STATES COOPERATE OUTSOURCING SCHOOL CHOICE

June/July 2003

STATES COOPERATE OUTSOURCING SCHOOL CHOICE

featuresfeatures

senior editorJack Penchoff

associate editorLaurie Clewett

graphic design coordinatorSusie Bush

contributorsJames Carroll • Keon Chi

Chad S. Foster • Ed JanairoKaren Marshall • Trudi Matthews

Magdalena Mook • John MountjoyJenny Sewell • Allison Spurrier

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on the coverRural America is at the crossroads

of challenges that will require structural changes to keep small

communities viable.Cover by Lisa Eads

rural issues

The rural policy question 5Rural America is at a crossroads.

by Charles W. Fluharty

rural issues

Rural America’s new economic frontier 8Regional approaches needed to boost economic development.

by Mark Drabenstott

rural issues

Rural voters 12Rural America has numbers to become political force.

by Rick Foster

rural issues

Will the NCLB help rural schools? 15Advocates fear increased federal resources won’t help rural schools.

by Jonathan R.Watts Hull

corporate governance

Reforming corporate governance 23States play unique role in reforms.

by the National Association of State Treasurers

homeland security

The Center for Homeland Security 25NEMA, Adjutants General Association and Mitretek team up to help states.

by Amy C. Hughes

personnel

Outsourcing human resources 27Florida takes outsourcing to a new level.

by Leslie Scott

education

School choice gains momentum 29Court rulings fuel charter and voucher movements in the states.

by Charlotte C. Postlewaite

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June/July 2003

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2 state government news june/july 2003

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council officesDaniel M. Sprague, Executive Director

Executive Committee

PresidentGov. Mike Huckabee, Ark.

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President-ElectGov. Frank Murkowski, Alaska

Chair-ElectSen. John Hottinger, Minn.

Vice PresidentGov. Ruth Ann Minner, Del.

Vice ChairAssemblyman Lynn Hettrick, Nev.

2003 executive committeeTerry C. Anderson, Director, Legislative Council,Wis. • Sen.Manny Aragon, N.M. • Jerry Bassett, Director, LegislativeReference Service, Ala. • Treasurer Marshall Bennett, Miss. • CarlBianchi, Director, Legislative Services, Idaho • Sen. Patty Birkholz,Mich. • Sen. John Chichester,Va. • Rep. John Connors, Iowa •Rep. Carol Donovan, Mass. • Gov. Jim Douglas,Vt. • TreasurerDan Ebersole, Ga. • Sen. Hugh Farley, N.Y. • Sen. PaulFeleciano, Kan. • Rep. Hector Ferrer-Rios, Puerto Rico • Lt. Gov.Charles Fogarty, R.I. • Sen. Hillman Frazier, Miss. • Gov. DavidFreudenthal,Wyo. • Sen. Lisa Gladden, Md. • Rep. Joe Hackney,N.C. • Senate President John Hainkel Jr., La • Speaker SethHammett, Ala. • Sen.Toni Nathaniel Harp, Conn. • Sen.TomHatch, Utah • Sen. Douglas Henry,Tenn. • Sen. Kip Holden, La. •Gov. Bob Holden, Mo. • Rep. Deborah Hudson, Del. • JudgeRobert Hunter, N.C. • Del. John Hurson, Md. • Sen. CindyHyde-Smith, Miss. • Hale Irwin, Communications & InformationTechnology,Vt. • Rep. Greg Jolivette, Ohio • Rep. DouglasJones, Idaho • Lilia Judson, Div. of State Court Administration,Ind. • Gov. Dirk Kempthorne, Idaho • Robert Kieffer, QuebecNational Assembly • Michael King, Executive Director, LegislativeOffice for Research Liaison, Pa. • Sen. Peter Knudson, Utah •Rep. Kim Koppelman, N.D. • Speaker Pete Kott, Alaska •Treasurer Brian Krolicki, Nev. • Sen. Sue Landske, Ind. • Gov.Mike Leavitt, Utah • Sen.T.D. “Ted” Little, Ala. • Sen. CarlMarcellino, N.Y. • Sen. John Marchi, N.Y. • Sen. KennethMcClintock, Puerto Rico • Kathleen Alana McGinty, ActingSecretary, Dept. of Environmental Protection, Pa. • SenatePresident Thomas V. Mike Miller Jr., Md. • Sen. Angela Monson,Okla. • Lt. Gov. Karl Ohs, Mont. • Sen. Jose Ortiz-Daliot, PuertoRico • Gov. George Pataki, N.Y. • Gov. Paul Patton, Ky. • VirgilPuskarich, Executive Director, Local Government Commission,Pa. • Sen. Pam Redfield, Neb. • Mary Regel, Director, Bureau ofInternational Development,Wis. • D. Sue Roberson, Director,Dept. of Personnel, Ind. • Del. Jack Rollison,Va. • Rep. ChrisRoss, Pa. • Rep. Roger Roy, Del. • Sen. Steve Saland, N.Y. •Thomas Sandretto, Deputy Commissioner, Dept. of Buildings &General Services,Vt. • Sen. DiAnna Schimek, Neb. •Assemblyman Robin Schimminger, N.Y. • Rep. Mary Skinner,Wash. • Assemblyman Robert Straniere, N.Y. • Sen. BrianTaniguchi, Hawaii • Sen. Robert Thompson, Pa. • SenatePresident Earl Ray Tomblin,W.Va. • Sen. Donne Trotter, Ill. • Sen.Rich Wardner, N.D. • Kathy Waters, Division Director, SupremeCourt, Ariz. • Jeff Wells, Secretary, Dept. of Labor &Employment, Colo. • Sen. Jeff Wentworth,Texas • SandraWinston, Executive Director,Transitional Employment Board,Ark. • Glen Woodbury, Director, Emergency ManagementDivision,Wash.

STATE GOVERNMENT NEWS, ISSN 0039-0119, June/July2003,Vol. 46, No. 6 — Published monthly with combined issuesin June/July and Nov./Dec. by The Council of StateGovernments, 2760 Research Park Drive, Lexington, KY 40511-8410. Opinions expressed in this magazine do not necessarilyreflect the policies of The Council of State Governments northe views of the editorial staff. Readers’ comments are wel-come. Subscription rates — In the U.S., $45 per year. Singleissues are available at $6 per copy. POSTMASTER: Sendaddress changes to State Government News, SalesDepartment, P.O. Box 11910, Lexington, KY 40578-1910.

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departmentsdepartments

Inside story 4Place matters.

by Jack Penchoff

Trends alert 18Reading First deadlines loom.

by Charlotte C. Postlewaite

State trends 19Interstate cooperation.

by CSG’s Trends Research and Response Group

Excellence in action 32Activities and events by CSG,its affiliates and other associations are highlighted.

Conference calendar 39Meetings and conference activities of CSG,affiliates and other associations are listed.

the council of state governments 3

page 19


inside story

ural America is more than open fields, small townsand roaming livestock. Like their brethren in urban

areas, Americans in rural areas face a variety of chal-lenges that will require a host of solutions.

While the health care, education and economicdevelopment issues that confront rural America are dif-ferent than those in the cities, they also differ amongrural Americans.

A small town of 10,000 people located 90 milesfrom a large city has different problems than a smalltown of a similar size that is a suburb of that same city.And the problems an Iowa hog farmer faces differsfrom those of a Kentucky tobacco grower.

As rural communities’ advocates like to say, “placematters.”

This month, State Government News features sever-al articles that explore the differences and commonali-ties of rural communities.

Experts on rural issues offer their views, and possi-ble solutions to rural problems in economic develop-ment, politics, education and health care.

Charles W. Fluharty, director of the Rural PolicyResearch Institute, raises the question of whether RuralAmerica is on the verge of a rural renaissance.

Mark Drabenstott, vicepresident and director at theCenter for the Study of

Rural America at the Federal Reserve Bank of KansasCity, makes the argument that new technologies andregional partnerships will keep Rural America a vitalpart of the nation’s economy.

The issues that influence rural voters are the topic ofan article written by Rick Foster, vice president forprograms at the W.K. Kellogg Foundation.

And Jonathan R. Watts Hull, a regional represen-tative for the Southern Legislative Conference inCSG’s Southern office, writes that advocates fear the

No Child Left Behind Actmay leave rural schoolchildren behind.

In other stories this month, Amy C. Hughes, a poli-cy analyst with the National Emergency ManagementAssociation, reports on the establishment of the Centerfor State Homeland Security designed to help statescarry out their homeland security responsibilities.

Florida has entered into a seven-year, $280 millioncontract to outsource most of its human resourcesfunctions. Leslie Scott, association manager of theNational Association of State Personnel Executives,reports on how the outsourcing project was imple-mented and how much the state hopes to save.

Place mattersBY JACK PENCHOFF

Rick Foster

RR

June/July 1933June 1On June 1,1933,Eugene Meyer bought TheWashington Post at a public bankruptcy auc-tion for $825,000. His dedication, hardwork and vision helped the paper tobecome one of the most respected andbest newspapers in the world.

June 2On June 2, 1933, the White House poolwas finally finished and opened. It con-tained all the latest technology and gadg-ets. The pool was built so PresidentRoosevelt, who was plagued with polio,could complete special exercises.

June 6On June 6, 1933, the first drive-in theateropened in New Jersey. The first movieshown was called “Wife Beware.”

June 16On June 16, 1933, the National IndustrialRecovery Act became law. PresidentRoosevelt devised this act to assist withthe economic recovery of the nation dur-ing the Great Depression. It sanctioned,supported and sometimes even enforcedan alliance of industries. Antitrust lawswere suspended, production quotas wereput into place, and codes of fair competi-tion were to be drafted for the variousindustries.

