Issue Position: A New Direction for Washington State Government

Issue Position

"Olympia needs new leadership and fresh perspectives among its agency leaders. To afford our priorities, we must remake state government so it's leaner, more productive, and less expensive." - Rob McKenna

State government is stagnant. For three decades, many of the same people have run state agencies as successive governors have reshuffled the same old deck, while agencies have grown faster than our ability to afford them. These managers may move around state government but rarely do they bring experience from outside of government. Olympia could use an infusion of fresh talent that won't accept "we've always done it this way" for an answer. As Governor, I will bring into state government new talent that is experienced in the private sector, where managers and executives have to operate in a highly competitive economy where their revenues are earned, not provided by taxes.

These leaders will inject new thinking that is cost conscious, customer focused, and constantly innovative. They will apply the leadership principles I have used so effectively in the Attorney General's Office to make it the best public law office in America - even in the toughest budget times. The principles I apply include employee empowerment to support continuous quality improvement, a relentless search for efficiencies and cost savings, rigorous performance evaluations for all, a culture of accountability, and a compensation system that rewards performance rather than mere seniority. These principles, applied by my leadership team and myself, consistently increase productivity, reduce costs, drive up service quality and therefore client satisfaction, and result in higher employee satisfaction with lower turnover.

State government has grown too big and too costly. We will craft a state government that is more nimble and responsive, that views state employees as partners in reform and innovation, and that implements new strategies to improve performance and reduce costs. We will apply leadership principles in every state agency that deliver more value to taxpayers.

By allowing transfers and retirements to reduce the number of general government employees, and by not replacing all those who depart, we will shrink government employment and costs, and plow the savings into education and into tax relief for small businesses. In both the short term and the long term, those investments will promote economic growth which produces higher tax revenues to support services to children in poverty, the elderly, the disabled and the mentally ill.

Guiding Principles for Reform

Government cannot do everything well. Leadership means setting priorities, then focusing state government to deliver on those priorities.

Employees in any job do better when they are managed by true servant leaders who combine employee empowerment with high expectations and clear accountability for results, in a system that rewards performance and not mere seniority or seat time.

Competition to provide certain government services will save taxpayers money while increasing service quality. Given the chance, government employees can compete with the private sector to deliver services, and it's the competition that is key.

Action Steps for Reform: Promoting Performance and Utilizing Competitive Processes

Promote Performance

We will require performance management and the adoption of lean manufacturing principles in every department of state government.

All employees in the Attorney General's Office work with their supervisor to set goals, then are evaluated twice a year on their effectiveness in reaching those goals. Managers undergo a 360-degree review that includes feedback from the staff they supervise, their clients and their own supervisors.

Largely due to this system of self-review and supervisor oversight, productivity in the AGO is up despite staff reductions, with staff accomplishing more work while earning higher client satisfaction ratings.

In addition, according to the state's Department of Personnel, AGO employees report the highest job satisfaction of any large agency in our state government.

We will apply these performance management principles in every state government agency to increase productivity and deliver more value for taxpayers.

Management must be willing to listen to employees and partner with them to improve agencies. State employees are eager to improve their office and find ways to work more efficiently.

We will engage every employee in a process of continuous quality improvement, drawing on their best thinking for improving their agency and then implementing their ideas, which in turn will encourage them to provide even more of their best ideas.

We will apply the principles of lean manufacturing that we have adopted in the Attorney General's office, to intentionally and systematically identify opportunities for eliminating waste, increasing efficiency and improving productivity.

As I often say, state government employees are the solution, not the problem; they deserve effective leadership that will unlock their full potential.

We will shift staff compensation away from the current seniority-driven, job classification-obsessed, rules-bound model to a model emphasizing performance-based pay and productivity enhancement.

In short, we will reward the best and inspire the rest.

We also will coach weak performers to improve their work. If that approach fails, we'll help them find another career outside state government, and never allow a weak performer to be foisted upon another, unsuspecting agency.

Promote Competition and Innovation

Competition is good; it promotes and rewards innovation while driving out wasteful costs.

Monopolies in any form or setting are bad; they invariably discourage innovation while driving up costs and increasing wasteful spending.

As consumers, we don't tolerate monopolies and we demand fair competition in the private sector, whether among for-profit businesses and industries like telcom and energy, or among large non-profit enterprises such as hospitals.

Why, then, should we tolerate wasteful, innovation-stifling monopolies to control many government services that agencies are forced to pay for, such as data services, printing, workers compensation insurance and facilities maintenance?

