On Monday, July 25, 1994, Governor Barbara Roberts of Oregon,

Multnomah County Commission Chairman Beverly Stein, and Portland

Mayor Vera Katz, briefed senior level officials from the White

House and Executive branch agencies. The briefing was a proposal

to partner with the Federal government in a demonstration project

to redesign intergovernmental service delivery based on

principles advanced in the National Performance Review. Oregon

is going into its fifth year of a legislatively approved, long

range effort to set standards for measuring statewide progress

and governmental performance. The program is called "Oregon


During the briefing, the state and local officials cited problems

they have encountered with Federal agencies and programs and also

cited some success stories which have occurred. Many of the

difficulties cited by these officials related to programs and

operations of various Federal agencies, while some difficulties

related to the work of Offices of Inspector General in auditing

programs operated with Federal funds.

Because some of what was presented relates to Offices of

Inspector General in several Federal agencies, this material was

put together as a way for these Inspectors General to see what

Oregon has presented and perhaps work within and across agencies,

consistent with the Inspector General Vision Statement, to

address some of the problems cited, in a constructive way.

Additionally, since the Oregon officials formally presented their

proposal for partnership, when it is considered at the agency

levels, this material will put Inspectors General in a position

of being informed on the issues in advance. The excerpt which is

presented below is a small part of the complete proposal. The

full proposal can be obtained form the address below. It cites

18 federal programs and 12 Federal agencies (not by name) as

impacting work going on under the "Oregon Benchmarks" project.

From the meeting, the following Federal departments and agencies

seemed to be among the group of 12: HHS, HUD, USDA, Labor,

Education, EPA, Veterans Affairs, Interior, Treasury, Justice,

and Commerce.

This information is provided as a service from IGNet, the

electronic communications network of people dedicated to creating

excellence in the Inspector General Community.

J. Jerome Bullock

Assistant Inspector General for Investigations

U. S. Dept. of Justice

IGNet Coordinator - IGNet gopher <>

Voice: 202-616-4774 Internet: <>

Fax: 202-616-9881


** This document is an ASCII formatted version of an **

** EXCERPT of a document printed by the State of Oregon. **

** The page numbers in this electronic version are not **

** in the same order as the printed document. If you **

** would like the printed version of this document, **

** contact the Oregon Progress Board, Governor Barbara **

** Roberts, Chair, 775 Summer Street, N. E., **

** Salem, Oregon 97310 Voice 503-373-1220, **

** TDD 503-373-1200, FAX 503-581-5115 **




July 25, 1994

The Proposition

Oregon and its local governments propose a special partnership

and long-range demonstration project with the federal government

to redesign intergovernmental service delivery based on

principles advanced in the National Performance Review. This

intergovernmental, interagency initiative would focus on outcomes

and treat outcomes as the principal measure of success. In the

model we propose the federal government and our governments will

mutually identify results to be achieved and we will be

contracted to achieve them. To help us achieve these results,

the federal government will merge funding categories and streams,

create funding incentives which reward desirable results, and

reduce micromanagement and wasteful paperwork. This

collaboration will empower our communities to identify local

needs to be met by federal and state programs, to make their own

decisions about how to address those needs, and to be accountable

for results.

*** This initiative would focus on outcomes and treat

outcomes as the principal measure of success. ***

We recommend that this demonstration project, "The Oregon Option"

focus on important elements of Oregon's top strategic priority,

our human investment benchmarks. These benchmarks underlie a

collective effort by state and local governments, civic groups,

nonprofits, and businesses to appreciably improve the lives of

Oregonians as self-reliant individuals, members of healthy

families, and skilled, successful workers. They fit our

strategy to enhance Oregon's economic prospects while getting

more people off public assistance and reducing the human and

financial costs of social dysfunction.

