Recommendations of the Texas Comptroller

Introduction

Texans are witnessing the dawn of a new and dramatically different era in human affairs. Call it the Information Revolution—a new economy and a new society, fueled by dizzying advances in information technology (IT).

The Internet is fast becoming the planet’s primary vehicle for connecting people, companies, and organizations. The rise of IT is leading to the emergence of new industries, global markets, new definitions of community, and a complete transformation in the way we relate to the rest of the world, economically and culturally.

Texans must find their place in this world. We will have to develop new skills and cultivate new ways of doing business. We will learn to adapt and become increasingly flexible in meeting the demands of a 24/7 marketplace.

We need a state government that will help rather than hinder this transformation.

But how? How can Texas state government help chart a course through the exciting but uncertain times ahead? How can government provide its citizens with the convenience and access they’ve come to expect from the wired world?

These are the questions that inspired Texas Comptroller Carole Keeton Rylander to launch e-Texas, a year-long exploration of new, more effective, and more efficient ways to provide government services. In November 1999, the Comptroller charged her blue-ribbon e-Texas Commission—aided by seasoned employees from the Comptroller’s Texas Performance Review and more than a hundred knowledgeable volunteers—with achieving six goals (see the accompanying box). In the course of this year, they heard from leaders in dozens of fields, studied the “best practices” elsewhere, and examined existing state operations with an unprecedented degree of depth and expertise.

The recommendations contained in this report will save Texas taxpayers more than $1.2 billion this biennium by streamlining government using the Internet and 21st Century technology.

Goals of the e-Texas Initiative

1. Improve education and learning for all Texans.
   Drive more of every education dollar directly into the classroom where it belongs to improve education and learning for all Texans.
2. Save tax dollars.
   Online services and new management practices have cut costs dramatically in the private sector. Similar leaps in productivity are possible for the public sector.
3. Empower communities and individuals.
   “Knowledge is power” is truer today than ever before, and the Information Revolution places this power squarely in the hands of individuals and communities. In this new era, Texas policymakers must shift responsibility and power from bureaucracies to an empowered, well-informed citizenry.
4. Refocus government on customer service.
   The Internet has opened a new world of “self-service” opportunities for consumers, and state government should adopt such innovations. Its customers deserve and should receive easy, “seamless” access to government services and information.
5. Streamline government operations and eliminate overlap and duplication.
   Smaller, smarter, faster government requires policymakers to ask hard questions about each and every program, the most fundamental being: “Should government even be doing this at all?”
6. Institutionalize the “Yellow Pages Test” in state government.
   Comptroller Rylander’s “Yellow Pages Test” should be applied to state government: “Government should do no job if there is a business in the Yellow Pages that can do that job better and at a lower cost.”

Selected Proposals

Education

Texas has moved from an economy based largely on natural resources and agriculture to one centered on complex information systems, and our educational system must acknowledge this leap. We cannot rest until all of our citizens are prepared to succeed in a rapidly changing world.

Aggressively address Texas’ teacher shortage.

Texas faces critical teacher shortages.

• Schools should reward effective teachers and offer salaries and amenities that will lure qualified professionals into the classroom and teachers should be rewarded for improving the performance of their students.

• State law and the Texas Constitution should be amended to modernize the formula used to distribute Permanent School Fund revenue. The additional revenue this would generate could help school districts establish benefit packages for teachers.

Create a flexible and accountable education system.

• More flexibility in exchange for greater accountability would enhance Texas institutions of higher education.

• Greater accountability means imposing real consequences for poor performance. Public schools should be placed on probation if they are “poor” performing for two consecutive years. If the school fails to improve by the end of the third year, the Commissioner of Education should impose mandatory reconstitution, removing and replacing staff.

Use technology and public-private partnerships to cope with the pressures of growing enrollment.

Over the past decade, Texas public school enrollment has risen by 21 percent and is expected to reach 4.4 million in 2009.

• Public-private partnerships in public school facilities construction and ownership have the potential to offer innovative and cost-effective methods to meet the demands of a growing school-age population.

• The Internet and “distance learning” can reach students beyond the boundaries of a traditional public school, college or university campus, allowing them to take courses at a time and place most convenient to them.

• Allow companies to create and maintain school facilities and give admission preference to the children of their employees. These company-maintained schools are called “worksite schools.” Such efforts save tax money and allow a greater share of that money to go toward instruction, since the sponsoring company or companies finance the facilities.

Create a world-class K-16 education system that prepares all Texans to achieve academic excellence.

Institutions of higher learning must have students who are prepared for college-level work.

