The Murphy Commission An Arkansas Policy Foundation Initiative

Summary of Key Recommendations

Reports published from 1996 through 1999:

The Role and Function of State Government

Current Structure of State Government in Arkansas:
Trends in Growth, Organization, and Spending

Improving Productivity by Reducing Taxes
& Taxes and Savings in Arkansas

Making Arkansas State Government Performance Driven and Accountable:
Four Reforms State Government Can Implement Now
to Save Taxpayers Millions

Arkansas' Public Schools...
A Thirty Year $20 Billion Taxpayer Investment Yields An Unprecedented Crisis in Academic Performance

Streamlining and Cost-saving Opportunities in Arkansas'K-12 Public Education System

Restoring Public Education's Academic Mission: High Expectations, Rigorous Academic Standards, & Proven Methodologies and Curriculums

Arkansas Department of Parks and Tourism
& Department of Arkansas Heritage

Arkansas Public Employees Retirement System

A Summary of Murphy Commission
Recommendations to Date

Key points: Role and Function Report and
the Current Structure of Government Report

From the Role and Function Report:

Government, in order to be lean and effective, needs to be...

1. Infused with market forces.

2. Less of a monopoly provider of services and more a broker of services in a competitive. 

3. Measured for accountability and performance.

The most effective government concentrates its resources in achieving a core mission aimed at carrying out essential functions. It must thoughtfully define what is essential, stick to it, and carry out its functions as well as they can be done. The Murphy Commission defined five essential functions for Arkansas' state:

1. To ensure safety and the protection of rights.

2. To provide for a fair and impartial system of justice.

3. To help those who, after exhausting all other options, cannot meet their basic human needs. 

4. To assure educational opportunity is provided (but not be the sole provider)

5. To responsibly manage public property, the environment and public infrastructure.

Also defined were operational principles for state government:

1. Stay focused on mission and essential functions.

2. Contain costs by injecting market competition into state government.

3. Be accountable and measure performance.

4. Be intolerant of waste (define it so that it can be spotted and quantified) 

5. Use activity-based cost accounting.

6. Insist on entrepreneurial, performance-based budgeting.

The report concluded with comments on what government should not do.

1. Intervene in the market.

2. Interfere in individuals' private lives.

3. So protect citizens or government policies that citizens are deprived of choices and personal responsibility.

4. Attempt to deliver services where clear opportunity exists for the private sector to do it more efficiently.

5. Attempt to do for citizens what they are able to do for themselves.

From the Current Structure of Government Report:
Working from a highly detailed organizational chart of state government this report notes that over several decades Arkansas has seen phenomenal growth in its state government.

1. The size of state government has increased exponentially

--number of state employees up 228% since 1965 (from around 20,000 to 57,000) 
--number of agencies increased 400% since1971 (up from 13 to 171)
--number of boards and commissions doubled since 1971 (up from 175 to 388)

2. Spending by state government has risen

-- a 452% increase adjusted for inflation since the mid 60's (up from $224 million to S8 billion)
--the state spends its dollars faster than Arkansas families can make them.
--Arkansas ranks first in the nation in per capita growth of the combined state local tax burden.

3.  The regulatory nature and intervention of state government continues expanding.

APF/Murphy Commission policy reform themes
as we look to a future political agenda for Arkansas

1. A major reorganization of state government ... more compact structure, fewer agencies.

2. A net reduction in state government spending and the size of state government.

3. An overall net reduction of state taxes after all selective tax cuts or increases, emphasis on relief for families (an institution under assault) and for business (to spur economic growth and development).

4.Tough school reforms dim embrace academic rigor based on policies and practices known to get results.

5. Adoption of the "Jeb Bush" approach to school choice. (It is a gross social injustice for a public system to force any child to attend failing or unsafe schools without allowing them a way out. The solution? Let the per-student cost float with the child to a school that does work be it public, private, or faith-based.)

6. Substantive ethics reform in state government.

Question: Will these themes be articulated publicly and continually by political leadership in order to reflect a clear political agenda for changing Arkansas?

