Running state budget like a business is a daunting task

As much as this will sound like heresy to his supporters and blasphemy to his detractors, Gov. Neil Abercrombie wants to run state government like a business.

Discounting the few months when he was privately employed, the paychecks cashed by Abercrombie during his 73 years have been imprinted with State of Hawaii, City and County of Honolulu and U.S. Treasury seals. Despite that lack of experience in the private sector, Abercrombie has a plan to shape Hawaii like a business.

He has a point.

Kalbert Young, the state budget and finance director, the sharp, young, former Maui County finance director, says Hawaii’s accounting and budgeting system is a jumbled up mess of cross purposes that needs to change. He hopes to lead a "formal restructuring" of the system.

Abercrombie is already calling Young the state’s "CFO — chief financial officer," but that title gets ahead of the revamping needed to actually make the change.

According to Young, the problem is that three separate state departments lay their hands on the state’s money and not in any coordinated fashion. The tax department collects it, budget and finance manages the money and the actual accounting and check writing fall to the accounting and general services department.

"In the private sector, it is not spread out that way. It makes sense to bring it in under one roof or one system of financial management," Young says.

Caution: Some important but, seriously geeky, policy wonk material is just ahead.

Hawaii’s budget system, at one time, was thought to be the most modern developed by any state. Called the Planned Program Budgeting System (PPBS), it was modeled on the U.S. Defense Department plan created during the Vietnam War by Robert McNamara. It is supposed to integrate priorities with the costs to reach specific goals and to measure expenditures needed for specific results.

There are legions of folks within B&F tallying up this data, which is then largely ignored.

University of Hawaii Professor Deane Neubauer, in a excellent chapter in the book "Politics and Public Policy in Hawaii," says PPBS was supposed to "enable those who operate the system to judge objectively the comparative merits of competing budgetary requests."

The state budget is still compiled according to PPBS, although I doubt if any legislators without an accounting degree have ever heard of it.

"PPBS as a system is simply too complex for the limited staff capabilities of the legislature," Neubauer wrote. "The (legislative) committees make do by largely ignoring it."

What happens, Neubauer contends, is that the PPBS system first creates a system that few in the Legislature can master, and then PPBS masks the real work done by any governor and the finance committee chairs to get what they want out of the budget without question or debate.

Now back to Kalbert Young and his plans. Instead of McNamara and his utopian plan, Young just wants to know what’s going on.

"Operationally, there is no report you can get on a monthly basis that shows revenue income, versus budgeted expenditures versus actual expenditures," Young says.

He complains that, given Hawaii’s accounting system, it is actually unknowable.

"We literally do not have the capacity to put that together," says Young, who is hoping to someday see Hawaii on a souped-up Quicken program.

As much as Abercrombie would like to just call Young his "CFO" and declare victory, Young knows that reforming Hawaii’s budget system and getting down to business will mean convincing legislators to change decades-old state laws and then restructure the government reporting according to new accounting rules.

This puts any real change about two or three years away, which will not be the most nimble of business plans.

Richard Borreca writes on politics on Sundays, Tuesdays and Fridays. Reach him at rborreca@staradvertiser.com.