• Texas should offer a college savings plan in addition to the prepaid college tuition plan and provide guidelines for after-school and summer programs intended to help students at risk of academic failure.

• Research funds retained at colleges and universities will enhance their work and draw additional research dollars into the state to benefit higher education and the economy. Higher education should be able to retain 100 percent of their indirect costs.

Electronic Government

The Internet and IT technologies are prompting a fundamental transformation in the way government thinks and acts. These proposals could help Texas assume a national leadership position in this transformation, making state government smaller, smarter and faster.

Create a Program Management Office in the Department of Information Resources.

Texas should create a Program Management Office in the Department of Information Resources to provide effective online government service and make sure agencies keep up in the Internet Age.

Enhance democracy by expanding electronic voting.

The 2000 presidential election put a spotlight on the need for election reform. The Secretary of State should investigate new electronic voting options that are feasible, cost-effective and accurate for as many Texas counties as possible.

Make it easier to do business with the state.

Frustration in determining what is required to open a business in Texas can be enough to discourage entrepreneurs. One way Texas could make it easier to do business with the state would be to provide online one-stop shopping for businesses. Citizens should be able to obtain needed business start-up information from one single and convenient place.

Improve privacy protection for citizens and businesses.

New technology has been accompanied by new concerns about the availability of personal information. Texas should enact a privacy act patterned after existing federal and state legislation to establish guidelines to protect citizen information gathered by government entities from inappropriate disclosure.

Competitive Government

Many if not most state services are delivered by government monopolies that rarely have to compete with other service providers. Opening such government monopolies to competition has proven to be an effective way to improve the quality of the services governments provide.

Apply the “Yellow Pages Test.”

To jump-start state efforts to encourage competition, Texas should institutionalize Comptroller Rylander’s Yellow Pages Test—“Government should do no job if there is a business that can do that job better and at a lower cost.” In 1998, Congress passed the Federal Activities Inventory Reform (FAIR) Act, which requires federal agencies to catalog services they provide that are commercial in nature and consider outsourcing them.

Privatize the Texas Workers’ Compensation Insurance Fund.

The Texas Workers’ Compensation Insurance Fund has made workers’ compensation more easily obtainable for Texas employers by providing coverage to small employers and serving as an insurer of last resort. The state could benefit from this asset and improve the fund’s efficiency by selling it to the highest bidder in a carefully managed auction. Revenue from the sale should be deposited into the state’s Economic Stabilization (“Rainy Day”) Fund.

Use information technology to reduce costs and facilitate networks.

Texas could use technology to reduce costs by exploring opportunities to adopt the “seat management” concept for state agency desktop computing, which transfers complete responsibility for personal computers from the government to a private contractor, and reduces the cycle times involved in contracting for services.

Use electronic marketplaces to cut the costs of services and supplies.

Texas should use reverse auctions in which sellers compete to offer the lowest prices on a given group of products, and should transform state procurement practices by centralizing administration, aggregating purchasing power, and moving all procurement online.

Use performance incentives to obtain results.

As governments contract for an ever-increasing list of goods and services, they are turning to outcome-based contracts that contain clear performance standards, financial incentives and penalties, and advanced performance measurement techniques. Such strategies often are collectively called performance-based contracting. Texas should transition to performance-based contracting and use more innovative practices in the bid solicitation process.

Government Performance and Human Resource Management

Results-based government identifies what works and what doesn’t—which programs achieve results and which waste money—and set its budget and management priorities accordingly.

State government relies on an aging workforce and is losing many talented workers, particularly in technology-related occupations, to the private sector. The state must devote more attention to attracting and recruiting high-quality employees and creating agency cultures that will encourage high performance.

Focus on big-picture results in the budget process.

The “big picture”—the things truly important to the average Texan—sometimes gets lost in Texas’ budget process. To correct this, Texas should amend the state’s strategic planning and performance budgeting system to improve the use of statewide benchmarks, and create government benchmark partnerships in Texas.

Make results open to the public.

Government cannot be held accountable unless it is open—so the public can understand what government is doing. New technology is helping some government agencies make progress in this area, but it is not enough simply to put information on the Internet. Information must be packaged in a user-friendly way.

Reward employees who produce results.

More than 70 percent of America’s private companies have implemented pay for performance systems, resulting in increased productivity and improvements in service quality. Agencies should be required to adopt policies that reward individual performance.

Asset and Financial Management

Maintaining state buildings, warehousing supplies, running vehicle fleets, processing tax returns, managing state finances, repairing equipment—these may not be particularly exciting topics. However, they are essential functions of Texas state government that can be improved by the public or the private sector.

