other Recommendations.

-106-

---.I(------TI--'------I I I Exhibit 111-1 OTHER RECOMMENDATIONS - Y FWYear FWYear ECOMMEhDATIONS -PAGE 1993 1. Report past dwobligations to natiod credit bureaus. lOe S140,oOO 2 Establish a state lien filing system. lQ€ S27opoo 3. Create incentive for debtors to pay. 109 TBD 4. Di~~l0seMmeS of persons owing funds to the state. 110 TBD 5. hdYexpansion of electronic funds transfer systems. I10 TBD 6. Establish state coUeaion standards and policy. 111 TBD 7. Identifyuntecognued’ Rceivables. 111 12Dopoo 8. Move forward with Iowa Communications Network 113 TBD 9. Review personal computer acquisitions. I IS TBD 10. Initiate locll government coordination of information systems. 116 TBD 11. Expanduseofvoicemail. 118 TBD 12 Dekr invertment in Wallace Technology Foundation. 119 s1,mpoo 13. Consolidate printing facilities. 119 wpoo 14. Subcontract janitorial services. 122 S17SpoO 15. Subamtract nursing SBVices at Iowa Veterans’Home. 123 52240,000 16. Use prison industries fo supplement printing sewice. 123 Sl50,oOO 17. Subconm liquor warehousing and delivery fleet operations. 124 s93oPoO 18. Eliminate state aircraft pool, or consolidate with I.S.U. Lircah pl. 124 5619poo 19. Eliminate seed testing at Depamnent of Agriculture. 125 S70,000 20. Partially eliminate Weights and Measures Div. in Dept. of Agriculture. 125 5758,OOo 21. Reduce higher education assistance by the Iowa Student College Aid 126 53,900,000 Commission and study the Iowa Tuition Grant proaams. 22. Revert savings from regents institutional restructuring to General Fund. 126 Sl2,ooOpoO 23. Require regents institutions to obtain tort liability insurance. 128 TBD 24. lncorpoate interest earned by institutions into budget process. 128 s2500,000 25. Review Universities Retirement Program. 129 TBD 26. Use inaease in tuition to offset need for General Funds. 129 TBD 27. Run Board of Regents office with university appropriations. 130 51,200,000 28. Revat SO% of Univ. of Iowa Hospitals & Clinics profit to General Fund. 130 s4,ooOpOo 29. Adopt managed care statewide for Medicaid. 130 s325,ooo 30. Cut optional Medicaid eligibility categories 131 533,ooO,ooo 31. Cut optional Medicaid senices for mandatory eligibility categories. 132 515,000,000 32 Develop guidelines for the retention of investment earnings. 133 5500,ooo 33. Develop a uniform financial reporting and accounting system. 134 TBD 34. Review polides governing property exempt from property taxation. 134 ” TBD 35. Reduce the State‘s CAAP defiat. 135 TBD 36. Analyze tax expenditures. 136 TBD 37. Develop a statewide system for delivery of services. 137 TBD 38. Merge Community Based Cometions (CSO boards into a central board 141 7BD rystem. 39. Increase use of intensive supervision at CBC facilities. 143 sr,m,ooo 40. Reduce the number of DOT maintenance garages. 143 TBD 41. Modify distribution and adminishation of vaccines under Title Mx. 14s 5289,OOo 42. Eliminate Regional library System. 14s nm,ooo 43. Adopt bntnctual Services’syrtem for indigent defense. 146 5650,ooo 44. Transfer Historical Sites to local governments or organizations. 147 s173,000 15. Reduce the Agricultrtnl Extension and/or fund education portion 148 s,mm thmugh user fees. 46. Coordinate townships and counties to eliminate duplication of dces. I@ s8l0,OOo 47. Implement Federal Funds Management System. -1% %5,8oo,OOo mAL - %9j,l49,OOO BD= To Be lkimruncd

-107-

------r7----.-- I I I I I COLLECTIONS TASK FORCE 1

(Report Past Due Obliaations To National Credit Bureaus I

Recommendation: We recommend that the State of Iowa report information to credit bureaus about persons who owe funds. Rationale: If uedit bureaus choose to make use of this information, debtors will have an inmtive to make payment to the State of Iowa. This is a proven mlleaion tool which is currently being implemented in several states and is used by the Iowa Student College Aid Commission.

While initial start up costs for this program are estimated to be $60,O00, the CoLlections Task Force estimates that the State of Iowa would collect an additional $2OO,OOO annually. This estimate is based on one percent of accounts receivable which are over one year old. The experience of the Iowa Student College Aid Commission indicate that a return of one percent can be expeaed from individuals' who wish to clear their credit bureau report.

Implementation: It will be necessary to carefully verify the accuracy of the information provided to credit bureaus in order to prevent situations in which an individuals credit rating is unjustifiably affected. [Establish a State Lien Filing System 1 Recommendation: We recommend that the State of Iowa establish a state lien filing system in the Secretary of State's Office and provide statutory lien authority to all state departments, similar to those presently available to the Department of Revenue and Finance. We also recommend that the State eliminate required service by sheriffs for certain types of levies and provide for administrative ganshments for up to 10 percent of the debtor's eamings to government agencies. Rationale: The establishment of a lien filing system would streamline the lien filing process and increase the number of liens filed, and enhance the ability of the State to collect from those debtors who have assets. Liens would be enforceable on property throughout the State rather than only in the county of filing. The Collections Task Force estimates that the State of Iowa would collect an additional $200,000 annually.

The Iowa Student College Aid Commission estimates a $70,000 increase in their agency's collections; judgments would increase by 33 percent and garnishment by 250

-1 08- percent for in their non-general funds. The general fund savings potential is based on an estimated increase of one percent of collections in Revenue and Finance. The Department of Human Services has indicated that a statewide lien filing would have effecton their collections child support, but could not project a potential savings. County reported liens generate appro&nately $25,000 to $40,000 per month. Analysis ofthe Board of Regent's debt and the Court's debt indicate that opporhmities exist to capture State and other funds, but not enough information exists to calculate an estixtate.

Implementation. The estimated inaease in mllections assumes that enabling legislation is approved to permit implementation by July 1,1992 We believe that is is appropriate for the State to initiate a lien filing system. We encourage state officialsto involve professional abstractors in the development of the statewide database on liens.

/Create Incentive For Debtors to Pav I

Recommendation: I We recommend that the State of Iowa establish incentives for debtors to fulfiLl their obligations to the State. 1 <. i Rationale: Private industry utilizes a variety of incentives to encourage persons to pay their overdue debt to a collections unit. If used properly, the incentives could be termed as a "closer" for the collection of the debt. Some of the incentives which should be ansidered indude: Collections costs - Assessment of collections costs if not paid within a specific time or a reduction of collection costs through negotiation.

Utilization of credit cards -The use of a credit cards by debtors effectively transfers the credit to another entity. Fees for use of credit cards as payment devices vary and probably can be negotiated. hterest Charges - Increase the rates of interest to encourage prompt payment of debts. The ability to negotiate a reduction in interest charges could also be an incentive. Mow the cost of attorney fees and court costs to be added to the amount owed by the debtor. Implementation: Private collections agencies with which the State has been working are using some or all of these incentives. If the state utilizes these collection incentives, appropriate training and supervision will be essential to ensure coIlections law and ethical considerations are handled appropriately.

-109- lDisdose Names of Persons Owine Funds to the State I Recommendationc We recommend that the State of Iowa explore opportunities to identify and disclose the names of persons who owe significantly delinquent amounts to state and local governments.

Background: The state currently has a practice of publishing, in newspapers, the names of individuals who are owed money by the state. This is commonly known as me Great Iowa Treasure Hunt." This program has been shown to be effective, and we believe that it is appropriate for the State to use similar means to mllect as well as disburse funds.

Similarly, some p~sonsowing the state funds are not easily locatable. Most collections to& are focused on the need to locate individuals so that they can be contacted and asked to pay moneys owed. In order to provide an additional incentive for debtors to fulfill their financial obligation to government, we recommend that the State of Iowa take action to disclose information about debtors.

Implementation: We also suggest that any policy on disclosing or publishing a debtor's name have appropriate procedures to prevent the circulation of inaccurate information IStudv Exbansion of Electronic Funds Transfer Svstems I Recommendatiom We recommend that the State of Iowa continue development of electronic funds transfer or automated cash handling systems for collections. Background: Eiecbonic hdstransfer (EFI? and automated cash handling (ACH) are different names for the same system. Currently, the state utilizes ACH to receive payments from Iowa's 1,000 largesf taxpayers.

Rationale: The advantages of these systems are: Payments are received and deposited in the state's treasury on the day the payment is due. Other systems such as a bank with a lock box might receive payments mailed prior to the due date and received after the due date. Processing by bank personnel requires at least one day before deposit. Payments can be invested by the Treasurer on the day they are received. Paper billings and other processing of paper can be eliminated. Banks do not charge an overdraw fee if an electronic transfer is unsuccessful. An electronic transfer is attempted the next day.

-110.

7-- -'-l--- Implementation: We recopbe that their are some technical and procedure limitations . which prevent the broad implementation of electronic funds transfer systems. For example, current ACH payments have the limitation of 80 characters of text to explain the ereetTonic payment. Problems with accounting and daily recondliation can occur. While the finanaal community is in the process of establishing new standards which will provide a peater amount of text information to accompany payments, these bani- must be overcome. We recommend that appropriate steps be taken to resolve these issues so that electronic funds transfer systems can be more widdy utibd. IEstablish State Collection Standards and Policy I Recommendation. We recommend that the State of Iowa establish a common collections standards and policy for all state agencies. A complete analysis of collection and receivable practices should be made and a collections standards and policy implementation group should be convened. The group should be representative of the major agencies who collect receivables.

Background: Most state government agenaes which collect funds do not have a Wonstatement that indudes the effiaent and effective collections of current and delinquent accounts receivable. As a result, priorities are more focused on the provision *z 1

of Senices to the public. While we do not believe that the primary mission of these I

agencies should be diminished, there are sipficant differences in collection polides I and procedures. For example, state agency polides differ in the manner in which the l follohg issues are handled: judgments, lien processing, garnishments, accounting for 4 1 debt, performance standards for collections, information about the location of debtors, ma a&g of accounts.

Rationale: Accounts receivable programs set up in other states indicate implementation of collections standards is essential to consistent and successful collections. Such standards maximize effiaent collection of accounts and should maximhe the collection of old debt. i [Identify Third Party Receivables 11

I Recommendation: 1 We recommend that the State take appropriate action to ensure that third party 4 receivables are being billed to the appropriate entities. 4 Background: Consulting proposals received from Deloitte and Touche and Peat 1 Marwick indicated that sigruficant amounts of third party receivables could be ( generated with a comprehensive consultant review. For example, research by the Department of Human Services indicates that Mental health or social services provided by state staff could be billed to Medicaid or Medicare.

-111- Institutions are the main potential source of billings for services provided by state staff. The Veterans Home bills for Medicaid, Medicare and private insurance. Hospital schools bill Medicaid, Medicare and private insurance. An attempt was made to bill Medicare several years ago even though the mounts were relatively small. (Most clients at the hospital schools are not Medicareeligible.) There were problems with the Medicare billings in that they could not be readily differentiated from Medicaid billings. Since 97 percent of the hospital school costs are billed to Medicaid it was decided not to jeopardize Medicaid by billing Medicare. It is estimated that between $lOO,OOO to $200,000 could be recovered annually but there would be additional staff costs which would partly offset these gains. Mental health institutions bill Medicare, Medicaid and private insurance where available "here is no incentive for the institutions to identify these third party payors because mveries go back to the general fund, not to the institutions. Providing an incentive could result in better recoveries. One area which could be looked at more dosely are the state cases where there is no county to bill for services. There is a possibility of collecting part of the cost of service from the client or the dient's family, although in most state cases no effort is made to collect fonn the client or family. Bills are generated by the institutions and sent to Revenue and Fmce where they are filed. The potential of collecting money, and the cost of it, studied by P this collecting has been the Division of Mental Health before, but it may be appropriate to review it again.

Post audit of MMlsl (Medicaid Management Information System) may review overpayments but providers may not be charged because of finandal hardship to the provider. The Department of Human Services actively pursues overpayments from the MMIS. Typically overpayments are revealed when a third party payor is discovered after a payment has been made. Most often this is Medicare because of the length of time it takes to establish Medicare eligibility. It also applies to private insurance. Human Services contracts with Health Management services (HMS) to pursue payments from these third party sources.

