CPR for California

The California Performance Review is the latest blue-ribbon commission to prescribe state government reform.

by / January 26, 2005
"The state will not be able to achieve a statewide IT vision until it coordinates the planning that guides each department and agency with that vision." -- The Governor's Task Force on Government Technology Policy and Procurement, 1994.

"There is no overall coordination of the state's use of technology, resulting in functions that are poorly organized, duplicative and inefficient from a statewide perspective." -- California Performance Review, 2004.

Reading these observations -- which are taken out of a larger context but still instructive -- suggests two less-than-glowing conclusions: California clearly has not learned its lesson, and never underestimate the power of inertia.

It's an open secret that California, arguably the epicenter of technological innovation in this country, operates a state government IT environment that's as fragmented and siloed as any in the nation. California's technology shortcomings are documented in numerous reports from investigative entities such as the Legislative Analyst's Office and the Bureau of State Audits, but little has changed. Until now, perhaps.

Lighting the Fuse
Around the state Capitol in Sacramento, observers say Gov. Arnold Schwarzenegger's combination of star power and political muscle may give California its best shot in years at real government reform -- including changes in how the massive state government purchases, deploys and uses information technology.

Schwarzenegger made reform a key component of his administration since riding into office on a wave of voter dissatisfaction that led to the dumping of Gov. Gray Davis in the middle of his term. One of the new governor's first moves was commissioning the high-profile California Performance Review (CPR) to recommend changes for making state government more responsive to citizens and businesses.

Schwarzenegger tapped California Department of Motor Vehicles (DMV) Director Chon Gutierrez and Texas Deputy Comptroller Billy Hamilton to lead the CPR. Gutierrez is a veteran of California government and Hamilton helped President Bill Clinton and Vice President Al Gore create their National Performance Review.

In August 2004, the CPR released a four-volume report, Government for the People for a Change, focusing on reorganization of the executive branch, program performance assessment and budgeting, improved services and productivity, and acquisition reform.

Schwarzenegger signaled his intention to implement CPR reforms in his Jan. 5 State of the State address.

"A year ago, I told you that I wanted to blow up the boxes," he said. "Well, we have lit the fuse. The California Performance Review has done an outstanding job. Two hundred eighty-five people have worked for nine months looking at how to eliminate duplication and increase accountability in government."

J. Clark Kelso, California CIO and the governor's special adviser on information technology, calls Schwarzenegger relentlessly optimistic and confident in his ability to succeed. Those qualities will be tested as the governor pushes the CPR reforms, a high-stakes gamble that includes changing how California teachers are paid, altering the process for drawing state legislative districts and reforming state employee pension plans.

Kelso, named state CIO by Democrat Davis before he left office and retained by Schwarzenegger, compares the new chief executive to another popular California governor: Ronald Reagan.

"Reagan had the same type of critics who, at times, said, 'How can you be this optimistic when this is the situation?'" Kelso said. "It's that type of optimism that I think, with Arnold, is infectious when you're around him. He makes you feel like things actually can happen -- like it's actually going to go this way."

As pundits have noted in editorial or political pages, Schwarzenegger isn't easy to pin down. He's a fiscal conservative, but he's a social moderate. He fought hard for passage of Proposition 49, which called for about a half-billion dollars in state spending on after-school programs, and he supports stem cell research

He's dramatically different from the risk-averse Davis. He's shown a willingness to sidestep state lawmakers through direct ballot measures when he hits legislative roadblocks. Perhaps unpredictability is the elixir California needs from its CEO.

"He didn't come to office with a 25-year history in and around government, and whenever you're part of an organization for a long period of time, you inevitably become [acculturated] to it," said Kelso. "[There is] a different style of leadership and a different atmosphere within the executive branch. The Legislature also feels the same thing. He governs in a very different sort of way."

That Was Then, This Is Now
Observers say the CPR isn't just another blue-ribbon panel that's cranked out yet another high-level report that will get tossed on a dusty stack of similar unread reports.

