Strategies for Success in the New Normal

1. Strategies for Success in the New Normal Dr. Joe Saviak, J.D., Ph.D. Associate Professor & Assistant Director Public Administration Program Flagler College

2. Redefining Government in the 21st Century • The New Normal • The Monopoly Is Dead • High Performance Government • Use of Analytics • High Performance Workforce • Redesigning Government – Partnerships, Contracting & P3s, Vouchers • Redesigning Public Pensions & Employee Health Care • Strategic Planning • Program Evaluation • Organizational Culture • Communication • Leading Change/Innovation in the Public Sector • Moving from Government to Governance

3. Redefining Government in the 21st Century It’s malpractice when we do not provide managers and professionals with the understanding, skill set, and the ability to use all the tools they should have in their problem-solving tool box for the challenges of the 21st century Organizing government around the realities of the 20th century can no longer be justified Real lessons from the 20th century (the professional public service model – a vast improvement over the incompetence and corruption in early 20th century local govt.) - some lessons still applicable (retain & employ what still works) But so much has changed that what worked last century simply will not work now! As Starling would say, “We can’t be the Post Office in the age of the Internet.”

4. The New Normal Here’s the current fiscal health of state and local government in America:(Martin, Levey, & Cawley, 2012) GAO estimates that collectively local governments face a $225 billion structural budget deficit Pew Center for the States (2011) estimates that state and local government pension plans may be underfunded by $1.3–$3 trillion. Municipalities nationwide ended 2010 with the largest year-over-year reductions in general fund revenues and expenditures in the last 26 years (National League of Cities) American Society of Civil Engineers (ASCE) rates the condition of the majority of America’s infrastructure as “mediocre” or “poor.” The ASCE estimates that it may cost up to $3.6 trillionto bring the nation’s infrastructure up to “good” condition (ASCE, 2013) Since 2008, the number of public sector jobs eliminated by just local governments alone has been variously estimated at between 236,000 and 850,000 - many of these jobs will not return when the Great Recession is over & are gone forever.

5. The New Normal As the economy recovers, life in local government will be just like it was in the 1990s - this is false Punctuated Equilibrium resulting in a New Normal - many changes are here to stay and more change will be on the way - no single status quo during a career in local government – change will be the constant – change will be our new culture Reduced revenues, smaller public sector workforce, tough choices on service levels, and adoption of new means of financing/delivering public services(Martin, Levey, & Cawley, 2012) Solutions cannot be short term & tactical in nature Solutions must be strategic, structural, & long term We will need to use all of the tools in the toolbox of successful public managers – we will need to be change leaders.

6. The New Normal (Martin, Levey, & Cawley, 2012) Specific Strategies: 1. Evaluate current services– mandates, needs, wants, & things we don’t need to be doing 2. Assess current service levels– based upon the evidence, what can we decrease? 3. Rethink service delivery– crisis offers opportunities for reform – time is now to rethink, reorganize, and reengineer service delivery. 4. Consider more privatization and less privatization– on a case by case analysis, should we outsource or in-source? Just the mere process of considering new service delivery choices will usually generate cost savings (Goldsmith Model) 5. Explore more shared services- you don’t have to consolidate govts. to engage in joint service delivery

7. The New Normal (Martin, Levey, & Cawley, 2012) Specific Strategies 6. Identify new revenue streams - improve tax collection– consider user charges where applicable – selling services & cost recapture - diversify from dependence on ad valorem - don’t leave money on the table 7. Un-freeze assets– conduct a lazy assets analysis – optimize value of all assets – use P3 concessions and leases of roads, bridges, and facilities to produce new revenue streams for local governments (Chicago Skyway) – sell public property not serving a public purpose 8. Automate, automate, automate– achieve greater efficiencies with IT solutions 9. Reform employee health care and pension plans– incentivize wellness & prevention, new hires go into defined contribution

8. The New Normal (Martin, Levey, & Cawley, 2012; Saviak; 2013) 10. Program Evaluation- We can ill afford to not measure what we do each day - culture of program of evaluation – builds public trust & confidence (Saviak, 2011) 11. Partnerships– for funding, service/program delivery, regulation, and to finance, build, operate, and maintain infrastructure (Saviak, 2013) 12. Use all tools in the toolbox- need to access the full set of tools beyond the traditional 20th century tools of government of legislate, regulate, & direct delivery by govt. (Salamon, 2002) 13. Continuously communicate and effectively educate– conduct honest adult conversations with citizens about services, costs, finances, & choices – make sure they have the facts – the communications burden is yours – also let them know about your successes (no one else will!)