Fkttionale Most of the third party receivables found in other states are in large " programs similar to those in the Iowa Department of Human Services. A small percentage increase in collections in that area could generate a sigruficant amount of funds. Implementation: We recommend that the State soliat proposals from appropriate consulting firmsto implement this recommendation. The expertise of a consultant is needed to: Develop implementation seategies Obtain impartial analysis of issues and implementation which cross lines of authority of government, and to Develop effetive legislative implementation strategies.

-1 12- I TECHNOLOGY ENHANCEMENT TASK FORCE (Iowa Communications Network 1 Recommendatio~ We recommend that the State construct Parts I & II of the Iowa Communications Network (ICN), but that the State immediately investigate the feasaility of eventually selling the network to private enterprise. We recmthat the legislation related to the ICN would have to be changed and that the proposed financing would have to be modified -probably at higher cost- but we believe that the lower operating cost per unit of capaaty would outweigh the additional financingcosts.

With regard to Part ID,we recommend that the State bepdiscussions with private entqrise on the options for business to participate in its construction and ownership.

In addition, we recommend that the State develop a comprehensive plan for the use of the ICN that will achieve savings and improve the quahty of education in Iowa.

C.S. C.S. Background: Parts I & II of the ICN is a fiber optic telecommunications network that conn&s 105 end points throughout the state. fienetwork end points are the three state universities, the 15 community colleges, a point of presence in each of the remaining 84 cornties including 54 high schools, the Capitol complex, Iowa Public Television and the ICN hub. The network will be used by the community colleges to provide distance learning to their remote campuses and high schools and by the State to carry administrative traffic.

The ICN concept was initially developed in 1986. The contract to construct the network was eventually let to Kiewit Network Technologies in Nove~nberof 1990. Construction of the network began in October of 1991. Approximately 10% of the 2600 miles of planned fiber optic cable has been placed. The total capital cost of Parts I & II is expected to be approximately $100 million. One estimate of the net cost to the State of owning and operating Parts I & II of the ICN is approximately $4.7 million per year over a 25 year useful life. Part III of the ICN has been defined by the committee for the purposes of discusion as a network connecting each of the state's 371 high schools. These end points were chosen because the ICN's primary mission is to serve as an educational tool, and the high schools are likely to be the early acceptors of distance learning and the network. However, there are several other potential end points for Part IIL These include hospitals, court houses and state field service delivery offices. These options should be pursued only if the State benefits from further investment. -113- The total capital cost of Parts I, II & IIl as defined above is expected to be between $127 million and $165 million ($27million to $65 million over and above the cost of Parts I &Z 11 stand alone). One =hate of the cost of owning and operating Parts I, II dt UI of the 1CN is approximately $12414 million per year over a 25 year useful life ($73million to $9.3 million per year over and above the cost of Parts I & II stand alone).

Rationale: We believe that the $4.7 million cost per year for Parts I & II of the ICN is more than offset by the potential benefits. lhbenefits of the ICN include: the avoided long distance telecommunications cost of approximately $8 million per year today (already included in the net cost of $4.7 per year) the potentiax savings through reduction in the number of teachers (increasing the average nuniber of students per classroom) providing small nual schools access to a broader diversity of curriculum, e.g. languages, sciences, college level courses sharing the state's most talented teachers among several schools

providing business and industry more convenient acceSs to training and continuing education programs

We believe that Parts I dr II of the network would be more valuable if they were used to carry private industry telecommunications traffic in addition to the State's telecommunications traffic. This is so because the cost of the network is mostly fixed and additional traffic could be canied by the network at very low incremental cost. However, the State should not be in the business of competing directly with private telecommunications companies. Therefore, the State should seek a partnering arrangement with private industry to allow the public and private sectors to use the network

We believe that the additional benefits of Part III of the ICN outweigh the additional at. The additional benefits of Part III of the ICN are: access to educational benefits for more high schools beyond the 54 in Parts I & XI additional networking of field officesto share information (not included in axt estimates) remote delivery of state services (not included in cost estimates) additional video conferendng (not included in cost estimates) additional potential savings through reduction in the number of teachers

-114- i.- additional sharing of the state's most talented teachers among several schools

We believe that Part III of the network should be owned and operated by private . industry. Part ID,because of its eqnomic development potential if privately owned, should be privately owned and operated where possible. As a result, we believe that the state should encourage private industry to construct the Part linkages to schools and other locations that would benefit from the service. Implementation: There is a lack of a "game plan" for using the ICN. It is possible that implementation of the ICN and its applications could cost significantly more than the amounts described above and that =me potential uses of the network could nm munter to other committee recommendations such as further school district consolidation and containment of growth in community college costs. The plan should mnsist of the following key elements:

Speafic efficiencysavings targets through teaching staff reductions Set of operational guidelines for the schools for use of the network, e.g. supervision of remote classrooms, coordination of program offerings via the network, limitations on minimum and maximum class sizes Instructions on adapting curriculum for a distance learning environment

0 Guidelines for determination of types of educational ues that are appropriate, e.g. what types of courses are suitable for distance learning, what is the maximum percent of a student's education that should come from a remote location

Is it cost effective to sell the capaaty of the network not needed by the state to private industry or sell the entire network and lease back the capaaty needed by the state?

In which cases will the atizens be better served by consolidation of school districts rather than use of the ICN to deliver courses that would allow schook to retain their accreditation?

I [Review Personal Computer Acquisitions Recommendation: 1 We recommend that the procedures and criteria for the acquisition and use of 1, personal computers in state government be reviewed. Restrictions on the !' purchase of persondl computers were considered by the Technology Enhancement Task Force as a potential source of immediate savings in fiscal year 1993. However, after the potential savings were analyzed, a freeze on personal computer purchases or other spedfic reforms was rejected as an immediate opportunity. -115- Background: Total state expenditures for personal computers averaged appro>dmately $3.7 million in each of past two years, but only 10-12 percent of those expendihues were made from the State General Fund, and much of that was fully reimbursable from regulated industries. These figures exclude purchases by the Department of Transportation, Board of Regents, and the Legislative and Judicial branches of government.

Rationale: A freeze on purchases was considered and rejected both for relative small Size of potential savings and loss in productivity. However, we do recommend that the State review the criteria and procedures used by state agencies for the purchase of personal computers. One area that may be reviewed are the site licenses for software. For example DOS 5.0 Upgrade would be appropriate for all State personal computers to improve uniformity of operating systems and to save on costs of piecemeal upgrades. While site license may not produce net savings in acquisition costs alone as many ws would never upgrade to DOS 5.0, savings in operational support services and compatibility of data still justify DOS 5.0. Other potential benefits which might be gained by a review of persod computer aquisition include:

Savings fTom Ihe licensing of standard software packages volume disco~mtsfrom some vendors if state would commit to a spedfc level of purchases of personal computers

In recent years, the State has annually purdrased approximately 750 P.C's,with supporting software, printers, modems, and local area computer networks Ws). IBM discounts are not voIume dependent, but other vendors would offer substantial discounts for a bulk p.~rchase. [Initiate Local Government Coordination of Information Systems I Recommendation: We recommend that the State of Iowa initiate the development of a process to develop and coordinate a common information system among state agendes and 104 governments.

Background Cmently, counties, aties, and school districts do their own data processing with some commonality in equipment. Incal government (aties and counties) face many

-116-

-- I I -'-I--- I and transmitted to the state. Even at the State level, data is sometimes entered twice when two usefs store information electronically but transmit the records by hard copy, There are currently several examples in Iowa which shed light on how a state and loca, information system could be used. The Department of Transportation supports the liming and titling of motor vehicles in all Iowa counties. This allows local 1 government to deliver services in a uniform and effiaent manner. 4 4 Voter registration and election services are provided by the state to 69 county offices. This gives the participating county control over its own data yet allows the state to provide up-to-date information in a consolidated manner. The process also reduces 4 applications development expenses for partiapating counties, reducing local expense 4 and the need for expensive, skilled staff or private mnsultantr. The voter system I i utilizes the DOT communications network.

Many other systems could be developed, purchased, shared or transferred which WOL. provide dormity of data and delivery of services to the local level at reduced cost to i bth local governments and the State. These are examples of the State as a wholesaier services to the local retaiI ievel handled by political subdivisions. t 1 Rationale: haeased cooperation and coordination of information systems dtrvelopment, purchasing and operation could yield collective savings for both State *-’ t arid local Iowa governments. Assuming that a savings of 5 percent could be achieved haeased coordination and voluntary amperation of purchasing and proces through I estimated savings to the General Fund would be $468,600. 4 I Areas which may provide opportunities for coordination and savings include: 1 property tax collections and records budgets ammting voter registration, and motor vehicle licensing I

We believe that it is possible to establish a state and local coordinated information 1 system, and a guiding principle of such a system should be to capture data once and the closest point possible to the point of origination. This process results in fewer erra 1 and reduced costs of correction or duplicated data entry efforts, 1 ! hnplementation: We believe that state and local govmentofficials should form a 1 partnership to develop and support infomation systems serving mmmon needs. I Shedapplication development, maintenance, data entry and transmission and I hardware costs will generate collective savings for all partidpants, and cooperative efforts will allow local governments to carry out similar functions and provide a standard process for the sharing of data between the state and local governments. T out this task, it may be appropriate to create an ad hoc group of state and local -117- officials as well as vendors to encourage cooperative efforts. This may also include the development of partnership based "user groups" to promote ongoing enhancements. [Expand Use of Voice Mail J Recommendation: We recommend that the State of Iowa expand the use of Voice MaiL Savings may be achieved by reducing secretarial support functions and increasing the productivify. of professional staff.

' There are many benefits assodated with using Voice Mail, including: reduced cmenceof "telephone tag," completion of caller's "mission" on first try shorter a& reduced problems or conflicts with time zone/business hours conflicts reduced labor costs fewer calbado required reduced use of memos, and increased seaetarial productivity. The actual cost/benefit impact of voice mail was not possible to determine in the short period of time allowed for this study. Analysis of departmental budgets in this area is complicated by the fact that job titles do not always reflect the range of duties actually performed or the importance of the position. Presently, 1,165 of 7,227 (16 percent) state phones have Voice Mail. In September 1991, over 200,000 messages were placed using the Voice Mail system. The per line cost of phone mail is $36 per year ($3/month), with no new hardware required, because the Norstan phone system already includes Voice Mail capability. We recommend that efforts to expand the use of Voice Mail should be target@ at speafic agencies not currently using Voice Mail. Some agenaes have already switched to Voice Mail. Additionally, Voice Mail capaaty should not be instaled on all state phones. Some of these phones are located in conference rooms or other areas not assodated with spedic staff. Some staff members are more likely to be away from phones, either traveling or in meetings, and some staff members are more likely to receivecalls. It iS reasonable to believe that, at a minimum, extensiofi of Voice Mail to all managerid level staff in agenaes not currently using Voice Mail would result in significant savings. .. More stations casi be identified by departmental management as appropriate. Departmental management can adjust expenditures for paper, copying, and secretarial m'sas appropriate to realize savings at least suffiaent to pay for Voice Mail. Bringing these savings to the bottom line is more difficult. A likely result in most drcumstances is increased productivity by diversion of valuable personnel reSOurces to other duties. By having fewer intmptions, State secretaries should be more productive at other duties. Those that only answer phones or whose secondary duties do not independmtly the continued personnel expense could be my replad i-. -118- by voice mail at even greater savings, given the monthly cost per line of phone mail at $3 ($36 annually) and the average pay for a secretary I being $14,000 annualiy. lDefer Investments in Wallace Technology Foundation

Recommendation: We recommend that the State of Iowa defer expenditures for the Wallace Tedu\oIogy Transfer Foundation indefinitely or until the State accounting system has fully complied with the requirements of generally accepted accounting pdndples (GAAP). Potential savings from deferment is between $1million and $2,6 million for the Wallace Technology Transfer Foundation.

