Wilson Seeks to Reshape Way State Operates : Budget: Governor plans to ‘reinvent government’ by rating programs on their performance. Goal is to lessen interference from the Legislature.

Gov. Pete Wilson is proposing a dramatic change in state management that eventually would free bureaucrats to run their departments with minimal interference from lawmakers while holding them more accountable for their performance.

Wilson’s plan, which is evolving but was outlined in his Jan. 8 budget message to the Legislature, is part of the governor’s multipart strategy to trim administrative costs, reorganize the executive branch and redirect the state’s budgeting priorities.

Wilson’s proposal calls for a $150-million reduction in state administration and the elimination of several high profile commissions and departments, including the Franchise Tax Board, Energy Commission and California Arts Council.

Although the Republican chief executive does not expect the new management strategy to save any money immediately, it could reshape the way the state operates and, if it works as advertised, produce long-term savings.

Borrowed in part from Minnesota, Oregon and the Bay Area city of Sunnyvale, Wilson’s idea for “performance-based” budgeting relies on a seemingly simple notion: judge state programs not so much on how they spend their money but on whether they get the job done.

Under California’s system, the Legislature scrutinizes every item in the budget of each department and agency that make up state government. If a program’s managers want to use money budgeted for travel to hire an extra person, they have to get permission to do so.

Schools, welfare, prisons and other programs each year report the anticipated increase in demand for their services and seek additional funds to cover the expansion.

“The entire state has grown accustomed to thinking: ‘How much money am I getting?’ ” said Deputy Finance Director Steve Olsen, a chief architect of the new plan. Instead, Olsen said, the question should be: “What are we trying to accomplish and what’s the best way to get there?”

As Olsen sees it, the line-item budget should be replaced by a broad document in which department managers and lawmakers would agree on goals but the bureaucrats would have wide latitude to spend their money as they see fit.

Wilson is calling his proposal “reinventing government,” which is the title of a 1992 book that the governor has described as providing a “new paradigm” and President-elect Bill Clinton said was a “blueprint” for government in the 1990s.

The book, by management consultants David Osborne and Ted Gaebler, surveys efforts under way at local, state and federal agencies to make government work better by measuring the results of programs and then rewarding success and penalizing failure.

“The majority of legislators and public executives have no idea which programs they fund are successful and which are failing,” the pair wrote. “When they cut budgets, they have no idea whether they are cutting muscle or fat.”

The alternative, the authors suggest, is for legislators to set the standards but free the managers to achieve them.

In state government, the Social Services Department might be rated on the number of people it moves from welfare to work. The Department of Parks and Recreation could be judged by asking the people who camp in state parks if their visit was satisfactory. The Department of Alcohol and Drug Programs would track the clients served and determine how many kicked their habits.

Programs that meet their goals but spend less than the amount budgeted might be able to keep a portion of the savings for future programs or salary bonuses.

Larry McCarthy, president of the California Taxpayers’ Assn., applauded the move as long overdue. He said the state in recent years has focused too much on what goes into programs, namely money, and not enough on what comes out.

“It’s a cultural change here in the way we conduct public affairs,” McCarthy said. “There’s been so little focus on what the outcome is. That’s what the public is expecting. They want to know the money they put forward for these programs achieves a beneficial result.”

Wilson wants California to start small by setting up “contracts” between three or four departments and the Legislature to see how the theory works in practice.

“We have to be careful that the flexibility promotes performance rather than undermines accountability,” Olsen said.

The first hurdle for the Republican Administration will be to persuade Democratic lawmakers to give up some of their control over programs. Some Democrats suggest that the plan is a way for Wilson to divert attention from the state’s fiscal problems, which have resulted in deficits in each of the past three years.

“This is absolutely meaningless,” said Democratic Assemblyman Steve Peace of Chula Vista, a frequent critic of Wilson. “It’s mumbo jumbo. They’re saying: ‘We give up. We’re incapable of managing, of setting goals. Legislature, tell us how to do it.’ ”

But other Democrats suggest that they will be eager to turn the state’s budgeting upside down.

“Our method of budgeting is screwy,” said Assemblyman Phillip Isenberg (D-Sacramento). “It makes no sense. It removes incentives from agencies and employees to conserve and save because they don’t get any benefit.

“We reward lethargy. An agency that spends more and more money and claims it needs more and more money to do increased work, as opposed to being more efficient, is going to be rewarded. We give them more money. And efficient organizations, we take their money away. It’s insane.”

Democratic Assemblyman John Vasconcellos of Santa Clara, longtime chairman of the Assembly’s budget committee, said he is “game” to try Wilson’s idea. Vasconcellos suggested that the first candidate to have its performance evaluated be the Department of Corrections, which runs the state prison system.

The Corrections Department budget is the fastest growing part of state government, but Wilson, who built his career as a law and order Republican, has been reluctant to tamper with it. Vasconcellos said he would not mind rewarding the department for rehabilitating criminals and penalizing it each time a felon was returned to prison.

Some analysts suggest that in the end, the new system, even if it looked different, would work the same. Fred Silva, the top budget aide to Senate President Pro Tem David A. Roberti (D-Van Nuys), said the new-style budget tug of war might wind up like this:

“We would look at higher education, and we’d say: ‘These are the outcomes that we want.’ The universities would say: ‘That’s fine, it will cost $8 billion.’ And we would say: ‘Well, you only get $4 billion.’ And the university would say: ‘Well, you can’t get those outcomes with $4 billion.’ ”

In other words, Silva said, no matter what you call it, the result would be the same--a fight over the size and cost of every state program.