Chair's Corner: Kristen Rottinghaus (Kansas)
Happy New Year! I won’t dwell too much on everyone’s favorite topic, COVID-19. But given the times, I think it’s important to acknowledge that the pandemic is still very much a part of our lives. Many of us are tired, mentally and emotionally drained, and looking for some certainty and good news. Unfortunately, I can’t simply wish all those challenges away with a new year’s greeting. But as someone who’s an eternal optimist, I’ll attempt to recognize a silver lining at least from a professional perspective.
As difficult as the last couple of years have been, they’ve also pushed our offices in ways we otherwise may not have pursued. Greater flexibility, improved technologies, increased efficiency, greater appreciation for colleagues’ personal lives—these are just some of the ways I’ve seen our Kansas office grow stronger in the last two years. And it’s with that in mind that I’ve challenged my friends on the executive committee to build on the takeaways and lessons learned from the last couple of years. We’ve set the following goals for the coming year:
- Continue to provide more frequent training, both in-person and virtual. NLPES is still planning to join five other staff sections for an in-person professional development seminar this fall in Atlanta. We’re coordinating the details now, so be on the lookout for additional information including dates and registration instructions soon. In addition to the Staff Hub ATL 2022, we’re planning to offer a handful of virtual trainings throughout the year. The executive committee recently surveyed offices to get opinions on the types of training that would be most useful. We’ll use that information to plan a schedule of virtual trainings at minimal cost to member offices. Brenda Erickson will provide more information when it’s available.
- Update and modernize the professional development resources page. The executive committee also is using the survey feedback to revise our online training resources. We aim to refresh the page by making better use of today’s video technology and provide a layout that is easier to navigate. In time, we hope this page can become a go-to resource for your office.
- Develop a coordinated communications plan, including a LinkedIn group for member offices to connect. The executive committee is working on a strategy and plan for better coordinating with (and facilitating communication among) member offices. The plan also will provide a framework for continuing some of our fledging communication strategies such as LinkedIn and our information sharing calls, both of which we’ll continue in 2022.
- Make the audit report library more user friendly. The initial feedback on the report library has been positive, but it has been a little clunky to use. The executive committee is working with NCSL to come up with some strategies for making the library easier to search and maintain. See the more about the audit report library under News & Snippets below.
I want to thank the 2021-2022 NLPES Executive Committee for their commitment to the profession and for their willingness to provide their time and talents to accomplishing this year’s goals. In particular, I’d like to congratulate Eric Thomas (Washington) on being elected as our new vice chair and Darin Underwood (Utah) on being elected our new secretary. I’d also like to commend our immediate past chair, Kiernan McGorty (North Carolina), for a successful 2020-2021 term.
I firmly believe we produce better products when they reflect the ideas, thoughts, and suggestions of different people with different perspectives. So please don’t hesitate to reach out if you have feedback or suggestions for the executive committee. We are here to serve you. Cheers to a happy, healthy 2022!
Kristen Rottinghaus is the 2021–2022 NLPES Executive Committee Chair.
Research and Methodology
NCSL and Pew Partnership Provides States with Resources to Evaluate Tax Incentives | Dana Lynn (Washington) and Michele Colin (Colorado)
A growing number of states are deciding that ongoing, rigorous evaluation of tax incentive programs is a win for their states. Legislatures across the country are seeking honest answers to hard questions on whether incentive programs are achieving their goals, and the incentives’ actual economic impacts and opportunity costs. More than 30 states and large cities such as New York, Washington, D.C., and Philadelphia have adopted tax incentive evaluation programs, with Georgia and New Jersey most recently adopting an evaluation program.
As states venture down this challenging road, The Pew Charitable Trusts provides valued support to both new and veteran incentive evaluators. Pew staff also are ready to help work with policy makers and staff as states consider implementing a tax incentive evaluation program.
Pew created the Evaluators Network to supply resources to state tax incentive evaluators and facilitate peer support and collaboration. Through events like “Office Hours”, an on-line collaborative deep-dive into a specific topic led by an experienced peer, and a tri-yearly newsletter, evaluators can get the latest on useful methodologies and strategies for analysis, new state tax incentive evaluations, legislation implementing evaluation recommendations, and upcoming events.