The Problem To Be Overcome

This proposal accepts the premise of the National

Performance Review: that the intergovernmental system for

delivering assistance and services through federal grants and

mandates to state and local governments has broken down in a

tangle of good intentions gone awry. There are too many

funding categories, suffocating regulations and paperwork,

a misdirected emphasis on remediating rather than preventing

problems, and no clear focus on measurable outcomes. The system

stifles initiative and squanders resources without achieving

sufficient results. We have been attempting to correct similar

problems in state government. We are delegating greater

responsibility for program design, delivery, and results to

the local level,


and we are encouraging more service integration and

a preventive approach to problems.

Why Seize This Opportunity With Oregon?

Oregon is an ideal partner for this initiative. The test of an

outcomes-based approach to intergovernmental services is likely

to be more successful where state and local government are

already using an outcomes model for establishing a long-range

vision, setting public priorities, allocating resources,

designing services, and measuring results. We are well along in

pioneering state and local effort -- Oregon Benchmarks -- to do

all of these things. Benchmarks cover issues as wide ranging as

ecosystem protection, urban mobility, and industrial

diversification. Our human investment benchmarks focus on such

outcomes as reduced teen pregnancy, diminished crime and

recidivism, lower unemployment, higher per capita income,

greater early childhood immunization, and stronger K-12 student

achievement, just to name a few.

*** Oregon is ideal for this initiative. Our systems are

in place. We are ready to move. We know how to be a

good partner. ***

We have already achieved notable success in the benchmarks

process, and we will continue to pursue the progress made these

past few years. However, these efforts would receive an immense

boost if federal participation was also focused and structured to

achieve results. Oregon offers an opportunity for the federal

government to join the state and its communities in designing and

demonstrating a more efficient, results-driven model of service


We are ready to move. Through our 20-year strategic

plan and through Oregon Benchmarks we know what we want to

accomplish. We have established systems to pursue and measure

those accomplishments at state and local levels, and we have

enlisted the involvement of local jurisdictions, nonprofit

organizations, businesses, and civic groups. In just the first

four years of our benchmarks process, we have already

taken nationally heralded steps to achieve benchmarks outcomes in

child and family well being, in K-12 education, and worker

training. Moreover, we know how to be a partner in an undertaking

of this nature. Oregon has a record of participating in creative

federal-state efforts to improve services. Examples include a

1981 Medicaid waiver, which has improved services to seniors

while saving nursing home costs, and the 1993 forest plan, which

streamlines and consolidates federally funded services to workers

and their communities coping with changes in the forest

products economy.



The most important benefit, and the ultimate test of The

Oregon Option, will be results: higher rates of prenatal care and

infant immunizations, lower teen pregnancy, higher K-12 skill

levels, re-employment of dislocated workers, higher wages, safer

neighborhoods. Other benefits include better use of public

resources -- money and people -- at all levels, less client

confusion and despair, and greater confidence in public services.

The Oregon Option also offers a laboratory for federal, state,

and local participants to learn from their efforts and act on

what they learn to improve service delivery. The Oregon Option

will advance the Administration's domestic policy agenda and the

campaign to reinvent government.

What It Will Take

The Oregon Option demonstration will require a long-term

commitment and a fundamentally different way of thinking about

the mission and structure of service systems at all levels of

government. The system envisioned here is focused on outcomes,

customer-centered, decentralized, and accountable. In this

partnership, participants must be willing to a) contract for

measurable results, b) combine funding streams, c) renegotiate

funding amounts and rates, d) eliminate rigid and costly

program restrictions, e) provide multi-year funding, and f)

empower those closest to front-line service to choose the

delivery mechanisms, initiatives, and investment criteria they

deem most suitable. The demonstration will require the waiver of

a number of federal rules, and it will require financial and

political support. It is essential that the project have the

initial involvement and continuing support of cabinet or

subcabinet officials.




The Dysfunctional Intergovernmental System

In its 1993 report, the National Performance Review observes that

a well-functioning intergovernmental system is central to

Americans' quality of life and the national government's ability

to pursue a domestic policy agenda. It also notes that thousands

of dedicated employees work hard within this system to solve

human and societal problems.

Unfortunately, the report adds, there is a widespread feeling

that public institutions and programs are not working. At the

same time, serious social and economic problems are deepening.