Background The Wallace TechnoIogy Transfer Foundation is a corporation created to pursue a long-term vision of Iowa's economic future through investments in basic research, with the mission of making new technologies commercially viable and thereby create pbs in Iowa. The Foundation's mission is to improve the profitability and global competitiveness of Iowa's businesses by assisting their adoption of new technologies, support the formation of new businesses utilizing commerdal applications of the advanced scientific and technology resources of the state, formulate and implement plans and propms for development of advanced sdences and technologies, determine the needs of individual Iowa businesses and farms for saentific and technological innovations to improve products and processes. 'r. & 4 Rationale: The Foundation received $25 million from state appropriations during fiscal year 1992 Funding in the amount of $15 million should preserve staff and allow the , , Foundation to meet continuing commitments for a one time savings of $1 million. This + funding level is slightly above what was actually available to the Foundation in fiscal year 91, its first year of operation. I!

(Consolidate Printing Facilities I

Recomenda tion: 4 We recommend that the State of Iowa establish a centralized &nice authority to provide the most cost efficient and best managed printing facilities, utilizing both f in-house printing facilities and outsourcing when economically viable, to meet client agencies' needs. Centralized service authority does not necessarily mean a single printing facility, but at least all printing operations should be under centd 1 management The cental service agency should also be responsible for I stablishing standards to improve the cost efficiency of printing and graphics I services.

We also recommend the following actions to immediately reduce printing costs in fiscal year 1993: Require agencies to review printing budgets and procedures with General Services Printing Division. Many agencies do not know sewices available or methods available to minimize costs.

Requirs agencies to review duplication of reapients on dhglists (reduced printing and postage expenses).

Provide training to state agencies in techniques to Limit number of copies, number of colors of ink, kinds of paper and publication foqmts.

Review inter-departmental and intradepartmental publications. Consider options for disseminating information through alternative means, e.g. electronic mail. Review duplication of publications between agencies.

Implement a justification process within each agency for printing expenses, and consider combining newsletters. t.. .. Wold cllient agency staff responsible for last-minute changes that incur costs by overtime, reprinting large jobs, or proofing errors.

Review all professional service contracts that include art, graphics, ! printing, advertising and mail services. These services may be available for less within State Government ip Fund all printing services through user based fees. Background: The State of Iowa currently maintains seven major printing facilities to support Executive Branch Agencies. Other printing facilities are operated by the wee &egents' universities. Duplication of graphics senices to support desk top publishing also exists in several agenda. The majority of Executive Branch print shops are within a i the Capitol Compfex:. They provide services on decentralized basis with little coordination among departments. The decentralized print shops fail to capture available economies of scale.

The State of Iowa spends approximately $225 million annually on printing, photocopying, and graphics services. A five percent savings would amount to $1.1 million. The Technology Enhancement Task Force found that there is no consistency in the pricing of print jobs no consistent standards of performance across departments no uniformity in state policy with regards to the acquisition, utilization justification, and maintenance of high-speed and convenience copiers, and

C

L -120- no uniformity in state policy with regard to newsletters, calendars, and generic fonns, similar to recent economies achieved through greater uniformity in stationary.

The cooperative relationship between General services Division and Prison Industries, demonstrates the value of establishing performance standards and incentives for performance. General services should continue to expand the work out-sourced to Prison Industries subject to the same standards applied to all vendors.

For example, only 20 percent of work provided by the Department of General services is produced in-plant. Eighty percent of the work is outsourced for a total value out- sourced of appro>dmately $8 million annually. ($8 million out-sourcing total includes $I million in graphics and printing services in-sourced to Iowa Prison Industries annually.) Printing work is privatized when emnomically viable to satisfy objectively defined quality and service standards. The review of in-house printing services demonstrates that state government has the capacity to effiaently provide printing services, while still utilizing private vendors when appropriate. The average cost per impression from a commercial printer is $3 while the average cost per impression in the Department of General services Printing Division is $.025. Given 65,907,908 impressions in fiscal year 91 at a cost of $1.2 million the cost of performing work in-house reflects approximate savings of $2 million - rr, 4 miually over average mmmeraal printing expenses if all work were out-sourced.

Rationale: By coordinating the operation of printing fadlities, the economies of scale and effiaenaes in utilization can be achieved. At the same time, printing services can ‘I be delivered with a high level of professionalism and “art quality,” provide on-time deliveries, and provide an adequate supply of and access to materials necessary to 1 manufacture print products in conformance with state standards.

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-- I I ---r--- 7PRIVATIZATION TASK FORCE

Privatization and subcontracting is the process of turning certain government functions over to the private sector. It is perceived to offer an opportunity to continue these government Services or functions without degradation or reduction of the quality of the services, but to do so at a reduced cost. Recommendation: We recommend that the State of Iowa establish procedures to systematically review all programs, including proposals for new programs, to identify opportunities to establish relationships with private organizations and companies to perform government senices. While the Privatization Task Force found that the potential for saavings from privatization were not as great as we had antiapated, we believe that opportunities do exist, and that procedures to identify these oppoxtunities should be integrated into the State's budget and planning L. processes. Fox example, the Privatization Task Force found that opportunities to establish contractual relationships between Prison Industries and private business had 'been inhibited, because Iowa law governing these relationships is more restrictive than federal law requires. Federal law (the Prison Industries Enhancement Act) allows prison industries to provide contract labor for private businesses, The Privatization Task Force was not able to review all state programs within the time allowed for their work, and selected the opportunities that appeared to have the greatest dollar savings potential. The State of Iowa should mntinue the work begun by the Task Force. [Subcontracting Jiinitorial Services 1

Recommendstion: We recommend subcontracting janitorial services at the Capitol Complex in Des Moines and at DOT offices in hes. Background: The Department of Transportation 0office in Ames is a complex of 12 buildings with approximately 255,000 square feet. Private vendors estimate that the annual cost of janitorial services at the Ames DOT complex would be $1 per square foot or $255,000. A separate contract would be required for window cleaning. Currently, the Ames DOT employs 15 janitorial FIEs at an annual cost of appro&nately $33O,OOO. The Capitol Complex is comprised of approximately 1.9 million square feet of interior building space. The fiscal year 1992 budget for janitorial services is approximately 1.7 million dollars. The Department of General Services employs 70 FITS. A private vendor estimates that certain cost savings could be achieved in the appro>dmate annual amount of $100,000. However,it should be noted that additional costs could be incurred by the State for services currently provided by janitorial employees are L which -122- not ~pcifi~allyidentified as custodial senices (i.e., fountain cleaning, room setup). Private companies are reluctant to provide proprietary mst and profit infomation in an infond "bidding" situation. To establish precise savings, the Department of General Services and the Department of Transportation should prepare and issue Requsts for Propcrsals for janitorial senices at the Capitol Complex and the Ames complex respectively.

The analysis prepared by the Privatization Task Force could not determine a definite cost savings estimate. They estimated that the finanaal impact of this recommendation ranged from a savings of $175,000 to a loss of $265,000.

(Subcontract Nursine Services at Veterans' Home 1

Recommendation: We recommend subcontracting certain services at Iowa Veterans' Home. Additionally, we recommend that the Iowa Veterans' Home, together with local business and industry leaders conduct an in-depth evaluation of the manner by which services are delivered or performed in the areas of laundry, dietary, building and grounds maintenance, transportation, administration, and occupational and physical therapy to determine whether subcontracting for those services may generate additional cost savings.

Background: The Iowa Veterans' Home has an annual budget of approximately $30.2 million dollars, and employs approximately 700 individuals. During the past five years, its personnel expenditures have increased approximately 9 million dollars from 16 million dollars in fiscal year 1986 to 25 million dollars in fiscal year 1991. The Task !I Force attempted to capture a "snapshot" of potential savings opportunities by comparing costs assodated with nursing Services in like private sector facilities and nursing services costs at the Iowa Veterans' Home. The savings potential is estimated at 'I $2,240,000. However, exact savings will not be known until a Request For Information or a Request For Proposal is developed and submitted to private vendors for their consid erabon. 1 wrisonIndustries to Supplement Printing Services I Recommendation: We recommend Prison Industries should immediately be offered the 1 opportunity to actively bid on all printing performed by General Services and , that which is contracted to the private sector.

Background: At the present time, approximately $4.3 million in printing senices is contracted annually to private entities on behalf of state agenaes. (This amount does not i include printing performed by private companies for the Department of Transportation, Department of Economic Development, Board of Regents or the Iowa Lqplawe.) State agenaes pay the private contractor directly from general fund appropriations for

-123-

c printing services performed by the private sector. Iowa Prison Industries and the printing Division of the Department of General services were surveyed to determine whether the State's printing capaaty could be augmented efficiently and inexpensively by utilizing Prison Industries printing facilities'at Mitchellville and Anamosa. Personnel from General Services and Prison Industries identified approximately $5OO,OOO in outsourmd printing which could be handled by prison Industries with its current capaaty. Personnel from herdservices estimate that 20 percent to 30 percent I savings ($lSO,OOO) nray be achieved by utilizing prison Industries for the $SO0,OOO in ! printing projects which are appropriate for Prison Industries. ! I lsubcontract Liquor Operations I ! I

Recommendation: 1 We recommend the State subcontract its liquor warehousing and delivery fleet operations. I! Background: The Alcoholic Beverages Division requested proposals from private vendors for warehousing and transportation services related to the wholesale sale of alcoholic liquor at the State's Ankeny liquor fadlity. I ,, The Division has signed a contract with a private vendor for the performance of these duties, and annual savings will generate $630,000 from this endeavor. !' In addition to the annual savings from subcontracting the warehousing and i transportation servicM, the Division will realize a one time "windfall" from the sale of its delivery fleet in the approximate amount of $400,000. The State will avoid future costs of fleet replacement as well. [Eliminate State ~ircraftpool I Recommendation: We recommend the State divest itself of the State Air& Pool.

Background: The State owns three aircraft (a Cheyenne, a Cessna 402, a C~SSM403) which could be sold for approximately $6OO,OOO. If the aircraft pool is sold, State employees on State l~usinesscould utilize private air charters for such services. The Department of Transportation estimates that the State may save an additional $18,625 annually from the LI.W of private air charter senices rather than using the current State aircraft pool. However, the Department of Transportation is exploring the potential cost savings which auy be derived from consolidation of the aircraft pool with the aircraft owned by Iowa State University.

-124 w FteSeed Testing At Department of Agriculture

Recornmenda tiom We recommend elimination of the seed testing program at the Department of Agriculture.

Background: The Department of Agriculture currently perfom certain seed testing which L also performed by row State University. The Department myreduce its annual budget by $70,000 for the seed testing function,and permit Iowa State University and the private sector to perfom that function.

Elimination of the Weiehts and Measures Division 1

Recommendation: 'We recommend partid elimination of the Weights and Measures Division of the Department of Agriculture.

Background: The Department of Agriculture inspects weights and measures at Iowa's grain vwehouses. The fiscal year 1992 budget for this function is $827,673,and 16 FTEs. By reducing its staff and by retaining 5 inspectors to conduct random "spot" weights and measures inspections, the Department can realize $643,000 annual savings. The Department will retain its regulatory authority and 5 inspectors to conduct random inqxtions. The sale of the Department's scale trucks will result in an estimated $114,886.

I I !

7PUBLIC FINANCE TASK FORCE I

IHieher Education Assistance .. I :.: :::i:i: ;:i;:;i :>

Background: The State Universities have come forth with their initial set of recommendations fox spending reductions. These recommendations represent many excellent ideas and we applaud the effort and the results. The savings by each university is summa~izedbelow: i

-126- summary of Potential savings -University -1993 -1994 State University of Iowa $4,555,598 1 Iowa State University $8,400,000 $7,400,000 1 University of Northern Iowa NA NA 4 Total

In addition, the Iowa State University has identified 70 areas for further study that mu1d result in additional $7-9 annually. an million savings 1 sated exampks of the opportunities for reducing spending identified the the 1 universities are:

-, 4 State University of Iowa 1 1 Ematethe Human Nutrition program i Ematethe department of Dental Hygiene 4 EWatethe subsidies by the University to the Center for Conferences and Institute f Iowa State University

Reduce centraked support personnel and service in the College of Engineering (e.g. dtorial senices, shops) i Eliminate undergraduate major in Leisure Studies Eliminate courses in floral design and horticulture therapy Combine the departments of Parking Systems and Public safety 1 ! University of Northern Iowa 1 I Eliminate the Mastefs degree program in business education I Eliminate the Mastefs degree program in vocational home economics Eliminate the Iowa Prinapals Academy

Even though the Regents institutions have conducted an internal review for mst savings, there are a number of additional opportunities for general fund savings that -127- have been identified outside the scope of the internal review. These areas have been reviewed quickly, but we recommend that these areas be pursued. /Regents Lnstiitutions Tort Liability Insurance: I Recommendation: We recormend that the Board of Regents purchase appropriate liability insurance for claims against the universities. Background: These claims are currently paid from the state general fund. Each year millions of dollars are spent as a result of lawsuits and settlements involving the Regentr institutions.