July 6On July 6, 1933, baseball’s All-Star gamedebuted at Chicago’s Comiskey Park. In1933 and 1934 the fans, along with teammanagers, selected the teams. Lou Gehrig,Jimmie Fox, Al Simmons and the legendaryBabe Ruth all participated in the first game.The American League won 4-2, partly inthanks to Ruth’s homer in the third inning,the first homer in All-Star history.

July 8On July 8, 1933,Arthur J. Rooney foundedthe Pittsburgh Steelers, the 6th oldest NFLfranchise in the United States. Until 1940,the Steelers were known as the Pirates.

Jack Penchoff

Amy C. Hughes

Leslie Scott


n 1908, President Theodore Roose-velt appointed the Country Life

Commission to consider and solve theso-called “rural problem.” “The socialand economic institutions of the opencountry are not keeping pace with thedevelopment of the nation as a whole,” hesaid.

Nearly a century later, while muchprogress has been achieved, significantrural inequities continue to challengepolicy-makers.

Today, we are in the midst of anemerging national dialogue regarding thedevelopment of a more integrative, com-munity-based national rural policy. Theattention this issue is receiving today isby far the most substantive rural policyopportunity of the last 25 years, and mayindicate the potential for a dramatic newexamination of these issues. We maytruly be at a rural “tipping point” – or wemay be heading into the eye of the “per-fect rural storm.”

Will we be able to exploit the rural tip-ping point, or will we allow the perfectstorm to finally extinguish the hopes fora viable rural America?

The perfect rural storm?

Although serious discussions of ruralAmerica’s challenges are emerging,along with unique opportunities in the public, private and philanthropic

sectors, these are occurring as a potent-ial “perfect rural storm” approaches onthe horizon.

This convergence includes three increas-ingly challenging rural frameworks: 1) therural dilemma in American federalism; 2)the fiscal crisis in state and local govern-ment; and 3) the challenge of rural eco-nomic and institutional restructuring. If thechallenges are not addressed, this perfectstorm will undoubtedly overwhelm ruralpeople and places.

The rural dilemma in American federalism

While much has been written regard-ing federal devolution of public policies,programs and funding, in reality we are atthe end of a 25-year shift in interjurisdic-tional relationships. Though many ruraladvocates believe greater state-level con-trol over programs, personnel and fund-ing works to the advantage of rural areas,this outcome remains uncertain. And,

rural issuesrural issues

Are we on the verge of a rural renaissance,or will hopes for a viablerural America be extinguished?

BY CHARLES W. FLUHARTY

The rural policyquestion

II


despite much recent attention to “smallergovernment” in our nation’s press, this isnot the reality.

As this nation’s “New Federalism”policy framework continues to evolve,local and regional government capacitybecomes increasingly critical for ruralcommunities. Today, 2,305 of ournation’s 3,043 counties are rural. Thisaccounts for 76 percent of all counties, 83percent of our nation’s land, and between20 percent and 25 percent of our nation’spopulation, depending upon how youdefine “rural.”

These facts are of more than mereinterest, as the economies of rural communities are significantly moredependent upon federal governmenttransfer payments than are urban commu-nities. Today, nearly 18 percent of totalpersonal income in rural America isderived from federal transfers to rural cit-izens. Social Security, retirement,Medicare and Medicaid payments consti-tute 80 percent of these totals. As the fed-eral government reduces these payments,income substitutes must be found withinrural communities if they are to remainviable, much less grow, in the future.

Additionally, rural governments aresmaller and most often manned by part-

time “citizen servants.” The overwhelm-ing majority of county governments (72percent) serve fewer than 50,000 persons.In fact, 700 of the 3,043 counties in theUnited States serve fewer than 10,000inhabitants. These jurisdictions have littleor no access to the technical assistance,research, and grantsmanship supportwithin larger units of government. Thisfurther advantages suburban jurisdictionsin capturing state-level funding for localand regional governments.

A hidden but equally critical challengeis the nature of federal support to ruralcommunities. In 2000, federal per-capitaspending in rural areas was $5,481 perperson. While this is a significant com-mitment, it remains below the $5,742spent per urban citizen.

An even greater challenge for ruralareas is the difference in the type of fed-eral funding that rural and urban areasreceive. Nearly 70 percent of federalfunds flowing to rural America are feder-al transfer payments to individuals. Inurban America, transfers account for lessthan 50 percent of federal spending, withthe remaining funds targeted to infra-structure and community capacity build-ing for government and nongovernmentalorganizations. This 20 percent differen-

tial assures much stronger federal supportfor building the capacity of urban andsuburban communities, organizations andinstitutions, and this disadvantage isexacerbated with each passing year.

The fiscal crisis in state and local government

As we all know, state and local gov-ernments are facing their most difficultfiscal crisis since World War II. With over$200 billion in state deficits anticipatedin fiscal years 2003 and 2004, rural com-munities face a significantly more criticaldecline in relative community capacityfunding, for the reasons outlined above.In addition, because of the relative weak-ness in the philanthropic and nongovern-mental sectors within rural America,institutional alternatives to state and localfunding are also less available.

Moreover, as large swaths of ruralAmerica continue to depopulate, theever-declining tax base of these countiesfurther complicates this challenge. Whileall governments face the same dilemma,rural jurisdictions have fewer handles topull, fewer adjustments to make, andmany more difficult choices to face.

The challenge of economic and institutional restructuring

Until this most recent economic down-turn, rural unemployment had declined toits lowest level since the recession of theearly 1990s. After a decade of decline,rural earnings and per-capita incomewere rising at rates similar to those inurban areas. However, recent declines inthe rural manufacturing and servicesindustries have taken away most of thesegains, and major job losses have occurredin many other sectors.

Sadly, rural employment is still domi-nated by low-wage industries. In 2000,24.5 percent of rural workers were em-ployed in the service sector. In 1999,more than 27 percent of the rural workforce over age 25 (nearly 5 million work-ers) received wages that would not lift afamily of four above the official povertyline, if earned full-time, year round. Thisis significantly higher than the 19.3 per-cent urban rate.

Rural earnings per non-farm job



remained relatively constant between1999 and 2000, dipping slightly from$25,982 to $25,980. Meanwhile, in urbanareas, earnings per non-farm jobincreased from $38,499 to $38,806.

Thus, rural incomes remain signifi-cantly lower than urban incomes. In2000, the per-capita income was $21,847in rural areas, compared to $31,332 inurban areas. Particularly disturbing is thestark reality that rural poor families aremore likely to be employed and still poor.In 1998, two-thirds of rural poor familieshad at least one member working at sometime during the year, while 16 percenthad two or more family members work-ing, and 29 percent had one or more full-time, full year workers, a disturbing 9percent increase since 1996.

In general, poverty rates are higher inrural areas than in urban areas (13.4 per-cent compared to 10.8 percent in 2000).

Child poverty is also higher in ruralareas. This problem is particularly daunt-ing in the 382 persistent poverty coun-ties, defined by the federal governmentas those with 20 percent or more of theirpopulation in poverty from 1960 to 2000– 95 percent of which are rural. Thesecomprise nearly one-quarter of all ruralcounties, and are located mainly in theSouth, core Appalachia, the lower Rio

Grande valley, and on American Indianreservations.

A rural “tipping point”?

This perfect rural storm, in which thestate and local government fiscal crisis,the continuing rural disadvantage infederalism, and the ongoing economicand institutional restructuring withinrural America work in consort, will onlybe overcome if rural America capturesthe potential of several key emergingopportunities.

This exciting set of public, private andphilanthropic initiatives are creating thepotential for a true rural “tipping point,”not yet fully actualized, but within ourgrasp. The potential for a true rural ren-aissance can be seen, and is briefly out-lined below.

Crafting a rural public/private entrepreneurship

A new institutional framework forrural economic and community develop-ment is emerging. It is a framework inwhich new and exciting, cross-sectorinnovations occur, where regional collab-orations and jurisdictional realignmentsare happening, where increased attentionis given to place rather than sector solu-tions, and to regional competitiveness,rather than subsidy dependence.

If this public/private moment is to beoptimized, public and private entrepre-neurs in rural America must be lifted up,and the models they are creating must bereplicated across space, time and cir-cumstance. Many of these examples arehighlighted in this issue. Many moreexist, and in every sector, unique ruralexperiments are under way and areachieving success.

The unique rural laboratory

Rural America offers a laboratory forinstitutional innovation, because of sizeand scale. Investments in rural Americacan truly matter, when done right. Uniqueprograms in our most distressed ruralareas have already achieved success. Forexample, the roughly $9 billion investedby the Appalachian Regional Commis-sion over the past 40 years has lifted over

100 counties out of the “distressed” cate-gory. In every sector, and at every level ofgovernment, experimental models areworking, and new approaches are beingtested and refined.

Untapped human resources exist inmuch of rural America. As Joel Kotkinpointed out in a July 21 op ed piece inThe Washington Post, “The Great Plainstoday are a kind of ‘brain belt,’ boastingone of the nation’s highest levels of liter-acy and scholastic achievement, withMinnesota, North and South Dakota,Iowa, Nebraska and Kansas almostinvariably ranking at or near the top innational science test scores and in bache-lor’s degrees per capita.”

Yet, “brain drain” exists in these statesbecause economic opportunities do not.Investments to address this deficiencywould produce significant change.However, in other rural regions, newinvestments in human capital must still bemade.

Finally, while each rural area is differ-ent, rural investments highlight common-alities across space, from urban and sub-urban areas to our smallest rural commu-nities. What we lack are intermediariesand sufficient capital to fully exploitthese new rural experiments.