These include low-birth-weight babies, single teenagers having

babies, falling high school graduation rates, juvenile crime,

declining household income, and the high number of Americans

without adequate health care coverage.

*** The system intended to be a solution has become a major

part of the problem. ***

At least a part of the reason for these trends, the report

asserts, is an increasingly dysfunctional intergovernmental

process. Grant and income transfer programs, notes the report,

amount to over $226 billion in fiscal 1994. The number of

individual grant programs, now exceeding 600, continues to grow.

Yet so do "problems of duplication and overlap." The report goes

on to level this harsh assessment.

Unfortunately, the myriad of federal mandates and

regulations that accompany grant programs are cumbersome and

very costly to administer, lack a coordinated

implementation strategy between levels of government, and

are not achieving the intended outcomes. Each separate

program has its own array of rules and regulations that

must be observed, regardless of their impact on the

effectiveness and quality of customer service. States and

localities have limited ability to customize service

delivery by integrating programs because of competing, often

conflicting federal rules and requirements that accompany

each program.

The NPR report cites telling examples of a grant and mandate

system that is fragmented, burdened with overhead, focused on

process rather than results, and paralyzed with rules,

regulations, and paperwork. The system intended to be a solution

has come to be a major part of the problem.


The Oregon Perspective

Not only are such problems familiar to our state and local

governments as they view the federal end of the system, these

problems are familiar to our localities as they view State of

Oregon rules, regulations, and paperwork. This is why Oregon

state government, aware of its own bureaucratic shortcomings, has

been making an effort through the benchmarks process to identify

and integrate a wide range of functions and responsibilities

(both within state agencies and between state and local agencies)

that can be better handled at the local level The advantage of

benchmarks, with their emphasis on measurable results, is that

they make it possible to do this by measuring front-line

performance in terms of outcomes.

Intergovernmental Barriers

To Efficient, Integrated, Client-Centered Service

In preparing this proposal, the Governor's Office surveyed state

and local agencies to learn how they perceive their mission, the

results they are trying to achieve, how the current

intergovernmental system helps or stifles their efforts, and what

features of a redesigned system would be most helpful to them.

The themes that surfaced are presented in the remainder of this


At this point, however, a word of caution is in order. While the

examples that follow are intended to illustrate one dimension of

intergovernmental dysfunction, they do not tell the whole story

of Oregon's relationship with the federal system. As explained in

the next section of this proposal, there are many instances in

which the federal government has been supportive in cutting red

tape and improving federally funded services to Oregonians.

We want to build on those successes. Moreover, we know that state

government is far from guiltless when it comes to generating

stifling rules, regulations, and red.tape. The attempt through

Oregon Benchmarks to simplify and integrate services is our own

implicit acknowledgement that we, too, need to change the way we

deliver services to Oregonians. That said, here are some examples

of problems we hope to resolve with The Oregon Option

demonstration project.

Too Many Federal and State Categories Add Overhead

and Make Service Integration Difficult

The growing number of categories of federal programs confuse

customers and waste resources. Every agency has a story to tell.

For example, the


Douglas County Health Department was recently admonished in a

finicky federal "technical assistance review" for allowing an

office work station purchased with WIC (Women Infant and Children

nutrition) funds to be partially used for non-WIC activities

(which were related to family health). The county was asked to

return a portion of the $5,227 investment for furniture, a matter

still under negotiation.

To manage among all of these categories, agencies must either

keep elaborate (and expensive) accounting records, or (as is

often the case), wastefully isolate administration and delivery

of one program from another to avoid being penalized by auditors.

Many community colleges, for example, run separate training

programs for each federal program rather than merge classes

because of different requirements and accounting complexities.

Separate computer systems are set up for federal programs,

at greatly added expense, rather than joining with existing

systems. The prospect of federal sanction is intimidating.

In addition, each program generally requires separate planning

and reporting requirements, all of which adds to costs. For

example, Oregon is expected to provide five plans for five major

federal programs in work force preparation. If these plans were

consolidated into one, Oregon could provide more integrated

services with less overhead.

