The value of Minnesota government: Cost is one issue; quality, quite another

How much should running government cost? That's the central issue in a little-noticed battle taking place at the Legislature, with potentially major implications for Minnesota. To try to force state government to be more efficient and restrain its growth, both the House and the Senate passed budget bills with significant cuts to state agency operating budgets. Moreover, as they work toward a final budget, legislators are also considering mandating a reduction in employee head count and putting a hard cap on compensation growth. Agency officials have sharply criticized these proposals as arbitrary, counterproductive and harmful to government services, all while making it more difficult to recruit and retain the talent government needs.

Regardless of how this fight eventually plays out, the public interest probably won't come out ahead. That's because the underlying problem — how the public workforce is organized and managed — won't be addressed.

For more than 20 years, the polling organization Gallup has surveyed workers worldwide on workplace elements with proven links to performance outcomes. Recently, it issued a report about state and local government workers' engagement. Based on responses to its survey, Gallup grouped respondents into one of three categories:

• Engaged: employees who work with passion and feel a profound connection to their work. They drive innovation and move the organization forward.

• Not engaged: employees who are essentially "checked out." They put time but not energy or passion into their work.

• Actively disengaged: employees who are not just unhappy at work, they are busy acting out their unhappiness by undermining what their engaged co-workers accomplish.

Minnesota's results were dismal. Gallup classified only 28 percent of state and local government employees as "engaged." Fifty-five percent were not engaged, and nearly 1 in 5 (17 percent) were actively disengaged.

What's behind these depressing findings? According to a review of the Gallup results in Governing, the states with the worst employee engagement scores tended to have one thing in common. They rely on very old and regimented civil-service systems that govern hiring, career progression, management of performance, pay increases and most work-related problems.

Such findings resonate with government professionals. Governing reports that the topic of recruiting, retaining and rewarding high-performing government employees is invariably a top concern when it meets with public officials around the country. As Governing states: "[P]ublic officials tell us over and over that their agencies are fighting a losing battle." The author of Governing's Gallup review adds, "My own experience tells me civil service laws and regulations inhibit the response to operational problems and contribute to a culture that inhibits employee performance."

It's a problem that has existed in Minnesota for some time. Years ago, I was speaking with a veteran state agency manager who expressed frustration with some recent staff losses. He had hired a couple of young, bright, energetic performers, both of whom had left in short order when the limitations of personal and professional development, career advancement and related compensation issues in government employment became evident. "I've learned my lesson," he said. "Next time, I'm going to look for average."

It's in this context that the debate over funding state agencies needs to be framed. Applying staffing cuts and compensation caps within our current civil-service system is a recipe for only more employee frustration and disengagement — especially when legislators inevitably add new administrative and reporting responsibilities into law. Instead of efficiency gains and productivity enhancements, we are much more likely to see a deterioration of government services and significantly reduced accountability and oversight thanks to a reduction in the level and quality of the management and information these critical "backroom" operations provide.

But money can't solve a problem when the problem is how money is being spent in the first place.

The public sector is riddled with narrowly defined job classes and rigid work rules. Compensation is based on what bureaucrats think a job is worth to government rather than what labor supply and demand realities say. We manage our government labor force as a giant commodity in which tenure and inflation rather than skill acquisition and performance drive changes in employees' pay. And increasingly, any new money for compensating employees is directed toward unfunded retirement commitments, not paychecks.

All this makes any spending on agency operations as flexible, adaptive and responsive to emerging realities and new needs as poured concrete.

There is an important agenda to pursue here. Maintain high-quality government services by improving productivity and efficiency as competition for general fund resources continues to intensify. Create a workforce that is committed and engaged. Ensure that needed talent is willing to come to and remain in the public sector. Forcing change through budget cuts won't deliver those outcomes. Neither will pretending that labor management designs from a century ago advance the needs of 21st-century government.

The public-sector workforce is the scene of a tug of war between the defense of middle-class values and the need for greater efficiency, innovation, flexibility and performance in government. Resolving this tension goes way beyond the give-and-take of budgeting. In the spirit of high-profile state study commissions of the past, it's time to establish a 21st-century civil-service reform commission to tackle these challenging issues. Minnesota's future depends on it.

Mark Haveman is executive director of the Minnesota Center for Fiscal Excellence.