Regent's Institutions Tort Claims paid from General Funds

I986 $1,125,989 1.987 $3,184,104 1988 $1,257,627 1989 $2,590,733 1990 $ 923m 1991 $1,145,062 Total $10,I 27,404 The Iowa Code provides for payment of such actions from State General Funds "not otherwise appropriated" (i.e. a standing unlimited appropriation). As a result, the incentive to mininb such costs is diminished because the actions do not affect the regent's state appropriations.

Provisions in the Code of Iowa which provide for payment of future tort liability claims involving Regents institutions from the state general fund should be repealed. The Regents should purchase appropriate liability insurance from funds appropriated to the universities.

La [Earnings From Temporary Investment of General Fund Appropriations I Recommendatiorc We recommend that the State universities revert back to the State the interest income that acmes on appropriations horn the General Fund to the universities. Background: The interest earned on appropriated funds held by theuniversities is not spedfically identified in the appropriation process and results in a windfall to the Universities. The interest earned by the universities on all temporary investment of all funding soufces induding State General Funds and tuition is summarized Mow.

-128- Temporary Investment Account

Average Investments and -University Cash Interest Earned

State University of Iowa $60,570,167 $5,069,723

Iow,a State University $32,533,443 $2,692,192

University of Northern Iowa $6,344,077

Total $99,447#7 ======

Using the proportion of General funds to total hdingof appro>dmately 3075, the State should expect to revert or should reduce appropriations to the Regents’ institutions by approximately $2.5 million annually. Eversities’ Retirement Program (TIAA-CREF): ”,,4 Recommendation: We reammend thatthe Teachers Insurance and Annuity Association - College Retirement Equities Fund be reviewed to ensure that it is comparable 4, with other states and Like universities. f Background: Under this program 15%(10% on the first $4,800 of salary with less than five years of senice) of a regents’ employee’s salary is contributed with onethird beinf paid by the employee and two-thirds by the State with no maumsalary. The program vests immediately for both the employee and employer contributions, with the employee entitled to both contributions upon termination. Compared to the Iowa 4 Public Employees Retirement System CDpERS) the regents’ program appeps very generous. 1

Under IPERS, state employees and the state contribute 325%and 5.75% respectively OAL 1 a nmximum salary of $31,000 (1991). The employee share vests after three years, with , the employee entitled to the contribution upon termination. The employer share does not vest, for f~llhefit, unti~the emp~oyee’sage PIUSnumber of yeais service eqd i ninety-two.

EtionIncrease

Recommends tion: We concur with the Board of Regents recommendations to increase tuition by 7% for in-state undergraduates and 9% for out-of-state undergraduates.

-1 29- We further recommend that tuition be increased to bring the tuition rate for instate shidents to one-half of the full cost (including indirects) of education and the tuition rate for out-of-state students to 100% of the full cost Background Addition revenues from the tuition increase will result in additional revenue that could be used to offset General Fund appropriations. This would still place the State's universities' tuition in the middle of the pack of comparable institutions. Part of the proceeds of the higher tuition should be used to provide financial assistanm to qualified applicants. [Fund Board of Regents Office with University Appropriations I Recommendstioic We recommend that financial support for the Board of Regents Office should be allocated from funds appropriated to the institutions governed by the Board.

Background: Funhing the Board Office in this manner would save the state general fund approximately $12 million per year.

The primary goal of the Board Office of the Board of Regents is to provide all relevant information and effective review of all policies and proposals coming to the Board of Regents for consideration and to initiate studies and proposals as necessary or appropriate.

[Revert 50 percent of the UIHC Operating Profit to the General Fund 1 Recommendation: We recommend that a reduction in state appropriations to the University of Iowa Hospitals and Clinics be considered by the Governor and the General Assembly.

Background: In fiscal year 1991 University Hospitals received an appropriation of $28.8 million for the indigent patient program. At the same time the Hospital has shown significant operating profits, part of which is the result of income from the indigent patient program. We believe that it is appropriate for the State of Iowa to consider either a reduction in the appropriation to University HGpitals ,or a reversion of at least 50 percent of the Hospital's profits to the state general fund. [Adopt Managed Care Statewide for Medicaid I Recommendatioii: We recommend that persons eligible for Medicaid benefits in Iowa be enrolled in a managed care program. Since managed care agreements must be negotiated

-1 30- I

4 II with providers, this proposal would take severdl years to implement The majority of savings would not be available in fiscal year 1993. Approximately $325,000 addbe saved in fiscal year 1993 and $725,000 in fiscal year 1994 Greater saving, will be available in future years. Background The fiscal year 1993 Department of Human Services budget request 1 inciicates that enrolling 27,000 additional clients in managed care would reduce state Medicaid expenditures by $325,OOO to $725,000 over the next two years. This represent 1 about one tenth of the Medicaid eIigibIe population and about a two percent cost savk, fox this group. These savings cannot be immediately achieved, and are subject to the 4 number of persons who have access to optional health care programs. 4 f Muzaged care is a health care cost containment strategy. Usually, Medicaid clients selec, the health care provider they use and the program reimburse the provider for Service Under managed are, Medicaid patients are assigned to either a physician or a Health Miihtenance Organization (HMO). The manager's role is to act as a control on the 1 patient's use of health care services and procedures. Managed care has been found to'( 1 a moderately effective form of Medicaid cost containment. low-a has piloted a manag- 1 care system in several metropolitan areas where HMOs are operational.

It js not likely that all Medicaid clients in Iowa can ever be enrolled in managed care d-' 1 programs. This is because the availability of health care options and HMOs is limited 4 outside the metropolitan areas of Iowa. The Department of Human Services estimates I hit a total of 134,000 Medicaid clients could be enrolled in managed care. About 46,L are enrolled now. 1 While partidpation in a managed care progam will limit patient choices when 1 ampared with the current program, we believe that it is appropriate for the State to require partiapating in a managed care program, and we do not believe that the quali of patient care will be significantly diminished. 1 Et Optional Medicaid Eligibility Categories -1

-4 1 Recommendation: We recommend, with reservations, that the State of Iowa defer funding for Medicaid eligibility categories which are not required by the federal government. t This action would reduce state expenditures by approximately $33 million in fiscal year 1993. I 4 Baickground The Medicaid program is a pint federal-state health care program that 1 firmces medical services for the poor. Medicaid costs have risen rapidly in recent 4 years, partly as a result of new persons being made eligible for the program. h fiscal year 1981,221,133 persons in Iowa were eligible for Medicaid; by fiscal year 1991, this figure had risen to 277,371, an increase of 25 percent.

-131- Although the federal government mandates state coverage for most Medicaid partidpants, Iowa has chosen to add coverage for certain optional groups. These indude "the 300 percent group", who are 10,600 residents of nursing homes with incomes up to 300 percent of the federal poverty level; and the "Medically Needy", 14,355 persons who have incomes above the federal poverty level, but large medical care expenws. Under the federal Medicaid program, state expenditures for these optional eligibility pups are matched at about a two to one ratio just like the mandatory parts of the program.

If the State of Iovva implements this opportunity, $60 million in federal Medicaid matching dollars will be lost, Medicaid coverage for more than 25,OOO persons will end, and up to $93 million in medical services and income to medical providers will be lost. Some shift in medical axts to third parties, e.g. counties, is also likely to occur. [Cut AU Optional Medicaid Services for Mandatory Eligibility Categories I Recommendation: We recommend, with reservations, that the State of Iowa defer funding for Medicaid services for mandatory eligibility categories, if those sewices are no€

.I required by €hefederal government. This action would reduce state expenditures .. I by approxhately $15 million in fiscal year 1993.

Background: The majority of all Medicaid partidpants in Iowa are included in groups whose partidpation is mandated by the federal government. This includes certain recipients of federal and state income assistance, and pregnant women, infants and children in impoverished families. Most of the health care coverages provided to these groups are mandated by the federal govemment. However about $295 million in state funds will be spent in fiscal year 1993 on senices that Iowa has chosen to add to the program. Iowa has one of the broadest packages of optional senices among the states.

Although nearly $30 million in state funds will be expended in fiscal year 1993 for optional services, eliminating these services will not save $30 million in state costs. This is because Medicaid recipients are likely to choose alternative services that are still on .- the covered list For example, if chiropractors are not covered, patients will seek treatment from physicians, who are covered. It is estimated by the Department of Human Services that about $15 million could be saved once shifting is accounted for. Since counties are responsible for medical aid to the indigent under Code of Iowa Chapter 252, they would become liable for a portion of $38 million in medical care costs no longer covered by federal or state funds. Optional services likely to be shifted to the counties include:: mentalhealth equipment and supplies vision dental I

~ -1 32- i

-- I I ----I----- ambulanceservicesand prescribeddrugs

These make up the majority of fie optional services. If the State of Iowa implements this opportunity, about $23 million in federal matching funds, accounting for shifts in service, will be lost, medical services and provider income will be reduced, and some medical care costs will be shifted to other third partie.

The Public Finance Task Force expressed concern about the impact of two proposals which would eliminate optional portions of the Medicaid program in Iowa. Implementation of these proposals would cause the loss of medical services to needy and shift costs to county government and other third parties. The proposals were not . generally supported by the Task Force except as a last resort due to their severe impacts. We s'hare the concerns expressed by the Task Force, and recommend that optional services be reduced only if other opportunities which are implemented do not achieve the necessary savings to resolve the budget difficulties facing the State. [EJopGuidelines for the Retention of Investment Earnings 1 Recommendation: .. We recommend that the State of Iowa develop guidelines for the disposition of eiunings achieved by the investment of funds. Criteria need to be established to determine the circumstances in which earnings may be retained by an agency or program and not credited to the State General Fund. If this recommendation is implemented, additional revenues can be deposited in the General Fund, and the gruidelines would be in place for future decisions about the disposition of future investment earnings.

Background: Unless speafied in the Code of Iowa, investment earnings and interest from state funds is credited to the General Fund. However, a large number of funds retain their investment earnings by virtue of speafic Code language. Because no guidelines are used to determine how interest earnings are to be credited, the disposition of these earnings is often determined on a casebycase basis. Although this issue was explored several years ago and changes were made, some limited gains (up to $5OO,OOO) might acme to the General Fund by reviewing it once again.

A set of criteria should be developed to guide future legislative decisions regarding crediting fund investment income. It should consider items such as the onpal source of funds, whether the activity is an enterprise and constitutional constraints on credjag interest to the General Fund (i.e., in the case of highway funds).

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.. IDevelop a Uniform Financial Reporting and Accounting System I Recommendation: We recommend that the State of Iowa develop and implement a uniform financial reporting and accounting system for all units of government. Impternentation of this recommendation can improve management information for state government. The State would then have the ability to determine aggregate spending for government activities and to accurately eliminate transfers from one level to another, and cost savings born uniform accounting or consolidated financial operations could be achieved

Background: A finanad reporting system would be the least expensive of the two options. It would not be intended to save money, but instead to provide more reliable data for statewide planning and policy analysis: It could be devdopd as a team project with local governnzents and be completed within five years. A uniform financial accountingsystem would be far m&e expensive and theconsuming to develop. However, this option would also have the potential to save large amounts of duplicated financial management msts. -_ The best alternatives in consolidation of finanad accounting operations may involve regionalize similar finanad operations. For instance, the finanad operations of a group of school districts, or cluster of counties or set of governments in a metro area could be combined to realize economies of scale.

Upfront costs for a reporting system would be small, but be substantially larger for a full- blown accounfing system. The implementation of this recommendation would be a time consuming project for both state and local governments and would require a great deal of negotiation and teamwork. [Property Exempt from Property Taxation 1 Recommemda tion. We recommendl that the State of Iowa review policies governing properties which are currently exempt from taxatiom Under state law local property tax is levied against red property. There are, however, a variety of exemptions granted to property based on ownership or use of the property. Background: The assessment and placement of a charge or property tax on currently exempt property may provide a revenue source for local governments. The amount of basic levy would be established based on the property tax collections mently levied for basic services. Establishing the potential of the basic levy requires estimation of the valuation of such property. While such assessments are reported to the state for specific classes of property the use of the valuation data is sub@ to limitations in several areas.