*** Separate planning and reporting requirements add to

costs and confuse customers. ***

More important, categorical programs confuse customers. In every

area of social service delivery, from families and children to

mental health to work force development, customers are confused

by too many categories of services. For example, the state

Legislature, in a report on Children and Families, reviewed the

dizzying array of services from a client perspective. They found

that services were scattered and difficult to access. The report

envisioned community centers integrating services to make them

more effective for clients.

We are attempting to address these concerns at all levels of

government, and it isn't easy. In Multnomah County, for example,

family planning, WIC nutrition support, maternal-child health and

other primary care services are delivered through an integrated

primary care delivery model. Multnomah County is recognized

nationally for this efficient system which allows clients to

receive many different services in one visit. While services

have been integrated, there are still heavy administrative costs

associated with the segmentation of funds and overlapping federal

and state


reporting costs. The county estimates that it could save over

$800,000 were the systems to be simplified. These savings would

be enough to accommodate more than 12,000 patient visits each


Multnomah County is not alone in its efforts. At the end of 1993,

there were 33 Oregon communities working in cooperation with the

Oregon Department of Human Resources to integrate services. One

such project is in White City, a small timber town in southern

Oregon. White City invited staff from the public assistance

agency, child welfare, and the public health and employment

departments to a coordination meeting. Each person was asked to

bring a list of the 30 families in the area deemed most at risk.

When participants compared their lists, they were stunned: There

was a crossover of 25 out of the 30. These service providers were

working with the same families, often at cross purposes, and none

of them were aware of one another's efforts. They were so

focused on the various state and federal requirements for

individual programs, they were unable to view their customers in

a holistic manner. Now in White City, like many other Oregon

communities, there is a single location where customers can

access all services.

Excessive Rules, Regulations and Oversight

Add Cost and Stifle Service Capability

As the NPR points out so well, the intergovernmental system is

driven by stifling rules and intrusive audits that add costs to

the administration of programs and discourage innovation. These

constraints are very expensive and have little value to

customers. Indeed, much of the bureaucracy that Americans

complain about can be linked to the way we manage our

intergovernmental system. By focusing so much of our

attention on the details of administration and the tracking of

costs, our systems have become cumbersome and we have lost sight

of the results that we are trying to achieve.

The burden and costs associated with federal rules and paperwork

are huge. Roughly one-fourth of Oregon's 40,000 state employees

are primarily involved in implementing federal programs, and many

more are partially involved with federal program requirements.

Large agencies that are involved in delivering big federal

programs such as public assistance and foster care estimate that

20 percent of their costs stem from unnecessary regulation. For

example, our public assistance division files 550 reports


each year and navigates through volumes of federal eligibility

manuals. Among smaller programs such as JTPA and Housing, more

than 50 percent of staff time is spent dealing with federal rules

and requirements. These are estimates just for state government.

We have not yet been able to estimate the amount of unnecessary

paperwork local governments must endure because of the current

design of our systems. Nor do we know the number of federal

employees absorbed in writing regulations and reading our

reports. If we could streamline the intergovernmental system,

thousands of public employees could turn their attention from

paper-pushing to direct productive services to citizens.

This regulatory overkill is demoralizing and at times absurd For

example, on an Indian reservation where no private child care

providers existed, a proposal to remodel a garage into a playroom

was rejected because of cumbersome regulations. The community

had to settle for fewer child care slots. The Department of

Consumer and Business Service has faced some microscopic

monitoring by federal agencies. In 1989, Oregon submitted

construction industry standards. This year a response arrived.

Comments extended to typos and the observation that while

Oregon's change of terminology from "flagman" to "flagger" was

understandable, a complete comparison document would be required

providing a rationale for this change.

One of the newer problems encountered by state agencies is the

federal "first dollar" requirement. The Vocational Rehabilitation

Division, for example, faces a federal requirement to look to

other agencies and resources to pay for client services before

using VRD funds. The problem develops when another agency with

the same client, say the Job Training Partnership Administration,

has the same requirement. In a situation where an employer is

interested in an on-the-job-training contract, both agencies

are paralyzed because neither can act until the other puts in the

first dollar.