"It has tremendous potential," said John Kost, managing director of Gartner's Government Research Division and former Michigan CIO. "As a result of all the political things that occurred in the state in the last year or so, there's a widespread and very publicly accepted recognition of the fact that the state's broken.

"Given that Gov. Schwarzenegger still retains a fair amount of credibility with voters in terms of his legitimately saying things are broken, maybe there's going to be some political pressure to fix some organizational things that have largely contributed to the problem."

As Schwarzenegger attempts to implement the CPR's recommendations, he'll be performing before a national audience.

"There are about a dozen states in the last 10 years that have gone through some form of re-engineering study like this," said Lawrence Herman, managing director of State and Local Government Alliances and Agencies for BearingPoint. "I'm not so sure I would say other states are watching for the methodology, but are there some tricks that California comes up with as to how to implement structural change?"

It's always of interest to other states whether an executive branch can politically muscle sweeping changes through, Herman said, because useful lessons can be extracted from those acts of political theater.

Herman said he was asked by CPR co-executive director Hamilton to testify before the CPR Commission on state re-engineering from a national perspective. Herman said he's been involved in many state projects similar to the CPR through his work at KPMG and BearingPoint.

For many states, the most intriguing aspect of the CPR is its proposal to create a Governor's Office of Management and Budget mirroring the federal Office of Management and Budget, Herman observed.

"That's kind of revolutionary in state government," he said. "That's something other states are watching: Can, in fact, California muscle silos away? Or legislate silos away? Or 'best practice' silos away?"

Clearly Schwarzenegger has difficult choices to make. He will have to decide how much of the CPR to fight for and how much to compromise. He'll also have to decide how much political capital he's willing to spend. Does he want to spend it all? Does he want to keep some in the bank for future political plans? It's no secret California is a springboard to national political aspirations.

Herman said provisions of the CPR have a chance at success because the climate in California is receptive to reform, especially in the Legislature.

"The game everywhere else this has been played out is not just [can] the executive propose, but can the legislative legislate," he said. "The experience and track record I'm familiar with has been modest to positive. Generally speaking, the problems are so recognized that the legislature is able to get a core group of recommendations through."

Critics of the CPR note that though some recommendations introduce new ideas, many proposals simply recycle old ideas for government reform. While such criticism may have some factual basis, it's perhaps a tad unfair because reform ideas don't just get plucked from the ether. They are built on other ideas.

Still, at least one aspect of the CPR is new: the governor's public agreement that the state's data centers aren't exempt from IT reform efforts. The governor's Executive Order S-13-04, issued Aug. 24, 2004, mandates consolidation of California's Stephen P. Teale and Health and Human Services Data Centers to the maximum extent permitted by existing law.

This is no mean feat, and one that significantly changes the perception of IT reform in California, said John Thomas Flynn, California's first CIO and now vice president of Advisory Services in the Center for Digital Government, the knowledge-management and research division of e.Republic Inc, which also publishes Government Technology magazine.

"There's no clearer indication of the governor's intent on IT reform than seeing an executive order on data center consolidation," Flynn said. "Data centers have long been the centers of a lot of the bureaucratic functioning of government -- not just in California, but everywhere."

Being at the center translates into bureaucratic power, and data center directors aren't about to willingly give up that sort of power. Part of that power comes from the fact that California's data centers handle a huge workload for state agencies. The importance of data centers to the day-to-day functioning of state government makes them a hard target, and talk of data center consolidation when the California Department of Information Technology (DOIT) was created in 1995 was thwarted by behind-the-scenes politicking and never got off the ground.

Flynn himself proposed such a consolidation in 1996 when he became state CIO, and he said his attempts went nowhere fast.

"It goes back to the old saying, 'The best way to get anything done in government is to have the president, the mayor or the governor put it in their State of the State speech,'" Flynn said. "You can be guaranteed that if it's been uttered aloud, it's going to be monitored and progress is going to be assessed. It's going to become one of those things you've got to do."

Rewriting the Rules
Of course, this has all been attempted before. California created DOIT in 1995 to fix a host of IT problems weighing the state down.

