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“Illinois hasn’t had truly balanced budgets for more than 15 years,” reports Illinois Policy, an independent organization generating public policy solutions aimed at promoting personal freedom and prosperity in Illinois, “And state spending has far outpaced growth in residents’ incomes. These are two reasons why Illinois is in desperate need of a spending cap that ensures residents are getting a state government they can afford. But there’s another key reason Illinoisans need a spending cap: lawmakers can’t reliably figure out how much money they have to spend each year, with state officials consistently producing revenue projections that don’t match one another or the actual amount of revenue the state ends up generating.” It’s that last line that really alarms us. Illinois can blame its fiscal mess — including the nation’s lowest bond rating — on all sorts of things; many of them dating back for years, like its failure to adequately fund state pension plans. But the first step, as far as we’re concerned, to putting together any kind of budget that can be both politically palatable and fiscally sound, is to start with the right revenue estimates. And that’s next to impossible, thanks to state law! According to the Illinois Policy Report, “The executive estimate comes from the Governor’s Office of Management and Budget, or GOMB, and is used by the governor in his annual budget proposal. A second estimate comes from the legislative Commission on Government Forecasting and Accountability, or COGFA. Unfortunately, these two estimates rarely match either each other or the amount of revenue that actually ends up coming in.” The alternative, of course, is consensus revenue estimating. As we wrote for the Volcker Alliance a couple of years back, “Consensus revenue forecasts are made by a group of contributors, often involving the legislature, executive branch, economists, and representatives of the Democratic and Republican parties. The point of a consensus forecast is to make it easier for policymakers to concentrate on expenditures instead of arguing about whether the revenue estimate was politically driven. While consensus revenue forecasts are not necessarily more accurate than ones produced by a governor’s budget office, the process is likely to go more smoothly when all the parties involved in forming a budget agree on a single revenue figure.” And not to belabor the obvious, that’s exactly what Illinois needs in order to come up with balanced budgets: a process that goes more smoothly.

When it was discovered that many of Donald Trump’s top advisers were asked to sign non-disclosure agreements (NDAs), forcing them to keep quiet about what happens in the White House, an outcry ensued. As a Washington Post editor wrote, these agreements are “not just oppressive, but constitutionally repugnant.” But it’s not just the federal government trying to keep employees mouths sewed shut, either through “confidential agreements” or “non-disclosure contracts,” according to a column by Katherine Barrett and Richard Greene that was released on governing.com on April 5. Following is a summary of the piece, with sections drawn directly from the Governing column. It’s been 24 years since 1984 as Orwell predicted it. But this kind of thing sounds like it was torn out of the pages of his book. Montana, for example, has had a reported escalation of confidential settements between employees and the state, according to the Governing article, which also related that, “in Philadelphia, reports of sexual harassment — and a subsequent settlement for one employee –led to calls for Sheriff Jewell Williams to resign and for the city to reconsider how NDAs and settlements are applied in cases of sexual harassment.” The issue is particularly problematic for potential whistleblowers. “At the federal level,” the column stated, “a whistleblower’s ability to report wrongdoing is strongly protected, but state laws tend to be weaker, vary dramatically and may not be known to employees, says Tom Devine, legal director of the Government Accountability Project, an organization dedicated to protecting whistleblowers. “He worries that any kind of agreement that curtails public employees’ free speech could deter them from flagging problems. “He worries that ‘There are administrative and legal remedies that would allow employees to break nondisclosure agreements or speak out or blow the whistle despite a confidential settlement,’ he says. ‘But the mere existence of the agreement is highly chilling.’” Take a look at the full article. This is important stuff.