All these rules and requirements distract workers from their real

priority, customer service, as they struggle to remain in

compliance. The system squanders our greatest asset, the valuable

time of front line workers, in a tangle of unproductive,

unnecessary activities.


A Bias Toward Remediating Problems

Rather Than Preventing Them

Besides too many categories with too many rules and regulations,

there is one final problem with the intergovernmental system.

Resources are directed at the wrong place. Indeed, the structure

of federal program allocations often reward failure and penalize


We in Oregon believe strongly in the Clinton Administration's

agenda to build strong families that can take care of children,

to improve education, to provide preventive health services, and

to create the kind of professional technical education and job

training services that move Oregonians into high wage jobs. When

we look at how federal dollars flow, however, we see a

preponderance of expenditure on the kinds of assistance and

remedial support services that could be reduced dramatically if

we invested earlier in the life cycle.

Much of this misallocation of resources stems from matching

requirements created in federal programs. For example, Oregon's

efforts and expenditures in the JOBS program have helped reduce

the state's ADC caseload. Because JOBS funding is allocated in

direct proportion to the state's share of the national ADC

caseload, performance in reducing the ADC caseload is penalized:

better results bring fewer federal JOBS program dollars available

to the state, while larger shares go to states I programs that

do not perform. Similarly, we receive substantial matching

funds for foster care, yet limited funds for in-home care, even

though many experts believe home maker services are cheaper and

forestall the need for more expensive foster care. These

examples are not atypical. In too many cases our investments in

preventive programs that work reduce the total funds we receive

from the federal government.




Despite problems in the intergovernmental service

delivery system, Oregon governments have forged a number of

promising partnerships with federal agencies. Collectively,

these successes provide a precedent and a foundation for a

broader redesigned partnership between our state and local

agencies and the federal government.

Here are prominent examples of successes to build on.

Senior Services

In 1981 Oregon applied for a waiver from the Health Care Finance

Administration to allow Medicaid funds formerly dedicated for

nursing homes to be used for home and community-based care for

the elderly and disabled. We were the first state in the nation

to use such an approach, and the results have been excellent,

allowing a majority of long-term care clients to be shifted out

of nursing facilities. This has afforded a greater

independence and better quality of life for clients while saving

the federal and state governments $319 million between 1981 and


The number of Medicaid nursing facility clients has

actually declined slightly over the past 11 years, despite rapid

growth in the elderly segment of the population. Our population

over 75 years old grew 50 percent in the 1980s. Yet during that

period, nursing facility occupancy dropped from 93 percent to 88

percent. And the number of nursing facility beds per 1,000

Oregonians over 65 dropped From 48 to 38.

Oregon Health Plan Medicaid Waiver

We are working to expand health care coverage to all Oregonians.

The federal government worked closely with the state in

one key part of our strategy: the Medicaid reform component of

the Oregon Health Plan, a Title XIX demonstration project. Under

the plan, most Oregonians with incomes under the federal poverty

level are covered by Medicaid. Clients receive care through a

coordinated system of managed care plans, with benefits

defined through a prioritization process that emphasizes

cost-effective preventive care.

The program began on February 1, 1994. Today there are 260,000

people enrolled in 20 managed care plans under the health

plan. Of the total 260,000 enrolled, 72,000 are new Medicaid

eligibles who would not have been eligible for health care

coverage without the health plan. Because of


our partnership with the federal government in designing

this program, we are increasing the number of people covered,

enrolling more of them in managed care plans, controlling

Medicaid costs and improving health care to Oregonians.

The Forest Plan

The Northwest Economic Adjustment Initiative established a new

partnership between Oregon and the federal government to

assist dislocated workers, businesses, and communities that must

adjust to economic conditions and land management decisions that

adversely affect the forest products economy. The initiative

provides for cooperative planning and decision making among

local, state, and federal agencies as well as improvement in the

distribution of federal funds. Moreover, it is long

term, involving funding commitments of up to five years.