Flynn, CIO of Massachusetts at the time, was hired by then-California Gov. Pete Wilson to take charge of the whole messy IT situation; especially after a failed information system deployment at the DMV cost California approximately $50 million.

Unfortunately the legislation that created DOIT left the agency without any real teeth. Financial oversight of agency IT projects was put under the purview of the state Department of Finance, leaving DOIT powerless to stop funding for projects that didn't follow its recommendations.

"It's all about the money" is doubly true in government, and DOIT was hamstrung from the beginning. That's not to say the department didn't do some good. The state survived Y2K. The existence of a central agency with a goal of bringing an enterprise view to IT in state government at least started other agencies and departments thinking about the concept.

After a few years of DOIT struggling to find its place and define its role, the Legislature let the sun set on the department in mid-2002 after the agency became entangled in a scandal over statewide software licenses. The experience left a sour taste in many policy-makers' mouths, and any mention of IT reform is greeted with a healthy dose of cynicism.

That's a good thing, said Mark Forman, former administrator of E-Government and Information Technology at the U.S. Office of Management and Budget, where he took on the complex task of spearheading IT reform for the Bush administration.

"Cynicism is healthy," Forman said. "This is not easy work. It's very difficult work. It affects an awful lot of people if it's being done right, and having the oversight and review of it will force people to really think through, 'How do you get results?' At the end of the day, as some of the people on our task force keep reminding the rest of us, the problem with the state has been execution and delivering on the promise, delivering on what I would call the business case and executing that business case."

Forman is executive vice president of Worldwide Services at Menlo Park-based Cassatt Corp., and he serves on the board of directors for Joint Venture: Silicon Valley Network, a nonprofit organization providing analysis and action on issues impacting the economy and quality of life in California's Silicon Valley.

The California Legislature will play a key role in the CPR overall and IT reform because it's the entity that controls the introduction of legislation. It also controls the money, and those involved with the CPR know full well that getting the Legislature behind the CPR is extremely important.

Forman, while acknowledging his unfamiliarity with California's Legislative landscape due to his relatively recent move to the state, said the fact that Joint Venture: Silicon Valley's board of directors includes several state legislators clearly helps the nonprofit's cause when it comes to IT reform, though it's no guarantee.

"Having been through this in the federal government, I believe you need people running the agencies who understand how to take advantage of technology," he said. "At the end of the day, it's very difficult to legislate good management. If you have well informed, knowledgeable department secretaries, that's worth a whole lot more than having it legislated."

Forman also said the Legislature's role is to hold agencies accountable for effective execution of policies in keeping with one of the bigger reforms tied to the CPR -- the concept of performance management.

"I'm hopeful that whoever is the CIO or whoever assumes that role can work with the department heads and the Legislature to create a governance structure whereby IT investments were justified on the basis of performance gains," he explained. "If that accountability structure doesn't exist between the legislature, the governor's department heads and whoever is running the CIO role, it makes the work that much harder."

Power of Practicality
California's financial picture is much bleaker now than when the state made its last stab at IT reform, Kelso said, and the business need for IT reform is greater than anything seen in the past.

"We're still really in the throes of a continuing crisis," he said. "In 1995 and 1996, the recession budgets really had been resolved by Gov. Wilson so some of the overall governmental process issues just didn't exist. We did have IT issues then, and a little bit of that is still the same. But we didn't have anything close in 1995/96 to what we have today when you look at the challenge that California's executive branch faces in reducing costs while maintaining, or in many cases, trying to expand services."

It's no secret that technology gives an organization a precise tool to reduce costs and expand services. It's also no secret that successfully using technology isn't a matter of buying the latest and greatest hardware and software. There are strings attached, and not paying attention to those strings has consequences.

Though the CPR in general and its Technology Alignment section in particular serve up solid ideas, something is missing, Forman said.

Joint Venture created a task force to work with the state's Little Hoover Commission to present a set of recommendations to California policy-makers on the best way to respond to the recent CPR report, Forman said, especially issues relating to revenue and spending, such as procurement reform and electronic government.

