It is painfully clear the next governor will have to bring momentous change to state government. Rather than reinvent the wheel, the California Performance Review (CPR) is still a roadmap for reform.
The CPR effort was shelved, but reviving it would allow the new administration to immediately offer solutions, rather than spend months, or years, arriving at the same or similar recommendations found in the CPR Commission’s final report.
According to a 60 Minutes segment last week, California’s real unemployment rate is at least 22%. This means revenues are going to disappoint for the foreseeable future. We cannot triage our fiscal dilemmas any longer. Along with a current year budget deficit of around $19 billion, the Legislative Analyst’s Office reports the California Unemployment Insurance Fund is insolvent and will face a deficit of $20 billion by the end of 2011.
On top of this, according to the Governor, California’s state pension fund (CalPERS) has underestimated its future liabilities by $150 billion. A Stanford University study claims it is closer to $500 billion. The budget deal passed last month raised state employee pension contributions, but that merely buys time. The next administration needs to engage these shortfalls with a sense of purpose and urgency. The framework for doing so is already in place.
In 2004, Governor Schwarzenegger solicited government reform ideas from state and local government leaders, private-sector businesses, labor representatives, and members of the public. These ideas were discussed and vetted – often in public forums — and presented by the California Performance Review Commission. Their report contains more than 1,400 recommendations, with cost savings of $31 billion over five years, including $10 billion in General Fund savings. Unfortunately, few of the Performance Review recommendations were implemented. While there was broad agreement about the problems, the solutions with the biggest impact were perceived as ideological. There was little Legislative support for reforms that rocked the boat or blew up boxes.
Whether it was pension reform, or state spending generally, the Commission’s recommendations did not translate into political will. But today’s political climate is much different than it was in 2004. The new administration may find that many of the solutions no longer have the air of partisanship in this era of crisis.
One good idea among many in the report is performance-based budgeting. Legislators should use performance measures to link funding decisions with program performance. Several states use this approach, under which government services are identified by activity, rather than by agency, and categorized according to a set of pre-established goals with measurable performance targets. The activities are then ranked in order of priority and funded from the top of the list down until available revenues are exhausted. By requiring an agreement of priorities, the funding decisions follow more easily. There are many more reforms like this one – thoughtful, non-partisan, and on-point.
Californians and their elected representatives must undertake an ambitious re-evaluation of state government, and do so quickly. The California Performance Review is the best starting point to drive this effort forward.