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Tall
Corn, Rolling Prairies, and the Shopping Spirit
by
John M. Kamensky
State government is a great place for experimenting with new ways of managing for results. Look at Iowa, the land of tall corn and rolling prairies. In 2001, the state embarked on an ambitious plan to implement a new law, the “Accountable Government Act,” designed to make the state government more results oriented. This set of management reforms included requirements for state-wide and agency-specific strategic planning, agency operating plans, performance measurement, individual performance plans, performance audits, and continuous improvement efforts.
One element, however, did not get off to a good start. The state tried to tie its new strategic plan, agency plans, and performance measures into its budget process. But reformers quick found that the state’s performance budgeting effort “was more form than reality,” largely because there were few consequences for making the links meaningful to decision makers.
But with a quick shift in its strategy, Iowa created a “purchasing results” approach to budgeting, which is similar to an approach New Zealand pioneered in the 1980s. While it is seen as a radical approach in the U.S., it appeals to the American spirit of shopping.
The idea behind this approach is that the governor and legislature define a set of services they want to “buy” from agencies. In the governor’s budget development process, agencies become the “sellers” of services. They can compete against each other – or collaborate -- to see whose proposal is accepted. The better the results they offer, the better chance they have of their offer being funded.
What does Iowa’s new budget process look like?
Iowa’s results-oriented budgeting initiative is in its second year. Here’s how it works:
Step 1. The governor’s office defines a set of results areas and indicators of progress in each of those areas. It identified seven results areas that align with each of the legislature’s seven budget subcommittees. These include: education, health and human services, justice, etc. Indicators of performance would include, in education for example, “the percentage of 4th grade students achieving ‘proficient’ or higher in reading.”
Step 2. The governor’s office then creates “buying teams” that help the governor purchase results in each of the seven Results Areas. Each team includes staff from the offices of the governor, lieutenant governor, and Department of Management, which manages the state’s budget. Each team is given a predetermined level of money that can be spent in their results area. These teams issue Requests for Results (RFR) to agency “sellers.” Each RFR consists of Indicators, a Strategy Map, and Purchasing Strategies for each Results Area.
Step 3. State agencies prepare “offers” in response to the Buying Team RFRs. Each offer provides quantified results for a given price. If agencies want to do anything, it will have to appear in an offer. Each offer consists of “a Description, Justification, Performance Measures, and Price with Revenue Source,” according to the state’s budget office.
Step 4. Buying Teams evaluate offers, oftentimes negotiating with sellers to clarify purchases and price, and ranks final offers in their recommendations to the Governor. Each Buying Team develops a “purchasing priority” list that ranks offers from top to bottom, with a line drawn that shows where the predetermined amount of money for that team runs out. Each list is accompanied by a brief narrative that describes the intended impact of funding those priorities.
Step 5. The governor and state legislature can reorder the priorities by moving offers up or down on the lists, or add more dollars to reach further down on the list. Ultimately, they decide on which offers provide the best value for the state.
In the end, citizens have open access to the results of the process to see how the decisions were made at: http://purchasingresults.iowa.gov . This website shows where the “line was drawn,” what got funded, and what did not.
Does this approach work?
The state law creating the overall results-oriented management structure required an assessment of the implementation of all of the components of the Accountable Government Act, including the Purchasing Results process. This assessment was released in January 2006 by the Iowa Department of Management. It concluded that good progress was being made in the governmentwide effort. The assessment on the budget component, however, discussed the “significant challenge” in linking agency performance to the budget, which led to a shift in strategy. The shift to the Purchasing Results approach changed the dynamics of the traditional budget process by focusing on the value Iowans would get for their money rather than focusing on the total dollars being spent by agencies. As a result, the state budget focuses on the 575 services, products, and activities being funded, not the 46 state agencies.
The Governor points to specific successes of his reforms. For example, he talks about how his administration reversed an eight-year decline in elementary and secondary school test scores, achieved a 50,000 increase in college-educated workers in the last three years, and reduced traffic fatalities by 13 percent – all of which were goals in the state’s strategic plan.
Would this approach work elsewhere?
Iowa’s new results-oriented management approach was inspired by pioneering work in both Oregon and Washington state. Now its successes to date are catching the eye of other states. According to Jim Chrisinger, a leader with Iowa’s Accountability and Results Team, the State of Michigan has expressed an interest in Iowa’s approach. So, if Iowa’s Purchasing Results approach spreads, maybe America’s shopping spirit will extend beyond shopping malls to state halls!