.,.. -1 34- u.c 1 4 major classes of property are not assessed. These include government property, including local schools, as well as all intangible and tangible personal property.

due to the exempt status of the property the level of accuracy involved in the assessment varies throughout the state.

due to the spedal nature of various property such as churches and facilities used 4 for entertainment, accurate assessments of the market value may be difficult.

t Badon 1990 assessments, the total exempt property valuation ip the state exceeded $6.3 billion. The concept of levying for basic city services (a charge of $4.57 per thousand of taxable valuation) could generate approximately $28.8 million.

An alternative to a state mandated levy would be to allow local governments the optia to .impose the charge subject to voter approval or action by governing body.

Finally, since valuations on certain classes of property are difficult to establish, it may b that alternatives to market value may be more effective. For example, determining the taxable value based on the value established for insurance purposes could be i appropriate. -3 I Educe the State's GAAP Deficit 11

Recommendation: We recommend that the State of Iowa fulfill the commitment to adjust the accounting system to comply with Generally Accepted Accounting Principles (GAAP).However, we also recommend that the State of Iowa defer implementation of GAAP standards until fiscal year 1995, when the rwised standads are expected to be in place. The State has accumulated a General Fun& deficit under (GAAP)of $132 million for fiscal year 1990, and an estimated defiat of $296 million for fiscal year 1991. Currently, the State has a statute that requires the GAAP deficit to be eliminated by fiscal year 1992, on a phased in schedule.

BatAground GAAP standards are constantly evolving, with a major revision planned to be effective in fiscal year 1995. These revisions are currently estimated to materially reduce the GAAP defiat. For fiscal year 1991 the estimated GAAP deficit would be reduced from $296 million to $120 million. With this revision forthcoming, the State should develop a plan focused on the elimination of the estimated $120 million defiat by .fiscal year 1995, and the prohibition of future GAAP defiats. The State would need to build a General Fund reserve equd to the GAAP defiat by fiscal year 1995, or will need to '?my back" expenditures that are currently charged to the wrong fiscal year. Both of these methods would have an esstimatd $120 million impact upon the State's General Fund.

-135- Recommendation: We recommend that the State of Iowa conduct a study of tax expenditures to identifv characteristics of the various expenditures as weIl as to estimate the amount of foregone revenue. Certain aspects of the tax expenditures were enacted for spedfic purposes or to address specific characteristics of the tax structure. Changs in Iowa's tax structure as well as the characteristics of the Iowa economy may justify a review of these tax expenditures.

Background: Under Iowa tax laws revenue is foregone as the result of a variety of tax exemptions, deductions or tax aedits. The amount of revenue not collected as a result of these tax expenditures muld be studied as a means to identifV future funding SOufCeS.

I.

-136- rl STATEWIDE SERVICE DELIVERY TASK FORCE cpr 1 Eevelop a statewide system for delivery of senices . Recommendation: We recommend that the State of Iowa develop a statewide service delivery syste to provide services from multiple state agencies including the Department of 1 Human Services, the Department of Employment SerYices, the Department of Revenue and Finance, and the Department of Transportation dong with the 1 courts, local government and not for profit groups.

T3e key dements of the statewide service delivej system should include:

Exhibit 111-2-2 - Service Delivew System Elements Rationale 1 Coordination of the delivery of both Reduce redundancy in programs and state and local services personnel

Colocation of field offices in some cases Fadlitate the sharing of services including receptionist, derical and ! eventually intake personnel Provide service in rural areas at lower yl cost I Segregation of services delivered into most likely 3 levels of activity Match services performed to the appropriate level of consolidation to achieve effidenaes Coordination with the proposed 30 county administration service centers Facilitate the sharing of facilities and personnel rsourm.

Background: The State, in conjunction with the courts, local governments and other i non-governmental agendes, provides many services throughout the State. Each of these groups have one or several field organization to deliver these services. Some of 1 these statewide field organizations and their respective services indude: 4 t t l

f

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.. Exhibit 111-2-3

Number of field Agency Senices personnel

Department of Human services Assistance to 2,172 dependent children Foster care Medicaid assistance Food stamps Department of Employment Services Job placement 489 Unemployment 'I insurance claims Department of Transportation ' Ixiverslicenses NA Vehide titIes and regi seati on

..is Department of R.evenue and Finance Tax filing assistance 127 Tax audits

The largest field organization belongs to the Department of Human Services. Given the continuing growth in workload and the dwindling number of employees, the workload per employee has increased steadily from 1985 through 1991.

-138- Exhibit In-2-4

WORK LOAD PER DHS WORKER 1979-1991 200 1

CASELOAD PER EMPLOYEE

100 I I I I I I 1 1 I I I I I 1 f 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1930 1991 1992 ri. 4

Source: Department of Human Sern'ces

Rationale: There are opportunities for savings through improvements in both effiaency 4 and effectiveness. Given the already stretched field resources, we believe the larger opportunity for savings is in improvements in program effectiveness.

The fiollowing chart illustrates that tremendous leverage is available from improvements in program effectiveness, e.g. provision of jobs to persons receiving economic assistance from the State. Si@cantly less leverage is available from an 4 improvement in senice delivery effiaency. 4

I

-139-

.. Exhibit III-2-5 COST OF HUMAN SERVICES FISCAL M5u 1991

Effectiveness improvements should result from the elimination of redundant programs and in the effective coordination of services. For example: movement of people off medicaid and on to payrolls through more use of job Senices

maintaining a more widespread presence including myrural areas through sharing intake personnel across several agencies Effiaency savings from sharing of information and resources include mllecting information on a client onetime at the initial point of contact with any government service sharing of receptionist and clerical responsibilities among colocated agenaes the eventual sharing of intake/eligibility personnel after improvements are made in the automation of this function. (Our earlier recommendation of developing and implementing an expert system to aid in the eligibility assessment for Department of Human Senices should address this need.) i, -140- By coordinating services at the local level the allocation of resources can be done at a higher level. Speafic tradeoffs among programs and constituencies can be made at the lod level. The people at the local level are in the best position to make decisions on how to allocate resources. Implementation: We recommend that the State begin a process to rationalize statewide services. A critical first step in the implementation process is the establishment of a group to include the relevant experts. We recommend that two subgoups be formed: a Statewide Service Delivery council consisting of representatives of departments that would potentially be affected

an IntergovernmentaI council consisting of representative from the Statewide Service Delivery council mentioned above and from the various local entities

The councils should initially focus on those areas where a full time presence of specialists is not wananted by the current workload. These areas have the most desperate short-term need to share functions to be able to afford a full-time presence of at least in-take personnel.

The coundls should establish early "wins" by:

determining in which locales the colocation of services is attractive

developing pilot programs where success appears likely due to leases of affected parties coming due and a spirit of cooperation exists establishing measurable performance targets to determine the success of the pilot P'W- roll out successful models of cooperation to other locales I 1 [Merge Community Based Correction (CBC)Boards Into a Central Board I Recommendatiox We recommend that the State of Iowa merge the eight CBC boards into one I

centralized board, with board representation from each of the districts The 4 districts should be under the administrative control of the Department of Corrections, and the board should be responsible for program selection decisions. ;

We also recommend that the restructured CBC system use the State accounting, I payroll, and budget systems, and that personnel employed in the CBC system be redwified as State employees.

Background: Currently, the districts receive approximately $7,500,000 from the state general fund on a quarterly basis. By merging administrative functions under the Department of Corrections, the quarterly draw systems could be discontinued, thus allawing those funds to remain in the general fund until actual expend.iWs are made.

Community Based Corrections serves in lieu of or following incarceration for offenders. The servjces included in the program are: pretrial release presentence investigation probation parole interstate compact intensive supervision residential placement work release and OWfacility placement and community service sentencing.

The CBC system is a key component to the overall conections system as it serves approximately 85 percent of those adjudicated and under supetvision.

.-.d The community based corrections system is formulated around the eight Iowa judicial districts. Each district has a director and board of directors whose membership is prescribed by statute. In addition, each district has advisory committees. The board, dong with the director, sets policy, approves budget, and oversees the management of administrative and program operations in the district. Each district acts autonomously of the Iowa Department of Corrections, including administration and program selection dedsions. Each of the eight districts maintains its ompayroll, accounting and auditing systems. However the Department of Corrections has regulatory responsibility for all community based corrections programs including developing guidelines, accrediting programs and funding.

During the past ten years, the budget for community based corrections has increased threefold. Ninety percent of all funding to the eight districts is from state revenues. Appropriated state funds pass through the Department of Conections for the benefit of each of the eight CBC districts. Allotments are then made to each of the districts on a quarterly basis. Additional funding mmes from a variety of sources including local governments, federal contracts (the second largest funding source), rent horn offenders, grants and subarttracts with counties for supplemental services. Approximately 80 percent of the total community based mrrections budget is personnel costs including salaries, vacation and retirement benefits. Lnduded in the remaining 20 percent of the budget are the various mandated programs including substance abuse, domestic abuse, JTPA, sexual offender counseling and the OWprogram. Also induded in this 20 percent is construction and maintenance funds for the residential facilities.

-142- w Rationale: We believe that the implementation of this recommendation can result in more consistent and better coordinated correctional services, improved administration and planning, and more &dent purchasing, accounting, financial management and payroll procedures. For example, by classifying CBC employees as state employees, it will no longer be necessary to maintain duplicate payroll files. I [Increase use of Intensive Supervision

Recommendation: We recommend that more low to medium risk offenders be placed in an intensive supervision program as an alternative to placing them in residential facilities. The average daily cost for intensive supenision, such as use of electronic monitoring, is approximately $8 to $10 per offend-. If ten percent of the offenders currently placed in residential facilities are transferred to an intensive supervision program, the estimated annual savings would be $1million.

Background: Community based corrections residential facilities were initially

! established as a vehicle to place offenders back into the community once they were approved for parole from the prison system. The system has been expanded to include the placement of certain offenders on probation in residential facilities. Currently, aommunity based corrections has 779 beds in residential facilities. As of October 4, 1991, all beds were filled and there were 250 offenders within the prison system awaiting beds in the CBC facilities. This means that offenders cunently incarcerated I have been paroled but remain in prison due to lack of space. An additional 200 beds have approved for construction. A variety of remedial programs are available within the facilities, such as education, employment caunseling, and family services. It I currently costs approximately $45 a day to maintain each bed, or an annual ast of $35,055. The current annual cost of maintaining beds at full capaaty (ns) is $12.8 million.

Rationale: The implementation of this recommendation will allow offenders eligible L.. 1 i parole from the prison system to move into community facilities. One of the indirect 1 costs of retaining offenders in the prison system longer than necessary is an increase in AFDC payments in those cases where the offender is removed from the family environment and unable to provide support.

[Reduce the Number of DOT Maintenance Garages

Recommendation: We recommend that the State of Iowa reduce the number of DOT maintenance garages by 29, from 138 to 109. This reflects the optimum number of garages needed to perform winter road maintenance and would require minimal adjustments to handle non-winter maintenance responsibilities.

-143- Background: The closing of 29 garages would result in a one time capital expenditure avoidance of $500,000 for each garage dosed or a savings of $14.5 million in the Road Use Tax Fund over a period of years. The operating savings is estimated to be approximately $1 million annually in the Road Use Tax Fund once the 29 garages were dosed. The actual annual savings would be dependent upon the speed with which this recommendation is implemented.

There are two significant factors that play an important part in deciding where to locate maintenance garages. First, the area served must be suffiaent to sustain a large enough work force with adequate supervision to be efficientand productive. Second, snow plow nus must be kept as near the desirable optimum of 25 miles as practical to minimiZe the number of tum around points; this maximizes uniformity of Service. In striving to fulfill these factors, the Department of Transportation initiated a plan to replace and consolidate maintenance garages in 1972 Between 1972 and 1989,37 garages were dosed and their maintenance areas consolidated with adjacent areas. In January 1989, a moratorium was placed on closing garages and a consultant, Wilbur Smith Associates, was hired to provide recommendations relative to the location and construction needs for highway maintenance facilities. The consultant concluded that

the level of highway maintenance services now being provided by the can i DOT be matched or improved by operating larger and more productive crews, and that the proper number of DOT maintenance facilities ranges from 70 to 110, depending on the organizational strategy chosen to accomplish maintenance.

