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Here’s an idea: State pays only if programs achieve results

Two Republican legislators, with bipartisan support from civic groups, are proposing a pilot program that pays out state dollars only when social-services programs achieve results.Related: A reasonable cost-cutting move, or ‘micromanaging’

Government is often criticized for spending too much and measuring too little. So state Rep. Keith Downey, R-Edina, and state Sen. Julie Rosen, R-Fairmont, flanked by a bipartisan tank-full of thinkers, introduced legislation Monday to create a government model with the goal of spending efficiently by measuring results.

The legislation proposes a pilot program that pays out state money only when social-services programs achieve results.

Under the proposal, the state would issue bonds to create a pool of money, probably about $15 million to $20 million to start. Nonprofit groups that now use general-fund state dollars to, for example, train the unemployed or help people with drug dependency would get paid only if they demonstrate their programs worked, as measured — down to the dollar — by more tax revenues (from people going to back to work) or lower program costs (drug dependency is curtailed). The money and savings that are generated pay off the bonds, whose private-sector purchasers get a 4 percent return on their investment.

The proposal is a “win-win-win,” says Steve Rothschild, former General Mills executive vice president, who created the pay-for-performance model for Twin Cities RISE!, a nonprofit that trains the chronically unemployed and uses the model to attract donors. Rothschild helped put together the legislation because, he says, he believes health-care costs will continue to overwhelm the state budget, crowding out non-medical human services programs.

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Downey describes the proposal as “one of the only truly transformational ideas I’ve seen since I’ve been in the state Legislature.” Rosen said: “This is exactly what we should be doing with government. It’s the first step to transform the expectations of state-funded programs.”

Their enthusiasm had a cheering section, representatives of groups — left, right and center — who attended the news conference. Organizations as diverse as the Center for the American Experiment, Growth & Justice, and several in between like the United Way, the Minnesota Chamber of Commerce and the Citizens League, have high expectations that the legislation will kick-start a new way to get a handle how the state spends tax dollars.

“How can you disagree with any of it?” asked Mitch Pearlstein, the American Experiment president.

Sean Kershaw, executive director of the Citizens League, quipped about the presence of “this caliber of leadership, this caliber of bipartisanship and it’s not a funeral.”

While the goal of the pilot program is straightforward, the structure is complicated. The legislation provides that Office of Management and Budget oversee the program with a committee to select qualified nonprofit providers, a committee to create the measurement system for the “return on investment” and analysts to determine whether the nonprofit met the requirement. Then, of course, the bonds must be repaid, and any revenue the state earns beyond bond repayment gets returned to the general fund.

The details may provoke a collective, “Huh?” But Rothschild sees it as an obvious example of corporate metrics — “measure it, capture it, reward it” — where efficiencies and results far outweigh administrative costs. 

Efficiency and savings, if they occur, will not be immediate. So, is this the kind of a long-term, long-thinking legislation to take up in budget year with a big budget hole?  “I think this is absolutely something we have to do this year,” said Rosen. “Would we ever have gotten to this point if we didn’t have a $5 billion deficit?”