A new audit of Oregon’s foster care system provides an excellent example of the horrendous imbalance in the attention that goes to policy creation and policy implementation. A couple of weeks ago we highlighted an audit with a similar theme in Nevada. The remarkably thorough (and horrifying)  Oregon audit was released by the Secretary of State’s office at the end of January. The litany of problems is summed up in the audit’s opening comments: “Management has failed to address a work culture of blame and distrust, plan adequately for costly initiatives, address the root causes of systemic issues, use data to inform key decisions and promote lasting program improvements.” The audit reflects many of the issues we’ve been writing about in Governing and on or own website. Nearly a quarter of child welfare caseworkers leave their jobs every year. Caseloads are far greater than recommended levels, but positions are held vacant on purpose for budgetary reasons. A third of child welfare workers have been on the job for eighteen months or less. Managerial turnover is constant. Foster family recruitment is weak and the number of families is falling while caseloads are rising. Data quality is terrible. Caseworkers feel unsafe. The list of problems goes on and on and on, with potentially tragic results for both families and children. A federal review of Oregon’s foster care in 2016 found it did not meet any of the federal government’s seven outcome measures. Poor management leads to leakage of much needed dollars. As the audit points out, the Department of Human Services has paid out $39 million in legal settlements over the last dozen years “due to the agency’s inability to consistently keep children in their care safe from abuse and neglect.” The audit describes in some detail the many efforts that were tried over the last dozen years to fix Oregon’s foster care system. There have been multiple staff reorganization efforts, but with little management attention to the disruption, culture change and time that each change effort takes. There also have been a number of new initiatives that were launched with enthusiasm, but without adequate training, staff or budget. For example, in 2006 the department dove into the much-heralded best practice “Oregon Intervention Safety Model” to ensure child safety over the full timeline of a case. But inadequate training and staffing led to shortcomings in implementation. A few years ago, an ambitious re-training effort was launched and then halted a short while later when the department decided to put its training resources into yet another new idea, which also “sputtered in its development”. Likewise, a critical workload model was developed in 2008 and updated in 2013, with the goal of accurately calculating staffing needs. But the department has never been budgeted or staffed to the recommended level. In 2015, the Department of Human Services “transferred its workload modeling team to different unit, cut positions, and demoted key staff.” Since then, the workload model hasn’t been updated even though multiple legal, programmatic and societal changes have occurred. The lack of care attached to staffing analysis, coupled with a very problematic child management system, has resulted in the legislature getting inaccurate information about staffing needs. The message is pretty clear. There has been no shortage of big new initiatives in Oregon’s child welfare and foster care system. But there has been a tremendous deficit in both implementation and funding. “Several substantial reform efforts have been poorly planned and executed, then abandoned,” the audit says. “For over a decade, management’s response to crisis and scrutiny has been to reorganize the system not to effectively plan to fix it.”

Back in early January, we wrote a column for Governing magazine about “shared services,” titled “Why are Governments So Hesitant to Share Services.” Soon after its release, we got a very insightful note from one of our regular correspondents, Jay Gsell, county manager of Genesee County, New York. A native of New Jersey, Jay has been a local government professional since 1975 in seven different localities. He’s married. And enjoys the music of Carlos Santana. We thought we’d share his comments with you, and here they are: With regard to Shared Services and the seeming reluctance to fully embrace the realities of 21st Century local government service delivery, maybe we need to start with the underlying principle: “That which doesn’t kill us, serves to make us stronger.” Among the challenges that come into play, as we dip our toes into the “shared services” pond, are: protectionism, job security, fear of lost control, 19th Century notions of governance and often the presumption that the level of government closest to the taxpayer is the most responsive to taxpayers. Here in New York State, you would think that our 1,700 local public sector taxing entities would be falling over themselves to be more cost efficient and effective and do the state’s shared services bidding. What has become more apparent is that for years shared services and consolidation have occurred and have been providing fiscal and service benefits, but the real big ticket items or more politically complicated/nuanced efforts are the hardest to get our collective hearts and minds around and take a stab at. So what will it take to move further? We’ve had success stories in Genesee County, New York including joint health departments, youth bureaus, fuel farms, highway construction equipment sharing and so on. In New York State, and I suspect elsewhere, there’s hope for county-wide school districts, regional county jails (as is the case in North Carolina and Virginia) and more. When do we get gumption to go to the next level of these initiatives?