The consultant’sreport found that about 50 percent of the highway maintenance facilities in the state are in need of major rehabilitation or replacement due to their size, condition, or both. The consultant concluded that 110 garages would provide the highest level of Service for winter snow removal activities but would saaifice some effiaency for summer maintenance activities. They found that larger crews allow for the full spectrum of maintenance functions to be performed and significant gains in productivity were achieved when larger crews were formed. Though scheduled maintenance work in the spring, summer and fall seasons constitute approhately 70 percxnt of the money spent on highway related activities, winter maintenance is critical to providing the traveling public and industry in Iowa with the mobility they need to sustain the Iowa

I1 economy. ‘I a The best combination of winter and summer maintenance can be provided by the additional consolidation of garages. In a few locations, un-staffed satellite garages may be nmsary to provide storage for an end loader and deidng materials to provide the greatest possible efficiency to the maintenance crews. The ability to consobdate the department’s maintenance forces and to sene larger maintenance areas is, in part, a

5 -144 I I

I result of the State's ability to purchase larger and more efficient equipment with which to maintain Iowa's highways. ,

Modify Distribution and Administration of Childhood Disease Vacdnes under Ti& MXMedicaid Recommendation: I We recommend that the Department of Public Health purchase and provide vaccines to administering physicians within the Title Mx program The Iowa 1 Department of Public Health (DPH)is dowed to purchase the childhood vacdnt from the Centers for Disease Control at the Center's bulk contract prices. I Potential Savings to the State are S29opOO. t I Background: For children who are ADC dependent, immunizations are available from either a private physiaan or at a local Public Health Clinic. The physidan usually . purchases immunization vacdne directly from a pharmaceutical company without a discount. The physician is reimbursed by the Department of Human services.(DHS) at the Title rate. 1 Mx 1 [Eliminate Regional Library System I J1 ..,: Recommendation: We recommend that the Regional Library System be eliminated and that resourc-; currently appropriated to the Regional Libraries be reallocated, in part, to the State Library to provide support services to local libraries. The fiscal year 1992 budget for the Regional Library System is $1.5 million, funding approximately 37 full time equivalent positions.

Background: The Iowa Regional Library System was established in 1973 to provide supportive library senices to existing public libraries, and to encourage local haal support of public library in areas where it was inadequate or nonexistent. service 4 The primary services provided by the seven regional libraries and the State Library to 1 the 525 public Iibraries in Iowa are

interlibraryloans ! the sharing of reference information consultation and library development support services, and 1 continuing education for Iowa librarians. 4

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I. I. [Adopt Contract for Services System for Indigent Defense I Recommendation: We recommend that the State of Iowa consider additional options for providing indigent defense services. During the 1991 session of the legislature, the Department of Inspections and Appeals sought increased funding for the Public Defender Program as a way to reduce the expenditures in the Indigent Defense Program. This proposal was approved, because public defenders can provide quality legal exvices which are comparable to the services of court appointed attorneys, and those services can be provided by public defenders at a much Iower cost. Background: One option which may further reduce the cost of indigent defense services is the establishment of a contract for services system for indigent defense

Services. A preferential treatment system would contract with local. attorneys for legal ~ Senices. The attorneys who are awarded a contract for services are guaranteed that legal cases fitting drcumstances specified by the antract will be assigned to those attorneys by appropriate judicial officer. For example, an attorney who sped- in criminal proceedings relating to the possession or distribution of illegal substances might be awarded a contract to defend those cases.

We believe that a contract for services system can produce sigruficant savings for the Indigent Defense Program. The Statewide Service Delivery Task Force has estimated that the implementation of this system could reduce expenditures for indigent defense by $60,000.

We also recommend that the State of Iowa review the cost of attorney's fees in the juvenile justice system. Detailed costs for these juvenile justice services should be coliected by the Department of Inspections and Appeals. These costs can then be anal@ and an estimate of potential savings can be prepared. Lf the review of the eqmses in the Juvenile Courts indicates that additional savings can be achieved, then it may also be appropriate to implement a contract for services system or an expanded public defender program for juvenile j~~ticeservices.

We also recammend that the State of Iowa complete implementation of the expanded public defender program which was approved earlier this year before further changes are made to the program. While the expanded public defender program is expected to achieve substantial savings, it cannot be assume that further expansion will result in similar savings. Indeed, the changes which are already being implemented may be having a secondary effect of bringing court appointed legal fees more in line with public defender costs. If a review of the fiscal year 1992 public defender program indicates that additional savings can be realized by adding more public defenders, then the Governor and General Assembly should take appropriate action during the 1993 legislative session.

-146- ITransfer Historical Sites To Local Governments or Oreanizations 1 Recommendation: We recommend that the State of Iowa consider transfening title and maintenance responsibilities for certain historical sites to ldgovemments or civic organizations. The Departments of Cultural Affairs and Natural Resources currently own and operate or have management agreements for seventeen historical sites. These sites indude Montauk, Gardner Cabin, Toolesboro, Edel Blacksmith Shop, Blood Run, Union Sunday School, and Gothic House. Because insufficient resources have been available to operate and maintain the sites, it may be appropriate for the State of Iowa to evaluate the feasibility of transferring ownership to organizations which would be willing to maintain and operate the sites. It should be noted that in some cases the terms and conditions under which the State accepted those properties stipulate that ownership mynot be transferred to private individuals and organizations.

Background: The fiscal year 1993 operation, maintenance and promotional expenses for these sites is estimated to be $335,000. Capital expenditures for the sites are estimated to be $1.8 million over the next five years. The actual appropriation.a - for these sites in fiscal year 1992 was $173,OOO, which is-the amount of savings which would be _C. achieved by fully implementing this recommendation. 1 4 4 4 1

-147- ! I INTERGOVERNMENTAL RELATIONS TASK FORCE /Reduce the Number of Aericultural Extension Offices 1

Recommendation: We recommend that the State of Iowa consider reducing the number of agricultural extension offices and financing educational dceswith user fees. Background: The Agricultural Extension program, administered by Iowa State University, was established to disseminate and apply useful and practical information on subjects relating to agriculture, home economics, and community and economic development to the people of Iowa. An extension office is located in each Iowa aunty. Two offices are located in Pottawattamie county. The agricultural extension program is governed by an dected nine member council. * Funding for the program is provided by a ambination of state appropriations and property taxes. The education portion of the program, as well as costs for unemployment compensation and tort liability are funded by a statutory tax levy. In year 1991, agricultural extension programs levied approximately in 8’ w fiscal $8,000,000 property taxes.

Savings could be realized by teducing the number of agricultural extension offices. If the number of extension offices were reduced from 100 to thuty, nineteen, or fourteen, the estimated savings which may be achieved is $45 million, $53 million, and $5.8 million respectively.

By funding extension education programs with user fees, up to $8 million in property tax savings auld be realized. We believe that a shift in funding from property taxes to use^ fees would provide greater tax equity, because the people using the service would be paying for it rather than all property owners.

Officials at Iowa State University are currently reviewing the mission and operation of the agricultural extension propm. We encourage state officials to carefully review the proposed changes being considered by the university in order to assure that some savings achieved from any program restructuring which is implemented be phased in by the property tax levy.

[Coordinate Township and County Services -7 I Recommendation: We recommend that the Governor and the General Assembly review the mission and structure of township governments and benefitted fire districts, and consider transferring the responsibility for those services to either county governments Or other coordinated regional government structure which may be established. Background: Township governments were established to provide essential services to rural residents. These services include fie protection, ambulance Service, emergency 'warning systems, fence viewing, care of township halls and cemetery upkeep. At the present time there are approximately 1,600 townships.

Townships are governed by three elected trustees and a township clerk. There are approximately 4,800 trustees and 1,6W clerks in the state. The trustees and clerks are compensated at an hourly rate set by the County Board of Supervisors and paid out of the County's Rural Basic Fund.

Township services are primarily funded by local property taxes. The amount of property taxes which may be levied to support these services is determined on basis of population. Townships in counties with populations of less than 300,000 can levy up to 40 I /2 cents per thousand dollars of valuation. Townships in Counties with populations of greater than 300,OOO can levy up to 67 1/2 cents per thousand dollars of valuation. In certain drcumstances, townships can also levy an additional 20 1/4 mts thousand of valuation. per dollars w, I Townships can combine to form benefitted fire districts that also have elected trustees and an appointed clerk. Benefitted fire districts indude one or more townships or parts of one or more townships which may levy up to 60 1/2 cents per thousand dollars of valuation in additional taxes to pay for provide fire protections. In many cases townships and benefitted fire districts contract with aty fire departments to provide fin protection in their jurisdictions. Approximately $13,000,000 in taxes are levied annually in townships and benefitted fire districts. We believe that essential services can be provided to rural residents more effiaently and at less cost Township govmentsand benefitted fire districts mdd be eliminated or some of the services whjch they provide could be transferred to munties or other regional service delivery systems. For example, if the responsibility to provide fire protection services to rural residents was transferred to county governments, the Board of Supervisors could contract for these services without being restricted to township or fire district boundaries. Economies of scale and reduced administrative costs znight be achieved by increasing the geographic area in which these services are provided. Similar savings could be achieved by consolidating the administration of ambulance services, emergency warning systems and cemetery upkeep. Responsibilities for fence viewing (relating to property line disputes) muld be handled by a County Engineer's office in cooperation with the County Attorney or by another regional service organization.

The Xntergovmental Relations Task Force estimated that up to $500,000 in savings could be achieved by transfering the responsibilities for township services and benefitted fire districts to other units of government. The discontinuance of the positior -149- of township clerk would save $180,000, and economies of Scale achieved by transfening service responsibilitis could conservative save about $130,000 (a conservative estimate). Interest earned on revenues currently being collected by township governments could also increase by pooling the investment of those revenues.

hmalement Federal Funds Manaeement Svstem 1

Recommendation: We recommend that the State of Iowa establish a system to manage and increase funding horn the federal govemment, with the Iowa Office for State Federal Relations in Washington, D.C playing a key role in the system. The federal funds management system should establish State priorities for the use of federal hds, coordinate the writing of applications for grants Erom the federal government, and establish criteria to maximize the return on state funds used as a match for federal aid. This system could also be used to apply for grants and aid from other organizations. These actions will not require additional state funds and could help increase the flow of federal funds into Iowa The Intergovem- mental Relations Task Force has estimated that federal funds can be increased by an estimated $5.8 million by increasing spedal grant receipts by ten percent. L; Background: In state Fiscal Year 1991 Iowa state govemment received an estimated $1.6 billion in federal funds. This is compared to $3.2 billion in estimated state general fund receipts. Federal funds are the single largest source of state revenues, surpassing even personal income tax revenue estimated at $1.5 billion for fiscal year 1991.

Receipts from federal funds can be categorized as follows: Operating Grants $185.9

Entitlement Programs $1,146.0 Y Special Grants $58.1 Universitv Research $U

Federal programs which provide the largest amount of funds to the State of Iowa include the school lunch program, research grants to the state universities, low income energy assistance, Aid to Families with Dependent Children, medical assistance to the needy and highway construction. Sixty three percent of all federal receipts go to these six areas. Iowa's budget process includes the identification of estimated federal receipts and expenditures. Iowa Code Section 8.22 requires the Governor's budget message to include a statement of federal funds received in the form of block or categorical grants. State agenaes must provide this information to the Department of Management each year, and a Statement of Federal Funds is published annually. It shows federal funds

-150- received by each department, the p'upose of the funds and the amount of state funds which are required to match federal funding. Although this information is re+rted, the current budget system focuses on the state general fund and other appropriated funds. Federal funds do not receive the same scrutiny by the Department of Management, the Governor's office or the General Assembly as do state revenues and expenditures. State matching funds are reviewed in the context of each state departments general fund request, but there is no system or method to ensure federal funds are leveraged effeciivelyand in accordance with the state's goals and priorities.

Iowa can expect to lose federal money as a result of the 1990 census. Becam billions of federal dollars are allocated by formulas based in part on the decennial census, Iowans can expect to lose federal funding when the new ensus numbers become effective in 1992 Federal programs that use decennial population figures as a formula allocation factor indude some of the must basic support programs for communities: highway funds, community development block grants, low income energy assistance, vocational education, drug and alcohol abuse and payments to agricultural research stations. The State of Iowa must bepnow to prepare for expected reductions in federal funding tL i The following are areas upon which Iowa's federal funds management system should focus:

1. Establishing Priorities for Federal Funding Iowa could doa much better job identifying pFojects and propms likely to attract federal finanaal support. In order to accomplish this it is important to establish clear priorities for federd-funding. While the process of iden6gstate agency priorities has been successful,statewide goals and objectives need to be identified. Priorities should established for all of state government, cut across stage agency missions, and be organized on the basis of state agency dusters which have common goals. The existing duster groups could be used or alternative grouping could be established. For example federal funding priorities could be organized into three groups: human resources, infrastructure, and research and te'dmology.