Key Systemic and Policy Recommendations

Performance Management Recommendations
Condensed from Making Arkansas' State Government Performance Driven and Accountable

1. Adopt performance-based budgeting throughout state government.
--appoint a "performance management" director who works for the Governor through DFA. 
--provide for a small volunteer performance accountability "advisory group" to be put in place for oversight purposes.

2. Define and implement a system of performance-based pay for state employees.
--form a stakeholders taskforce to study the Georgia Gains program and Colorado Peaks and come up with their ideas for the Arkansas plan.
--provide for stakeholders recommendations to be referred to a Governor's task force (a small independent group, or the performance advisory group) for final approval.

3. Incorporate Activities Based Costing (ABC) into the state's accounting system with expenditures tied not only to costs but to measurable performance outputs.

4. Provide for a My independent audit of state government
--consolidate the internal audit functions; in various agencies into an Office of Chief Internal Audit under the executive branch.
--establish a bipartisan audit committee comprising a preponderance of members outside of state government's management and legislative sphere. This group would be responsible for oversight of both external and internal audit. With both outside and internal audit managers reporting to this committee, it would assure effective risk management as well as proper co- operation and coordination between the external and internal auditors.
--implement the recommendations contained in the management letters issued by the accounting firm of Deloitte & Touche over the course of four successive state government audits-1995, 1996, 1997, 1998.

School System Recommendations
Summary of recommendations from Murphy Commission reports on education (the Commission considers these recommendations to be systemic and programmatic as well). They are condensed from the three reports listed below.

• Arkansas Public Schools: Education Spending vs. Student Performance
• Streamlining and Cost-Saving Opportunities in Arkansas' K-12 Public Education System (projected savings in this paper are $50 million)
• Restoring Public Education's Academic Mission (High expectations, rigorous academic standards, and proven methodologies and curriculums)

1. Demand intellectual honesty and complete openness in reporting academic progress and "the state" of public education, this to be implemented through a comprehensive public school accountability system.

Sub-recommendation:
The Governor's "Education Performance and Accountability" address to the state to be given annually (state performance on all tests administered to students, along with their implications, are reported).

2. Issue school-by-school performance report cards to parents and the public.

Sub-recommendation:
Use the results of this report card to hold schools accountable--rewards for those performing on an exceptional basis and sanctions for low performing schools.

3. Attack wasteful education spending and redirect savings to teachers and classrooms to enhance the state's substandard academic performance.

Sub-recommendations:
a. Merge the seventeen Education Service Co-ops into one Educational Resources and Service Center to be located in central Arkansas; repeal legislation that established Co-op Coordinating Council.
b. Restructure the existing 310 superintendents into not more than 134 "administrative units"... without consolidating schools or bricks and mortar.
c. Conduct a comparative cost analysis of existing in-house operational services versus outsourced services, and where feasible and cost-effective, procure outsourced services with performance-based contracts (should be done on a biennial basis.)

4. Rewrite the Arkansas Curriculum Frameworks to be more academically rigorous. Assure they reflect student performance standards that are understandable and measurable. To accomplish this, standards must be based not on process-the effort to learn as opposed to actual learning-nor on self-esteem, or social and political dogma, but on fact-based content and curriculums tied to grade-levels.

Sub-recommendation:
Use proven "best practices" in standards development from other states as deemed by the 'Thomas B. Fordham Foundation's review of academic standards for the fifty states.

5. Adopt proven curriculums and teaching methodologies and form a "best practices" council to assist in determining what works and what does not work in the teaching/learning process.

Sub-recommendation:
Schools must return to teaching explicit systematic phonics in reading in grades K-3 and adopt a back-to-basics; "no-nonsense" approach to teaching math that includes memorization and computation. Teacher licensure requirements should be changed and strengthened accordingly.

6. Assure continued use of both norm-referenced and criterion-referenced tests.

7. End the practice of social promotion--a form of educational malpractice

8. Pay Department of Education officials, superintendents, other school administrators, and teachers on the basis of defined performance measures.

9. Provide for dismissal of ineffective teachers while protecting education managers (principals and superintendents) from unwarranted litigation. Change the Teacher Fair Practices Act to encourage this.