When we think about the usual gang of states that have serious fiscal problems with their Medicaid program, states like Florida, Illinois and New York immediately spring to mind. But having just read an article in the Anchorage Daily News  we’ve come to the realization that the northernmost state faces an iceberg worth of expenses in order to pay Medicaid now and in years to come. Medicaid covers almost one out of three Alaskans. “It’s going to eat us alive if we don’t manage it,” Sen. Peter Micciche, who oversees the state health department’s budget for the Senate, told the paper. A few more factoids as reported by the Daily News: “Total spending on Medicaid in Alaska, including federal cash, has grown to $2.2 billion this year from $1.6 billion three years ago.” The “health care industry is one of the only bright spots in Alaska’s economy, which has otherwise lost thousands of jobs amid the recession.” “The state’s Medicaid budget still grabbed lawmakers’ attention this month when [it became a distinct possibility that the “administration would ask for an extra $100 million in their ‘supplemental budget’ to cover costs overruns in last year’s spending plan.” “There’s also a backlog of 15,000 applications still awaiting processing, some of which are two years old, said Monica Windom, director of the health department’s Division of Public Assistance. Some 60 percent of applications are typically approved, she added.” All this presents a significant fiscal issue for the state. But one of the most alarming things in this article was this: “[Governor Bill] Walker’s administration warned last year . . .  that there would likely be cost overruns because lawmakers weren’t setting aside enough money for Medicaid to begin with. The Legislature’s chief budget analyst, David Teal, made that point in a hearing . . . “He said the Walker administration doesn’t have the power to control the program’s costs itself when there are specific eligibility requirements and defined payment rates for doctors and hospitals.”

In 25 plus year of writing about state and local government, we are often stunned by how much time and attention goes to creating policies and processes and how little time and attention goes to policy implementation. There’s no better evidence of the chasm between policy vision and policy implementation than the photos on this page, which were pulled from a January legislative audit of community-based living arrangements for the mentally ill in Nevada. We’re not talking about a few bad actors here. The performance audit of the Division of Public and Behavioral Health looked at 37 provider homes. “We observed serious, deficient conditions in all 37 homes inspected,” the audit reported. “Although the Division developed policies and procedures to inspect provider homes, staff implementation of procedures is inadequate.” This isn’t the first time that Nevada officials have learned about community living problems for the mentally ill. Newspapers reports about deplorable conditions in the last few years resulted in a slew of new policies, including standards established in 2014 for certifying providers, and clear requirements to inspect homes regularly. Two Nevada agencies, which are part of the behavioral health division, oversee providers. One operates in the southern part of the state. The other in the north. The policy for Southern Nevada Adult Mental Health Services, effective April 2016, says its home placements for the mentally ill provide “independent living with the security of monitoring, continued support and behavioral skills training in a scattered site community Center.” A similar policy exists in the north. More legislation was passed in 2017 providing for certification and regulation of community-based homes. Currently, providers get an average of $1450 a month from the state for each resident and may also receive funding from the federal government via Social Security Administration disability checks. An average of four residents are housed in each home. The audit alludes to the temptation that some providers may have to skimp on services, care and basic home maintenance. “Providers operate a business that inherently is driven by a profit motive. In the absence of adequate inspection and certification activities, providers may limit their level of care to maximize profits at the detriment of client services.” On Friday, The Nevada Independent reported that the Nevada Department of Health and Human Services had immediately responded to the situation and would re-inspect 105 “community-based living arrangement” homes. The department’s director, Richard Whitley,  was also clearly stunned by the audit and the photos that accompanied it, and baffled that agency inspectors had missed the problems witnessed by auditors.  “If you read the audit, you see that they were in facilities that we were in days before, so . . . how did they see something that we missed or didn’t report?” Whitley told reporter Megan Messerly. “To see that we’ve been out there and didn’t act on seeing what the auditors saw, I have to know why that is and fix it now.”

Why don’t state and local governments keep better records on contractor performance? We’ve puzzled over the answer to this question in Governing, where we observed in a January 2016 Smart Management column that many states and local governments “fail to consider a company’s past performance when contracting with them.” The fact that contractor performance isn’t reported – even when required – was shockingly displayed in a Minnesota legislative audit of professional/technical contract spending that was released yesterday. The audit looked at contracting in the Pollution Control Agency and the Departments of Corrections, Education, Human Services and Transportation. While many of the audit’s conclusions were positive, it did find a big flaw in department inattention to reporting requirements. In Minnesota, departments and agencies are required by statute to file a report with the Department of Administration on contractor performance when contract awards are greater than $25,000. Based on contracts tested, the audit found that the Pollution Control Agency failed to submit the required contractor performance reports 100 percent of the time; the Department of Transportation failed 86 percent of the time and education had an 83 percent miss in submitting the required reports. The omission rate for both corrections and human services was 75 percent. Such high rates of non-compliance suggests not only that departments are lax in following the law, but that the Department of Administration doesn’t much care. “Our testing indicated that none of the agencies had sufficient internal controls to ensure compliance with the statutory reporting requirements,” the audit says. “However, given the widespread noncompliance, we also question whether the Department of Administration is taking a strong enough leadership role as the state’s central procurement agency.”