New rural governance

To optimize these opportunities, a“new rural governance” must emerge. Inmany places this has already begun. It isevident when local and state governmentsjoin hands with the private sector andnongovernmental organizations to opti-mize public/private collaboration within aregional framework.

While structural challenges continueto beset rural communities, this new gov-ernance framework offers a uniqueopportunity to neutralize them. As ruralissues receive additional attention incross-sector innovation, these modelswill become increasingly important.

“Perfect storm” or “tipping point”remains the question. Ultimately, stategovernments will play a significant partin determining the answer to this criticalquestion.

— Charles W. Fluharty is director of theRural Policy Research Institute.


ain streets throughout the nationare looking for new economic

engines for a simple reason: the oldengines are sputtering.

For much of the past half-century,agriculture and manufacturing havebeen the two main pillars of the ruraleconomy. Both have enjoyed tremen-dous gains in productivity over time,meaning that fewer firms can producemore. As a result, consolidation in farm-ing and factories has left more ruralcommunities, especially smaller ones,wondering where they can turn for newsources of economic growth.

Signs of strain are showing in the ruraleconomy. Economic growth is highlyuneven across the countryside. Global-ization is taking a toll on major sectors ofthe rural economy. And finally, popula-tion continues to shrink in many ruralplaces, with the decline often greatest inthe regions experiencing the smallesteconomic gains.

Economic growth is concentrated inroughly three to four of every 10 ruralcounties. Typically, these high-growthareas have one of three main characteris-tics: a major scenic amenity (mountains

or lakes), proximity to a major metropol-itan area where growth spills over fromthe city, or a primary hub for retail,health, or financial services. The thirdcategory often represents “right stuff”kinds of communities that essentiallygrow at the expense of neighboring com-munities. That is, in many parts of ruralAmerica, successful market hubs areserving an ever-widening market area.

The other side of this coin is that six to

seven of every 10 rural counties arestruggling to grow their economies.These counties are heavily concentratedin the nation’s Heartland where agricul-ture has been a primary economic anchorin the past. But they are also found inremote corners of the countryside, or inareas where consolidation has been pres-ent in other sectors such as energy.

Globalization is a big reason why ruralareas dependent on farms and factories



State policy-makers shouldencourage regionalapproaches

BY MARK DRABENSTOTT

MM

Rural America’snew economicfrontier



are struggling. Last year, for the first timein history, Brazil and Argentina producedmore soybeans than the United States.This underscores the pressure on U.S.farmers to cut production costs andincrease acreage, making do with lessincome per acre.

Similarly, rural factories feel the pres-sure of global competition. Many facto-ries moved to rural locations in search ofcomparatively inexpensive labor, landand taxes. Those cost comparisons weretypically made relative to the costs ofdoing business in U.S. urban locations.Today, however, there are far more com-parisons to be made – and many are notin the United States. Last year, nearly 140rural factories shut down, representing 45percent of all mass layoffs in rural manu-facturing. By contrast, plant closingswere just 25 percent of mass layoffs inurban manufacturing.

Shifts in the rural economy are closelytied to recent demographic shifts in ruralAmerica. Areas with rapid economicgains generally enjoyed strong gains inpopulation, according to the 2000 census.Conversely, rural areas with weakeconomies saw declining populations,especially throughout the Heartland.Those leaving tend to be the youngergeneration, a “double whammy” formany rural areas – a weak economy cou-pled with an outflow of current and futureleaders.

New opportunities on the horizon

Despite these worrisome trends,opportunity still exists to strengthen therural economy. While commodity agri-culture, branch factories, natural resourceremoval and a host of traditional activi-ties will still have a role in the rural econ-omy; economic development in the futuremay depend on powerful new technolo-gies. Regions must constantly invest innew sources of competitive advantageinstead of just protecting the old. Thepower of this principle lies in its ability totransform rural regions from continueddependence on a commodity-based econ-omy to one that is much more diversified.The principle also recognizes that whatworks for one region may not work foranother.

While there are many items on rural

America’s new economic menu, three meritspecial consideration: product agriculture,tourism, and advanced manufacturing.

Product agriculture

Product agriculture represents a spec-trum of new opportunities that can be dif-ferentiated from the commodities thatmostly define agriculture today. The spec-trum runs from “near commodities” onone end to highly differentiated productson the other. A good example of a nearcommodity would be ethanol, whichreceives much attention, but probably rep-resents exchanging one commodity (corn)for another (ethanol). That is, makers ofethanol will be subject to the same forces

of commodity markets that corn produc-ers already know so well. Bio-plasticsmight be somewhat more differentiatedand lie a bit further along the productspectrum.

In the middle of the product spectrumlies farm-to-grocer foods. Today’s gro-cery shoppers often want quality foodswith zesty flavor, nutrition and conven-ience. Consumers crave variety, and arewilling to pay for choices that suit theirindividual preferences. Farmers close toa major metropolitan area like Dallas orKansas City have an opportunity to giveconsumers more choice, by deliveringfarm-fresh foods and forging directalliances with the grocers or directlywith consumers.

There are very few examples, however,

of this strategy being used. Farm-to-gro-cer or -producer alliances are not verywell developed in the United States, espe-cially in the Midwest where commodityproduction remains dominant. However,crop producers within an easy drive tomajor cities have a clear-cut opportunity.The success of this strategy depends onhaving enough growers to consistentlyprovide products.

A related opportunity is to createregionally branded foods. The Europeanshave been very successful in creating spe-cialty foods that are tied to a specificgeography. For example, France’s Institutdes Appelations d’Origine governs theuse of regional labels on food products.Sparkling wine can only be called “Cham-

pagne” if the grapes were grown in thatspecific region. Similarly, Italy’sIndiccazione Geographica Typica over-sees regulations that give Parma ham itsunique identity.

“Farmaceuticals,” growing pharmaceu-tical inputs in genetically modified (GM)crops in fields instead of factories, repre-sents the far end of the product spectrum.These crops probably represent the high-est value crops ever grown, with thepotential to bring high-skill, high-wagejobs to rural areas previously served bycountry elevators. Some estimates suggestthat there could conceivably be hundredsof regional processing facilities each rep-resenting between $80 and $100 millionin capital investments, a huge boost to arural region.

to compete in the global marketplace.North Carolina’s hosiery industry pro-

vides a compelling example of rural suc-cess in advanced manufacturing. About60 percent of the nation’s socks are madeby 35,000 employees in rural NorthCarolina. The firms are small, employingfewer than 75 workers each and concen-trated in rural communities in the state’s Catawba Valley.

On the surface, this industry seemsespecially vulnerable to globalizationpressures. Quite to the contrary, thehosiery industry has prospered by build-ing new synergies among the small firmsthrough clusters.

The creation of the Hosiery Technol-ogy Center in 1989 at Catawba ValleyCommunity College provided a focalpoint for testing and adapting new tech-nologies that none of the small firmscould test or adopt on their own. Thecenter also provided training for industryworkers to more effectively use newtechnologies.

The result has been steady investmentin new technology, more productiveworkers, and a highly competitive indus-try. More recently, the industry haspushed aggressively to establish rigorousquality certification programs and to takeadvantage of e-commerce methods forpurchasing inputs and marketing itsproducts (www.legsource.com).

One key to cluster efforts in the futureappears to be a formal organization thatcan forge partnerships among firms. TheHosiery Technology Center played thatrole in this case. While rural America hasa strong history of cooperatives, especiallyin agriculture and utilities, there are rela-tively few examples of multifirm clusterslike the one in North Carolina. Thus, pub-lic officials may want to consider ways tohelp create the institutional setting inwhich clusters might form and flourish.

The common thread

There is an important common threadin each of rural America’s exciting economic opportunities. That thread isinterdependence. While known for itsrugged independence, many of the besteconomic opportunities on the horizonwill require a much more interdependentbusiness model. This may mean 200



The future of this investment structureis questionable because of a few widelypublicized breakdowns in control of GMplants last year. New regulations stipu-late separation distances from conven-tional crops. Some of these requirementswill be extremely difficult to meet in theCorn Belt. Thus, if current regulationsstand, this opportunity may be limited toareas east and west of the Heartland,where more substantial setbacks aremore possible.

An even bigger hurdle may be gettingfarmers to comply with identical produc-tion protocols. Farmers are accustomedto growing crops “their way.” For farma-ceuticals to become a developmentengine, several hundred farmers mayhave to all abide by the same ISO 9000production protocols – the kind of criti-cal mass of production needed to supplya $100 million processing facility. Thisrepresents a very big shift in culture andpractice. ISO 9000 protocols are interna-tional quality standards followed bymajor manufacturers around the world.

Tourism

Tourism offers significant advantagesfor many rural regions, yet building crit-ical mass is an issue with this opportuni-ty, too. Three kinds of rural tourism

strategies are emerging. The scenic strat-egy builds on mountain vistas and lakes.The nature strategy exploits a uniqueadvantage in selling nature for recre-ation. In South Dakota, for example,some farmers have given up corn andsoybeans so their land can be a pheasanthabitat for East Coast hunters.

Finally, there is a cultural strategy thatleverages a region’s unique history andculture. Tuscany is a great example ofthis strategy at work in a largely ruralregion. Tuscan foods are given a notableregional identity. Tuscan inns combinethe region’s food with its artistic, scenicand cultural amenities.

Unfortunately, there are not a lot ofexamples of similar success yet in ruralAmerica. Napa Valley is one notableexception of the power of a developmentstrategy that combines regionally brand-ed foods with the cultural and scenicassets of a region.