10. Require appropriate degrees for subjects taught and permit qualified, but non-certified, teachers to be retained as teachers.

11. Install a uniform cost accounting system common to all schools such as the In$ite program developed by Coopers Lybrand/Fox River Learning.

Sub-recommendation:
Phase in the finance analysis model over a three to four year period beginning with the largest districts first.

12. Broaden Arkansas' inadequate charter school law to allow for the development of new start-up charter schools.

Tax Policy Recommendations:

Extracted from a statewide conference on taxation and two Murphy Commission papers, Improving Productivity by Reducing Taxes and Taxes and Savings in Arkansas,

1. Reduce the state's income tax. Among the reforms, consider an across the board 10% cut (or 3.8 percent of general revenue), reduce the marginal rates, exempt taxpayers below a certain income level from filing, and expedite the process of indexing for inflation.

2. Decrease or eliminate the corporate income tax.

3. Repeal the state's capital gains tax.

4. Create and empower a "sales tax exemption and exclusion taskforce" (i.e. the base closing commission) to eliminate various sales tax exemptions in effect now.

5. Submit all tax proposals (cuts and decreases) to a process of dynamic scoring in order to assess economic impact of the proposal. Report findings to the public before enactment of the tax.

Agency Recommendations

Summary of Recommendations, Murphy AHTD Report:

1. Re-direct more existing resources (on a fast-track basis) to Arkansas' Interstates and restore them to first class condition.

2. Redirect a greater portion of ED funds to upgrading major arteries and interstates.

3. Encourage public policy at the Federal level to accomplish the following:

• Require states to certify that they have adequate funds available to maintain a new road or highway over its useful life before allowing federal highway funds to be spent on its Construction.
• Require states to certify that at least 90% of their existing urban and suburban highways are in good condition before allowing them to undertake new construction.
• Support a joint state/federal effort, through Congress, toward the establishment of a national goal for improving the condition of our interstate Highway system, and provide incentives to states to meet these goals.

4. Repeal or significantly amend Amendment 42 (Mack-Blackwell). Reintegrate AHTD into the executive branch; give it cabinet level status as an essential government service ... a status it surely warrants.

5. Have the Director of AHTD report to the Governor and serve at the Governor's pleasure. Subject the hiring of the Director to the Highway Commission's consent, plus Senate confirmation.

6. Restructure the Highway Commission to provide for eight members, geographically chosen and serving four year terms appointed by the Governor.  No more than five members may be from the same political party.  (Another option worthy of discussion is providing for Commissioners to be elected.  Either way--bi-partisan composition should be mandatory).

7. Concentrate highway priorities and resource allocations where the greatest needs and economic development potential occurs. To better affect this, move to a planning and resource system model aimed at greater objectivity in determination of priorities and distribution of resources.

Sub-recommendations (#7)

• AHTD should develop and use a dynamic computer model to assure a wholly objective determination of construction and maintenance priorities for the state. The model should embody a uniform system for allocation of projected costs to planned construction and maintenance of highways, roads and bridges and fully integrate with a system of performance-based budgeting and activities-based-cost accounting.
• A public report on priorities should be shared regularly in periodicals and the media, as well as be made available on the internet (would include progress on construction underway).
• The design of the model should be contracted out and overseen by both a reliable independent accounting firm and the state's audit committee (should one be put in place as recommended in other Murphy Reports)
• The Governor should task an accountability and performance advisory group with conducting a nationwide search to retain the finest team of "cost conscience" transportation experts in the country to design the model planning and resource system for Arkansas. They should also design (outside of AHTD) the base inputs and outputs comprising the system. The goal should be to make this a "best practices" model that other states would want to consider using.

8. The planning, design, and cost-estimating of Arkansas transportation needs should not be predominantly an "in-house" function at AHTD. Instead, much of it should be contracted out on the basis of performance as well as cost-saving incentives built into contracts.

9. As a matter of control and oversight, the Governor, through an independent audit committee (such a body has been recommended in another Murphy study), should also contract for the periodic independent review by an independent accounting firm with the requisite expertise.  It would randomly review selected highway system job cost estimates, design specs, and jobs in progress.