Managed competition is the answer. It doesn't assume privatization is the best solution but rather empowers and trains public employees to compete with private providers (including small businesses and non-profit organizations) to provide specified services and products.

Many times, the public employees will win the contracts because they don't have to show a profit or pay shareholders; but they will always find ways to provide the service or product more cost-effectively than before because the competition will require them to do so.

When private enterprises are the successful bidder, whether they are a for-profit small business or non-profit agency, they will produce substantial savings and efficiencies and more private sector jobs will be created in the process while reducing unnecessary state government positions.

Managed competition has been implemented successfully by governments across the nation. Because of their expertise, state employee groups are competitive bidders in this process. In one of the most studied examples of managed competition, the City of Indianapolis saved an average of 20% in functions put out to competitive contracting, regardless of whether a business or government employees won the bid.

Like performance evaluations, competitive contracting is already allowed under state law. We just need a governor who will actually implement it.

Again, higher productivity and greater quality will result from these competitive processes, and the resulting savings will be reinvested in what should be state government's highest priorities: promoting job growth and building world-class K-12 and higher education systems.

Audit for Performance and Require Performance Contracts

As Governor, I will require all state agencies to implement the recommendations of performance audits from the State Auditor's Office.

These audits are full of useful suggestions on how to improve office practices, increase productivity and save taxpayer dollars.

We won't just wait for the Auditor to recommend improvements, however. All agency directors will immediately commence a thorough and systematic evaluation of agency processes and practices to identify improvements and savings, drawing on proven techniques such as lean manufacturing and employee involvement.

Their systematic review will also cover their regulatory role, and result in a cost-benefit analysis of all agency regulations. I often say that when it comes to regulations, Olympia never cleans out the garage. Instead, the regulations just keep piling up without regard to their cumulative cost or the iron law of diminishing returns. It's high time for some serious spring cleaning.

We will also require the consistent use of performance contracts by state agencies. The State Auditor has demonstrated that contracts that pay for outcomes, not merely for vendor inputs, consistently deliver greater value for taxpayers.

Budget for the Long Term and Avoid Beggaring the Future

Public Employee Health Insurance Costs

When state revenues are tight, one of the easiest moves is to short-change the state's contributions to its pension funds. While this produces short-term savings, the long-term result is unfunded pension obligations that are extremely costly to taxpayers. The state must be prudent and conservative by fully funding its pension obligations, based on the state actuary's recommendations.

The state currently spends nearly 12 percent of its general fund budget -- $3.5 billion per biennium -- on health insurance for state employees and K-12 staff. Those costs recently increased another 10.5 percent -- in one year!

Unfortunately, state employee contributions to health care insurance are nowhere near average contributions in the private sector. The state simply cannot afford to be so far off of national averages. We will require state employees to make a fairer contribution to their health insurance costs, such as the 25 percent share already proposed by Governor Gregoire.

At the same time, we will expand available insurance options for those employees to include wellness plans that reward prevention and healthy living, reducing long-term health care costs for both state government and its employees. We will also work with providers to develop other, lower-cost insurance plan options that can combine with health savings accounts to incent cost-conscious health care consumption.

Reducing the Size and Cost of State General Government

Another key to reducing the high cost of state government is reducing the number of general government employees, utilizing attrition from retirements and transfers, as well as managed competition for certain state services and products.

In recent budgets, the average state agency has reduced its workforce by approximately eight percent compared to four or so years ago. In the Attorney General's Office, we have reduced the number of staff by 15 percent, to a lower level than when I took office in 2005.

As we empower every agency's employees and institute the rigorous performance management system that we use in the AGO, we will look for opportunities to further shrink the number of state general government employees, e.g., by another five to ten percent in the next biennium, especially in those agencies that have not already downsized by 15 percent or more.

General state government (not including K-12 and higher education) has reduced its workforce by roughly 11 percent from peak employment in June 2008 to present. In the AG's Office, we've reduced the number of staff over the same period by nearly 14 percent to a lower level than when I took office -- without widespread layoffs.

We will balance a smaller workforce with fair compensation of state employees, based on performance and not merely seniority, and on higher productivity.

As your Governor, I will bargain hard with the public employee unions. I will owe them nothing. I will owe everything to Washington's people, whose taxes support the services state employees provide. Therefore, I will work hard to obtain the most value for taxpayers, even as the union negotiators strive for the best deal they can obtain for their members. True, arms-length negotiations, conducted in good faith, are what we owe Washington's people.

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