A planning and decision making process for setting priorities needs to be established. Inter-agency Task Forces could be established to develop priorities. These task forces could be organized among the cluster groups, and mdd use the Iowa Futures Agenda to set priorities in accordance with the State's goals and objectives.

Once the priorities are identified, an action plan for each priority should be developed. Each action plan should iden* existing federal grant programs and seek direct appropriations for Iowa's projects. The establishment of dear priorities and a uniform state policy can minimhe fragmented or conflicting efforts by state departments in communications with Congress and federal agenaes.

2 Coordinating with Other Entities -151- 1I

The State's efforts to attract federal funds could also be coordinated with local governments, private enterprises and non profit organizations. Communication efforts will be enhanced if all interested parties work together to secure federal funding and promote Iowa's interest. The federal funds management system should include plans to coordinate efforts to obtain federal funds.

3. Improve Grant Writing A communications network should be developed to enhance existing staff effortsin researching and requesting grants. State agenaes should pool resources and assist each other in preparing well-Written and well-justified grant proposals. Training and technical assistance on grant writing should be provided, and a list of key persons who are responsible for writing grants within each state agency should be developed and made available to all departments.

4. Reviewing State Matching Funds While not always possible, state funds should be committed to help attract federal matching resources. Projects which share costs with the federal government have a much better chance of getting federal attention. The federal funds management system I -A should ensure state matching funds are targeted towards the state's priorities and toward effectively leveraging federal funds. Federal funding and a review of state matching funds needs to be integrated into the state budget process.

5. Tracking Federal Receipts and Expenditures The Iowa Grant Application Form and the Iowa Grant Management System should be fully implemented in order to identify the receipt and expenditure of federal funds. This tracking system should provide the basis for the development of the federal funds management system.

The State of Iowa currently has a system for tracking the receipt and expenditure of federal funds. The Iowa Grant Application Form is used to provide the Department of Management with notification of grant requests. The information provided includes the type of assistance requested, project duration, match requirements, indirect cost and a description of the grant purposes. This information is useful in obtaining infoxmation about federal funds received by the State and helps ensure that grant requests are in accordance with the state's priorities.

The directors of the Department of Management and the Department of Revenue and Finance have recently recommend the mandatory use of the Grant Management System. The primary function of this system is to identify and collect all grant-related financiaI information. This system provides both modification of award and grant expenditure information.

i.

w -152- Section I11

Chapter 3

Near Term Guidelines

p* I

I I The basis for our work these past months has been to idene opportunities to reform state spending in order to overcome a General Fund deficit of $300 million in fiscal year 1993. Half of the anticipated defiat is stmcturd, i.e. spending projections for fiscal year 1993 will wceed state revenue growth by about $150 million. The other portion of the defiat is related to the accounting of state spending under Generally Accepted Accounting Prinaples (GM).Our recommendations for spending reforms, if implemented, are estimated to resuit in savings which will exceed the amount necessary to resolve both the structural defjat and the GAAP defiat (based on future GAAP standards). We recognize that many of the recommendations which we have made are controversial, and will require difficult dedsions on the part of the Governor, the General Assembly, local government offiaals, and the people of Iowa. However, we believe that it is important that policy makers at the State level implement as many of these recommendations as possible. At a minimum, it appears neceSsuy to reduce state spending by $150 million to provide for a legally balanced budget on June 30,1993. Furthermore, we strongly recommend that state offiaals work dilgently to approve a budget during the 1992 legislative session which is legally balanced. This will require state officials to set short term priorities about how General Fund dollars are spent. Above aLl, we believe that state offiaals should do everythmg possible to avoid the necessity of another across-the-board budget reduction in FY 1993.

In preparation for the fiscal yeas 1993 budget, we recommend that the Governor and the General Assembly utilize the Program Screening model prepared by the Executive Branch Task Force to evaluate programs for possible deferral, reduction, or elimination. Further, we believe that priorities for spending reduction decisions be based on criteria such as the following:

? Spending redudions in programs which will not have an immediate, sigruficant or material impact on Iowans. Example: WhiIe there are desirable attributes to the Resource Enhancement and Protection program, the defend of further expentures will in no way jeapordize the health, safety, or well being of the atizens of Iowa. Spending reductions which do not undermine State efforts to invest in operational improvements and effiaenaes.

I

ii -153- I :I i -______- ,- l------I- Example: Investments in technology and training, such as the X-PERT system at the Department of Human Services, which will improve efficiency and service delivery, and which will result in long term savings to the State budget, should be among the last budget items to be cut.

Spending reductions which are not critical long term priorities for future development in the State of Iowa.

Example: Expenditures which can have a significant and demonstrable impact on the Iowa economy should be carefully examined before spending reductions are implemented. Budget areas which relate directly to the State's ability to sustain economic development or provide education and training to Iowa's present and future workforce should be among the highest priorities for state spending. However, it is vital that policy makers not be constrained by the current distribution of resources to those budget areas. We strongly recommend that State resources be redirected to activities which will I improve economic and educational results.

d

I \! Section I11

Chapter 4

Long Term Vision

& ..

I 1 Long Term Opportunities While the projected State Budget defiat requbes immediate attention, we recognize that these budget problems are but symptoms of changes which all levels of government in Iowa must face. The population of the State has aged and has significantly shifted to urban and suburban mmmunities. Economic forces and new technologies have profoundly changed the environment in which public services are delivered. Meanwhile, the structure and delivery of public services have in many ways remained unchanged. During the past several decades state government has assumed greater finanaal responsibility for local govment services and services previously financed by the federal government.

The decisions facing state policy makers must extend beyond the short term need to reduce the cost of government senices and to bring spending in line with revenues. The State of Iowa must also take this opportunity to address fundamental questions about the role, structure, and financing of public senices. What services should government provide? What government structure should provide those services? How can the productivity and effiaency of government senices be increased? How should those services be financed?

During the past few months, we have attempted to take the first steps toward creating a new vision for the structure, operation, and funding of government in Iowa. In addition to identifying discrete opportunities to reduce State spending in the short term, we have also considered opportunities to restructure the system of delivering government services and opportunities to increase the efficiency, productivity and management of government.

Service Delivery Restructuring

Our review of state government spending lead us to conclude that state and local offiaals need to seriously consider changes in the way services are delivered to Iowa atizens. We believe that public resources can be used more efficiently, and that the quality and effectiveness of seryices provided to Iowans can be improved. Our recommendations include suggestions to integrate the delivery of services which are cunently fragmented among various agenaes and levels of government, to restructure the delivery system to achieve economies of scale, and to focus more resources on service delivery and less resources on management functions. We have recommended that the State of Iowa establish a statewide system for managing and delivering senices to Iowa citizens. We recognize that the size of the smpe of state and local government services will make implementation of this recommendation challenging. We also understand -1 55- that other govment offiaals, communities, and individual atizens may have concerns about the effect that an integrated and restructured delivery system Wiu. have on the quality and accessibility of government services. Nevertheless, these challenges and concerns must be overcome if governments are to effectively serve Iowans with existing resources.

I EXAMPLES OF SERVICE DELIVERY RESTRUCr'UIUNG I Inteprated Service Delivery 0 Establish Conditional License Issuance Establish State Collection Standards and Policy Encourage Coordination of County Functions Coordinate Township and County Services Establish Priorities for Federal Funding Coordinate Federal Grant Application with Other Entities

Restructure Delivery Svstems Centralize State Collection Activity Establish Youth Correctional Facility Reduce Area Education Agenaes (MAS)from 15 to 9 Restructure Driver Licensing Centers b Close Mental Health Institutes Merge Community Based Correction (CBC) Boards d Enhance State Library Services to Communities Focus Resources on Services Provide Flexible Funding for Foster Care Services Reduce Middle Management Implement Management Incentive Program

i We strongly recommend that the State of Iowa move foward with the implementation of OUT specific recommendations for restructuring the service delivery system, and to establish an appropriate process for developing a comprehensive service delivery restructuring plan.

We also recommend that a resstructuring plan address the means by which government evaluates the value and effectiveness of the services which are provided. Currently, it is difficult for government officals to measure the value of a service or program in relation to other programs provided by government. It is also sometimes difficult to objectively determine whether a service has materially benefited the persons receiving the services.

During the next legislative session, state policy makers will be faced with the task of setting priorites for the distribution of state resources. Unless the future delivery -1 56- system includes better methods for evaluating the value senrices provided, decisions on funding will continue to be based on subjective judgements and other forces present in the budget setting process.

Productivity and Management Reforms and Investments

If the State of Iowa is to meet the challenges ahead, it must have the capacity to respond and adapt to changing conditions which require long term shifts in programs and shcesprovided to Iowa citizens. Iowa does not appear,to have sufficient capaaty to make systemic changes in services, because budgeting practices, information systems, and budget constraints have forced state government to limit its response to short term changes in the e>cisting delivery system. Indeed, many of our near tern recommendations can be characterized in this way.

We believe that state government and local governments in Iowa should reseme appropriate funds to invest in activities which will improve the productivity of the government workforce and enhance their capaaty to effectively manage and evaluate the programs and services which they provide. This means that suffiaent resources need to be allocated for increasing the application of new technologies to government services, and that budget procedures should be refonned in order to provide suffiaent time, resources, and incentives to manage government effectively. I EXAMPLES OF PRODUCIIVTTY AND MANAGEMENT REFORMS I Increase Use of Technolomt Computerize Eligibility Determination for Human Services Develop a Technology Enterprise Plan

Refom Budget- Process Move toward a performance and program based budget system. Return to a biennial budget cycle. Revise Revenue Estimating Process and Establish a Emergency Resente Fund Establish Incentives to Increase Budget Reversions

-157- Section IV

Chapter 1

Citizen Input Hundreds of Suggestions Received from Citizenry

Shortly after the formation of the Spen&g Reform Committee was announced last July, the public began to offer their opinions of what they expect of government in Iowa, along with suggestions on how to cut spending in the state govement. Hundreds of suggestions were received by the Committee and members of the task forces. Most of the suggestions were outlined in letters, but many were also expressed over the phone. We gratefully acknowledge the help which the public provided US in identifying ideas for consideration in developing proposals to reform government spending in Iowa. A sampling of some of the suggestions we received follows:

"Strongly consider using the funds in the REAP program .... to help the budget crunch.

"Reduce the number of counties to 33." r.. "New programs should automatically & after a set numb of years. Let results prove the need for renewal."

"Stop tuition grants for students to attend private colleges in Iowa."

" ... sell all or most of the state parks." "... have the educational radio stations in Iowa broadcast as a network w th one central studio and the other stations operating as network transmitters."

"Examine AEAS. They are not seen as contributing members in proportion to their salaries and raises."

"... share county offices ..." "... put the radio systems of the D.O.T.and D.P.S. out for maintenance contracts under private bid."

"... contract out to equalization appraisals currently preformed by Department of Revenue and Finance personnel." "... eliminate front license plates on automobiles." "... decentralize the state government."

"Reorganize county government ..."

"Contract services at state institutions with the private sector ..." "Examine costs of free legal services."

"Toughen enforcement of tax laws and collections of delinquent child support payments."

"... consider salary freezes for all public employees for the 1992-93 school year."

"Consolidate state libraries."

'I... privatize health care services ..."

'Take the State of Iowa .... out of the liquor business."

"Eliminate redundant programs at the state universities .... Contract some

government senices e.g. state highway maintenance, to private firms.'' 1

1 %Eminate the Apiary division of the Department of Agriculture ...I'

"Stop all grants and reexamine all grants for real actual need. 1

"Establish a one house legislature term ..." with limits 4 "Encourage consolidation of wal school districts ... through use of finanaal i incentives ..."

I "Establish an educational voucher system for higher education." I "Put the Area Community Colleges ... under the bard of Regents control..."