Improve the management of state assets.

State agencies spend almost $3.8 million a year to lease 76 warehouses with almost 804,000 square feet of space. To reduce or eliminate unnecessary leased warehouse space, the General Services Commission should work with state agencies to review and evaluate the operations of the first five leased warehouses in Austin eligible for renewal after October 2001.

Improve financial management practices.

Texas should recapture the premium AAA credit rating lost in the economic downturn in 1987. A restoration of the AAA rating will allow the state to pay less interest on its debts and send a signal to financial experts across the country that Texas is a well-run state.

• To help in this effort, the state should develop a formal debt policy to outline its strategic goals and ensure that the state prudently manages its debts. This policy should include guidelines for appropriate levels of reserves, opportunities for further consolidation of debt authority, and other best practices.

• An examination of a fund that holds protested taxpayer payments found $99 million in compounded interest that rightfully belongs to the state’s general revenue fund. By amending the law to transfer this money, the state can use the money for other needs.

Workforce

In the fluid, dynamic labor market of the future, state government’s primary role in workforce development should be to create a climate that encourages continued improvements in productivity.

This will require the state to create innovative public-private partnerships to optimize our training capacity and resources; provide information and technical assistance to both employees and employers so they can assess and respond to the market’s demand for job skills; and finally, remove obstacles that impede the effective flow of skills across industries and regions.

The workforce system should better meet the needs of the state’s employers.

Changes in the economy and in employers’ expectations require rethinking the state’s role in workforce development. The Smart Jobs program, currently administered by the Texas Department of Economic Development, provides grants to businesses for worker training. Texas should move Smart Jobs to the Texas Workforce Commission (TWC). The Smart Jobs program and the Skills Development Fund should be merged into a single program that is completely funded by the Smart Jobs fund.

Restructure the adult basic education system.

Organizational separation between the state’s adult basic education system and workforce development system creates problems for individuals trying to learn basic workplace skills while also working to improve their literacy. All adult basic education programs should be housed at TWC to ensure full integration with local workforce development board efforts.

Health Care and Human Services

Texas’ health and human services (HHS) spending has skyrocketed in recent years, driven by a rapidly expanding population, changing federal requirements, and rising medical costs. Given the growing demand for these services, Texas should transform the way it delivers HHS to ensure the continued provision of basic services while avoiding a dangerous drain on the state’s finances.

Improve the Medicaid eligibility determination process.

More than 600,000 Texas children are eligible for Medicaid but not enrolled in the program. Lacking health insurance, many of these children use hospital emergency rooms for basic health care. Improvements to the state’s Medicaid eligibility determination system could reduce the financial strain on public hospitals while improving the health of more Texas children.

Improve Texas’ immunization programs for children.

Public-private partnerships such as the Seniors and Volunteers Program for Childhood Immunizations (SVCI) use volunteers and community resources to improve immunization rates among Texas children through outreach work, transportation and other services, and follow-up calls and visits. Texas should expand the SVCI program to reach more Texas children who might otherwise go without immunizations.

Reduce the cost of drugs for Medicare recipients.

More than a third of Texas’ Medicare recipients have no prescription drug insurance coverage or inadequate coverage while drug prices are increasing rapidly. Elderly Texans who lack prescription drug coverage pay retail prices 20 to 40 percent higher than those paid by insurers, health maintenance organizations and Medicaid. Texas could reduce drug costs for Medicare recipients by implementing a state program allowing Medicare recipients to purchase prescription drugs at the Medicaid-discounted price.

Improve Texas’ Vendor Drug Program.

Texas’ Vendor Drug Program for Medicaid recipients should consider contracting directly with a pharmacy benefit manager, and expand its list of drugs requiring a physician’s prior authorization to ensure that its pharmacy benefit is managed in a cost-effective manner while preserving quality of care.

Use the opportunities provided by federal welfare reform to end dependence on government benefits.

Texas should take full advantage of the flexibility granted under the new welfare reform law to provide employment-related services to all welfare recipients before they exhaust their five-year lifetime limit for federal assistance. Texas should restructure its welfare program to provide additional alternatives to the monthly cash grants eligible families receive, and customize assistance and services according to individual needs. Finally, Texas should use existing resources to develop innovative strategies to end dependence on government benefits.

Expand the use of an effective long-term care program.

Bienvivir Senior Health Services in El Paso, a Program for All-Inclusive Care for the Elderly (PACE) site, provides an alternative to nursing home care for frail, elderly Medicaid recipients. PACE saves the state and federal governments 14 percent over the cost of regular nursing home and medical care, and supports community decision-making in designing long-term care options. Texas should expand the PACE program throughout the state.

