Incoming Governors Will Have Opportunity to Shape the Post-Great Recession Era

For forward-thinking governors, the post-Great Recession era will be marked by innovation and opportunity, says Accenture’s Steven J. Rohleder. In this edition of CivSource’s The Gallery, Mr. Rohleder writes that fresh approaches to revenue generation, fiscal management and public assistance are within reach for incoming governors.

On Nov. 2, voters in 37 states will elect the governors they hope can lead them out of the worst fiscal crisis in generations. It is likely to be a thankless job as incumbents and new officeholders will continue to face unprecedented state budget deficits. According to the Center on Budget and Policy Priorities, states could face total shortfalls of as much as $260 billion through FY2012.

While federal support is at an all-time high, many states are currently suffering from fiscal paralysis because of a lack of information about the extent of federal assistance in the years to come, coupled with their own inability to accurately assess the full impact of the recession on state revenues.

Another complicating factor is health care reform, which has eclipsed education and infrastructure as the paramount fiscal challenge going forward. The extent to which the costs of health care reform will be supported by the federal government still remains to be seen.

These issues together cast a pall over gubernatorial candidates. They are unable to make pronouncements during campaign or state-of-the-state speeches with any degree of confidence, particularly with regard to state fiscal affairs. The great fear in state government – now more than ever – is that costs may be underestimated and revenues overestimated. The political rhetoric, “cut – cut – cut,” wears thin when it comes time to execute and manage.

Incoming governors, however, will have the opportunity to implement new ideas and fresh approaches to fiscal decision-making, particularly around three critical areas that must be addressed:

Revenue Generation: The fact is that historical revenue models are failing. The ability to predict state income through taxes and fees must be modernized or states will continue to see declines every budget cycle. Collections are down, and fraud and abuse continue to rise because of the poor economy. Meanwhile businesses and individuals use technology and loopholes to stay one step ahead of the tax collector. In response, states need to implement:

• Analytics and tools to better predict future revenues, and to model the effect of tax and fee changes that must be enacted during a governor’s term in office
• Improved collection strategies; and
• Fraud and abuse strategies.

Strategic Fiscal Management: At the same time governors are getting the revenue side of the books in order, they must also control spending. Admittedly it is difficult to make cuts in education, public safety and the economic safety nets that citizens require in these challenging times. However, rapid cost reductions can be achieved in several major areas:

• Strategic sourcing, in which state agencies consolidate their spending to drive down the cost of goods and services they purchase
• Cross-jurisdiction consolidation, such as combining multiple school districts’ financial, payroll and student administration systems, rather than each district operating their own systems
• Sharing services of back-office functions such as HR, finance and payroll across multiple agencies; and
• Eliminating redundant layers of management or canceling unnecessary projects.

Public Assistance and Support: While state governments are struggling economically, citizens and businesses are being challenged to an even greater degree. Incoming governors may address revenues and cost controls, but they must also improve and target the delivery of services to those who need it most. Most states’ human services and employment systems are decades-old, operate in silos, and focus only on process, policy and procedure — rather than outcomes. By modernizing these systems, states can:

• Put families first, which means truly integrating the delivery of services that address each family’s needs, whether it is food, shelter, health services, or job training
• Use analytics to determine what citizens require now and in the future, especially (though not limited to) focusing on child welfare, to identify the needs of our most vulnerable citizens; and
• Understand the skills of the unemployed and underemployed, and match those skills quickly and effectively with available jobs in each state.

Newly elected governors will be taking office at a critical juncture in the history of their states, shaping the post-Great Recession era. They will have a tremendous opportunity to lead their states through this fiscal crisis and create a new foundation that will last for the next generation.

Stephen J. Rohleder is group chief executive of Accenture’s Health & Public Service operating group

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