SYSTEMS GOVERNANCE BANKRUPTING STATES

Systems governance bankrupting states

June 14, 2003

According to a report issued by the American Legislative Exchange Council (ALEC), all fifty states are now experiencing, to some degree, financial difficulties.

Washington state, ranked second (Connecticut ranked first) in the total amount of taxes levied (The Tax Foundation), started experiencing real financial distress circa 2000. The battle of the budget has been ongoing ever since.

Why is this happening? Two words are at the root of the problem: "systems governance." Systems governance is, by its very construct, a system that is ever evolving, requiring vast amounts of money to establish, maintain and sustain the system — to keep the system in balance.

Over a period of many years, more and more social programs to "help" people have been implemented at the state and federal level. Because government programs only continue if the need for them is justified, these programs quickly turned from helping people to be or become independent to ensuring that people became and remained dependent on the system.

As dependence on the system grew, more and more tax dollars were needed to support the programs. States met this need by raising taxes and legalizing gambling. Today, Americans, on average, pay over 30% of their gross income to taxes of one form or another: excise tax, sales tax, income tax, property tax, state tax. And gambling has created yet another economic and social hardship on society, because of the crime it naturally engenders and because of the addictive tendency of people who gamble.

Another effect of raising taxes was to create more problems in the form of a larger number of people becoming dependent on the state and more spouses having to gain employment to support the family, leaving children without a parent at home to teach and supervise them.

In the early 1990s many states began the transformation to systems governance, the ultimate goal of which is to establish and maintain a "sustainable environment" in America. This required the transformation of all existing programs and offices to an outcome-based environment where the focus is on reaching goals benchmarked to the ultimate goal of the sustainable environment.

This is true whether speaking of education, transportation, health care, labor relations, social and health services ... every state and federal office and program has been or is in the process of being transformed.

This transformation, imposed on the states through discretionary grants sought by the states from the federal government, has been largely funded at the state level, not at the federal level where the transformation was imposed. The federal discretionary grants, in most cases, only provided "seed" money to fund the transformation imposed, said seed money equating to pennies on the dollar of the actual cost to implement and sustain the transformation.

Even though this transformation has occurred over a period of years, in most cases since the early 1990s, the long term effect has been the depletion of budget surpluses and rainy day funds.

Too, with an ever increasing behemoth of state programs requiring funds to insure their continued existence, state legislatures have been unable to accurately predict the revenue required to fund the plethora of programs.

Another factor adding to the financial distress is the lack of fiscal accountability. Audits of state financial records are of little use when there is no accountability for the misuse and abuse of funds.

A case in point: the Schools for the 21st Century in Washington state. Over the term of this pilot program for education reform in Washington state and nation-wide, the program paid Peter Holly over $178,000 in contractual consulting fees. These fees were paid over the period of five fiscal years. Each contract was a "sole source" contract, meaning the contract was not let for competitive bids as services provided by Holly were of "such a unique nature that the consultant is clearly and justifiably the only practicable source to provide the service... " (RCW 39.29.006(10), Washington State). With all the people within the United States advocating for the transformation to systems education, Peter Holly (of Cambridge, England) was the only consultant who could provide the service needed. This was approved by the Office of Financial Management in Washington State.

The last contract with Holly was for $15,000. What the people of the state of Washington would come to realize was that this $15,000 was in payment of some 770 pages of scribbled notes written by Holly concerning the Schools for the 21st Century program. These 770 pages supposedly comprised the "final report" required by the law governing the Schools for the 21st Century program. This "manuscript" was never typed into a finished format but was buried in a file in the offices of the State Board of Education. The manuscript did not surface again until activists in the State of Washington threatened to sue to force disclosure.

In actuality, the 770 pages cost the taxpayers much more than the $15,000, as the writing of the 770 pages started as much as two years prior to the date the report was due and payments beyond the $15,000 were made during those two years for "progress" on the manuscript. How much the taxpayers of the State of Washington actually paid for the 770 pages of Holly's scribbling is not known or determinable since no itemized billings were presented for payment.

Although the requirements of the law governing the Schools for the 21st Century program in Washington State were never met, although $21,000,000 taxpayer dollars were spent on this program, no one was held accountable for the misuse and abuse of taxpayer funds on this program.

This is just one instance. It joins a plethora of others.

Under systems governance, accountability is not to taxpayers for how their tax dollars are spent, accountability is to the system. The focus of accountability is reaching the system benchmarks in pursuit of the ultimate goal of achieving and maintaining the sustainable environment. The amount of money spent in achieving the ultimate goal is relegated to the realm of unimportant, or at the most, necessary to achieving the ultimate goal.

Unfortunately, just as the free market system relies on money, so does systems governance. And when more money is spent than revenue is received in the form of taxes, and when money is spent without accountability for how it is spent, deficits are inevitable.

When the United States began the transformation to systems governance, activists nation-wide warned of the impending economic woes. And true to form, legislators, at both the state and federal level, refused to listen.

In Washington State, the people, tired of the tax and spend policies of the government, have given voter approval to several initiatives limiting the ability of the state to increase taxes without the consent of the people. Although the State Supreme Court has ruled against portions of some of the initiatives, the Legislature refuses to listen to the message being sent them by the people of Washington State, not to mention their attack on the backer of these initiatives, Tim Eyman.

Claiming an unfriendly tax environment, many businesses have left Washington State for other states or for foreign countries. With businesses leaving, unemployment has soared in Washington State. The result has been the loss of tax revenue from both the businesses leaving and from those who have lost their jobs because of the businesses leaving. Playing into the unemployment in Washington State is the shut down of the once thriving logging industry due to environmental neophytes from other parts of the United States who know little to nothing about how to maintain a healthy forest ecosystem in the Pacific Northwest. The result has been the loss of thousands of board feet of timber to fires caused by lightning and the further financial drain due to the expense of fighting those fires and dealing with the aftermath of those fires.

One of the selling points of systems governance, at the outset, was that it would be a leaner, meaner, more efficient, more accountable system of governance. As usual, however, when snake oil salesmen appear bearing cures for what ails the system, the rhetoric (or sales pitch) and the reality don't exist in proximity to each other or even on the same scale or plane.

The way forward almost certainly assures bankruptcy for many states, paving the way to dissolve state governments and form regional governments in the ten regions in which the United States was divided many years ago.

The way back to the free market society on which America was founded also assures economic hardship but will not result in the bankruptcy of the United States or the third world conditions that will result from that bankruptcy.