We are part of the Evaluators Network Advisory Group composed of five veteran tax incentive evaluators bringing a wealth of experience. Dana has been reviewing tax preferences as part of Washington’s JLARC since 2009. Michelle helped to implement the tax expenditure evaluation process at the Colorado Office of the State Auditor (OSA) beginning in 2016 and has been overseeing these evaluations since that time.
The Advisory Group assists The Pew Charitable Trusts staff, bringing our in-the-field perspective to identify helpful and relevant topics for new workshops and newsletters. The Group also helps develop the agenda for the Roundtable on Evaluating Economic Development Tax Incentives, hosted by NCSL and sponsored by The Pew Charitable Trusts, annually since 2015. In November 2021, NCSL and Pew hosted the first hybrid roundtable. Some members joined online while others gathered in Washington, D.C., to meet, learn, and share best practices, evaluation strategies, and new methodologies.
Interested in learning more? Visit NCSL’s tax incentive evaluations database or Pew’s website on economic development incentives. You may also contact Pew directly.
Dana Lynn is a senior research analyst with Washington Joint Legislative Audit and Review Committee. Michelle Colin is the deputy state auditor in the Colorado Office of the State Auditor.
Report Spotlight
Editor’s note: If your office would like to highlight its award-winning report in the Working Paper, please let Jason Juffras know.
Navigating in Turbulent Times: Forecasting the Impact of COVID-19 on Local Governments Revenues | Edward Seyler (Louisiana)
Background
At the onset of the COVID-19 pandemic, we inquired with state policy makers and found that estimating the impact of COVID-19 on local government revenues was of interest to them, and that no other government agency was working on this task. Although this project was different from our usual work in that we were not evaluating the performance of any particular government program, our agency was still uniquely capable of studying this issue because of our performance audit services section’s experience with economic analysis and our local government services section’s experience with monitoring local government finances. We streamlined our process as much as possible to provide this information for local governments adopting their budgets and legislators allocating CARES Act funds, and we issued our first forecast on May 7, 2020.
Gathering data
To forecast local government revenues, we first needed actual historical financial data. Although numerous national and Louisiana-specific data sets existed with data on local government revenues, there were no datasets that were as comprehensive, detailed, and frequent as we needed. The detailed financial data for each entity were, of course, available in PDF format from the comprehensive annual financial reports filed with our office, but this would have required us to do data entry for 491 local government entities for each fiscal year that we wanted to include. Instead, we opted to strategically overlay datasets from different sources to form a comprehensive financial data set for each of these local governments.
The Louisiana Department of Education (LDE) published data on the sales and property tax bases in each parish by fiscal year, which did solve a huge problem for us, but we still needed to know how much each entity was collecting from each revenue source, and the LDE data told us nothing about entities that were not school boards. To get sales and property tax amounts by entity, we ultimately did some data entry from annual financial reports, but for most entities we interpolated and extrapolated the sales and property tax amounts from the Census of Local Governments (released every 5 years) based on the percentage change in the reported sales and property tax bases in each entity’s parish for each year in the LDE data. For other revenue sources, like mineral and gaming revenues, the state was more directly involved in collections and produced periodic reports that we could use to find how much each entity had received.
Methodology
Our overall strategy was to break up each revenue stream into components, and then forecast those components separately to get a more accurate overall picture of the impact of COVID on total revenues. For example, for sales tax, we identified portions of the tax base that could be attributed to tourism, restaurants, manufacturing machinery and equipment, and general retail sales, among other categories. Some parishes publish a sectoral breakdown of their sales tax base in their financial reports, and we used federal economic statistics to estimate sectoral shares for other parishes.
We then identified which sectors of the economy were the drivers behind those revenue streams. For each sector of the economy, we looked at publicly available data to estimate how much each sector would initially contract, and how long it would take to revert to its pre-COVID baseline trend. We came up with four scenarios in total: baseline (assuming COVID had not happened), average, pessimistic, and optimistic.
Since all parish-wide entities use the same property and sales tax bases (with few exceptions), we could use this data set as the basis for a regression analysis (using an Arellano-Bond estimator) of past sales and property tax bases on various indicators of economic activity. This enabled us to predict how much the sales tax base would decrease based on, for example, a 5% drop in parish-wide aggregate wages in the concurrent and previous fiscal years. We used this wage-tax elasticity to estimate the impact of COVID on retail sales and other non-retail sales, but the enhanced federal unemployment benefits were modeled as impacting retail sales, but not non-retail sales.
