Up to the Challenge? Vermont’s restructuring plan comes with blurry details; human services target $6M short

Sen. Diane Snelling, center, and members of the Joint Government Accountability Committee

The first iteration of Challenges for Change, the vaunted government restructuring program that promises to provide better government services to Vermonters at a price the state can afford, was rolled out by Douglas administration officials to lawmakers yesterday to much fanfare. But pricetags on each package of proposals were missing.

Though administrative officials acknowledged that there will be winners and losers as the state reorganizes some of its most important services, including education, economic development, planning and services for needy, elderly and disabled Vermonters, they did not indicate how many jobs might be lost as a result in state government, local school districts and designated nonprofit agencies (such as community mental health programs and regional planning commissions) funded by the government.

Nor did officials provide specific details of the savings through much-touted initiatives they say will transform government into an efficient, business-like entity that is more responsive to Vermonters’ needs.

The most controversial aspects of the plan include: replacing the state’s stringent standards for private contracts (Bulletin 3.5); consolidating child services; school district mergers; the release of several hundred nonviolent prisoners; and an estate recovery program that would enable the state to more aggressively seek reclamation of the assets a deceased family member who has received long-term care services. In addition, the administration has proposed selling 500,000 square feet of state buildings and leasing office space when needed. Another item that has gotten a lot of attention: merging the state’s 54 separate regional development corporations, employment offices, planning commissions, micro-business programs, small business development centers and employee training programs into nine new regional service centers.

Secretary of the Administration Neale Lunderville put the situation in context: The state had to do something to come to grips with a General Fund deficit of $154 million in fiscal year 2011 and a gap of $250 million in fiscal year 2012.
“There are things here that people are going to have a different point of view on,” Lunderville said. “What we ask of folks who have a different point of view and think there is a better way to accomplish this, that they offer that alternative, provided that the alternative meets the mandated outcomes we are trying to achieve. Is fiscally sustainable, and that by definition doesn’t rely upon raising taxes or using reserves. Last year we embarked on a unique approach to address this budget gap – a Challenges for Change process.”

Under Act 68, which became law on Feb. 25, the Douglas administration and the Legislature agreed to find net savings of $38 million in General Fund expenses and $19.5 million in the Education Fund for fiscal year 2011. (The Department of Education has asked the Legislature to recognize the $22 million in general education savings realized by local school boards as its contribution to the Challenges.)

The administration is charged with developing and implementing the reorganization of state government and the educational system. Officials presented the Challenges for Change plan in booklet form to lawmakers on Tuesday. The 43-page document (five pages longer than the original proposal), available on the Web, outlines initiatives that emphasize government efficiencies.

The Legislature has mandated the outcomes and required measurements for the reorganization in Act 68; its role now is to decide whether it will alter legal impediments to the restructuring process.

Unlike the normal budgeting process, in which lawmakers analyze the impacts budget proposals have on programs, under the Challenges for Change they do not have a direct say in how the money is removed and “reinvested.” They do, however, have a lever – without changes in statute, many of the proposals aren’t possible to implement, according to Speaker of the House Shap Smith.

The administration’s plans call for major changes to seven areas of state services, including contracts, human services, prisons, general education, special education, regulatory reform and economic development.

In addition, the administration’s Challenges document proposes the creation of “charter” units, areas of state government such as the Department of Taxes and the Department of Forests, Parks and Recreation, which, like the charter school concept, entails suspending certain rules in order to achieve outcomes that are believed to have the potential to realize isolated savings or to generate income.

Ironically, perhaps, the first quarterly progress report from the administration, which prided itself on a more entrepreneurial approach on Tuesday, did not come with the obligatory spreadsheets that typically accompany a business plan. Smith said he didn’t expect to see fine budgeting detail at this point: “I don’t think that’s what we asked for. We identified savings within broad areas.”

Many of the suggested changes were developed by “teams” of administrative officials, state employees and “legislative liaisons.”

Tom Evslin, chief technology officer, talked about how the process of developing the restructuring plans “has been somewhat marvelous to watch.”

He said the teams focused on the content of the outcomes rather than the amount of money they were faced with saving in each area of state government.

The progress report focused on four major areas: Program service integration (consolidation of multiple programs that provide services to a particular population, such as needy children); technology (automation of administrative functions); “path to independence” (more intensive job placements for needy and disabled Vermonters, for example); and performance incentives for contractors and state grantees.

“What we want are outcomes that lead to people becoming independent,” Evslin said. “The answer in many cases is jobs, jobs, jobs.”

He told a group of reporters that the state will generate efficiencies through technology and that these efficiencies in turn will lead to more productive services for Vermonters who, with the support of the new integrated programs, would become more self-sufficient.

Though Smith isn’t ruling specific ideas out at the moment, he says not everything will meet lawmakers’ muster. He has concerns, for example, about the proposal to create mandatory unified union school districts.

“I think there are some ideas that are really interesting,” Smith said in an interview. “I think there are some ideas that are difficult and I think based on conversations I’ve had with committees of jurisdiction there are things that may not get out of the starting gate.”

Human services challenge target $6 million short

Details on how the restructuring will lead to the required $38 million in reductions to eight areas of government are blurry.

A lack of specificity was noticeable even for the Agency of Human Services, which, of all the state agencies affected by the reorganization, made the greatest effort to provide information to
lawmakers. The agency provided a 112-page addendum for the Challenges pamphlet, with lists of outcomes, targeted programs, initiatives and timelines that provide details for many of the changes.

Still, the information is largely unaccompanied by specific fiscal goals. The administration says this is because the plans are still a work in progress.
Human Services Secretary Rob Hofmann handed out a half-page summary spreadsheet to lawmakers on Wednesday for 10 slated areas of departmental “integration” within his agency.

In testimony to the House Human Services Committee, Hofmann said his agency, which was targeted for the biggest restructuring changes – and savings – didn’t meet its overall financial target of $16 million.

The Agency of Human Services, which provides a diverse array of programs for children, needy families, elderly and disabled Vermonters, came up with $10 million in savings, Hofmann said.

The agency is not only $6 million short in meeting its obligations under Act 68; it’s also missing $10 million in already-booked income for the Vermont State Hospital.  Last Friday, the hospital, which cares for acute and forensic mental health patients, was not recertified by the federal government. The agency had asked the House Appropriations Committee to plan on $10 million in income based on the assumption that the troubled hospital would be recertified by the Centers of Medicaid and Medicare Services this spring. Without the recertification, which has eluded the hospital for seven years, it is not eligible to receive federal funding for Medicaid-eligible patients. The Vermont House included the $10 million as income in the General Fund budget it passed last Friday.  The changes under consideration by the Agency of Human Resources include the integration of services for children, preventive care for mentally or physically disabled children, and a consolidated program for work-related services.

Rep. Ann Pugh, D-Burlington, chair of the House Human Services Committee, gave Hofmann and his commissioners of the departments of mental health, aging and independent living, health and child and family services an incomplete in a meeting on Wednesday.

“Your assignment was to come up with $16 million, give or take, in savings,” Pugh said. “What we got back is $10 million in savings, and you took the assignment in a direction that was not anticipated.”

She said the agency had taken up several policy issues, including involuntary treatment and estate recovery that were the purview of her committee and weren’t relevant to the Challenges.