A Q and A With Robert Campbell III: February 2010

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Interview by Garry Boulard

Robert Campbell III is the vice-chairman and U.S. State Government leader for Deloitte LLP, which includes consulting, financial and tax services to the states. He is the co-author of “States of Transition—Tackling Government's Toughest Policy and Management Challenges” and his observations on how state governments work have been published in a wide variety of national magazines. He also has also worked closely with state leaders on a variety of financing and operational issues and has been involved in specific projects dealing with revenue and taxation issues, as well as economic development, public health care, and financing and administration.

State Legislatures: When it comes to reducing budgets, what are you seeing in the states today?

Robert Campbell: Most of the states have approached this downturn as they have approached other recent downturns, deploying across the board cuts, postponing certain expenditures, leaving certain items between the accounting periods in the interest of getting the budget reconciliation.

Unfortunately, although there are a few state leadership teams that have taken advantage of the crisis to drive alignment around more fundamental change, I am finding that to be very much more the exception than the rule. And although the American Recovery and Reinvestment Act certainly helped a lot in the short term, it is obviously temporal, and I am finding and observing in a number of states that the ARRA funding has further exacerbated the challenge of transformation by allowing some of the tougher decisions to be put off even longer.

And that's unfortunate given that some of the issues driving today's budget crisis are more systemic and are going to require more fundamental changes.

I am seeing a few states doing more creative, innovative things on this front.

SL: What sort of things?

Campbell: Deloitte works with most of the states, in some states as an advisor, which I want to disclose first, although I think I can still look at what is going on independently.

We are seeing several states undertake shared services initiatives across the state enterprise where state the legislative and executive leadership are assessing what organization performs a function particularly well, and then having that agency perform it for other agencies, vs. having each and every agency perform each and every administrative business process.

That allows for some streamlining, allows for some cost-savings, and arguably allows for an improved level of service. Governor Tim Pawlenty's “Shared Service Initiative,” which has had strong legislative engagement, I think is a good example. I've seen Illinois do some creative things in the shared services area as well, although I am not current with where they stand.

I have also seen several stands moving to take advantage of online technology now available to get much more customer service work out of the office and onto the Internet. There was a first burst of that back in the late '90s and early part of the decade. It had some success. In my view, the technologies now available were not available then and a few states are starting to adapt more advanced technologies, whether its vehicle registrations, driver's licenses, birth records, what have you. It has had the effect of being able to reduce staff levels and also improve customer service because citizens don't have to drive into the state office and wait in line.

The Texas online initiative, it's actually called Texas Online, would be one I would highlight, and there are others out there.

Also there are several states re-looking at data center consolidation, technology consolidation, across the individual agencies, reducing capital costs, driving operating cost savings. Teri Takai, State Chief Information Office in California, is doing some good work there. The Michigan CIO office seems to be doing some good work.

Several states are looking at transforming revenue operations. Probably the most creative one: Florida has adapted an enterprise technology solution to manage all revenue collections across the state with a significant enhancement in revenue, significant reduction in cost of administration.

I am also seeing several states moving towards investing in technology to improve integration of human services, eligibility and service delivery. Historically because of the federal entitlements, you have had a number of different agencies and programs, each doing their own thing there.

By moving toward an integrative system people in need are able to go to one place, apply once, get access to all services required to be self-sufficient. Pennsylvania, Michigan, and Texas, among other states, are doing some work in the integration area.

These are all initiatives that require some capitalization, but end up having significant cost-savings while actually improving the state's service to its citizens.

SL: But isn't there a resistance to many of these ideas within the actual government administration?

Campbell: Sure—that is human nature. The sorts of ideas I was describing are not one size fits all. One really does need state-specific analysis of business processes, organization and staffing, cost of operations, to be sure that the changes being contemplated do make sense for that environment.

There are some instances where a methodical approach has been taken and it goes pretty smoothly. But there have been other cases where leadership may jump to an answer such as outsourcing or making a major change without the underlying substantive analysis, where one ends up trading one set of problems for a new different set of problems.

The ideas I am sharing may have potential, but they need to be approached in a methodical, analytical way.

With that said, even with some of these initiatives that have been approached in a well-thought manner, their success is also frequently dependent on having a well-though approach to change management within the state organization. And I would ask: are we adequately communicating upfront before the change the reason and support for the change? Are we adequately training the state workforce in the new business environment? Do we have a plan for displaced workers, or retraining them to address other high-priority state needs?

So there are some things one can do to help head off the change management concerns. But it's natural for people to be comfortable with what they are doing and how they are doing, and to feel threatened by new different ways.

SL: During Ronald Reagan's first term as governor he talked of cutting California's budget by 10 percent across the board, regardless of department, and later discovered for a variety of reasons, some of which had to do with certain services being more important than others, that such a cut could not be done. Are we still seeing this sort of approach to budget-reduction in the states?

Campbell: There are still state legislative leaders taking an across the board percentage to reconcile. It is certainly expedient, it avoids the complaints of “You are picking on me, because I had to take deeper cuts.” But that sort of approach fails to take on some of the more fundamental organizational change, organizational transformational needs that the states have that, even if revenue starts to turn up, are still going to have to address.

SL: What about the argument that you can't really cut your way out of a budget crisis—if you get rid of one program that costs $500,000, but have a shortfall of $5 million or more, what difference does it make in the long run?

Campbell: I've spent a little time in Sacramento lately. I think in some of the states, and probably California would be included, the cost of administration of state government is such a small portion of the total general fund cost of state government, that you can't cut enough administratively to address the issue.

But in my experience and judgment there are significant opportunities associated with reviewing and challenging policy decisions long set in statute, which drive costs. And this is not administrative policy but program policy: the who, how much, how often, for what frequency, for what duration, with what outer limits questions.

So I would suggest re-challenging statutory program policies would be an area not addressed that should be.

And I would suggest that the states could be much more focused on revenue and receivables management, not revenue taxation, but obligations owed to the state, receivables owed to the state, across the state enterprise. From my perspective, much of that responsibility is vested out with individual agencies and those agencies don't really have receivables management and collection as their core competency.

For states willing to take a more methodical enterprise-wide approach to improving collections, I think there are opportunities there.