Manufacturing

A final opportunity is building on theexisting manufacturing economy. Theuse of advanced manufacturing strate-gies allows older rural factories to com-pete. Advanced manufacturing is theconcept of using cutting-edge technolo-gies to allow clusters of small rural firms



farmers signing on to the same ISO 9000protocols for growing special corn, orhundreds of textile companies poolingtheir resources to adopt new technolo-gies. A real issue for state lawmakers tothink about is how they create publicinstitutions that can help broker suchcooperation around new economicopportunities.

New policies for rural America’s new frontier

A new economic frontier for ruralAmerica means a new policy frontier, too.Sticking with the traditional line-up ofrural policies will not provide the supportcommunities and entrepreneurs need toseize new kinds of business opportunities.Simply put, agricultural policy alone is nolonger sufficient to meet the needs of thenew rural economy.

Evidence suggests that rural regionswith strong local economies tend to dofour things well. First, they think regional-ly, recognizing that parochial developmentefforts often fail in a global economy thatrequires some level of critical mass.Second, they create institutions that forgeregional partnerships. A number of region-al institutions are taking form across thecountryside, from the Elkhorn ValleyEconomic Development Council inNortheast Nebraska to the Prairie StatesCenter for Entrepreneurial Leadership inthe Panhandle region of the Great Plains.Third, successful regions make steadyinvestments in knowledge and training,knowing that new economic engines usu-ally flow out of such investments. Andfinally, they leverage educational institu-tions, just as the hosiery manufacturersused Catawba Valley Community College.

New rural policies will build on thesefindings and the directions they will takeare increasingly clear. Two major shifts inthinking are plain. First, new rural policies– whether at the state or federal level – willlikely shift from a focus on subsidies toattention on growing more entrepreneurs.Business starts and expansions will be thetrue anchors of the new rural economy,and the evidence suggests that entrepre-neurs face a tougher time in rural placesthan in cities. Second, policies willemphasize rural regions as the essentialfocus of new programs, acknowledging

that “one-size-fits-all” simply no longerworks. What is good for southwestGeorgia probably does not work for west-ern Kansas.

Within this broad framework, three pro-gram directions are likely to be importantat the state level.

Entrepreneurship initiatives will be acore building block of new rural policies.Technical assistance and technology trans-fer are two areas of special value. Ruralareas often spawn many business starts,but they are less successful in helpingyoung businesses reach the growth phasesthat lead to significant gains in employ-ment and local wealth. Better access tobusiness and technical assistance is oneanswer. Another key issue is access toequity capital. Nearly every rural MainStreet in the country has a communitybank, but few have an equity fund office.While there are some highly successfulequity funds based in rural areas, theyhave not been widely replicated. A public-private partnership will probably berequired to solve this dilemma.

Technology programs will be anotherkey rural policy program area. Broadbandtechnology is an obvious example, but notthe only one. New investments in pharmacrops are another. In general, technologiesthat help rural businesses go beyond com-modities and exploit product niches willbe important. This may suggest a richerportfolio of state investments in technolo-

gy than was true in the past.Finally, rethinking governance at the

regional level will be an important dim-ension of new rural policies. Countiesare important units of government, but inmany cases they were drawn with 18thcentury technology. State governmentsare in a position to encourage the forma-tion of new regional partnerships that canbring several counties together. Theseinstitutions will need enough force tobring major economic players and localgovernment officials to the same tableand yield new and enduring forms ofeconomic partnership.

Conclusions

Economic opportunities for ruralAmerica lie in new technologies and arenewed ability to leverage the uniqueassets of the countryside. But these newbusiness opportunities also represent anew way of doing business – workingregionally to build new economic engines.

State governments have a uniqueopportunity to assist by encouraging thedevelopment of regional partnerships,focusing attention on growing moreentrepreneurs and launching new invest-ments in technologies.

— Mark Drabenstott is vice presidentand director at the Center for the Studyof Rural America, Federal Reserve Bank



he problems of rural America areprobably evident nowhere more than

in little Orient, in southwest Iowa.Nestled in farm country, it has only onebusiness, the local grain elevator.

There’s no grocery store, no medicaldoctor or facilities. The school, alreadyconsolidated with another community, isfacing consolidation again because of thedeclining student numbers.

The one bright spot is the library andits computers – made possible throughthe actions of a local community group ina Managing Information with RuralAmerica (MIRA) project of the W.K.Kellogg Foundation.

The combined school-communitylibrary is appreciated by old and young,but it will take more than this to keepyoung people from leaving after theygraduate from high school.

Lack of opportunity

Rural communities across America arelosing their young people, especially in therural Midwest. Paul Demmel, a high schoolstudent participating in a MIRA project inthe western Nebraska town of Grant,explained, “I think young people want tocome back. They’d like to raise families ina rural area, but it’s hard when there are sofew opportunities for good jobs.”

In addition to lack of opportunity,there are also social impediments. “Someof the younger people who come backoften feel left out because it’s an oldercommunity,” said Demmel.

Such comments are not uncommon asrural America continues to “gray” morequickly than its urban counterparts, prima-rily due to out-migration of young people.

State legislators recognize rural

America’s assets and the challenges itfaces. In a survey of the nation’s statelegislators sponsored by the KelloggFoundation last year, 86 percent of therespondents reported that they thoughtpeople who live in rural areas had feweropportunities than those in cities or sub-urbs. State legislators reported that the10 greatest problems facing rural com-munities, in order of importance, were:

• Lack of opportunity for young people• Decline of the family farm• Access to health care• Low-wage jobs • Quality education• Overdevelopment • Access to technology • Access to transportation• Breakup of the family • Degradation of the environment.But state legislators also reported that

their legislative work on rural issues didnot match their prioritization of the prob-lems. They noted that their attentionfocused on education, followed by theenvironment, access to technology, accessto health care and access to transportation.Lack of opportunity for young people inrural areas was way down the list.

Barriers to rural development

The discrepancy is rooted in a numberof dynamics. Larger economic problems

tend to be intractable, forcing legislatorsto focus on narrower issues. At the sametime, state lawmakers are overwhelmedwith budget shortfalls. Legislators believethat their states simply do not have theresources for serious investment in ruraldevelopment. And state legislators rarelyhave to contend with an organized ruraladvocacy group like those they may facein education, agriculture or health,because there are none.

The same is true at the federal level,where rural development is almost afootnote to the rest of the Farm Bill – abill dominated by commodity supportprograms. The support programs are lob-bied much more intensively than therural development programs, and theresults show it.

One Southern member of Congresswho participated in a congressional sur-vey sponsored by the Kellogg Found-ation put the Farm Bill lobbying in per-spective. “It’s the food industry, the cornindustry, the cotton industry … all ofthem. It’s tough to compete with peoplewho have resources to make things hap-pen versus people who don’t. And, unlessthere are public interest entities out there that promote this, then you get verylittle public policy made by the peoplewithout power.”

In the 2002 Farm Bill, the CommodityCredit Corporation budget, from which

A potent political force forrural policy change

BY RICK FOSTER

TT

Rural voters



federal support payments are paid, makesup more than 23 percent of the U.S.Department of Agriculture’s annual spend-ing, while rural development titles totalless than 3 percent.

The notion that supporting farmers isan effective way to support rural commu-nities is a myth. The fact is that farm jobsmake up only 7 percent of rural employ-ment. And even after adding the jobs offarm input suppliers, food processing and

ag-related marketers, the total percent ofagriculture-related jobs in rural Americais only 11.7 percent.

Potential power of rural voters

Rural residents have not yet exercisedtheir voting power to influence federalfarm policies that support the quality oflife in rural communities. But they havethe potential to do so.

That was no more evident than in the2002 presidential election, when 53 per-cent of rural voters chose candidates whosupported President George Bush’s poli-cies or programs, compared to 44 percentof voters in the suburbs and 37 percent ofurban voters. Those figures come from astudy commissioned by the KelloggFoundation that compared the 2002 ruralvoting data with the results from urbanand suburban areas, as well with nationalpost-election data from 1998 and 2000.

“If we were to write off the rural voteas simply echoing national trends, we’dmiss a seismic shift in American poli-tics,” said Bill McInturff of PublicOpinion Strategies, one of the researchfirms that did the study. “There’s a dividein U.S. voting patterns, separatingAmerica’s Heartland from urban andsuburban areas. Data make it clear thatrural voting patterns are motivated to agreat degree by cultural issues and gener-ally conservative political views, distin-guishing voters in rural areas from theircounterparts in non-rural areas.”

Republicans in 2002 won rural votersby a margin of 24 percent, with 60 percentof rural voters choosing Republican con-gressional candidates, compared to 36 per-cent of rural voters selecting Democratic

Table 1: Issues of Influence on Rural Voters

Issues Urban Suburban Rural

Creating jobs and improving the state’s economy 93% 91% 93%

Improving public education 90% 90% 91%

Dealing with issues of state spending and state budget 89% 87% 84%

Fighting to keep taxes low 77% 80% 84%

Making sure seniors have access to affordable prescription drugs 80% 80% 80%

Changing the direction of your state 70% 68% 70%

Source:W.K. Kellogg Foundation.

Rural leaders recognize that maintaining health care andother key services is critical for attracting and maintainingeconomic opportunities in rural communities. Health carealone makes up as much as 20 percent of income andemployment, according to the U.S. Department of Healthand Human Services July 2002 Rural Task Force report.

Yet, rural areas face many barriers to maintaining vitalhealth care services. First, they don’t have the critical massneeded for services. Recruitment and retention of healthcare professionals is also a problem. Rural areas also have alarger proportion of uninsured residents than suburbanareas.And rural providers rely disproportionately on the rel-atively low payments from Medicare and Medicaid for rev-enues. These realities make it difficult for rural health careproviders to remain financially viable.