"Cut back the amount of sick leave and replace it with "extended sick leave" I when serious illness strikes." I "Stop any support of college sports." "Combine any state offices that do similar work into one unit."

"Merge the Department of Corrections and the Department of Human Services." "... review the cost/benefit associated with the automobile registration system."

'I... abandon the Phase 3 program ..."

-159- "Review and eliminate the State Universities' practice of using teaching assistants for college professors."

"Expand the statewide income offset program to include all souces, such as the Regents, Unysis, DOT, Judiaal, etc"

"Consolidate various field offices of state agenaes to reduce overhead and provide a central point of service.''

"Perhaps county could share services, such as health departments, engineers, human services, to name a few."

"Hire a federal grants coordinator."

"Study the possibility of prisoners performing more work for the State."

iL

-160-

--. I -7- Section rV

Chapter 2 i I I Opportunities to be Quantified i : biI

i i

I Task Force Other Possible Opportunities collectjons Publish names of persons owing funds to the state. Provide incentive for debtors to pay. Charge interest and collection cost on past due debts to the state.

&termidpursue unrecognued receivables.

Statewide Service Delivery Review possible duplication in senices provided by the community coIlege srjtem and the ameducation agencies. Explore the possible merger of the two systems.

Mew possible duplication of services perfod by the Dephltment of Human Services' mental health institutes and the University of Iowa's Psychiatric Hospital.

Review possible environmental program merger/duplication between the Departments of Natural Resources and Public Health and the State Hygienic Lab. Review/elimiMte fragmentation of programs administered by the Department of Economic Development Analyzemergmeconomiesofsubstanceabuseprogaw administered by various agencies. I Analyze the need for two hospital schools for the mentally retarded.

Analyze the need for two state juvenile institutions.

Compare senices provided by the University of Iowa Oakdale campus with services provided by other state agencies.

Comprehensively analyze the management of information systems in state government including mainframes, microcomputers, 14area networks and all assodated "PpOfi syjtans.

Analyze scpanded application of voice (phone) mail in state government.

Analyze the application of an X-PERT type system in other hfeas of state gowrnment

-161- i Task Force Other Possible Opportunities ntergovemmental Relations Lview education overlap in secondary schools, communi~ i, dleges and public universities. .! i Lview all state mandates, rules and regulations for local I govanmerrts. Eliminate statutory barriers for aties and counties to I ;meboards and commissions.

mvebarriers to in-state placement of children m the uvdejustice system I improve statewide coordination of program development at mommunity colleges. I Review coordinated road construction and road maintm mong governmental entities. I'

loint administration of libraries. I

Coordinate emergency services. 11 Consolidate public safety functio~.

kbljc Finance Analyze Medicaid (TXLX) &nic scenario.

Sxecutive Branch Review Transfer the Criminal and Juvenile Justice Planning Division 1 to the Department of Public Safety. I Eliminate the Executive Council. I' Eliminate the Department of Human Rights.

all Health Boards to the Department of TransferCommerce Professional I

Transfer all administrative support functions for the Iowa Law Enforcement Academy to the Department of Public '17 Safety (DPS).

Transfer the DPS Communications Division to the Iowa Highway Patrol. I, Review needs for records management and evaluate reguirr;ments for saving documents. 1 I

.. -1 62-

i. i i --_____ -. -- TI--- I Task Force Other Possible Opportunities Executive Review (continued) Branch Establish a fee for claims filed with the Appeal._ Board ($5 for general, $25 for tort).

Increase local match for elderly service programs from 15 to 25 pe-t Eliminate Foster Care Review Board, transfaring responsibil~ty to DIA or DHS. Eliminate the Displaced Homemaker Grant program.

Fund the legislature with a s-c appropriation rather than with a standing unlimited appropriation. 'rivatization Dutsourcing: State park, forest and nursery maintenance Records management (mimgraphia) Physical plant operations Grorndsmainte~nce htrial and presentence investigation Increase use of electronic monitoring Training of public health professional staff Propertytaxappraisals Ll Lease retail and advertising space in state buildings to private sector Various children and family services Expanded use of prison population for state work Continue to evaluate subcontracting the administration and delivery of certain services at the mental health institutes; security services; medical services at Oakdale correctional facility; and certain functions associated with the Auditors's office.

-163 i/

______-. 7------I Section N

Chapter 3

Task Force Members COLLECTIONS TASK FORCE

Edgar F. Hansell, Chair George Price, Co-Chair Nyemaster Goode McLaughlin Iowa Dept. of Management Voights West Hansell & O'Brien FC Des Moines, Iowa Des Moines, Iowa

MikeFlaherty Daryl Henze Iowa Dept. of Revenue & Finance Peat Marwick Des Moines, Iowa Des Moines,Iowa Will Hoekman cedlia Johnson First Star Bank Iowa Dept. of Human Services Des Moines, Iowa Des Moines, Iowa

I Tom Koehn &a Lopez Waldinger Corporation Lopez & Heishman, Inc. kn Des Moines, Iowa Iowa City, Iowa i.n' Gary Nichols Harry Sue College Student Aid Commission State Senator Des Moines, Iowa Cedar Falls, Iowa Chuck Sweeney Iowa Dept. of Inspections & Appeals Des Moines, Iowa

. -, Ihl -164- p ! EXE~UTIVEBRANCH REVIEW TASK FORCE

William Vernon, Chair Gretchen Tegeler, Co-chair The Vernon Company Iowa Dept. of Management Newton, Iowa Des Moines, Iowa Mary E.Kramer Don Byers State Senator Retired General Counsel, Maytag West Des Moines, Iowa Newton, Iowa

Wayne Creagan Ira Dolich Reti~edPresident, Dixie Narco Corp.-Maytag Drake University Newton, Iowa Des Moines, Iowa

Jeanine Hettinga Gary Johnson Hettinga Equipment, hc. Winnebago Industries Clive, Iowa Forest City, Iowa

Martha Nash AlRenken Martin Luther King Center ALCOA Waterloo, Iowa Davenport, Iowa &4 Joe Ryan Shirley Andre Coltec Industries Iowa Dept. of Transportation West Des Moines, Iowa Des Moines, Iowa Linda Hanson Iowa Dept. of Personnel IiI Des Moines, Iowa

I

I 1 I

-165-

..I, INTERGOVERNMENTAL RELATIONS TASK FORCE

Moms E. hopf, Chair Cynthia Eisenhauer, Cdhair Ahlers Law Fm Iowa Dept. of Employment Des Moines, Iowa services Des Moines, Iowa Dolores Mertz PeterKing State Representative Iowa League of Muniapalities Ottosen, Iowa Des Moines, Iowa Betty Snyder Myron Linn Mayor RoIscreen Company Clinton, Iowa Pella, Iowa

JamesD. Undwood Dr. Ben Norman Iowa Comprehensive Human Services Ankeny community schools Des Moins, Iowa Ankeny, Iowa

Owen Heiserman Judy Peters Mid-Iowa Community Action Agency Job Service of Iowa Marshalltown, Iowa Fort Dodge, Iowa Dr.Norm Nielsen Donald C. Byers Kirkwood Community College Newton, Iowa Cedar Rapids, Iowa

Don Rowland IanMacGillivray I Iowa Southern Utilities Iowa Dept. of Transportation Ottumwa, Iowa Ames, Iowa

Marie Thayer Almo Hawkins Iowa Dept. of Commerce Iowa Dept of Human Rights Ankeny, Iowa Des Moines, Iowa

=thy Beery brrahe Tate Iowa Dept. of Economic Development US West Communications Des Moines, Iowa Des Moines, Iowa

1' :

______- -7------I PRIVATIZATION TASK FORCE

Myrt Levin, Chair Dan4 W. Rensink, C&air Iowa Business Council Iowa Dept. of Transportation Des Moines, Iowa Des Moines, Iowa Harry Cannon Dale Den Herder Iowa Prison Industries American State Bank Des Moines, Iowa Sioux Center, Iowa

Marty Deaton Connie Wimer Iowa Dept of Commerce The Business Publications Ankeny, Iowa Des Moines, Iowa

Paul Carhn John DeVries Iowa Dept of Management The Graphic Corporation Des Moines, Iowa Des Moines, Iowa Jack Taylor Kevin O'Brien Ringland-Johnson-CrowleyCo. McDonald's Des Moines, Iowa Coralville, Iowa

Carroll Bidler Bill McClymond Iowa Dept. of Public Safety Warren Co. Supenisor Des Moines, Iowa hdianola, Iowa

Austin Turner Mark Douglas Coming, Iowa Association of Business & Industry Des Moines, Iowa

R Geig Slayton Adj. Gene& Warren Lawson Iowa Dept. for the Blind Iowa Dept. of Public Defense Des Moines, Iowa Johnston, Iowa Jim Cownie Joan Poe New Heritage Assodates Standard Distributing Co. Des Moines, Iowa Waterloo, Iowa

ChareseYanney Guarantee Roofing & Siding, Inc. Sioux City, Iowa

-167- PUBLIC FINANCE TASK FORCE

Robert Rigler, chair Gerald Bair, Co-Chair Security State Bank Iowa Dept. of Revenue & Finance New Hampton, Iowa Des Moines, Iowa

Marvin Selden, Jr. Pat Cavanaugh UDea Finanad senices Drake University Des Moines, Iowa Des Moines, Iowa Glen Erickson Dick Hahn Scott County Administrator Farm Bureau Davenport, Iowa Walcott, Iowa

Dick Christie Kay Chapman Council Bluffs School District State Representative Council Bluffs, Iowa Cedar Rapids, Iowa Pa Dr. William Lepley Anita Mandelbaum Iowa Dept. of Education & Coopers & Lybrand Des Moines, Iowa Des Moines, Iowa Mike McCarville Tom Gould Mayor Younkers Fort Dodge, Iowa Des Moines, Iowa Michael Fitzgerald State Treasurer Des Moines, Iowa

1.

-1at- I": STATEWIDE SERVICE DELIVERY TASK FORCE

Charles McNider, Chair Charles Palm&, C&air Holman, Inc. Iowa Dept. of Human services Clear Lake, Iowa Des Moines, Iowa

Chris Atchinson Kathy Beery Iowa Dept. of Public Health Iowa Dept. of Economic Des Moines, Iowa Development Des Moines, Iowa

Bill Beckwith Lorna Burnside Fareway Stores Inc. County Supervisor Boone, Iowa Storm Lake, Iowa

Perrychapin Robertcramer South Central IA Federation of Labor, AFL-CIO Fareway Stores Inc Des Moines, Iowa Boone, Iowa

Arlene Dayhoff Charles Edwards 6:- .\ Human Services Council Ds Moines Register Cedar Rapids, Iowa Des Moines, Iowa

Betty Grandquist Joan Hester Iowa Dept of Elder Affairs State Representative Des Moines, Iowa Honey Creek, Iowa

Emil Husak William Jackson State Senator Iowa Dept. of Cultural Affairs Toledo, Iowa Des Moines, Iowa

Kyle Krause John lR& Krause Gentle Corp. Iowa Utilities Assodation - West Des Moines, Iowa Des Moines, Iowa

Wayne Richey Elaine Szymoniak Iowa Board of Regents State Senator Des Moines, Iowa Des Moines, Iowa Man Thorn Donald Williams Iowa Dept. of Economic Development The Prinapal Frnanaal GrouF Des Moines, Iowa Des Moines, Iowa

-169- TECHNOLOGY ENHANCEMENTS TASK FORCE

Sunnie Richer, Chair Gerald Anderson, Co-Chair Brenton Banks, Inc. Iowa Dept: of General Services Des Moines, Iowa Des Moines, Iowa Norm Baker Jim Billings Iowa Dept. of Personnel Kirkwood Community College Des Moines, Iowa Cedar Rapids Bob Delaney Lee Liu The Mapal Financial Group I.E.S. Industries Des Moines, Iowa Cedar Rapids, Iowa

Terry L. Marksberry Edward J. Stanek Meredith Corporation Iowa Lottery Des Moines, Iowa Des Moines, Iowa Er! JamesR. Youngblood Bob J. Canney Iowa Methodist Medical Center Blackhawk County Information Des Moines, Iowa Sys terns Waterloo, Iowa

Richard G. Heidloff Ray camp Lyon County-Rock Rapids Division of Fiscal Management Rock Rapids, Iowa Des Moines, Iowa

Carson Smith Leland Tack Board of Regents Department of Education Des Moines, Iowa Des Moines, Iowa

-170-