9. In the New Normal, The Monopoly Is Dead (Benest, 1996) • Government no longer has a monopoly – government now competes! • Citizens should be seen as customers – citizens now have options – in the 21st century, when the public does not like your agency or policies or level or quality of service or its cost, the public an do something about it • They can fire your agency – they can still get the service without using you! Options available to policymakers and taxpayers include: • Annexation • Consolidation • Incorporation • Privatization • Contract with another public provider • Reorganization • Reduced funding • Service elimination • Or just fire staff & start over

10. In the New Normal, The Monopoly Is Dead (Benest, 1996) Each local government must now compete for customers & prove & communicate that its policies and services represent the best product at the best price Citizens will no longer be content with “that’s the way we have always done it”, “you don’t understand”, “it’s none of your business”, etc. Govt. has to continually explain & justify its spending, policies, & services to win and maintain public support – don’t assume it, prove it! Citizens cannot just be told – they must also be convinced Program evaluation & effective communications are key – evaluate and communicate! “Local governments also compete in a marketplace as they attempt to retain and attract residents, businesses, shoppers, tourists, utility and transit users, service customers, and arts patrons. Public agencies compete for people’s cooperation and political support, whether that support involves complying with codes, conserving water, or paying higher trash fees. Realistically, local government cannot force people to do anything unless they are willing to comply. Because citizens are bombarded with communications from all sources, local governments must vie for their attention. Cities and counties literally must compete on a daily basis for people’s hearts and minds.” Dr. Frank Benest, former City Manager of Palo Alto, California (1996)

11. Local Government in the 21st Century – Declining Social Capital (Putnam, 1995; 2000) We regulate human behavior either through private institutions, public institutions & both – as private institutions decline, a greater burden to address needs, solve problems & regulate conduct can be placed on public institutions (informal to formal, internal to external regulation, social norms to laws, private to public institutions/functions) Social capital helps communities thrive – trust, engagement, networks, norms – enable communities to more effectively organize/mobilize/support/respond to prevent problems, meet needs, & maintain a higher quality of life – strong predictive relationship with quality of governance & quality of life – life is different in communities with low levels of social capital Major decline in social capital in America in recent decades - over the last 25 years: 58% decline in club and civic organization participation 33% decline in family dinners 33% decline in church attendance 45% decline in having friends over 35% decline in involvement in community life (public meetings) While 55 percent of American adults in 1960 believed others could be trusted most or all of the time, only 30 percent did in 1998, and the future looks bleaker because the decline was sharpest among our nation’s youth. Roughly 75 percent of Americans trusted government to do the right thing most or all the time in 1960, a figure that sounds quaint today when less than 25 percent trust the government. What does this mean for managers in local government? 1) Design policies which foster social capital, 2) avoid policies which harm social capital, 3) deal with changing citizen expectations, 4) influences decisions on programs & services, 5) managing in an era of distrust, & 6) how to engage citizens?

12. High Performance Government (Abels & Lee, 2010; Benest, 1996; IBM, 2008; 2011; 2013) Priority Issues Redesigning government at all levels from 20th century to effectively operate in and respond to 21st century realities Citizen engagement – visioning – articulate values, hopes, & fears – educate! Not passive consumers but active partners in problem-solving - Vending Machine vs. Barn-raising models - Neighborhood Empowerment Moving away from sole dependence on traditional hierarchical bureaucratic model for organizational structure/service delivery - Service boundaries matter less – service delivery matters more – service delivery will be organized differently (e.g. not one single dept. – networks, collaboration, joint service delivery) Expect surprises – doing risk management right!

13. High Performance Government (Abels & Lee, 2010; Benest, 1996; IBM, 2008; 2011; 2013) Priority Issues Focus on results – managing for performance Meeting citizen expectations for on-line, real time, & high quality service – coordinated response/integrated service delivery - being transparent & accountable Culture of Innovation in Government Leadership

14. High Performance Government – Use of Analytics (Bachner, 2013; Partnership for Public Service, 2013) Increasing use of analytics by wide range of government agencies at all levels to enhance outcomes & performance – reduce crime, prevent epidemics, improve agriculture Analytics converts data into actionable information to guide decision-making – identifies patterns, opportunities, and relationships to drive decisions Analytics confirm predictive relationships - predict & prevent problems before they occur or in real time as they are occurring – confirm causes to select solutions – target limited resources to prevent or react rapidly to the problem Case Studies 1. Stopping Starvation – USAID – FEWS NET – target food aid - use of partnerships – public-public – leverage data & tools of other agencies – don’t reinvent the wheel – confront policymakers with hard data to incentivize action 2. CDC – PulseNet – identify food-borne disease outbreaks – identify clusters – collect data from state public health labs - 29:1 ROI – cost-avoidance accounting – monetizing value of prevention