Our forecast for energy industry performance was based on prices (which we forecast based on futures markets) and estimated production elasticities published by the LSU Center for Energy Studies. We weighted production in each parish based on whether it was located in the more oil intensive southern parishes or the more natural gas intensive northern parishes. The performance of the energy industry impacted parish revenues directly through severance taxes and mineral royalties, as well as indirectly through its impact on personal income.
Results
We estimated that the state’s school boards, parish governments, municipalities, and sheriffs would lose $405 million to $1.1 billion over fiscal years 2020 and 2021 in our first report, released in May 2020. We later revised these estimates to $522.9 to $860 million in our September 2020 update. In both forecasts, the biggest impact came from sales taxes, which are more sensitive to economic downturns. The differences between the two reports were driven by minor tweaks to the assumptions as well as three significant methodological changes: incorporating the impact of Hurricane Laura, emergency-related property tax reductions, and changes in commuting patterns. A line graph showing our updated forecast as of September 2020 for sales and property (property) taxes in the baseline and average COVID scenarios is shown below.
Between the first and second reports, Hurricane Laura struck Lake Charles and the western portion of the state, causing significant damage to the its power grid, disrupting economic activity, and severely damaging property. In general, hurricanes negatively impact property taxes because of the property damage, but they can positively impact sales taxes through increased spending on building materials, appliances, furnishings, vehicles, and replacements for other damaged items. Based on past experience with major hurricanes, we estimated that the impact of Hurricane Laura on local sales and property tax revenues in fiscal year 2021 would amount to $20 million.
We also revised down our forecast of property tax revenues based on reports that many assessors would be invoking a state law that allowed assessors to reduce property values temporarily when their value was negatively impacted by disasters or emergencies. We estimated these reductions based on discussions with assessors about their plans for how they would approach the tax year 2021 assessment cycle.
Our second report also accounted for changes in commuting patterns. Revenues in parishes who had more workers commute in than commute out (such as Orleans) were more negatively impacted than bedroom-community or exurban parishes, where people were spending more time and spending relatively more money than they did pre-pandemic. We obtained actual sales tax revenue amounts from all of the parishes that published this information online, which represented a variety of commuting patterns. We then parameterized the impact of commuting patterns to minimize the forecast error.
Impact
Overall, our report helped local governments to plan for the uncertainty surrounding the COVID-19 pandemic. We provided our report to our local government services section, who provided us with valuable advice throughout the project, for their use in monitoring local government financial health.
State lawmakers and executive branch officials could refer to our report in deciding how to allocate CARES Act relief dollars, and the report was provided to the state’s congressional delegation for their use in deciding federal fiscal policy in the wake of the pandemic. Our report also served as a reference for fiscal analysts in other states. Ultimately, we hope to publish more reports on the economic situation of local governments, with the hopes that continued work in this area will help us to assess and improve our accuracy and understanding of local government economic dynamics, and that our work will yield public policy insights that can help local governments to better serve the public.
Edward Seyler is an economist with the Louisiana Legislative Auditor’s Office.
Office Process Spotlight
A Good Graphic Can Be Worth More Than a Thousand Words: Recent Efforts in Virginia to Develop More Effective Data Visualizations | Drew Dickinson (Virginia)
Because so much is competing for our attention nowadays, it seems more important than ever to make sure we make good use of the attention that individuals are able to spare.
In recent years, the Virginia Joint Legislative Audit and Review Commission (JLARC) has been seeking ways to improve graphics in its reports and briefings. JLARC is fortunate to have an information graphics designer on staff, but all research staff are expected to give their best efforts at first drafts of graphics. To help staff refine their data visualizations skills, JLARC staff participated in a two-day training session with Jon Schwabish, founder of PolicyViz, on how to create more effective graphics. (Mr. Schwabish also led three training sessions at the September 2021 NLPES Virtual Professional Development Seminar.)
Since the training, JLARC staff have sought to incorporate many of his lessons and his core principles of data visualization when developing graphics. The following are several examples of how we have sought to incorporate some of his lessons into our graphics.
