A vision focused on results instead of costs

Business isn't bad everywhere. At the headquarters of the 18-year-old Public Strategies Group in downtown St. Paul, clients and potential clients are calling constantly these days.

Demand has never been greater for what PSG sells -- advice about how governments can do as much or more than they do now, with less.

Generous guy that he is, PSG cofounder Babak Armajani gave me gratis a potentially billable hour chock-full of advice he would give Minnesota government officials if they'd hire him. (Or, he hinted mysteriously, it may be the advice he is giving Minnesota. He won't disclose which state governments have PSG under contract.)

Armajani is "Armi" to just about everybody he meets. For years, he was the professional sidekick of Peter Hutchinson, his Perpich administration colleague, PSG cofounder and 2006 Independence Party candidate for governor.

Hutchinson moved on to the Bush Foundation in 2007. But PSG and Armi don't appear to have lost a step, or to have run out of ideas for streamlining government. He had three big ideas to share with Minnesotans. They belong in the mix at the Capitol this week as a new revenue forecast delivers more bad news to government budgeteers.

•Focus on results per dollar. If he could convince legislators and local elected officials of just one thing, Armi said, it would be this: "The bottom line of government isn't dollars. It's results per dollar.

"As opposed to thinking, 'We can get by with fewer paper clips,' we should be saying, 'What are the results we are trying to produce, and is there a better and cheaper way to produce the same results?'"

To illustrate, Armi cited work PSG did in other states on child placement services. PSG's analysis found that the states were paying group homes a per-day fee for their services. That acted as a financial disincentive for producing the desired result -- prompt placement of children in a permanent home. Altering the payment structure to reward agencies for placing children rather than housing children saved money and produced better results, he said.

•Provide service recipients with choices. "When the ultimate beneficiary of a service has choice over the source of that service, or the mix of that service, you get better outcomes and more satisfaction than when the state decides for people what the source should be," Armi said.

He cited the experience of a state that cut spending on services for children with developmental disabilities but offered to switch at the same time to a voucher system that allowed families to choose from among several providers of the services their children needed. Families loved the idea, he said -- but the existing service providers didn't, and they defeated the voucher proposal in that state's legislature. The subsequent cuts left nobody happy.

•Allow flexibility; demand accountability. This is the idea at the heart of a proposal by the Association of Minnesota Counties that's getting a hard look this year. It would have the state stop directing how much counties spend on dozens of services, and instead hold them accountable for achieving results.

"This is 'Give us a block grant, get rid of all the red tape, and let us design our own system,'" Armajani said. It's a change that acknowledges that the way Hennepin County handles, say, mental health services can and probably should be different than the way Lac qui Parle County does.

Armajani said he is in sympathy with this session's impulse to save money by consolidating government services into bigger units, creating fewer and bigger counties, school districts and the like. But he cautioned that there's a right and a wrong way to consolidate, to wit:

"Most of what I've seen around the country is a Soviet-style approach. We'll force everybody into one central structure, or to use one source. You capture economies of scale. If you're just focused on cost, you can justify that to yourself.

"But if you're focused on results for the dollar, you find that large centralized bureaucracies don't necessarily produce better results, especially in the eyes of those served."

The better idea, he said, is to consolidate the providers of service into several competing entities, free local governments to contract with them and hold the locals accountable for securing good results.

His example was police services. "When city councils deal with public safety, they think about how to run a police department. That's how they spend their time, instead of saying, 'What are the results we want, and how can we use our money to get those results?'"

Armi asked hypothetically: What if a region had several law-enforcement services available and cities could contract with the one that best met their needs?

"It would be hugely controversial, I know. But it would be less threatening than the idea of consolidating everything into one metro police department and [having] the Met Council run the police. That would have much more opposition. That would be considered loss of local control."

Spoken like a fellow who, though he may be advising other states, knows his home state pretty well.

Lori Sturdevant is a Star Tribune editorial writer and columnist. She is at lsturdevant@startribune.com.