15. High Performance Government – Use of Analytics (Bachner, 2013; Partnership for Public Service, 2013) Lessons Learned Strong support of agency leadership is key Users need analytics that deliver actionable information when, where, and how they need it – must be able to easily access and comprehend the tools and modify them to suit their needs Data-driven decision-making must become fully integrated into the organizational culture of an agency – “it’s how we do business here” First understand your current operations & objectives to ID data needs & value of analytics - where can I obtain data & where can analytics help? Collaborate with other agencies – capitalize on their knowledge & tools – share successes & lessons learned Create a team to manage the initiative who have agency history, analytical abilities, & subject matter knowledge Sell success to incentivize agency leaders & employees to support & use analytics – prove the value of analytics with ROI

16. High Performance Workforce(Nigro, Nigro, & Kellough, 2007; Starling, 2008) Public sector HR will need to be able to prove its contribution to organizational performance - 1) getting the right people 2) maximizing performance and 3) maintaining an effective workforce Public sector HR should embrace performance metrics and program evaluation (measure for outcomes) – opportunity to prove your value & document your successes This is the key question for your careers - Are your HR policies & procedures obstacles to the goals of management or do they facilitate and enhance organizational performance and can you prove it? HR policies, procedures & outcomes must optimize organizational and employee performance – prove that your policies: 1)promote low absenteeism 2)reduce turnover, 3)foster dependable performance 4) create a culture where employees are willing & able to do more than their formal job requirements 5)recognize/reward performance – for example, use well designed & effective performance appraisals & merit pay plans (Volcker, 1989) – all of these improved outcomes can be validated by collecting & analyzing the data Public sector HR must clearly contribute to a “culture of performance” where employees are selected, trained, evaluated, promoted, & rewarded for performance as opposed to non-performance criteria (length of tenure – yes, there are legal/political constraints to this) If there are policy or managerial obstacles to HR contributing to optimizing organizational performance, then it is HR’s role to identify & help remove these barriers to performance – recommend reforms so performance truly matters (recommend organizational policies, HR policies & procedures, incentive & disincentive structures for performance)

17. High Performance Workforce(Nigro, Nigro, & Kellough, 2007; Starling, 2008) Anticipatory HR - strategic planning – workforce planning - need to anticipate future workforce needs and pro-actively design & implement specific solutions for those challenges – solve the problem before it becomes a problem - cannot be reactive in HR in the 21st century Aging of the public workforce – a historic amount of institutional knowledge is being lost with retirements of Baby Boomers – need to recruit and fill positions – agencies needed to have strong succession planning, career tracking, mentoring, and professional development/training programs or you will have a big problem! The organization needed to be “learning” while the person was still on the job so the knowledge does not leave when the employee does - knowledge management program Recruitment and retention must always be a top priority (Volcker, 1989) – high demand & real competition for knowledge workers – you compete with private sector & against other public sector employers too – need for working conditions, wages, benefits, career tracks, organizational culture, management style, other incentives, etc. to be competitive to attract & retain knowledge workers – especially in a recovering economy, these workers have options and they change jobs and careers several times during their working lives (for example, what will happen with your best IT employees when the economy ramps back up?) Public employers will have to sustain ongoing & major investments in workforce planning, training & employee development - need to continuously upgrade skills & technical abilities of employees – the organization needs it, the public expects it, and employees want it – it will cost $ but failure to plan & invest could carry an even higher price tag (it’s just like defer/delay of maintenance with your infrastructure, there’s a point you pass where costs go way up because you did not do it when you should have)

18. High Performance Workforce(Nigro, Nigro, & Kellough, 2007; Starling, 2008) Highly diverse & increasingly diverse workforce and service population in Florida which will affect all aspects of HR – different employee expectations & needs – new and different generations within the workforce – HR policies need to match the needs & expectations of changing demographics within the public sector workforce HR should always have a seat at the senior management table when all major decisions are being made– almost every policy decision affects and involves HR – mgt. needs to always effectively integrate HR into the mission, goals, and performance of the agency – never view or allow it to be an isolated support function HR needs to help managers effectively manage – helpprepare employees for management roles & responsibilities & help ensure their success once they are there! (if nothing else, teach supervisors to always call you before making a decision with potential HR consequences!) Help make sure that your organizational culture is a positive & productive one - employees internalize the organization’s mission & values (make the mission and values of the organization their own) - the right organizational culture facilitates communication, coordination, attainment of goals, reduces risk & liabilities, ensures consistent performance, enhances retention, sustains morale, boosts productivity & performance, & maintains public trust - tools include selection, policy, training, supervision, rewards/discipline, teachable moments, & leadership

19. High Performance Workforce (IBM, 2009, 2013; Spreitzer et al, 2012) Priority Issues Make sure your employees thrive! Vitality & Learning. Keep employees healthy, make work meaningful, opportunities to learn, innovate, & lead, provide decision-making discretion, information sharing, minimize incivility, provide performance feedback, & promote diversity Managing a Multi-Generational Workforce Attracting and retaining high quality employees Design, implement, evaluate, & if needed, reform pay for performance & performance evaluation systems Offering benefits that match, motivate, & matter - flexible working arrangements Measuring employee satisfaction – employee satisfaction programs