In 1997, rural health received a boost from the BalancedBudget Act, which created the Medicare Rural HospitalFlexibility Program (FLEX). Two pieces of the FLEX programwere especially beneficial to rural health care providers – the

Critical Access Hospital program and support for ruralhealth networks.

Hospitals designated as critical access hospitals are allowedflexibility on operating requirements.They also receive cost-based reimbursement for some Medicare services.

Rural networks help smaller rural providers shareresources and achieve economies of scale, thus loweringcosts through increased volume or spreading of fixed costsacross a larger group. Examples of rural networking includeoutsourcing of laundry services, housekeeping, billing andcollections and other services; joint continuing medical edu-cation, training and credentialing of providers; sharedemployee benefits; and provider networks.

Through these kinds of programs, rural health careproviders can strengthen their financial viability, maintain vitalhealth care services and serve as a source of economicgrowth and development for rural areas. For more informa-tion about the FLEX program, see the Office of Rural HealthPolicies Web site at http://ruralhealth.hrsa.gov.

Rural health care providers face challenges

— Trudi Matthews, chief health policy analyst, CSG.



opponents. Democratic congressionalcandidates were competitive as recently as1996, but by 1998, the GOP won solidlyby double digits (24 percent).

Forty-nine percent of both rural menand women voted Republican on con-gressional ballots, compared with 51 per-cent of suburban men and 43 percent ofsuburban women, versus 33 percent ofurban women and 46 percent of urbanmen who voted for GOP candidates inthe latest elections.

Revitalizing rural communities

It is obvious from the size of the ruralvoting bloc that rural voters can have sig-nificant impact on policy. For significantchange to happen, the W.K. KelloggFoundation believes that 1) there must bean investment in human capital; 2)resources must flow in different patternsthan before; and 3) there must be achange in policies, locally or nationally,so change can be sustained over time.

We also believe rural communities havethe natural resources and people resourcesto improve and rebuild themselves. Theyneed help, however. That help ranges fromreversing state and federal governmentpolicies that favor larger over smaller and

global over local, to helping build thecapacity of local leaders and their commu-nities to effectively marshal and utilizetheir resources for their communities’ andcitizens’ benefit.

In our state legislators’ survey, weasked legislators to identify policy inno-vations that could be implemented tofoster rural economic growth. Theycited policies to attract businesses, suchas enterprise and renaissance zones,rural economic action plans and otherbusiness incentives. When thinkingabout future policies to help rural areasthey included job training, educationand other investments to create opportu-nities for people to succeed.

One of many areas in which state andfederal government could help ruralcommunities is to adopt policies encour-aging and enabling them to develop localfood systems and local food-basedeconomies. The potential is great – andbuilds on the farming heritage that existsin many rural communities. Food andagriculture could be a rural economicengine once again, if framed to impactlocal economies and markets.

Take Iowa as an example. Iowa is thelargest corn and hog producing state inthe nation, has a population of 3.3 mil-

lion, and imports $8 billion in food eachyear from other states. What if the veg-etables and even some of the fruit thatIowans import were grown locally?

Local food systems are importantbecause they add to the local economy,reduce input costs, provide healthier foodand nutrition, support local communitiesand protect the environment.

Can we create a re-energized agricul-ture that is an economic and social enginefor sustaining rural communities? I cer-tainly hope so. I believe that the long-term health and well-being of our ruralcommunities depends on it.

— Rick Foster is vice president for pro-grams at the W.K. Kellogg Foundation.

Table 2: Which party’s candidate would better handle these issues?

Issues Urban Suburban Rural

Creating jobs and improving the state’s economy Republican 44% 50% 48%

Democrat 47% 42% 41%

Improving public education Republican 38% 45% 42%


Dealing with issues of state spending and state budget Republican 48% 52% 56%


Fighting to keep taxes low Republican 54% 58% 59%


Making sure seniors have access to affordable prescription drugs Republican 31% 35% 38%


Changing the direction of your state Republican 45% 45% 47%


Source:W.K. Kellogg Foundation.

All the surveys cited in this articleare available on the W.K. KelloggFoundation’s Web site atwww.wkkf.org on the Food Systemand Rural Development page.

Surveys available online

he No Child Left Behind Act offersnew opportunities for schools to lever-

age funding for improved student perform-ance, but some rural education advocatesfear that rural schools will not be able totake advantage of the increased federalresources provided in the legislation.

“Overall, we are starting to see that thelaw was written with Title I schools in urbancenters in mind,” says Terri Schwartzbeck,policy analyst with the AmericanAssociation of School Administrators.“Much of the law does not work as well inrural areas.”

When signed into law last year, Bushadministration officials touted NCLB as amajor change in federal education policy. Itestablishes new guidelines for teacher andschool accountability and increases torecord levels federal aid to education.

It also requires states to set annual yearlyprogress expectations for all students,including minimum performance standardsthat rise over 12 years until all students, andeach demographic subgroup of students,are performing at proficiency in readingand math.

Schools and districts failing to meetthese expectations are subject to sanctionssuch as providing students with supple-mental services, offering school choice,and reconstituting school districts.

The NCLB increased the resourcesavailable to schools from the federal gov-ernment, particularly for reading. It alsogives states and local education agencies



Advocates fear increasedfederal resources won’t helprural schools

BY JONATHAN R. WATTS HULL

Will the NCLB helprural schools?

TT



greater flexibility in using these funds thatare now more specifically targeted to high-poverty schools than previously.

But some rural education advocates areconcerned that NCLB may widen the gapbetween rural and urban school systems.

Highly qualified

A new provision under NCLB, forexample, requires every teacher in a schoolto be “highly qualified” by 2006. While itis up to the states to determine what thisterm means, it is generally understood thatat a minimum it means a teacher must becertified. This poses a serious challenge forrural schools.

“The premium the act places on highlyqualified teachers will widen the gapbetween suburban and hard-to-staff schools,” says Marty Strange, director ofthe Policy Program for the Rural Schooland Community Trust. “Wealthier schoolswill be able to outbid poorer schools evenmore than they already do. This, in turn,will turn up the pressure on states toresolve the inadequacy and inequity intheir various funding systems.”

Mississippi Senator Alice V. Harden,chair of the Southern Legislative Confer-ence Education Committee, concurs.“Everyone wants a quality teacher in everyclassroom,” she said. “But in Mississippi,we are already facing teacher shortagesand, in rural areas, they are very severe.The act also makes it very hard for us toretain our experienced staff who do not ful-fill the academic requirements for thatstandard, but are excellent teachers.”

Harden’s observations hold true acrossmuch of rural America. While teachershortages have abated somewhat this year,thanks in part to a slowing economy andimproved recruiting programs, rural areascontinue to have difficulty filling teachingpositions with qualified teachers. They alsohave greater difficulty than suburban andurban districts in retaining experiencedstaff and providing continuing education tohelp new staff develop professionally.

The invisible quarter

Rural schools in communities with2,500 residents or fewer account for 25percent of America’s public schools andeducate 14 percent of America’s school

children. When schools and students in towns smaller than 25,000 people areadded, the number of schools swells to 43 percent and the number of students tonearly three out of 10 American schoolchildren.

Rural students graduate from highschool at a higher rate than the nationalaverage and rural schools often serve pop-ulations with higher incidences of povertyand near poverty.

Given the size of the student popula-tion and the scope of the obstacles, thenear invisibility of rural education issueshas been a long-standing frustration.There was considerable optimism whenthe NCLB was passed, in no small partbecause it included the Rural EducationAchievement Program, which allowsrural schools to transfer federal fundswithin applicable programs.

The benefits of this flexibility areobvious. Because formula grants arebased principally on population, smallerrural schools may receive relatively smallamounts of money within each category.Under previous legislation, schools wererequired to use these funds for theexpress purposes for which they weredistributed, regardless of the fact that theamount a rural school received may beinsufficient to accomplish much of any-thing toward that goal.

The flexibility of REAP allows small

schools to accomplish their priorities ingiven areas with the federal funds theyreceive. REAP also released rural schoolsfrom many of the “set-aside” requirementsassociated with categorical funding, suchas requirements that a percentage of somefunds be used for staff development.“With REAP rural schools can use theirfunds more efficiently and more purpose-fully,” says Charles Lovett, who adminis-ters REAP in the U.S. Department ofEducation

For rural schools, perhaps the best partof all was that REAP came with an addi-tional set of funds for grants for districts tosupplement the formula funding theyalready received. Called the RuralEducation Initiative, districts are eligiblefor direct, noncompetitive grants ofbetween $20,000 and $60,000, dependingon their population. The grants can be usedin any of the program areas covered underfund consolidation allowances. In its firstyear, 4,026 of the 4,700 REAP-eligibledistricts participated in the program.“These grants were very important forrural schools,” says AASA’s Schwartz-beck. “This amount of funding can go along way in a small school.”

Authorized for $300 million byCongress, REAP was funded in fiscal 2002at just over half of that amount. While thebudget submitted by President Bush toCongress for fiscal 2003 increases overallspending on education by $2.8 billion, itzeros out funding for REAP. The U.S.

The Rural School and Comm-unity Trustwww.ruraledu.orgERIC Clearinghouse on RuralEducation and Small Schoolswww.ael.org/eric/U.S. Department of Education,Rural Education AchievementProgram (REAP)www.ed.gov/offices/OESE/reap.htmAmerican Association of SchoolAdministratorswww.aasa.orgOrganizations ConcernedAbout Rural Educationwww.ruralschools.org

Resources on the Internet

Department of Education contends thatchanges made in the 2002 reauthorizationof the Elementary and Secondary Edu-cation Act eliminated the need to fund dis-crete categorical programs like the tworural education programs.