10. AHTD should demonstrate to the public a "good faith effort" to substantially reduce operating costs.

Cost Saving Recommendations, AHTD

1. Restore control of 5000 miles currently in the state's 16,288 mile system to county or municipal government jurisdictions for maintenance and upkeep.

Possible savings or efficiencies: $13-$16 million annually.

2. Eliminate 5 of the 10 existing AHTD District Offices and 54 of 82 field offices across the state.

Possible savings or efficiencies: $5 million (An additional $4 million in maintenance expenditures and about $1 million in administrative and overhead costs).

3. Integrate the existing Arkansas Highway Police organization, currently an integral division of the Arkansas Highway and Transportation Department, into the Arkansas' State Police organization.

Possible savings or efficiencies: $2.5 million

4. Offload a number of roadside parks, and explore opportunities under TEA 21 to privatize existing interstate rest areas.

Possible savings or efficiencies: (including those acted already): $1.3 million per year plus an estimated one time savings of $11.7 million in rehab costs. 

*The Murphy Commission would also have recommended not spending $19 million for roadside park electronic surveillance, which becomes unnecessary in light of 12 parks to be closed, as decided by AHTD.

5. Scale back AHTD's workforce by 5%.

Possible savings or efficiencies: $8.8 million

6. Explore the efficacy of outsourcing more in-house programs at AHTD:

Possible savings or efficiencies: $1.8 million

7. Integrate AHTD's stand-alone retirement system into the existing State Public Employees Retirement system.

Possible savings or efficiencies: $2.1 million

8. Discontinue redundant AHTD auditing of motor fuel suppliers. (Department of Finance and Administration audits them)

Possible savings or efficiencies: $150,000 to $200,000

9. Exempt AHTD (and other state agencies as well) from paying state and local sales taxes.

Possible savings or efficiencies: $4.3 million

10. Miscellaneous Recommendations:

Sell AHTD 'twin engine aircraft:

Projected Savings: $160,000 per year and $2.6 million from the sale of the aircraft.

Reduce by 400 the number of state-owned vehicles assigned to department employees.

Projected Savings: $1 million per year

End funding to the Good Roads Council, $20,000 per year in savings

Summary of total savings:

Summary of Recommendations for Arkansas Department of Parks and Tourism & Department of Arkansas Heritage

General Recommendations for both Departments. Parks, Tourism and Heritage:

1. Combine the Arkansas Department of Parks and Tourism with the Department of Arkansas Heritage into a single state agency. The new department could be called The Arkansas Department of Natural and Cultural Resources.

* Would be a cost savings, but is difficult to project at this point.

2. Shift some land management to Game & Fish Commission or other appropriate State agency.

3. Update office equipment particularly computers and fax machines, to improve efficiency and communications within the entire Department.

4. Establish clearer and streamlined procedures for procurement budgeting, and accounting.

5. Implement incentive programs to prevent loss of key personnel, high employee turnover, and the general poor employee morale we discovered throughout the departments.

6. Create the Governor's Tourism Working Group (comprised of the Department heads or their designees whose Departments have an impact on tourism) to work with the Tourism Division of the merged Departments. (Would replace the current Parks, Recreation, and Tourism Commission that only works with the Department of Parks and Tourism)

Specific recommendations for only Parks and Tourism:

*After visiting every Arkansas state park our team came up with several specific site recommendations. These are based on economics, staff requests, and common sense:
1. Some current park sites do not meet defined requirements for being state parks. They should be closed or ownership and maintenance should be transferred to the appropriate local governments.