20. The Public Manager’s Toolbox (Salamon, 2002) Tools are the means by which policies operate & produce results – pick the right tool for the right job and know how to effectively use and evaluate it – strengths & limitations - avoid selecting the wrong tool or using the right tool the wrong way 1. Re-engineering & Reorganization 2. Contracting & Public-private partnerships 3. Vouchers 4. Grants & subsidies 5. Regulation – economic/social 6. Distribute benefits 7. Government insurance program 8. Social marketing 9. Needs assessment 10. Technical assistance 11. Impact fees 12. Development agreements 13. Sale, use, exchange of property 14. Information technology 15 Tax & Budgetary Policy 16. Provide a service or program

21. Partnerships (Saviak & Christiansen, 2013) We can effectively partner with other agencies (public-public), non-profit orgs, & private firms (public-private) for: • Funding ($) – grants, new revenue streams, cost savings • Service/program delivery • Regulation • To finance, build, operate and maintain infrastructure • Two counties who build & staff a single fire station at the county line to serve a large development which extends across the borders of both (joint service agreement) • Local govt. engaging a private sector partner to handle agency technology needs or a non-profit to deliver a specific program for citizens (contracting) • State government partnering with a private firm who will design, build, finance, operate & maintain a major highway to serve a major port city and several counties in a region of the state (public-private partnership) • Many success stories across the world & nation – partnerships can help obtain needed expertise and skills, reduce costs, improve service, enhance efficiency, enhance citizen satisfaction, secure financing for infrastructure & deliver new infrastructure on time and on budget • Not a silver bullet solution to every problem but it is a potential problem-solver when wisely selected, appropriately designed, effectively implemented, and rigorously evaluated

22. Partnerships (Salamon, 2002; Cohen & Eimicke, 1998) To make partnerships successful, managers need to be skilled in: procurement, partner selection, rethinking service/infrastructure delivery, relationship management, contract design and management, risk allocation, and program evaluation The proposed partnerships must make sense – what’s the rationale - complementary capabilities – each partner does what they do best - benefits outweigh costs for both partners – citizens experience improved outcomes - risks & rewards appropriately allocated – both partners must be “all in” “Nothing new that is really interesting comes without collaboration.” (Watson & Crick – discovery of the structure of DNA)

23. Two Types of Partnerships – Contracting and P3s (Martin & Saviak, 2014) Contracting – for goods & services P3s for infrastructure Renewed interest today in a valuable tool of public management whose successful use in our country pre-dates our birth as a nation Don’t let policy choices precede research – do the business case analysis each time Contracting out should not be seen as a challenge to but as an opportunity for public administration In recent years, many state and local governments have dealt with their budget deficits is by deferring maintenance on existing infrastructure and delaying the construction of new infrastructure - somewhat helpful in the short term but results in longer term financial problems. Is there another strategy available to state and local governments? How do we close this funding gap and meet our infrastructure needs for the 21st century?

24. Contracting “Guarantor Government” – government guarantees the service will be delivered to citizens but non-governmental providers do the job – government provision/private production (Martin, 2001; Salamon, 2002) Government decides to “purchase outcomes” (Eggers & Goldsmith, 2004) – government goes from the “funding business” to the “buying business” (Hoogland DeHoog, 1985) 2 Key Questions 1.Is this a legitimate governmental responsibility? often unasked but a good place to start the analysis – should we be doing this in the first place? 2. If YES to Question #1, then it’s the classic Drucker “make or buy” question (Martin, 2001) – evidentiary question – need to collect & analyze the data on all key performance measures – conduct the CBA – based on the empirical analysis, will it be direct delivery by government (govt. funds & govt. delivers) or do we choose to purchase outcomes (govt. funds & private sector or non-profit provider delivers) - the evidentiary analysis may yield different answers depending on the specific service

25. Contracting Issues to Analyze and Address Accurately identify the pre-privatization conditions– what’s the nature of the problem or crisis (failing/underperforming program, fiscal, restore policymaker/public confidence, enhance quality, etc.) or is there no crisis but a potential opportunity for improvement? What will be our major benefit or benefits (cost, improved service, choice, etc.) and what will be our major challenge or challenges? (identifying proven providers, procurement process, contract management, cost containment, customer satisfaction, etc.) Operationalizing Outcomes– selection of standardized performance measures to make effective comparisons between providers (public or private or among competing private providers) and conduct the cost benefit analysis – cost, quality, safety, efficiency, service-specific measures – we need to measure what matters and utilize valid, reliable, and accepted performance measures – measure success/failure by actual outcomes not with outputs or inputs (Martin, 2005) Select the right method of compensation – avoid perverse incentives (Goldsmith & Eggers, 2004)

