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Arkansas Efficiency Project

ARKANSAS POLICY

FOUNDATION

Greater Opportunity Through Innovative Change

Author's Acknowledgement Page

The author wishes to thank the Policy Foundation Board members whose dedication, support and loyalty made the Efficiency Project possible: Dr. Glenn Davis; George Dunklin, Jr.; Donald Fitz; Gregory Hartz; Blant Hurt; Dorothy Morris; Madison Murphy; Dr. Wendell Pahls; Bob Ratchford; and Will Rockefeller.

Scott and Marshall Harmon are extraordinary volunteers engaged in citizenship.

The author wishes to thank Arkansas Gov. Asa Hutchinson, whose vision made the Efficiency Project possible.

The cooperation of the following Arkansas state government officials has been essential to the Efficiency Project: Lt. Gov. Tim Griffin; (Executive Branch) Vu Ritchie; (Aeronautics) Jerry Chism; (Agriculture) Wes Ward; (Arkansas Heritage) Stacy Hurst, Rebecca Burkes; (Assessment Coordination) Bear Chaney, John Nichols; (Career Education) Charisse Childers; (Community Correction) Sheila Sharp; (Correction) Mike Carraway; Tiffanye Compton; (Economic Development) Mike Preston, Betty Anderson; (Education) Johnny Key, Susan Harriman; (Emergency Management) Tina Owens; (Environmental Quality) Becky Keogh; Timothy Cain; (Finance & Administration) Larry Walther; Timothy Leathers; Duncan Baird; Jake Bleed; Walter Anger; (Health) Ann Purvis; (Higher Education) Nichole Abernathy; (Highway & Transportation) Randy Ort; (Insurance) Allen W. Kerr, Russ Galbraith; (Labor) Leon Jones, Jr.; Ms. Veronica Alexander; (National Guard) Major General Mark H. Berry; Col. Don Mabry; (Parks & Tourism) Kane Webb; Kris Richardson; (State Bank) Candace A. Franks; Susannah Marshall; (Veterans Affairs) Karen Watkins; (Workforce Services) Daryl E. Bassett; Dorothy Tilley; and Anita Chance.

The author is solely responsible for any errors or omissions.

Author: Greg Kaza, M.S.F.

Introduction

The economic literature includes numerous references to efficiency.[footnoteRef:1] Posner (2007) notes a foundational claim of law and economics is "the common law tends to the promotion of economic efficiency."[footnoteRef:2] The Arkansas Constitution (Article 14) also uses the word "efficient" in terms of the public education system: [1: Examples include Chandra, Amitabh and Douglas Staiger. 2016. "Sources of Inefficiency in Healthcare and Education." American Economic Review, 106(5): 383-87; Kamada, Yuichiro and Fuhito Kojima. 2015. "Efficient Matching under Distributional Constraints: Theory and Applications." American Economic Review, 105(1): 67-99; and Hauner, David and Annette Kyobe, "Determinants of Government Efficiency." IMF Working Paper 08/228. The first abstract notes: "Healthcare and education exhibit wide variation in spending that is loosely associated with outcomes." The second notes, "Many real matching markets are subject to distributional constraints." The third is "the first examination of the determinants of government efficiency with a large country panel, building on a newly compiled dataset of scores of public sector performance and efficiency in education and health around the world."] [2: Posner, Richard A. 2007. Economic Analysis of Law (7th ed.) (New York) Aspen Publishing. ]

"Intelligence and virtue being the safeguards of liberty and the bulwark of a free and good government, the State shall ever maintain a general, suitable and efficient system of free public schools and shall adopt all suitable means to secure to the people the advantages and opportunities of education."

Efficiency is also a topic in non-academic publications. Governing magazine has published columns[footnoteRef:3] including several written by Harvard University researchers.[footnoteRef:4] One 2013 Governing explains, "(W)hat we once thought of as trade-offs -- "I can only do so much, so let's concentrate on the big items" -- is really a false choice." Harvard Kennedy School professor Steven Goldsmith observes: [3: One cites the Arkansas Game & Fish Commission. Melissa Maynard reported, "States are increasingly offering more mobile apps to citizens in the hopes of connecting better with them and improving the efficiency of service delivery." May 23, 2013] [4: Four appeared in Governing in 2016. Chieppo, Charles. "State Spending and the Search for Hidden Efficiencies" (February 2); Goldsmith, Steven. "Social Media's Place in Data-Smart Governance" (May 18); Goldsmith, Steven. "Infusing Government with a Data-Driven Culture" (May 26); Goldsmith, Steven and Jane Wiseman. "The Billions We're Wasting in Our Jails" (June 22).]