Help the audience focus on the most important information
Differences in shape, position, size, or color can help audiences focus on the most important information in graphics. JLARC staff used this lesson when developing a graphic to show how Virginia’s sole juvenile correctional center is much larger than all other similar facilities in nine nearby states (Virginia’s Juvenile Justice System, December 2021). JLARC sought to direct the reader’s attention to one data point: Virginia’s juvenile correctional center. Prior drafts of the graphic included additional labels and gridlines, and all dots were the same color.
Reduce clutter
Clutter can include unnecessary text, grid lines, or gradients. In its Review of the Virginia Information Technology Agency’s (VITA’s) Organizational Structure and Staffing (2021), for example, JLARC staff sought to focus the audience’s attention to a key point: that a vast majority of VITA staff reported being satisfied with how they were managed. Rather than show all of the categories, differential shading, and gridlines, JLARC staff simply showed three statements and the proportion of staff who reported agreeing with those statements in a survey.
Show only necessary data
In its 2021 report Transportation Infrastructure and Funding, JLARC staff provide a useful example of this concept—showing only Virginia’s rank compared with other states before and after recent changes to Virginia’s taxes and user fees. Much more data could have been shown in this graphic (or in several graphics), but JLARC staff sought to show only the most important—the effect of changes to Virginia taxes and user fees on Virginia’s rank compared with other states.
Multiple graphics may be more effective than one (i.e. “small multiples”)
One final example I thought would be helpful to share is another graphic that was used in JLARC’s 2021 report Virginia’s Juvenile Justice System. In this graphic, JLARC staff needed to convey that there is excess juvenile detention center bed capacity in every region of Virginia—and that the excess capacity is not a result of the COVID-19 pandemic. Initial versions of the graphic placed all of the data on one graphic, which was difficult to understand. Using Schwabish’s “small multiples” technique, the team separated the utilization data into five graphics, one for each region of the state. The team also removed gridlines and unnecessary labels to minimize the clutter.
Drew Dickinson is a chief legislative analyst and project leader with Virginia’s Joint Legislative Audit and Review Commission (JLARC).
News & Snippets
Making Flexible Work a Success: Lessons Learned from Kansas LPA | Mohri Exline (Kansas)
Flexible work environments are all the buzz these days, but what does it really take to make flexible work environments a reality? The Kansas Legislative Division of Post Audit had flexible policies long before the Covid-19 pandemic threw the world headfirst into the deep end of the pool. I expected that joining the workforce would mean suits and high heels at my desk from 9 to 5 every day, and I dreaded that idea so much that I joined the Peace Corps for one last hurrah before becoming a career woman. I remember telling my supervisor that I needed to leave a bit early to sign my lease when I moved to town, and I’ll never forget his response, which was essentially, “Why are you telling me this? Do what you need to do when you need to do it.” I thought, “Wow, this is how a job is supposed to feel.” I like to say that this job has ruined all other jobs for me.
I would argue that flexible work environments and healthy productivity go hand in hand. Some people may find that dressing to the nines is what it takes to get in the headspace to do their best work. For me, dressing to the nines is constricting and keeps my mind ever consumed with my physical comfort level. Maybe having that separate space away from home helps to focus on the work to be done, but maybe not having to worry about whether your dog is destroying your couch while you’re away at the office allows you to focus much better on the task at hand. For me, I find I focus much better when I am in my own space, and Post Audit has done everything they can to support people like me, like giving us a stipend to make sure our home offices are suitable workspaces. The point is that we found that having a flexible work environment isn’t just about letting people work from home a couple days a week or dress casually on Fridays. It’s about letting people decide what works best for them and respecting their ability to make that decision responsibly, no limits.
One of the biggest hesitations to working from home is the idea that the office will suffer from lack of social interaction or impromptu chats and brainstorms in the breakroom. I do understand this concern, but I want to also offer my thoughts and experience. We live in a digital age, and the people entering the workforce these days are people that have grown up building relationships over the phone and over text messages. Staying competitive in attracting young talent means that we should be building comfortable work environments for them. So don’t be afraid to send a Zoom chat when you have a question, and video chat when you need to discuss. Get work done together and bond over your dog’s surprise cameo. To me, this is one of the biggest benefits to working from home. I get to bond with my coworkers in a way that would never have come up naturally next to the water cooler because we get a little window into each other’s worlds, and we get to see people as they are. I’ve worked in many traditional offices over the years, and I have had my fair share of water cooler conversations, but I can say that I know my coworkers here at Post Audit better than anyone I’ve chatted with over a Dixie cup.