26. Contracting Requires a different skill set for public managers – you are no longer managing direct delivery of the service – managing the contract and the contractor – need expertise in contract design, selection of performance measures, contract management/monitoring performance, making needed modifications during contract performance, contract renewal and termination, contract/program evaluation (Hoogland DeHoog and Salamon, 2002; Kelman, 2002) Avoid “bureaucratization” of private and non-profit providers (Martin, 2005) – manage but do not micromanage & accountability without overregulation – measure by outcomes not by dictating the exact production process – don’t potentially rob yourself of the intended benefits (lower cost, increased efficiency) & discourage good providers from doing business with you We need to ask “Who is the customer?”, what do they consider to be value, and how do we confirm customer satisfaction – how does each customer define & measure satisfaction (policymakers, agency/program administrators, taxpayers, program participants, program staff, etc.) – customers will vary by program - collect evaluation data from all customers

27. Contracting Program evaluation matters! Confirm that intended objectives were translated into actual outcomes – avoid non-evidentiary means – employ rigorous and objective methods of program evaluation using agreed upon, valid and reliable performance measures – many statistical analytical tools available to public managers and providers to confirm program/ service effectiveness, efficiency, and equity Be careful about potential costs & possible pitfalls – identify/understand and properly structure/account for liability issues, adverse selection of clients, information asymmetry, statutory/legal/administrative barriers to successful implementation, there will be costs to government to establish & maintain a contracting out process, loss of institutional capacity, public employee displacement, any potential for service disruption, & possible blurring of lines of responsibility (Cohen & Eimicke, 1998; Hoogland DeHoog & Salamon, 2002; Chi, Arnold, & Perkins, 2003) Opportunities to achieve cost savings, improve service, introduce competition, strengthen accountability, create consumer choices, enhance policymaker/public/customer confidence and access the experience and specialized skills of non-governmental providers (Cohen & Eimicke, 1998; Osborne and Gaebler, 1992; Chi, Arnold, and Perkins, 2003)

28. Public-Private Partnerships (Martin & Saviak, 2014) An alliance between government and the private sector – decisions, risks, & rewards are shared – trust is key – true partnership – long term relationship State & local govts. have only begun to realize benefits of P3s - financing and delivery of infrastructure and facilities (capital projects) – HB 85 Partner (government or private sector) best positioned to deal with the risk should assume the risk. Key differences from traditional govt. contracting: 1) Change in government/private sector roles and responsibilities 2) Longer contract time periods - involve longer contract time periods (5, 20, 25+ years) - can last as long as 99 years 3) Private sector partner sometimes provides all or some of the funding for the project & may assume significant risks from the government partner 4) Involves a potentially higher degree of risk for the partners 5) Contracting process does follow traditional government procurement and policies and procedures (note: with several key differences) Florida is a national leader in P3s

29. Public-Private Partnerships Benefits: 1) Accelerating infrastructure maintenance and construction 2) Substantial risk transfer from government to the private sector 3) On-time and within budget delivery of infrastructure projects 4) Source of infrastructure funding 5) Cost Savings 6) Equal or better quality The Impact of P3s on Project Duration, Cost, & Quality The Virginia Pocahontas Parkway (Route 895) was completed for $10 million less than the original cost estimate. The Denver, Colorado E470 toll road was originally estimated to cost $597 million, it was completed at a cost of $408 million. A study conducted by the Federal Highway Administration found that design-build infrastructure P3s performed well on all 3 metrics - reduced project duration by 14%, reduced total costs by 3% and maintained the same level of quality

30. Public-Private Partnerships Most Common Public-Private Partnerships (P3s) Airports Bridges Highways Hospitals Parking Facilities Prisons Rail Systems Roads Tunnels Water/Wastewater 2011 - 377 public-private partnerships (P3s) have been initiated in 24 states - 104 of these P3s for transportation infrastructure - Florida (16), California (12) and Texas (9) have initiated the greatest number of P3s.

31. Port of Miami Tunnel P3 The Port of Miami actually sits on an island. Traffic entering and exiting the Port of Miami must do so on surface streets. 26,000 cars each day on those surface streets entering & leaving the port – congestion. The Florida Department of Transportation (FDOT) has entered into a transportation P3 with a private sector consortium partner, MAT Concessionarie LLC, to design-build-finance-operate-maintain (DBFOM) a tunnel that will connect the port with interstates I-395 and I-95. The total cost of design and construction of the tunnel is $903 million. The private sector partner contributed $80 million to the project with the remainder of the funding in the form of debt and loans. Once the tunnel is open to traffic, all operating and maintenance costs will be paid by the State of Florida. The FDOT will collect container and passenger fees to provide the revenue stream to fund the partnership. Construction of the tunnel began in May 2010 and completion is expected by May of 2014. Operational control of the tunnel will revert to the FDOT at the end of the P3 contract in October 2044.