We’ve been thinking a lot about the challenges faced by government auditors, as we prepare to give a talk to the 2017 Mid-America Intergovernmental Audit Forum later this week. One of the issues we’ll be discussing is the lack of cooperation government auditors sometimes get from the departments they’re auditing.  The obstacles they confront include delays in getting necessary documents, the refusal by departments to share information, and controls placed on auditors’ access to departmental employees. As we wrote in a Governing column in September, California’s auditor Elaine Howle believes this kind of audit interference is becoming more common. “We’ve had to fight these battles more and more,” she told us. In general, these are the kinds of problems that are not picked up by reporters, so we were somewhat startled to see a number of recent examples in our Google searches this week. In New Jersey, for example, an audit that was scheduled for release in the summer is still in progress. The reason? According to a November 30th article in Route 40, which supplies South Jersey news and information, the holdup stems from delays in getting requested documents from the Casino Reinvestment Development Authority. We saw another example in Louisiana, where the auditor’s office has asked for records from the medical examiner’s office, which is seeking the opinion of a Baton Rouge judge as to whether it should refuse to comply based on doctor-patient confidentiality laws . The auditor there told The Advocate in Baton Rouge,  “They feel like they can’t give us the records. We feel like the law is on our side.” Then there’s the situation in Montgomery County, Tennessee, where the county audit committee issued a letter of reprimand last week against a county trustee for refusing to comply with the auditor’s request for public records. Coming back to California, in mid-November the UC Board of Regents published its investigation of alleged university obstruction of an audit that was released in April.  The investigation found that top aides to UC president Janet Napolitano had examined audit responses submitted from high-level officials in the university system and had moved to have answers modified. An editorial in the L.A. Times on Saturday said the aides, who have since resigned,  “engaged in egregious interference, telling campuses to omit or temper their criticisms of the president’s office.”

Just a handful of days ago, the Volcker Alliance released its latest in a series of ground-breaking reports, titled “Truth and Integrity in State Budgeting: What is the Reality?”  at a gathering in the Roosevelt House in New York City. This report, which covers all fifty states over the fiscal years of 2015 through 2017, focuses on five critical areas that explain methods used to achieve budgetary balance, as well as how budgets and other financial information are disclosed to the public. States were given grades of A to D-minus for their procedures in: Estimating revenues and expenditures; Using one-time actions to balance budgets; Adequately funding their public worker retirement and other postemployment benefits; Overseeing and using rainy day funds and other fiscal reserves; Disclosing budget and related financial information. As William Glasgall, director of the Volcker Alliance’s state and local program said, “With state revenue growth estimates being revised downward in 2017 and 2018 despite more than eight straight years of economic recovery, the pressure is great to balance budgets using one-time maneuvers or underfunding long term obligations for such areas as infrastructure, education and public employee retirement. The press conference also featured commentary from Paul Volcker, the Alliance’s Chairman and former Federal Reserve Board Chairman, Richard Ravitch, an Alliance director and former Lieutenant Governor of New York and Thomas W. Ross, president of the Volcker Alliance. The top graded states in Budget Forecasting included Connecticut, Florida, Hawaii, Maryland, New York and four others. In the budget maneuvers category, the list of states least dependent on using resources from other years to pay the bills due this year was led by California, Delaware, Georgia, Hawaii, Idaho and sixteen others. Legacy costs, like pensions and post retirement health care were given the highest marks in Idaho, Iowa, Nebraska, Oklahoma, Oregon and three others. The evaluation of Reserve Funds found that Alaska, Arizona, California, Hawaii, Idaho and ten others did better than the remainder. Finally, the category that covered transparency only had two states with the highest scores; Alaska and California. This was largely due to the fact that both of those states are making an effort to disclose deferred maintenance figures for their infrastructure. The remainder of the core Volcker Team, working under the auspices of Glasgall, include Melissa Austin and Noah Winn-Ritzenberg. Consultants to the report include Matt Fabian and Lisa Washburn of Municipal Market Analytics and Katherine Barrett and Richard Greene (us!) principals of Barrett and Greene, Inc. For a film of the Roosevelt House event, click here.