Although this initiative is still in its infancy, some promising

results have begun to take shape. The initiative has fashioned a

coordinated service delivery system for a package of assistance

involving 18 federal programs, 12 federal agencies, and numerous

state and local interests. Of nearly 50 recommendations for

cutting red tape and streamlining delivery systems, over half

have been adopted and only seven have been denied. The

initiative has also been a catalyst in finding common ground

among forest industry workers, communities, and state and federal

governments to create a new kind of forest-based economy. The

"Ecosystem Workforce Pilot Program" is redefining jobs in the

woods through ecosystem restoration projects that provide

dislocated workers family wages and benefits, long-term

employment, and skills training.

Developmental Disabilities

Before 1981 certain Medicaid dollars had to be used to house

individuals with developmental disabilities in large, state-run

institutions. But then the federal Health Care Financing

Administration worked with Oregon to allow those dollars to pay

for home and community-based care instead.

We were the first in the nation to receive such a waiver

and the results have been excellent. More than 1,500 former

residents of large institutions now live in community-based

homes. And more than 100 people a year are able to stay in the

community with new or enhanced services, rather than

institutions. This change has been essential to the state's

effort to reduce


the size of its largest institution for the

developmentally disabled, bringing it back into compliance with

Medicaid regulations.

These separate efforts demonstrate that Oregon is fertile

ground for bold, innovative experiments that can yield big

dividends. We have learned a great deal from these efforts and

have built a promising track record in collaboration with our

federal partners. Now it is time to take the next step

-- to build on these separate successes by implementing

The Oregon Option.



Oregon proposes The Oregon Option, the multiyear demonstration of

a redesigned model of intergovernmental service delivery. It

would be structured and operated to achieve benchmarks in human

investment that are mutually desirable to the federal government

and to our communities.

These are the principles of the recommended service delivery


* Only results equal success. The system should be

structured, managed, and evaluated on the basis of

results (i.e., progress in achieving benchmarks).

* Customers come first. The system should be oriented to

customer needs and satisfaction, especially through

integration of services.

* Nip problems in the bud. The system should be biased

toward prevention rather than remediation of problems.

* Cut red tape, empower front-line workers. The system

should be simplified and integrated as much as

possible, delegating responsibilities for service

design, delivery, and results to front-line,

local-level providers, whether they are local agencies

or local offices of state agencies.

Need for High-Level, Long-Term Commitment

To have a reasonable prospect of success, this delivery model

must have high-level support at both federal and state levels,

and a long-term federal commitment to funding. Because it will

take time to put new systems in place and begin to see results,

eight years should be considered a minimum time frame. Funding

for this effort should be based on a formula that creates strong

financial incentives for successfully improving the lives of

Oregonians while reducing the need for public assistance and

remedial program services.

This delivery model will require consolidation of funding

categories and streams, suspension of stifling regulations and

wasteful paperwork requirements, management accountability by

results rather than inputs, and a cooperative rather than

adversarial relationship among government partners.


How the Parties Should Proceed

If there is strong federal interest in this proposal, the parties

should proceed by further refining the recommendations contained

here, with an aim toward two near-term accomplishments. First, we

should develop a statement of principle that identifies what

We are moving on Oregon outcomes we want to achieve and the

ground rules for redesigning the service delivery system.

Second, we should select a few benchmarks for immediate attention

as the basis of system redesign. For example, the federal

government may wish to join with Oregon to reduce teen pregnancy

rates and increase immunizations. Each benchmark should generate

a substantial list of actions to take, some of which can be done

quickly, others over a longer time, perhaps in conjunction with a

legislative strategy.

Next Steps

We recognize that a great deal of collaborative work lies ahead

to take this concept forward. Team structure, benchmark outcomes,

timelines, budgets, and organizational logistics need to be

established. We are moving on Oregon Benchmarks already. We are

ready to move on The Oregon Option.


End of Excerpt

*** Last update 07-29-94 (jjb) ***



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