32. Vouchers (Salamon, 2002; Cohen & Eimicke, 1998) Vouchers– Instead of direct delivery, citizens are given a choice by funded access to multiple competing providers Examples:GI Bill – another partnership tool 3 key issues for public managers to assess in considering use of vouchers to provide public program or service: • Choice:When the govt wants the receiver of the good or service to have some choice of the supplier of the good or service • Efficiency:When the govt wants to promote efficiency. A voucher can allow for competition and thus lower prices • Equitable:Vouchers can promote equity and are often driven by concerns with fairness (ex: children stuck in failing or low performing public schools – low income families provided vouchers) Challenges: • Need competition & capacity among providers • Ensuring informed consumers - information asymmetries (when consumer lacks sufficient information to make choices – providers knows everything & consumer knows little) • Evaluate provider performance • Potential for adverse selection (customers will select bad providers or providers will end up with bad customers – screen providers via procurement – match providers to diff. customer groups) Should we depend on a public sector monopoly (the VA) or give our veterans the power and choice to pick their doctors and health care providers?

33. Redesigning Public Pensions & Employee Health Care The traditional implied contract – less pay, more benefits – is changing Collective bargaining agreements - some services in some localities are pricing themselves out of the market (Benest, 1996) “I can afford 1 fire department – I just cannot fund 2-3 fire departments at the same time” (Moore, 2011) – cost of retired employee pension/benefits obligations GAO – unfunded state and local govt. retiree health care obligations total $530 billion (Martin et al, 2012) SLGE study – 68% of city & county govts. pushing to have retirees assume more of their health care costs 85% of state & local govt. employees still in DB retirement programs State & local govt. pension plans underfunded by $1.3-3 trillion (Pew Center, 2011) In 2008, state & local govts. spent about $132 billion annually on employee health benefits From 1996-2008, the average single employee premium increased 156% - for family coverage, 169% (Barro, 2011)

34. Redesigning Health Care (Barro, 2011) What makes public plans so costly? In the 4th quarter of 2010, public workers earned an average of $4.66 per hour in health benefits compared to an average of $2.08 per hour in the private sector – a difference of 124% The plans are different in the public sector! Lower employee contributions to premiums – 10% less compared to private sector Fewer and smaller co-payments and deductibles – insurance plans pay a greater % of the bills and lower cost sharing increases utilization which increases costs - 75% of private sector employees have a deductible – just under 50% of public employees have one 74% of private plans impose a waiting period for eligibility – only 58% of public plans do and when they are required, they are shorter – this means people take jobs with health benefits anticipating a likely claim (adverse selection) which means more costs to the plan Only 20% of private plans offer health benefits to retirees under age 65 (pre-Medicare) but 66% of state & local plans do 99% of full time state & local employees have access to benefits (86% in private sector) and only 16% of public employees waive them (compared to 26% in the private sector) Superior physician networks & higher provider reimbursement rates

35. Redesigning Public Pensions & Employee Health Care (Brookings, 2014; ALEC, 2013; ICMA, 2013; GFOA, 2011; Barro, 2011) Employee Health Care Identify your cost drivers Manage choice of providers Manage eligibility – eligibility audit – change time to eligibility Cost sharing – increase contributions, co-pays, & deductibles – variable premium contributions Offer diversity of plans to employees – 1) High deductible plan & HSAs 2) High deductible, low premium catastrophic insurance policy Self insure Implement wellness, health literacy, disease management, physical fitness programs & smoking cessation programs – reduce utilization – decrease costs Surcharges for smoking – 9 states reward non-smokers & make smokers pay more – 39 states with smoking cessation programs

36. Redesigning Public Pensions & Employee Health Care (Brookings, 2014; ALEC, 2013; ICMA, 2013; GFOA, 2011; Barro, 2011) Leverage Points of Cost Management • Change benefits • Manage plan participant choice of providers • Cost sharing with employees • Reduce utilization • Right combination of outsourcing & insourcing • Maximize value ROI All Stars • Onsite clinics • Variable premium contributions • HDHP & HSAs • Wellness programs • Self-insurance • Cooperative purchasing • Value-based insurance design disease-management (VBID) – Asheville Model

37. Redesigning Health Care(GFOA & Colonial Life, 2011) To succeed with these strategies, local governments should: Secure stakeholder support Use employee benefit committee – they participate in plan decisions – increases buy in Provide employees with benefits value statement with $ costs – educate them about the real costs of HC Sell the benefits of specific types of reforms to employees (on-site clinic convenience, HSAs help them accrue savings, self insuring can better match employee needs) Emphasize ROI to decision-makers Compensation study to show public compensation in line with other local governments Implement long term reform incrementally!

