The results for year one of the Iowa Charter Agency pilot program show that if you give governmental bodies more authority to manage, they’ll do a better job of it, and even set a national example.

As of July 1, 2003, six Iowa government agencies – the Department of Revenue, the Department of Corrections, the Department of Human Services, the Department of Natural Resources, the Iowa Veterans Home and the Alcoholic Beverages Division – were granted charter agency status for five years. The legislation for the Charter Agency program, part of a larger movement of “reinventing” government, was passed by the Iowa General Assembly at the end of the 2003 legislative session.

The agencies received an assignment in conjunction with their new status. Their goal, along with the Iowa Lottery, which retains a unique status, was to contribute $15 million to the effort to reduce the state’s budget deficit, either through cost savings or increased revenues. In exchange, the charter agencies received more flexibility, more autonomy and less red tape.

“The idea was introduced and passed at the end of the 2003 legislative session as a way to help balance the budget,” said Jim Chrisinger, who is in charge of strategic planning and accountability for the Iowa Department of Management. “The state ran in to the problem where it had anticipated revenues of a certain amount and anticipated expenditures of a certain amount, and the latter number was higher. They had to figure out how they were going to close the gap before the session ended, and having $15 million come from the charter agencies would help. “

The results show that each agency met or exceeded its contribution goal, bringing the total savings generated by the program to more than $22 million, far surpassing initial expectations. Put another way, the charter agencies worked harder, with less funding in some cases, to help close the deficit in the general fund. What made this possible were the new opportunities that came with the “lighter bureaucratic cloud,” as Chrisinger described it.

“You need the rules and regulations, but you don’t want it to be the only thing that people think about,” Chrisinger said. “You need rules to accomplish their purpose, but you don’t want them to get in the way of innovation or better service to your customers. Like the bottom line in business is service to your customers, the bottom line for state government is service to Iowans.”

The agencies say what is even more significant about the past year are the new ideas and programs they’ve launched, which will forever change and enhance their services to Iowans.

The Department of Revenue was able to cut costs and create additional revenue to the tune of $1.3 million. Its goal had been $1 million. Simply by having the state-mandated cap lifted on the number of full-time employees it could have, along with having new access to grant money to hire additional employees, the department was able to concentrate on two areas that were eating away at its bottom line, said Cindy Morton, administrator of the department’s internal services division.

“Through the money we received through the grant, we knew that we could go out and hire new auditors,” Morton said. “By doing that, we devoted those new employees to going in to some examination of tax returns that we knew could bring in some additional revenue, and we looked at some things that were slowing us down and causing us to pay more in interest.”

Similarly, the Department of Natural Resources was able to make significant changes to its staff, and saved $38,281 by replacing contract employees with 15 full-time positions. Because of the cap on full-time employees, the DNR had been dependent on area staffing agencies to provide contract labor for its office jobs, costing it extra money in third-party administrative costs and training and retraining the temporary employees to fill permanent positions, according to Liz Christiansen, deputy director of the department.

“The contract, we had made it so that we couldn’t keep an employee more than 18 months,” Christiansen said. “Where we know we have long-term funding, it makes sense to have those positions under full-time employment.”

Many agencies also reduced their travel costs. As charter agencies, they no longer had to follow the state’s travel company contract, and could take advantage of the most economical vendor for their purposes, including Internet options.

Another example of how charter agencies can act more like private businesses, demanding competitive rates for services, is in place at the Department of Corrections. The department is in the process of using its new authority to save taxpayers money on prescription drugs by submitting bids to multiple public and private-sector providers, instead of using a single provider.

Some of the changes the departments made as charter agencies were based on practical business sense. Others were a long time in the planning. But as the agencies found out, any change had a marked effect on the propelling them into further action.

The Alcoholic Beverages Division instituted many changes after gaining its charter agency status, and its efforts helped produce a 22 percent increase in revenues for fiscal year 2004. The ABD’s contribution goal had been $1.25 million. Its actual contribution was $9.8 million.

“We were able to take advantage of the entrepreneurial spirit and fashion profitable programs for the state,” said Lynn Walding, administrator of the division. “A lot of the ideas we put in place were ideas that we had beforehand, but there was no way to implement them. The charter agency initiative encouraged innovativeness, and therefore, the programs were able to come to life, and to the benefit of the taxpayers.”

Some of the changes the ABD instituted included taking over control of its distribution warehouse, which will save $64,000 per month, and developing a business plan with the Department of Corrections to use a combination of state employees and inmates from the Iowa Women’s Correctional Institute, which will result in a net savings of $1.5 million over the next two fiscal years. Also, the division initiated a variable wholesale liquor markup program March 1, which is showing early signs of increasing annual profits.

In the process of evaluating the division, Walding said they also found ways for the ABD to improve customer service, with many of the best ideas coming from the workers and staff who were most familiar with operations.

Christiansen said she has found that the charter agency program has also prompted the DNR employees to share their ideas on how to work toward “world-class government.”

“Tremendous opportunities have been identified, through the changes that we’re going through, which includes the charter agency initiative, and it’s brought out the best in our folks,” she said.

Though it may have taken strained economic times to prod the state government into exploring the “reinvention” of government, the new ideas that are being explored are helping bring the public sector up to speed with the private sector, Chrisinger said.

“Government has been much slower to come around to this more entrepreneurial, more team-oriented, more decentralized, more customer-oriented and less rule-oriented status, but slowly, that’s begun to happen,” Chrisinger said. “Now the public sector is learning and borrowing from the private sector and adapting that learning and borrowing to the special circumstances of government and the public sector.”

COUNCIL RECOGNIZES IOWA CHARTER AGENCY PROGRAM  Last month, The Council of State Governments selected the Iowa Charter Agency program as one of two regional winners for its 2004 Innovations Award Program, which is aimed at facilitating the transfer of successful ideas among the states.

The charter agency pilot program was launched in Iowa during fiscal year 2004, which ran July 1, 2003, to June 30, 2004. The highlights of the year include:

• The Alcoholic Beverages Division increased revenues 22 percent, which provided an additional $360,000 for substance abuse programs.

• The Department of Human Services helped boost Medicaid funding to schools, from $4.26 million in fiscal 2003 to $5.35 million in fiscal 2004.

• The Iowa Veterans Home generated an additional $361,778 and completed phase one of a three-phase electronic documentation project.

• The Department of Revenue saved $683,705 in interest payments and collected $633,705 from audits.

• The Department of Natural Resources hired 15 full-time employees and generated $76,500 through a new timber/lumber sales program.

• The Department of Corrections exceeded its goal to increase the use of women inmate labor on projects by 50 percent.