The Little Hoover Commission is an independent state oversight agency created in 1962 to investigate state government operations and promote efficiency, economy and improved service.

"For Silicon Valley, the IT reform side is really a no-brainer," Forman said. "It's an area where there's so much expertise here, on the one hand. On the other hand, it's the heart of so much of the economy in California that it's important government lead in taking advantage of the technology innovation."

Forman said he's looking forward to getting involved in government management reform once again, given his experience at the federal Office of Management and Budget. Joint Venture, under the leadership of its CEO, Russell Hancock, is positioning itself to participate more actively in certain policy decisions, Forman said.

"We're getting a little more aggressive in things we see that need to be done with respect to government, in part because we've got expertise, but largely because if the government works better, Silicon Valley becomes a better place to live and work," Forman said. "The CPR is an accumulation of lots of good ideas, but without the focus and consistency of a strategy you need to really achieve any measurable gain."

A lot of work has gone into structuring the task force to set forth visions, goals and objectives leading to specific legislative recommendations, he said, and those recommendations target achieving a set of specific goals.

As the task force continued its research, he said, questions like, "How do you cut the cost of IT in state government?" or "How do you fix IT problems in the state?" became less important than what Forman described as the approach he took in the federal government, where he focused on questions like, "How do you use IT to improve the operational effectiveness of government?"

"What we're looking to do in our recommendations to the Little Hoover Commission and our creation of legislative proposals is really to identify the governance structure, the strategy and the set of objectives we believe California needs to get to in delivering better quality of service to citizens and efficiency in government operations," he explained, noting the recommendations take more of a big-picture approach.

"We're much more focused on: How does state government manage change? How does state government effectively take advantage of technology to de-layer bureaucracy? Really, the strategic use of IT," he said. "That's a point of departure we're seeing with the CPR. We view the CPR as a boatload of great ideas but without the disciplined approach or the strategy to get the business transformation needed."

Who's in Charge?
Gartner's Kost voiced concerns about the IT Alignment component of the CPR's final report, specifically citing vagueness as to whom California's CIO will report and the CIO's roles and responsibilities.

Still, he said he's encouraged that the IT Alignment section acknowledges that what happened in the past didn't work. DOIT didn't succeed, in part, because its power was limited since it wasn't accepted as part of the state's bureaucratic culture due to its separation from the Department of Finance.

"There is a tacit recognition in the CPR that the Department of Finance plays a very significant role in this," said Kost. "Whether the CIO is put in the governor's office as a senior policy adviser, which I would strongly recommend against, or put in the Department of Finance as a direct report to the director, which I would strongly recommend they do, that's probably the most critical success factor."

That position contradicts what state CIOs and this magazine rallied for over the last several years -- that IT is so important to a state, the CIO must be in the governor's Cabinet and should report to the governor directly.

"If the governor is a day-to-day executive manager, that is true," Kost said. "Very few governors are. We recommend instead the CIO report to the person who is, in effect, the chief operating officer or the chief financial officer -- whoever is the uppermost executive responsible for day-to-day execution.

"If you look around the country, the most successful CIO models have been those where the CIO was actually one layer down reporting to somebody very crucial to the organization," he explained. "In Michigan, I reported to the director of the Department of Management and Budget. I was extraordinarily powerful because she was extraordinarily powerful."

In the end, the success of the CPR's IT Alignment proposals could well rest on the question of responsibility. Kost said the one thing CPR lacks is a clear position on who's responsible for what -- a crucial omission, given the state's history.

"That's the fundamental failing of California government," he said. "It isn't that IT is broken, it's that because it's so big and has been historically so deprived of someone responsible for day-to-day execution, every department director is left to their own devices. Citizens suffer because even if there could be some synergies gained from combining efforts, those synergies are not occurring.

"The problem I see in CPR isn't that any of the recommendations are bad -- they're all terrific," he said. "The problem is no one is responsible for executing it. At the end of the day, who does Gov. Schwarzenegger turn to, assuming the Legislature even enacts all of this stuff, and say, 'OK, make it happen.'?"
Shane Peterson Associate Editor