38. Keeping the Promise: State Solutions for Government Pension Reform (Liljenquist, 2013) “The sad fact is that political calculations give legislators strong incentives to promise generous benefits and few, if any, incentives to make good on those promises.” (p. iii) Local govt. can go bankrupt & restructure – states cannot States can have increasing pension burdens rob them of discretionary spending decisions 76 of 126 (60%) major state and local plans below the recommended 80% funding ratio Unfunded liabilities ranging from $730 billion to $4.4 trillion

39. Redesigning Public Pensions (Brookings, 2014; ALEC, 2013; ICMA, 2013; GFOA, 2011; Barro, 2011) Specific Potential Pension Reform Solutions Leaders must commit to permanently fixing the problems You must confirm the actual scope of the problem Don’t exempt public safety – employees retire earlier so price tags are larger, exempting them may make your reforms legally vulnerable, & citizens support public safety but they also want fiscally sustainable pension plans Know the legal limits (case-law) Effectively communicate – sell reform Tools of Reform: Delaying retirement (increase age & service requirements) Stop double dipping & eliminate pension spiking (cashing in a large amount of sick leave or OT in the final year of employment) Limit COLAs/make COLAs contingent upon the financial health of the plan Change from non-contributory to contributory plans Increase contribution requirements Change the calculation of final average salary DB to DC for new hires, hybrid plans, CB plans Decrease the multiplier Place a hard cap on pension payouts

40. Redesigning Public Pensions (Brookings, 2014; ALEC, 2013; ICMA, 2013; GFOA, 2011; Barro, 2011) How to Sell Pension Reform • Assess the Environment for Major Reform • Develop a Winning Message • Talk with System Stakeholders • Message Math not Ideology • Reforms need Strong Champions • Accurate Data & Effectively Communicating Pension Liabilities are Key • Prove the Impact of Pensions on Taxes & other Public Spending Priorities • Anticipate and plan forLegal Challenges • Ensure People Understand that We Cannot Grow Our Way of the Problem • Ensure People Comprehend that Inaction is not an Option • Sell Benefits to Public Employees – More take home pay, sound retirement • Build a Strong Support Coalition • Identify What Can Be Negotiated and What Cannot – meet commitments to current retirees – take steps for a troubled plan (close the plan to new hires, freeze the amount accrued by current participants (do not add to your problems), & move to a more sustainable model • Understand that Plan Administrators are in a Predicament as far as Public Statements Go – they don’t want to alarm employees or bring their own management into question – you need them to make accurate statements – use outside expertise too

41. Strategic Planning (Cohen & Eimicke, 1998) This process seeks to arrive at the best fit between the organization & its environment so that organizational goals are attained It is about our mission, our customers, our future – how we will best survive, succeed, & serve for years to come - planning involves identifying threats & opportunities in the future & designing plans which optimize those opportunities and reduce/thwart those threats in the present Enables us to be pro-active – identifying opportunities to optimize our success - driving events instead of always being driven by them – leading change & playing offense - no longer reacting to the issue of the moment & only playing defense SP facilitates success in leading and managing change - times change & successful organizations change with them - organizations which fail to anticipate, lead, & manage change will at best compromise their performance or at worst, begin to write their own organizational obituary - “It is futile, for instance, to try to ignore the changes and pretend that tomorrow will be like yesterday, only more so.”(Drucker, 1999) Given our mission, strengths, weaknesses, opportunities, threats, stakeholders, history, capacity, and resources, what should our objectives be and which strategies can we design and implement to achieve them? R  M  G  O  S  T  I  E

42. Strategic Planning (Cohen & Eimicke, 1998) “The temptation in many organizations is to go to a retreat, or go through a strategic planning exercise, develop the strategy, and then ignore it.” Strategic Planning Need leadership & organizational commitment to the process Resource constraints are important Strategic goals must reflect organizational capability or they will not happen SP connects ends to means SP helps the organization collectively “think” There are risks: 1) Goal definition will have explicit trade-offs – here’s what we will do and what we don’t do – may spur political opposition from internal and external groups who don’t share those objectives 2) SP can fail – wrong mission, goals, or objectives selected, lack of leadership, lack of capacity, no real commitment, lack of accountability, objectives not measurable or measured, action plans not well designed or effectively implemented, organizational barriers (agency culture, personnel, policies, procedures not geared towards performance), politics/external constraints

43. Strategic Planning - Benefits to Planning in Public Management (Cohen & Eimicke, 1998) Clarify our mission, goals and objectives Optimize organizational performance Efficient allocation of limited resources Boost morale – employees internalize the mission Attract resources – it’s easier to get agency stakeholders & citizens to invest in a winning plan they can see, understand, & support Enhances public confidence – with a clear plan and demonstrated outcomes, the public can understand and support what our agency is doing Anticipatory government – being prepared for the predictable and there’s a lot that is capable of being predictable - limit the # of surprises, their duration, & intensity Enables us to successfully introduce & lead change