"The right answer incorporates both: completely rebuilding some program budgets while transforming others through incremental efficiency improvements. Officials who force attention to harvesting small savings develop a culture intolerant of waste at any level, building a consciousness that every dollar spent comes out of someone else's pocket. A culture of efficiency induces changes throughout the governmental entity that not only build up to real money but also increase the likelihood of big ideas emerging from emboldened employees."

Goldsmith explains that through "partnerships and bottom-up initiatives, government can do more with less in ways that might have been impossible to push through without the mandate of lower tax revenues. As these small improvements set a new norm of constant reinvention, they will produce substantial savings and better services, culminating in better, faster, cheaper government."[footnoteRef:5] [5: Goldsmith, Steven. 2013. "Building a Culture of Efficiency in Government." Governing (March 20)]

Gov. Hutchinson's First Year Efficiency Initiatives

One common sense explanation of efficiency is that it involves doing more with less. Individual households and commercial enterprises face this challenge on a daily basis. Technological advances that generate productivity increases[footnoteRef:6] help meet this challenge. But can these increase efficiency within state government? [6: Moore's Law explains this process. See Moore, Gordon E. 1965. "Cramming more components onto integrated circuits." Electronics (April 19). There are multiple examples but personal computers and smart phones are among the most prominent.]

Elected officials in a democratic republic are not oblivious to this process. Officials answer to their constituents, and are responsible for the delivery of public services. One idea is that these outputs can be delivered in a more efficient manner using fewer inputs such as state employees and tax dollars.

Gov. Asa Hutchinson, after being sworn in as Arkansas' 46th chief executive in January 2015, ordered a hiring freeze[footnoteRef:7] in his first executive order. Gov. Hutchinson referred to efficiency in the order and in a statement: [7: Governing has described how governments have controlled their headcounts through attrition. See Eggers, William. 2013. "The Real Story of the State and Local Workforce." (August 14)]

"That a moratorium on hiring is necessary to promote the fiscal efficiency and financial integrity of the State of Arkansas."

"The executive orders[footnoteRef:8] I signed today will help provide that new perspective, which is critically important as we find new ways to make state government work more efficiently for all Arkansans." [8: Gov. Hutchinson signed a second executive order requiring a review of state agency rules and regulations prior to submission.]

Six months later, Gov. Hutchinson cited efficiency in a statement about the hiring freeze:

"We want to be good stewards of the taxpayers' money, and this is an example of carrying out that philosophy. My first act on my first day in office was to institute a hiring freeze so that we could be more efficient and prudent in how we staffed state government."[footnoteRef:9] [9: Efficiency initiatives saved $2.5 million during the first six months of 2015.]

Several state agencies were merged during the General Assembly's 2015 fiscal session. These were the Department of Rural Services and Science and Technology Authority into the Economic Development Commission; the Division of Land Survey into the Geographic Information Office; and the Building Authority into the Department of Finance and Administration.[footnoteRef:10] According to officials, a cultural change must occur within state government to increase efficiency. "This governor's aim is to inspire people to change," an official explained. "Every department has employees with ideas about improving efficiency. The challenge is getting them to come forward with ideas because not all of them will happen."[footnoteRef:11] [10: Savings were estimated at $10 million to $12 million over five years. Gov. Hutchinson termed mergers "efficiencies measures." ] [11: Interview with state employee, February 19, 2016]

Gov. Hutchinson Announces Efficiency Project

Gov. Hutchinson announced an Efficiency Project in December 2015 near the end of his first year, noting his interest in the topic and "a very willing leadership team (of) cabinet officials." He defined the challenge in two sentences:

"How can we best deliver services for the taxpayers in the most cost-efficient manner. That is the objective."

Gov. Hutchinson explained the objective is "not cost savings at any measure. It is effective delivery of services in the most cost-efficient manner."[footnoteRef:12] [12: Gov. Asa Hutchinson public remarks, December 17, 2015]

In announcing the Project, Gov. Hutchinson issued the following memorandum:

"As Governor of the State of Arkansas, I am committed to preserving and protecting the financial integrity of our state. Transparency, accountability, and efficiency promote t