With the unprecedented horrific hurricanes hitting Florida, Texas and Puerto Rico in just the last weeks, we’re reminded of a conversation we had some time ago with one-time Iowa Governor Tom Vilsack. It seemed to be particularly timely in the wake of these devastating hurricanes, and so we thought we’d share it. When Former Iowa Governor Tom Vilsack was about to take office in 1999, he went to the National Governors Association’s “New Governor’s School,” and sat next to then-Governor Zell Miller of Georgia. Vilsack had one big question to ask his seatmate: “What are the one or two things I should focus on? Should it be health care? Should it be jobs? Should it be education?” As Vilsack recalled in his conversation with us, “Governor Miller said, ‘Son, emergency management. I guarantee you that within six months something is going to happen in your state and if you don’t handle it well it won’t make any damn difference what you do in health care or jobs or education.” Vilsack took Miller’s advice, and when the state was hit with a huge tornado three months later, its leaders handled the situation in a coordinated, capable way that saved lives and property damage. This isn’t the kind of story that people need to hear today. But when this onslaught of horrific hurricanes, and other natural disasters, has passed, and there’s the potential for months to pass without another, it’s entirely too easy to forget. That’s a bad idea.

We often misplace our keys, and last year we left a Kindle in the seat pocket of an airplane. So, we understand that it can be tricky to keep track of possessions. Even so, we are repeatedly struck by the huge difficulty state and local governments have with maintaining an accurate inventory and solid knowledge of the whereabouts of their various assets. The latest example comes from Philadelphia. This month, Controller Alan Butkovitz took a look at the city’s inventory of personal property, delving specifically into how effective city departments were in tracking computer and high-tech equipment. As it turned out, less than half of the 350 items sampled by the controller’s office could be located in the city department that was specified in the citywide inventory. Missing items included a $16,600 GPS system from the Office of Innovation and Technology, two thermal imaging cameras from the fire department (with a combined value of about $15,000) and a $12,300 generator from fleet management. The list of missing items also included 48 desktop computers, and 11 portable computers. According to the audit, “The Water Department was missing a pneumatic jackhammer, a hand-held meter, two water pumps, and a paving breaker. The Police Department could only locate one of thirteen portable radios, the Health Department was missing an x-ray film processor, the Streets Department could not locate a paving breaker . . . the Parks and Recreation Department could not find a pool vacuum or a commercial lawn mower.” While there are detailed processes in Philadelphia for tracking equipment, many departments have been lax about following them. The result? “Departments’ ability to determine the need to acquire computer and other high-tech equipment may be impaired, departments cannot provide assurance that equipment is protected from loss or being used only as authorized, and valuable equipment could be easily misappropriated.” As noted above, Philadelphia is far from alone in having problems with maintaining accurate inventories or locating missing assets. We wrote a column about this topic in a Governing column three years ago, called “How Does a City Lose a Backhoe?” [Note: We also did a Q&A column with City Controller Butkovitz in Governing in January, 2016.]

What computer weaknesses open the door to a local government data breach? Missouri’s state auditor, Nicole Galloway, has summed up the results of multiple local audits to pinpoint the most common data security shortcomings. The list is designed to provide insight to Missouri locals, but any local government could benefit by taking a look. Here are the five data breach trouble areas for local governments in Missouri: 1. Too wide access. We see this over and over again in government audits. Employees are able to get into multiple systems that are not actually needed and too often they retain access after leaving a job. 2. Employees are sloppy about passwords with many local entities failing to put in place rules about changing passwords or making them more secure. 3. Security software is not in place and inactive computers stay on rather than closing down after a period in which no one is working on them. 4. Data isn’t backed up. 5. Edits are too widely permitted, enabling employees to potentially alter or even destroy data. For each security issue, the report lists the entities that were cited for the issue during an audit between July 2016 and June 2017. The most common problem involved passwords that were left in place too long without alteration.