That said, this doesn’t just happen. It takes a collective dedication to this idea. It takes self-control. Most importantly though, it takes trust and respect. Management has to trust that they hired great people and expect greatness, and individuals have to accept responsibility to hold up their end of the deal. For us, this means that we are expected to get the job done and to meet our individual deadlines to keep the team moving forward. It’s our job to figure out what that means for us, and from there, it’s pretty much sink or swim. Either you prove that you can manage your time and produce quality work in an unstructured setting, or Post Audit may not be the best fit, and that’s okay too.
All I can say is that I am thankful to work in a place where I feel trusted and respected, and a huge part of that is the flexibility this job offers. Embracing this new trend has made Post Audit a dream job, and I would urge anyone on the fence to take that leap. It’ll be a good one.
Mohri Exline is an auditor with the Kansas Legislative Division of Post Audit.
Staff Comings and Goings
More staff changes have occurred during the past few months. Here’s a snapsho of what’s happened.
- California—Elaine Howle retired in December 2021, after serving for more than 20 years as the California State Auditor.
- Kansas—Chris Clarke was appointed as Kansas’s new legislative post auditor. She had been the deputy post auditor. Following in the footsteps of former Legislative Post Auditors Barb Hinton and Scott Frank, Justin Stowe is taking a position with the Washington State Auditor’s Office.
- Minnesota—Judy Randall was selected as Minnesota’s new Legislative Auditor. Her predecessor, James Nobles, retired in October 2021, after holding the position for 38 years.
Add These to Your NLPES Radar
2022 NLPES Awards
Each year, NLPES offers an opportunity for legislative audit and evaluation offices to be recognized for their work. Four categories for recognition exist—Outstanding Achievement, Excellence in Evaluation, Excellence in Research Methods and Certificates of Impact. Go to the NLPES Awards website for information about the various awards and on how to make a submission in 2022. The deadline for award applications is Friday, May 6, 2022.
2022 NLPES Executive Committee Election
When it’s spring, it will be time for the NLPES Executive Committee election. Four positions on the 12-member Executive Committee will be up for election in 2022. So, if you want to become more involved in NLPES, think about running for a position on the EC. More information about running for office will be distributed via the NLPES website, Linked In page and NLPES listserv as the time for the 2022 election draws closer.
Websites, Professional Development and Other Resources
Audit Report Library Changes Are Coming
The NLPES Audit Report Library soon will become the NLPES Audit Report Database. The library’s content is being converted into a Power BI database. When the database goes live, it will contain more than 800 reports released by member agencies between 2018 and 2022. Database content will be updated on a quarterly basis.
NLPES LinkedIn Group
The NLPES Executive Committee established a LinkedIn group exclusively for NLPES members. We are excited to offer another way for offices to connect, exchange ideas, and share information relevant to our field. And we hope you’ll join the group to share stories about your office’s awesome work or to simply stay connected when doing so seems increasingly tough.
NLPES Listserv
The NLPES listserv is an email discussion group for NLPES members. Authorized listserv users can query other states about evaluation work, receive announcements about performance evaluation reports and job opportunities from other states, and are notified when the latest edition of this newsletter is available! To join the listserv, send an email to Brenda Erickson, NCSL liaison to NLPES, with the subject “SUBSCRIBE to NLPES Listserv.” Include your name, job title, legislative audit agency/organization name, mailing address (including city, state, zip code), phone number and email address. A “Welcome” message will be sent to you once you are successfully added to the listserv. See the NLPES listserv webpage for additional information on how to post messages and “netiquette” niceties, like not hitting “Reply All” when answering a query posted to the listserv.
Who We are and What We Do: A National Survey of State Legislative Program Evaluation/Performance Audit Programs
What’s the most common internal performance measure for evaluation shops? How many offices tweet? What percentage of staff has fewer than 10 years of experience? How can you contact a sister office in another state? Find out in Who We are and What We Do, formerly Ensuring the Public Trust, which provides descriptive information about the legislative offices that conduct performance audits and program evaluations.