44. Proving Performance – Program Evaluation Program evaluation must be a priority – why? 1. Limited/shrinking resources - in Florida, a multi-year recession and Amendment 1 have significantly reduced revenues and triggered scrutiny of spending & review of programs by local govt. - restraints on resources force choices to be made (Rossi et al, 2003). 2. Demand for greater accountability by policymakers & public – Continued & consistent pressure to constrict or terminate programs that fail to demonstrate effectiveness and/or efficiency (Rossi et al, 2003). 3. Need to restore public trust & confidence - Program evaluation can demonstrate to the public that you are operating both effectively and efficiently - program evaluation enables you to make the case to citizens that you are doing the job right and you are the one to do it for them. 4. It’s required for $$$- Program evaluation often is automatically required as a condition of receipt of a federal or state grant & 1/3 of local government budgets consist of fed. & state grants – if you like grants, then you need to learn to love program evaluation.

45. Proving Performance What is program evaluation/policy analysis and what can it help us do? (Royse, Thyer, Padgett, & Logan, 2006) • Apply the tools of the scientific method to the problems, causes & consequences of public policy -predict which programs would likely work & explain why a policy failed • Help us document need, better allocate resources, aid in program planning & design, aid in program reform or modification, assist policymakers and administrators (executive decision support), identify best practices & replicate them & actually help citizens • It can also aid us in building public confidence that we actually know what we are doing & why we are doing it. • Can enable us to “separate the signal from noise” and determine the real causes of a problem & which policies actually address those true causes to produce better outcomes

46. Proving Performance Tools to measure & validate program effectiveness: • experimental design • quasi-experimental design • single system research design • meta analysis Tools to measure & validate program efficiency: • data envelopment analysis (DEA) • cost benefit analysis (CBA) • cost effectiveness analysis (CEA) Tools to measure & validate program equity: • equity evaluation • use of major ethical frameworks *All of these are done & can be done by local agencies **Not always a need to do the study, someone else has probably done it for you (Royse, Thyer, Padgett, & Logan, 2006)

47. Proving Performance “What gets measured gets done. If you don’t measure results, you can’t tell success from failure. If you can’t see success, you can’t reward it. If you can’t reward success, you’re probably rewarding failure. If you can’t see success, you can’t learn from it. If you can’t recognize failure, you can’t correct it. If you can demonstrate results, you can win public support.” - Osborne and Gaebler, Reinventing Government, 1993

48. Proving Performance What can PE tell us? (Royse, Thyer, Padgett, & Logan, 2006)  Program Need – the extent to which a program meets a community need and the extent to which a program is reaching its target population  Program DesiGN – are the hypothesized relationships between the causes of the problem & effects of the program correct?  Program Implementation – is the program being implemented/service being delivered as intended?  Program Effectiveness – program outcomes are achieved  Program Efficiency – best use of limited resources  Program Equity - the extent to which all groups of the population are representative of those who should be and are being served by the program – benefits & burdens shared by all groups in the community A program whose effectiveness is secured through its inefficiency (got results by dumping money on the problem) is poorly managed Can be trade-offs – might increase one at the expense of another - “Cheaper, better, quicker – pick 2 out of 3 but you might not get all 3” We cannot assume performance – we must prove it. Have to demonstrate the effectiveness & efficiency of our programs & services

49. Organizational Culture(Starling, 2008) The dominant value system of a workplace- a strong & well defined organizational culture makes communication easier, can boost productivity, facilitates decision making, & can create increased cooperation & commitment If successful, everyone should both understand and live the organization’s mission, values, & objectives Employees have internalized the mission and values – it is inscribed upon their hearts You know when you are in an organization with a distinct organizational culture (shared set of values) – you know when you are in a Ritz Carlton or a Publix – there is a clear culture of customer service You know when you are around a group of United States Marines – there is an easily identifiable sense of mission and shared and specific set of values among them – their culture defines them

50. Organizational Culture(Starling, 2008) Organizational cultures can either be healthy, positive, & productive or unhealthy and dysfunctional You can have a single culture across the entire organization or different cultures within different departments – the goal is a single healthy positive productive culture across the entire organization! Make sure that your organizational culture is apositive & productive one – healthy & functional not unhealthy/dysfunctional - The right culture facilitates attainment of goals rather than undermines positive results You want to avoid allowing subcultures to exist which run counter to the overall organizational culture (e.g. LAPD Ramparts scandal) In general, tools for establishing & sustaining an organizational culture: 1. Selection– hiring those who share our values 2. Socialization– teaching & reinforcing our values (emphasis on organizational history, use of role models) – never miss a moment to effectively communicate core values