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Hoosier Fixer

Friday, February 29, 2008

Indiana governor Mitch Daniels has brought a corporate mentality to the job of streamlining state bureaucracies.

Mitch Daniels, Indiana’s Republican governor, approaches political leadership from a business perspective. Having spent more than a decade in senior management at pharmaceutical giant Eli Lilly before entering public service, Daniels focuses on cost efficiency and empirical measurement, which has enabled him to reform a wide variety of state services. “Being governor,” he said at an American Enterprise Institute conference earlier this week, has allowed him “to do things that…are very difficult to do in the Washington context.” Daniels would know: after leaving Eli Lilly, he directed the Office of Management and Budget in the Bush administration for more than two years.

Government is “the last monopoly,” he said, and it “lacks accountability.” The only way to make it effective is to “implant” a system of accountability to measure and count results as businesses do, because “what gets measured gets done.” For example, Daniels said, a visit to the Indiana Bureau of Motor Vehicles—the kind of trip most Americans dread—now has an average wait time of eight minutes and ten seconds, down from over 40 minutes. Customer satisfaction has surged to 97 percent. The fact that Daniels refers to patrons of the bureau as “customers” speaks volumes about his corporate mentality.

During his tenure, Indiana has reduced the number of state employees by 10 percent. This reduction, even with the institution of a pay-for-performance system that provides much larger rewards for good workers, has allowed Daniels to operate with a state payroll that is lower than it was four years ago. Daniels’s emphasis is on “managing for results,” and he is not necessarily against government doing the job. But if the private sector is more capable of administering a project effectively, reducing costs, and operating “at the speed of business, not the speed of government,” he supports privatization. That is why IBM has replaced the state bureaucracy in administering welfare programs—which has saved Indiana roughly $1 billion. Daniels also brought $4 billion to the state by privatizing Indiana’s toll road, and he deregulated the telecommunications industry.

Under Daniels, the number of state employees in Indiana has fallen by 10 percent. IBM has replaced the state bureaucracy in administering welfare programs, saving Indiana roughly $1 billion.

Daniels joked that he achieved success through what might appear to be a “very mysterious process,” but the practical reforms he implemented to control annual expenditures and streamline government operations are rooted in basic business principles. When Daniels became governor in January 2005, the state’s deficit was $600 million. Within one year of his inauguration, Indiana had a $300 million surplus. Cutting employees and expenditures was not the only contributing factor. Under Daniels, Indiana has improved its business tax climate, attracted a surge of foreign investment (particularly from Japan), and brought its unemployment rate to the lowest level in six years.

One big project Daniels hopes to finish this year is property tax reform. He plans to offer Indianans immediate relief on property taxes by using the revenue from an increased sales tax along with part of the state’s $300 million budget surplus, and he hopes to put a permanent cap on property taxes starting next year.

Daniels is not shy about finding unusual (and sometimes controversial) means to fund efficient programs. For example, his new health care program for the “chronically uninsured” is being funded by a higher state cigarette tax. And during his 2008 reelection campaign, he plans to advocate using revenue from the state lottery to help fund higher education for middle-income high school graduates.

In keeping with his business mindset, he refers to his potential reelection this fall as a “rehiring.” He does not believe he is entitled to a second term as governor. Instead, he acknowledges that there is a huge amount of work left to be done, and he sees his first-term record as a qualification for remaining on the job. Daniels said that a fairly accurate stereotype of Indianans is that they are “cautious about change,” and his reelection may end up depending on whether Hoosiers think he is “stirring up too much dust.”

Christy Hall Robinson is an editorial assistant at the American Enterprise Institute. Former Indianapolis mayor Stephen Goldsmith discussed Governor Daniels’s record in the January/February 2008 issue of THE AMERICAN.

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