Indeed, states are required to demon-strate that rural schools receive an equitable portion of the federal funds. Thereauthorized legislation targets a greaterpercentage of program funds directly tolocal school districts and provides all dis-tricts, particularly rural ones, with greaterflexibility in the use of federal funds.

The flexibility afforded rural schools inNCLB and the expanded grant opportuni-ties are an indication that there is an inter-est in providing relief to rural areas. Thelaw’s move to resolve some of the inappro-priateness of scale in categorical federaleducation funding is viewed by most ruraleducation advocates as a positive step.“But,” says Strange, “the fact that [REAP]was not funded indicates rural issues arestill not a part of the ideology.”

Other challenges

Rural schools face other challenges withthe new legislation as well. Among them isthe use of test scores to determine schoolperformance. In the larger schools found inmany urban and suburban districts, thenumber of students taking an assessment ata given grade may exceed 100. Small ruralschools may have fewer than 10 students inone grade. The small sample size makes itvery possible for one poor test taker to dis-tort the performance of the entire grade.Furthermore, due to the small sample size,splitting out student performance by demo-graphic subgroups, as required by theNCLB, may serve to identify some individ-ual students, something not allowed underthe law.

“No Child Left Behind recognizes in itsaccountability system the problem of sub-groups so small that they are not reliable,but not when the school is small,” saysStrange. “All standardized testing assumesa large sample. With small schools, thestakes for each individual test-taker aremuch higher. There is a real risk of schoolsbeing misclassified under the act. Smallschools don’t have enough students to playthe game.”

The small sample size for many rural

schools poses a dilemma. For test resultsto be statistically relevant, the sample sizemust be large enough to account for anyvariation in performance not related tostudent skills and knowledge. How sta-tistical reliability is established isimportant. Because schools are the unitheld accountable under NCLB, Strangeworries that the statistical sample maybe set at the school level, meaning thatonly a minimum number of studentsacross all grade levels and not a mini-mum level at each grade. “This points toanother issue,” says Strange. “Test datacan be a part of an accountability sys-tem, but should not be a big part. Aproblem with the No Child Left BehindAct is that it narrows down the meas-urement of whether a student is gettingan education.”

The sanctions established in the newfederal law pose unexpected hardships forrural districts as well. Under the NCLB,school districts are required for two yearsto offer either intra- or interdistrict trans-fers to students in schools that fail to meetstudent performance targets for each iden-tified subset of students.

Sen. Harden worries how the schoolchoice requirements will play out in ruralareas because schools serve large geo-graphic areas.

“In some rural districts, the choiceoption is unrealistic. Putting a rural child

on a bus and shipping her to a school 30miles into the next county is not an optionthat will work for that student,” saidHarden. “The focus on choice removes thecommunity from the solution. Targetingresources to help the students do betterclose to home should be the goal.”

AASA’s Schwartzbeck agrees. “Inrural areas, the reality is there may be nochoices.”

In addition to a limited number ofoptions for choice, students in failingschools may find they have very fewoptions for supplemental education services,also required by the new education law forstudents in schools that fail to meet theirtargets. Finding tutoring, reading supportand other student services in rural areas forstudents in schools identified as needingsupport is an enormous challenge.

Most rural advocates agree the higherprofile rural schools have garnered inrecent years has been a positive step. Theproblem remains, however, that urbanissues continue to dominate the nationaldebate on education policy. Translating theincreased visibility into rural-tailored policyremains an elusive goal for many ruraleducation advocates.

— Jonathan R. Watts Hull is regional rep-resentative for the Southern LegislativeConference in The Council of StateGovernments’ Southern office.




eading First, the federal grant program that seeks tohelp schools and districts improve children’s readingachievement using scientifically proven methods of

instruction, has been at the center of controversy since itsinception, evoking commentary against corporate influ-ence and resolutions against a “one size fits all” approachto reading.

Some educators have been critical ofthe growing federal influence on state cur-riculum, pointing to a clause in the NoChild Left Behind Act that forbids thefederal government from dictating cur-riculum.

States must make their initial applica-tion by July 1 and gain federal approval bySeptember 1. After September 1, statesthat have gained approval can receiveadditional funding from states’ appropria-tions that were relinquished because theyfailed to gain approval by the cutoff date.

The two deadlines are placing addition-al pressure on states to comply with feder-ally prescribed requirements for ReadingFirst, the Title I initiative that anchorsmuch of the NCLB.

Even so, Reading First spokeswomanSandy Jacobs believes that all states are still capable ofgaining their 2002-2003 appropriated funds before thedeadlines arrive. As of early May, 31 states and one territo-ry had gained funding approval.

The U.S. Department of Education calls Reading First “abold, new national initiative squarely aimed at helping everychild in every state become a successful reader.” Nearly $5billion has been appropriated for distribution among the 50states, the District of Columbia, and Puerto Rico over a six-year period.

The funds are specifically dedicated to helping states andlocal school districts establish high-quality, comprehensivereading instruction for all children in kindergarten throughthird grade by adhering to scientifically based readingresearch and by including five major components: phonics,phonemic awareness, fluency, vocabulary, and reading com-prehension.

But states do not receive the funds automatically; theymust first meet several criteria specified in the Request forProposals (RFP’s), and assembling those criteria has provento be a difficult task for many.

Time is running down for funded states that qualify foradditional money based on the same formula that qualifiedthem earlier. Time is running out for unfunded states to gaintheir 2002-2003 appropriations. Some states that gainedearly funding last year are already in their first and secondrounds of awarding subgrants to local districts, while some

states are still trying to figure out how togain federal approval. Some state appli-cations have been revised as many asfour times following their review andtechnical assistance.

A big reason for the slow approvalprocess, according to educators in bothfunded and unfunded states, has beenthe absence of direct communicationwith their review team of five readingexperts. One applicant explained,“Trying to figure out what they wanthas been a guessing game.” Anotheradded, “We feel that it would have beenhelpful to have talked directly with thereview panel members rather thanUSDE staff. While staff have been veryhelpful, we feel that direct communica-tion with the review panel would havebeen more effective.”

A second problem that appears on the list of state con-cerns is the professional development criteria. “The reviewpanel questioned the SBRR (Scientifically Based ReadingResearch) knowledge base of in-state professional devel-opment providers, including language and literacyproviders from our leading research university. It wasapparent that we were going to have to seek out-of-stateexpertise for professional development in order to befunded,” said one applicant.

A third problem that complicates things for some statesis legislation enacted prior to NCLB, such as in local rulestates where textbook adoption is in the hands of local dis-tricts and the assessment requirements written into somestate accountability plans. One grant writer told CSG, “Wehave stayed very clear on what the criteria asked for. Butwe’ve also had lots of legislation to address assessment inour state.”

A fourth problem is that the re-allotment clause inReading First grant proposals puts additional pressure on

trendsalert

RControversy surrounds Reading First

BY CHARLOTTE CORNELL POSTLEWAITE

Charlotte Cornell Postlewaite

Continued on page 35

during the year. Montana Director of Agriculture

Ralph Peck is the co-chair of the U.S.-Canada working group, while SusanCombs, commissioner of the TexasDepartment of Agriculture, is co-chair ofthe U.S.-Mexico working group.

In Montreal, the United States andMexican delegations adopted a work planfor addressing migratory farm laborissues, including a commitment to con-duct surveys of the states and to study theestablishment of a pilot farm labor pro-gram. They also agreed to continue towork together on animal health issuesand organic certification.

The U.S.-Canada working group foundcommon concerns related to year-roundmovement of feeder cattle, pesticide har-monization and technical trade dispute res-olution. Delegates agreed on the impor-tance of protecting the security of the foodsupply in North America and the need tocoordinate the role of the states andprovinces. The accord also developed rec-ommendations urging government offi-cials to work together to minimize tradedisruptions that could result from theCountry of Origin Labeling regulations.

The states’ delegates agreed withMexican and Canadian representatives toencourage “the U.S. and Canada to movein a parallel manner on science-basedapproval of new biotechnology productswithout compromising the marketabilityof the products.” Farmers in both countriesare concerned about consumer acceptanceof genetically modified wheat.

Other regular U.S.-Mexican andU.S.-Canadian exchanges take placeunder the auspices of the U.S. BorderGovernors Conference, which has anagriculture working group; the GulfStates Conference, and through variousregional state-provincial and producer-to-producer exchanges along both bor-ders. There are regular meetingsbetween Texas and its Mexican neigh-bors, and strong bilateral working rela-tionships between California and BajaCalifornia, Arizona and Sonora, andMontana and Alberta. North Dakota andManitoba have hosted regional meet-ings of U.S. and Canadian producersfrom the northern plains.

— Carolyn Orr, lead agriculture andrural policy analyst – [email protected]

tate agricultural representatives inApril participated in the 13th meet-

ing of the Tri-National Accord, continu-ing a tradition of relationships amongsenior state and provincial agriculturalofficials from the United States, Canadaand Mexico.

Pat Takasugi, Idaho agriculture secre-tary and president of the NationalAssociation of State Departments ofAgriculture, was among 15 state leaderswho attended the meeting in Montrealas the agricultural leaders collabor-ated on agricultural trade and develop-ment issues. NASDA oversees the trina-tional accord program.

The current arrangement is rooted in aU.S.-Canadian exchange dating from1984. When efforts got underway in the1990s to expand the U.S.-Canada FreeTrade Agreement to create a NorthAmerican Free Trade Agreement, Mexicowas invited to participate.