Transportation

The Texas Department of Transportation (TxDOT) is at a crossroads and must abandon its outdated, business-as-usual approach to meet the challenges of the Internet Age. TxDOT must adapt to an economy powered by services and high technology and modern patterns of business and personal transportation.

Use innovative financing techniques to meet Texas’ expanding transportation needs.

Texas can better meet its critical transportation needs by making the best use of all opportunities to maximize the impact of its revenues. These opportunities include new funding mechanisms such as GARVEE bonds and federal credit assistance available through the federal Transportation Infrastructure Finance and Innovation Act (TIFIA). Both programs are designed to maximize the ability of states to use federal funding to further their highway projects and complete them more quickly than would be possible under traditional approaches.

Use innovative contracting options to speed road construction.

Accelerating project delivery and obtaining greater funding for infrastructure projects will make better use of the Texas Turnpike Authority (TTA). The Authority’s considerably greater flexibility and responsiveness in project development allow it to deliver projects more quickly than TxDOT and use innovative practices such as exclusive development agreements.

Modify risk transfer approaches.

TxDOT’s current highway project bidding process leaves the agency ultimately responsible for the quality of the roads produced, and does not allow the agency to consider contractors’ past performance in awarding contracts. TxDOT should be able to consider past performance in bid evaluations, and, in certain cases, to require contractors to provide warranties for the expected life of the road.

Environment and Natural Resources

The state’s soaring population and booming economy have led to air quality concerns in several urban areas. Clean water and continued water availability also are major environmental issues. Texas’ environmental and natural resource problems are complex—often unique—and require a more flexible, results-oriented approach.

Use financial incentives and market-based tools to protect and improve the environment.

Market-based environmental innovations help create a climate in which people face the consequences of their actions and receive incentives for being responsible stewards of their land and resources.

The state should encourage the cleanup and redevelopment of “brownfields,” industrial or commercial properties that have been abandoned or underused due to long-term environmental contamination. It can do so by allowing the creation of enterprise zones around brownfield sites that have been cleaned up.

Public Safety and Corrections

Texas has seen dramatic improvements in public safety in recent years. With our prison population at an all-time high—and projected to grow considerably more—and with little desire to begin another prison building boom, Texas must look to some new approaches in public safety and corrections.

Ensure that released inmates become productive, law-abiding citizens.

To deter crime in the most effective way possible, our prisons must prepare inmates to reintegrate successfully into society if crime rates are to continue to fall.

The Prison Industry Enhancement (PIE) program in Texas allows private industries to establish joint ventures with public agencies to use inmate labor in producing goods for entry into interstate commerce. Inmates participating in the program work in environments that simulate private workplaces—demonstrating the value of hard work and teaching marketable skills that increase their potential for successful reintegration into society upon release. The PIE program has proven to be an exceptional way to cut prison costs, reduce recidivism and reintegrate released felons into communities.

To ensure adequate prison space for violent criminals, explore alternatives to incarceration for some nonviolent criminals.

One growing and effective alternative to incarceration are drug courts which are special judicial proceedings generally used only for nonviolent drug offenders. Typically, the consequences of participation in a drug court include monitoring by the judge, weekly supervision by probation officers, daily drug tests, and treatment sessions. If participants fail to comply with the program requirements, they can receive additional sanctions including more intensive treatment services, more frequent urinalysis, community service, and incarceration.

Expand Texas’ use of “drug courts” for nonviolent juvenile and adult offenders.

Drug court treatment programs are being used by many states and some Texas jurisdictions as a cost-effective alternative to incarceration. More such programs in Texas would give prosecutors another option for dealing with drug offenders.

The Internet Age is a new frontier, as surely as the one our Texas pioneers carved from the wilderness. We are moving into an area of daunting challenges and almost unimaginable opportunities. While no one has a roadmap to the future, Comptroller Rylander and the e-Texas Commission believe the recommendations in

E-Texas: smaller, smarter, faster government can get us started in the right direction.

No state has yet fully taken advantage of the enormous possibilities of the Internet Age to fundamentally transform their government programs and institutions. But some state will be first, and it must be Texas!

Estimated Savings and Revenue Gain in This Report

(Dollars in millions)

Note: Totals may not add due to rounding.

e-Texas is an initiative of Carole Keeton Rylander, Texas Comptroller of Public Accounts
Post Office Box 13528, Capitol Station
Austin, Texas

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