State parks which are very small and have a more local and/or county significance and are candidates for such transfer are:

Arkansas Post Museum
Prairie County Museum 
Herman Davis Historic Site
Moro Bay State Park
Conway Cemetery
Jenkins Ferry State Park
Lake Frierson State Park
Woolly Hollow State Park
Lake Charles State Park
Jacksonport State Park

Projected Savings: $1,699,029/year

2. Efficiency recommendations for other state parks:

a. Consider consolidating Hampson Museum and parking Archeological State Park into one site to be located at Parkin.

b. Explore the cost effectiveness of opening the Ozark Folk Center year around rather than the current 7 1/2 months.

c. At Petit Jean Park significant facility improvements are necessary to better serve the public.

d. Consider leasing the Arkansas Museum of Natural Resource

Projected Savings: $579,710/year

e. Allow the park superintendent at Lake Ouachita State Park to close the restaurant and convert this space to a mini-market to better meet the needs of the camping public.

Projected Savings: $25,000/year

f. Consider privatizing the various marinas and lodging facilities at various parks. Many of these business activities would almost certainly be better managed through private ownership.

*Project a 5% operational savings based on Southern state trends in privatization

3. Repeal the Tour Bus Tax. (The state gains approximately $300,000 from this tax but loses an estimated $8 million per year in tourism revenue.)

4. Eliminate the twelve regional tourism associations.

Projected Savings: $1 million/year

5. Establish a moratorium on all future construction of additional accommodations at all park sites until a feasibility study can be developed, initiated, and completed to determine the fiscal impact of such construction.

6. Establish a "Friends of the Park" organization for each state park whose purpose would be to assist in promotion, landscaping, tourism development, or any park improvement project. (These groups could also do volunteer clean-ups, etc. and gain a modest savings).

7. Enlist Arkansas corporate sponsors for events, construction, and tourism activities.

8. Expand the use of prison labor, incarcerated people, and delinquent juveniles for park maintenance where travel distance to containment facilities is acceptable.

Three major recommendations specific to Heritage (a number of lesser recommendations are listed in the full report)

1. All museums and historic preservation programs should be under the purview of one director within the Arkansas Cultural Heritage and Historic Preservation Division. The historic and museum sites we recommend include nine sites currently under the auspices of Parks and Tourism, but which will be moved during the proposed merger: [These sites are noted by an asterisk (*)].

Old State House Museum
Trapnall Hall
Territorial Restoration
Delta Cultural Center (Helena)
Ozar0k Folk Center *
Plantation Agriculture Museum
Toltec Mounds State Park *
Old Washington State Park
Museum of Natural Resources
Parkin Mounds State Park */ Hampson Museum Prairie Grove Battlefield State Park
Powhatan Courthouse State Park *

*Projected savings currently being determined.

2. Merge Old State House Museum, Trapnall Hall and the Territorial Restoration under one museum director with one comprehensive program to reduce administrative costs and produce program continuity in museums which are within walking distance of each other. A suggested new name is The Arkansas Capitol Heritage Museums.

3. Merge the Arkansas Commemorative Commission with the Arkansas Territorial Restoration Commission and sunset both commissions since most of their existing functions would be assumed by The Arkansas Capitol Heritage Museums.

4. Reduce excessive administrative costs at the Arts Council which now oversees of approximately $1 million of federal grants and other funding. As it stands now its administrative costs are at an excessive 40% and eleven employees to administer $1 million.

Projected savings: $310,000 per year

Summary of Recommendations, Murphy Report on the Arkansas Public Retirement System.

1. Form a Citizen Board composed of members outside the retirement systems to oversee APERS.

2. Make state elected officials ineligible to participate in any public retirement system involving public funds in any form or manner.

3. Provide for an independent accounting firm to audit APERS, SPRS, and JRS and discontinue audits by the Division of Legislative Audits.

4. Share independent audit report with the public within sixty days of the presentation of the audit to APERS.

5. When former legislators accept a position at a state agency, prohibit their legislative retirement benefits from being added to and counted in their agency benefits.

6. Prohibit employees with 30 years of service from opting to place part of their accrued
benefits in a deferred options plan while they continue their service and generate additional retirement benefits. The effect is one of double compensation and should be avoided.

7. No further state retirement contributions should be made for any state employee group whose actuarial accrued pension liability is over-funding until the over-funding of the group is reduced to zero.

8. The state's Joint Committee on Public Retirement and Social Security Programs should request an appropriation by the General Assembly to engage the services of an actuarial firm to design one retirement to replace the present five systems.