The accord has three bilateral workinggroups that annually define issues thatwill be addressed. Issues of bilateral con-cern and agreed on approaches to work-ing on them are established at the annualmeeting and modified as necessary

InterstateCooperation

SS

critical issues, emerging trends and best practices in state governmentState TrendsState Trendscritical issues, emerging trends and best practices in state government


Now, more than ever, states are challenged to solve problemstogether.The current fiscal crisis and the devolution of federalpowers are spurring interstate cooperation.

While many problems are state-specific, an increasing numberof issues similarly affect all states, often in identical ways. Byworking together, states are able to vet innovative ideas, savemoney and manpower and develop solid solutions that addresstheir mutual concerns and further strengthen the rights of the

states to do so in the future.Whether the issue is energy, healthcare, the environment, transportation, corrections or taxation,states are leading the way in collaborative problem solving.

This month, CSG’s Trends Research and Response Grouplooks at the issue of interstate cooperation and how states arecharting new territory in specific areas of public policy.

For more information on CSG’s policy activities, please visitwww.csg.org (keyword: policy).

Agriculture – States join forces to promote international trade

BY TRENDS RESEARCH AND RESPONSE GROUP OF THE COUNCIL OF STATE GOVERNMENTS

State TrendsState Trends


Education – Teaching across state lines

Environment – Interstate cooperation across national boundaries

he American work force is highlymobile, with workers relocating and

changing employers often over the courseof a career. But when a teacher wants torelocate to another state, educators sud-denly face barriers to mobility that mostworkers do not face. The result, saidCharles Cobel, executive director of theEducation Commission of the StatesTeacher Quality Policy Center, is thenation is losing teachers.

“We hear teachers say they quit teach-ing because they couldn’t stand to jumpthrough a new set of hoops or face a newset of standards,” he said. With animpending teacher shortage in many partsof the country, ECS and other organiza-tions are working with states to eliminatethese barriers.

ECS helps states study their variouslicensure requirements.

“Each state looks at its highest stan-dards, and we ask states to make thosehighest standards their minimum standardand then to go above it,” Cobel said.“States then consider agreements toaccept a person’s credentials across statelines for licensure only if the candidateachieves above the highest standard thatall states agree upon.”

One coalition of states funded by ECS,the Mid-Atlantic Regional Teacher Project,is further along in achieving this goal thanother regions of the country. According toJennifer Piscatelli, ECS special projectassociate, one component of MARTP isworking to develop a “Meritorious NewTeacher” designation for high quality teach-

ers, in part with funding from the ECSteacher mobility initiative. “The hope isthat all of the states participating inMARTP would accept the designationwithout requiring those teachers to meetadditional conditions,” Piscatelli said. TheMeritorious New Teacher designation isone of five MARTP priorities.

MARTP identified the lack of reci-procity for teacher licensure and certifi-cation as one of the primary barriers toattracting and retaining teachers in thatregion, according to Diana Rigden, vicepresident of The Council for a BasicEducation. MARTP is considering anagreement that would allow new teachersin Delaware, the District of Columbia,Maryland, Pennsylvania, Virginia andNew Jersey to seek a regional teachinglicense. Later, the group hopes to take upreciprocity issues for mid-career and vet-eran educators, and the issue of pensionportability, which Rigden and Cobel pre-dict will be much harder to accomplish.

State retirement systems have billions ofdollars on the table, and pension portabilityis a thornier issue because of differences inretirement structures. “There’s a lot of talkabout this,” Cobel said. “There’s recogni-tion that we have a problem here, but whenyou ask states to give away their stateretirement money to people, you are askinga lot. There might be some compromisesstates can make, such as in the area of yearsof experience that will transfer. We’re notthere yet, but we are trying to find commonground. Right now, we will take small vic-tories where we can get them.”

The National Association of StateDirectors of Teacher Education andCertification, established in 1928, alsoprovides an interjurisdictional agreementthat assists educational personnel licensedor certificated in one jurisdiction to obtainsimilar authorization in another statethrough the NASDTEC Interstate Contract.Currently, 48 states and territories aremembers of the contract; 29 are membersof the support staff contract; 31 have joinedthe administrator membership; and 19 par-ticipate in the vocational contract.

“The portability of teacher credentialsis the area in which we have been work-ing for a number of years,” said RoyEinreinhofer, NASDTEC executive direc-tor. “States have been more reluctant togrant portability of seniority and pen-sions. Under the terms of the InterstateContract, teachers can move into newstates and be granted certification with aminimum of fuss.”

Pension portability, however, has notbeen tackled by NASDTEC because, saidEinreinhofer, “it is out of our hands.”

Piscatelli said that representatives ofNASDTEC serve as members of ECS’larger steering committee on teachermobility efforts with the State HigherEducation Executive Officers. “We areworking with the knowledge and supportof each other, but not directly together.They are serving in an advisory role inour project,” she said.

— Charlotte Postlewaite, chief educationpolicy analyst – [email protected]

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nize that environmental problems in thearea know no boundaries. Raul Arriaga,the undersecretary of SEMARNET,underscored that point when he was quotedin the Los Angeles Times saying, “Thegeography and resources that we share arethe element that validates our friendshipand binds our destinies.”

Border 2012 will focus on a 62.5-milearea on either side of the 2,000-mile long

the U.S. EPA and its Mexican counter-part, Secretaria del Medio Ambiente yRecursos Naturales (SEMARNET).

The 10-year cooperative plan buildsupon two federal, state and local govern-ment efforts that seek to protect the envi-ronment and public health on both sidesof the border, “Border XXI,” signed in1996, and “Laz Paz,” signed in 1983.

Governments of both countries recog-

our American states and six fromMexico launched a cooperative plan

in April designed to improve the environ-ment and protect public health on bothsides of the border.

California, Arizona, New Mexico andTexas, together with the Mexican states ofBaja California, Sonora, Chihuahua,Coahuila, Nuevo Leon and Tamaulipasestablished the plan, “Border 2012,” with

FF



Fiscal – States working together for tax collection

border that is home to almost 12 millionpeople.

Since 1992, the population of this areahas surged as a result of the NorthAmerican Free Trade Agreement, whichhas led to an increase in manufacturingfacilities along the border.

By 2020, the border region populationis expected to grow to more than 19 mil-lion people.

The Border 2012 agreement targetsthis dynamic economic, social and envi-ronmental landscape by promoting amore bottom-up approach with state andlocal governments prioritizing the keyissues and developing the solutions.

Key components of the programinclude:

• Partnerships among the 10 Americanand Mexican border states to imple-ment the program;

• A new organizational structure cen-tered on regional workgroups tofacilitate regional-level and local-level planning and priority setting;

• Goals and objectives that are measurable.

The Council of State Governments’Western regional office and the Southern

Legislative Conference have beenactively involved in the development ofthe Border 2012 plan through the workof the Border Legislative Conference,formerly known as the Border Legis-lative Initiative.

The BLC is a CSG program thatserves as a mechanism for ongoing dia-logue and collaboration among statelegislators from the United States andMexico. BLC fosters the developmentof shared solutions along the borderregion through joint consideration ofcommon problems and the exchange ofinformation.

The organizational structure ofBorder 2012 is comprised of the follow-ing three coordinating bodies and theirrespective task forces:

• National coordinators consisting offederal representatives of EPA andSEMARNET who manage the over-all program implementation andcooperation among all coordinatingbodies.

• Regional Workgroups, with onestate and one federal co-chair, willserve as the foundation of the Border2012 program, coordinating activi-

ties at the regional level and support-ing the efforts of local task forces.They are multi-media (land, air andwater) and geographically focused.The four binational RegionalWorkgroups are: California and BajaCalifornia; Arizona and Sonora;New Mexico, Texas and Chihuahua;and Texas, Coahuila, Nuevo Leonand Tamaulipas.

• Border-wide workgroups willwork on multiregional issues. Theseare issues identified by two or moreregional workgroups that requirefederal involvement on both sides ofthe border. The border-wide work-groups will address issues of envi-ronmental health, emergency pre-paredness and response, and cooper-ative enforcement and compliance.

For more information about theBorder Legislative Conference’s continu-ing involvement with Border 2012,please contact Edgar Ruiz, CSG-Westregional office, at (916) 553-4423 or viaemail at [email protected].

—Scott Richards, chief environmentalpolicy analyst – [email protected]

tates have worked together for yearsconcerning fiscal affairs, and the

trend continues today. Efforts includecollecting certain taxes and fees, such asmotor fuel taxes, and fees for commer-cial fleet licenses and registrations; cre-ating and refining state fiscal policy andpractices such as improving revenueforecasting; and working with the feder-al government on federal initiatives thataffect state finances such as taxing elec-tronic commerce.

Indeed, the Federation of Tax Admin-istrators was one of the first multistateagencies. Established in 1937, the FTA’smission is “to improve the quality of statetax administration by providing servicesto state tax authorities and administra-tors.” These services include research andinformation exchange, training and inter-governmental and interstate coordination.

SS



Health – Multistate Medicaid solutions

The FTA was followed by the creationof the National Association of StateBudget Officers. Established in 1947,NASBO defines itself as “the instrumentthrough which the states collectivelyadvance state budget practices.”

Interstate compacts also promote inter-state fiscal cooperation, primarily by pro-viding a framework for collecting certaintaxes. The Multistate Tax Compact,enacted in the 1960s, is probably the mostwell-known example.

A commission in which 45 states andthe District of Columbia participateadministers the compact. Twenty-onestates are compact members, and theremainder participate as sovereignty,associate or project members. All statesand other United States jurisdictions areeligible to participate.

The commission administers the com-pact by:

• encouraging states to adopt uniformtax laws and regulations that apply tomultistate and multinational enter-prises;

• reducing state tax compliance bur-

dens on businesses; and • protecting state fiscal authority

through active participation in signif-icant court cases and through educat-ing Congress about state tax authori-ty and interests.

