In his first State of the State address last January, Gov. Mitch Daniels announced a moratorium on state approval of school construction projects.

This triggered debates across the state over “local control,” but it also did something else. It ignited local conversations about spending by government in places like Hobart and Middlebury and Vincennes, where school corporations were responsible for some of the bigger increases in the local tax rate.

The result? “The Department of Local Government counts $87 million that came out of proposals that had come to them,” said Gov. Mitch Daniels last Wednesday. “$87 million! And those are the ones they know about. These are the ones that were slimmed down. As of today, no proposal has been rejected.”

“What we know but we don’t know the number for was that many more the pencils were sharpened before the proposals came,” Daniels said. “That’s exactly what I hoped would happen. We’re still home rule people around here. We’re not interested in telling people what the right dollar amount or what the right school size is. But if you’re above the national average, then think twice. Up to this point it is having an effect. It didn’t slow anybody down. Nobody was smacked down.”

In Daniels’ home school district (and also mine) — Washington Township Metropolitan Schools in Indianapolis — some $19 million was cut, some coming out of money budgeted for a swimming pool.

I mentioned to Daniels how I wish the school district had explored teaming up with the Jordan YMCA across the street to build a joint public-private aquatics facility, to which he responded, “I hope sometime while I’m governor, two school corporations build an athletic facility together and share it.”

“We’re trying to get that kind of thinking going,” Daniels said.

But, this isn’t necessarily new thinking.

A dozen years ago, when Stephen Goldsmith was mayor of Indianapolis, he called upon a couple of Mitches … Daniels and Roob - to serve on something called SELTIC, which stood for the Service Efficiency and Lower Taxes for Indianapolis Commission.

Fast forward the tape a dozen years and, it is Roob who now heads the Family Social Services Administration. He explains, “The same three players are in place, just operating in different positions.” It’s Gov. Daniels and off in the wings at Harvard University is Stephen Goldsmith, the unsuccessful 1996 Republican candidate for governor who would have brought the concepts of “privatization” to state government eight years ago had he won. The three of them are again taking some of the same concepts Goldsmith used in Indianapolis to the state.

SELTIC’s mission was to review every function performed and service provided by city and county government. As described by Sheila Kennedy and Ingrid Ritchie in their book “To Market, To Market: Reinventing Indianapolis,” SELTIC was charged with three essential goals: to determine whether a function should be performed by government at all; the real cost of that function to government; and if the service were still to be provided by government, how might it be done more efficiently.

Roob will be in the news a great deal in 2006, with his plans of privatizing state services like the Fort Wayne Developmental Center, which houses 200 patients and has a history of abuse and neglect. There are efforts elsewhere, such as the Indiana Department of Correction, to shift functions such as cooking meals to the private sector with significant savings.

Kennedy and Ritchie contend in their book that while privatization is “first and foremost a commitment to fiscal prudence,” Mayor Goldsmith cut the local government workforce by 62 percent saving $149 million, but shifted the jobs and functions to the private sector which cost taxpayers $290 million. They also say that Goldsmith left Indianapolis deep in debt.

And it was fascinating that while mayors from across the nation came to study Goldsmith’s Indianapolis experiment in public/private competition, it was not widely trended by his Hoosier counterparts.

Like Goldsmith, Daniels doesn’t care much for the term “privatization.”

But as the FSSA and efforts to lease the Indiana East-West Toll Road move forward, Gov. Daniels tries to make the case for new thinking, just as he did with school construction.

“It shouldn’t be scary at all,” he said. “A huge percentage of state government services are delivered privately now. We don’t build all our own roads, we hire private companies to do it. We don’t clean our own buildings. Think of the single biggest program that state government runs – Medicaid. Almost all of it is privatized.”

Medicaid also poses the biggest challenge to state government, reining in its costs, which were estimated to increase by 10 percent a year by the Indiana Fiscal Policy Institute. The last biennial budget Daniels signed pegged the increases at 5 percent, putting Roob in a sensitive performance perch.

The irony here is that the progressive conservative Daniels drew on the liberal New York Gov. Mario Cuomo. He was quoted in David Osborne’s book “Reinventing Government,” and recalled by Gov. Daniels as saying, “the job of government isn’t to deliver services itself, but to make certain they are delivered effectively.”

Daniels explained, “To me this is purely practical, to look at every service to see if this is the best way to get this done. Now, the State Police will always be full-time, 100 percent employees of state government. But any good business today asks itself, what are our core competencies. And on the other things, hire someone where that’s their core competency. When I was at Lilly, it was a very well managed company but I started asking, ‘Why are we doing laundry? Why are we running buses? Cooking food? We’re here to discover miracle drugs and find a way to manufacture them.’”

For Gov. Daniels, it comes down to this: “When you get a competition going, you usually get a better price for taxpayers.”

The word “usually” is key. Execution of any concept is vital.



Brian Howey is publisher of The Howey Political Report, the weekly briefing on Indiana politics. See www.howeypolitics.com.



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