The commission maintains a JointAudit Program that audits businesssales/use and corporate income taxes forseveral states simultaneously.

Joint audits contribute to uniformity intaxpayer treatment and dramaticallyreduce the administrative burden on tax-payers since one audit replaces manyaudits by numerous states.

The commission reports, “States havealso created through the commission aNational Nexus Program to encouragevoluntary disclosure, helping taxpayersassure themselves that they are in compli-ance with state filing requirements.”

The commission also maintains an Alter-native Dispute Resolution Program that:

• provides a voluntary, cooperativemeans of resolving state tax contro-versies involving two or more states;

• reduces costs and risks of litigation

for both the public and private sec-tors; and

• provides a means of addressing themultistate character of a controversyso that the interstate issues can beresolved among the relevant partiesconsistently.

The commission is working with theNational Governors Association, theFederation of Tax Administrators and theNational Conference of State Legislatureson the Streamlined Sales Tax Project.This project “will develop measures todesign, test and implement a sales and usetax system that radically simplifies salesand use taxes.”

After two years of deliberations, theproject released a final Streamlined Salesand Use Tax Agreement in November2002 that has been adopted, at least inpart, by 34 states. The agreement “focus-es on improving sales and use tax admin-istration systems for all sellers and for alltypes of commerce.

— Bill Voit, senior projects director –[email protected]

overnors Jennifer Granholm ofMichigan and James Douglas of

Vermont made headlines in Februarywhen they announced a multistate partner-ship to purchase prescription drugs forMedicaid. In the days following theannouncement, Wisconsin and SouthCarolina announced they would also jointhe plan.

Although the idea of bulk purchasingor buying-pools for prescription drugs isnot new, the Michigan and Vermont part-nership seems to have a head start onother states. The two states already havepreferred drug lists for Medicaid and usethe same company to manage pharmacybenefits.

As prescription drug spending hassoared over the last few years, states haveexplored working together to establishpurchasing pools for prescription drugs.Many states have given legislative author-ity to task forces and executive agencies toexplore working with other states to formprescription drug purchasing cooperatives

or alliances. The idea is to join forces andleverage buying power to negotiate steep-er discounts from drug manufacturers.

Medicaid has been the fastest growingitem in state budgets, and prescriptiondrugs have been the fastest growing por-tion of Medicaid.

The Northeast Legislative Associationon Prescription Drug Prices (NELA) iscomprised of six New England states plusNew York and Pennsylvania. Since 1999,NELA has been working on establishing aprescription drug purchasing allianceamong the Northeastern states. Three statesin this group – Maine, Vermont and NewHampshire – agreed to work together toform a prescription drug purchasing coali-tion particularly targeted to Medicaid.

West Virginia has helped organize dis-cussions among officials from Louisiana,Maryland, Mississippi, Missouri, NewMexico, and South Carolina to establishanother prescription drug purchasing poolfor state employees.

The state of Minnesota has operatedthe Minnesota Multistate ContractingAlliance for Pharmacy since 1985. It pur-chases drugs, equipment and other prod-ucts and services for state-run health carefacilities. More than 2,000 facilities in 40

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corporate governancecorporate governance

States play a vital role inimproving corporate gover-nance standards

BY THE NATIONAL ASSOCIATION OF STATE TREASURERS

he fall of Enron and WorldCombrought to light an issue that the fed-

eral government, state governments andmany corporations had left unchecked fortoo long: the need for improved and morereliable corporate governance practices.

These major corporate losses translatedinto tremendous losses for investors acrossthe country. The states were among thelargest investors to feel the negative effectsof such corporate mismanagement. Statepension plans were affected on a broadscale, making it difficult for retirees andfuture retirees across the country to bankon investments that were made with theirfuture economic well-being in mind.

But while the states were among thehardest hit by this corporate mismanage-ment, they also are among the most pow-erful entities that are speaking out andtaking action against unfair and unjustbusiness practices that affect the eco-nomic health of our nation’s public. Stateelected officials have a special role inprotecting their citizenry.

State treasurers, in particular, have fidu-ciary responsibility not only for pensionplans and general state funds, but also forstate college savings plans. State treasurersplay a unique role in making sure that cor-porate governance reform is conducted ina manner that will protect – and in the longrun, benefit – the citizens of their states.

Treasurers speak out on need for reform

The National Association of StateTreasurers represents treasurers from all 50states, the District of Columbia and all U.S.territories. The state treasurers – who havefiduciary responsibility for trillions of dol-lars in public funds – contend that greatercorporate responsibility is vital, since thebusiness practices of U.S. corporationshave a profound effect on public moniesranging from pension funds to state tax rev-enue investments.

At its annual legislative conference inMarch, NAST held the first meeting of itsSpecial Committee on Corporate Govern-ance, which will make recommendationsregarding adherence by corporations to ahigher plane of ethical standards andresponsibility.

In its first formal act, the committee rec-ommended that the association endorse the

new standards and changes in the corpo-rate governance practices of NYSE-listedcompanies, as recommended by the NewYork Stock Exchange’s CorporateAccountability and Listing StandardsCommittee. The full membership took thecommittee’s recommendation and voted toendorse the standards.

“State treasurers in this country manageseveral trillion dollars in state funds,including general funds, public pensionprograms and state college savings funds,”said Nevada State Treasurer and NASTPresident Brian K. Krolicki. “These fundsplay a critical role in the growth of thestate, local and national economies, andthis is a tremendous responsibility we per-form on behalf of our constituents. Notonly will we be able to help protect thebeneficiaries of these funds, but thesereforms will help protect all investorsthroughout the country.”

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Reforming corporategovernance

NYSE Chairman Dick Grasso speaking with NAST President and Nevada State Treasurer BrianKrolicki and NAST Past-President and Georgia State Treasurer W. Daniel Ebersole.


corporate governancecorporate governance

Innovative state actions

The strength of NAST’s SpecialCommittee on Corporate Governance liesin the role that state treasurers are taking toenhance and improve corporate gover-nance in their states and across the nation.Many treasurers have taken an active rolein addressing the concerns raised inresponse to shoddy corporate practices,calling upon corporations they do businesswith to verify that their accounting proce-dures are sound and that the money thestate invests on behalf of its residents issafe. Several examples of innovative stateactivity to enhance governance standardsare cited below.

California

In March, California State TreasurerPhil Angelides unveiled plans for a newCalifornia Office of Pension Protectionand Market Reform. According to theproposal, the new office would be a jointoperation of the nation’s largest and third-largest public pension funds – theCalifornia Public Employees’ RetirementSystem and the California State Teachers’Retirement System.

The office’s mission would be to takewhatever steps are prudent and necessaryto protect state pension-fund membersand their assets. The office wouldenhance the ability of pension-fundsmanagers to do the following: seekredress and restitution for harm done andlosses caused by corporate malfeasance;help protect pensioners from future mis-conduct; and pursue corporate and finan-cial market reforms necessary to returnand maintain integrity in the marketplace.

“This office will be a cost-efficient andfocused force that will fight to protect pen-sioners and taxpayers – firefighters, policeofficers, teachers and other public servantsand their families,” said TreasurerAngelides.

Treasurer Angelides is a member of theboard of directors of both CalPERS andCalSTRS. Together, the two systems havetotal assets of more than $225 billion.

Connecticut

In the last year, Connecticut StateTreasurer Denise L. Nappier, principal

fiduciary of the $18 billion ConnecticutRetirement Plans and Trust Funds, hastaken a very active role in protecting thesefunds. Nappier has helped the funds adoptcomprehensive proxy voting guidelines,has worked with the state attorney gener-al to block companies from reducingshareholder rights by incorporating off-shore, and has helped institute new meth-ods for electing board members, amongother measures.

With respect to enhancing methods forelecting board members, TreasurerNappier launched an innovative initiativeto increase the number of female andminority members of corporate boards ofdirectors in Connecticut. The “BoardDiversity Initiative” – the first of its kind inthe country – takes a multitiered approachto tackling the challenge of making corpo-rate board membership more independentand diverse.

The initiative complements a decisionby the New York Stock Exchange to adoptnew standards that require that independ-ent directors comprise a majority of aboard. The Connecticut initiative will:

• inform companies about the impor-tance of diversity;

• educate individuals about the neces-sary criteria for serving on boards,and help them identify opportunitiesto serve;

• work with companies that currentlylack diverse board membership; and

• broaden the talent pools of the

participating organizations.The initiative is particularly important in

light of a survey of Connecticut’s top 100public companies conducted by thePermanent Commission on the Status ofWomen. The 2001 survey found that of thecompanies responding, 49 percent had nowomen on their board.

“With cooperative efforts like the BoardDiversity Initiative, and with continuedpreparation, perseverance and persistence,we can and will expand opportunity as werestore public and investor confidence,”Nappier said.

North Carolina and New York

Last year, North Carolina StateTreasurer Richard Moore and then-Comptroller H. Carl McCall of New Yorkpartnered with New York Attorney GeneralEliot Spitzer to launch a major initiative toestablish stronger investor-protection prin-ciples for investments made with publicfunds. Moore and McCall together repre-sented a total pension investment portfolioof nearly $170 billion.

Under this initiative, the North CarolinaPublic Employees’ Retirement Systemsand the New York State CommonRetirement System require the following ofinvestment banking and money manage-ment firms that do business with them:

A panel of New York Stock Exchange leaders speaks to NAST members during the association’svisit to the exchange in November.

homeland securityhomeland security


new era of homeland security hascreated numerous challenges for state

governments. Consider the changes in the federal

bureaucracy that led to the creation of theDepartment of Homeland Security.Consider the thousands of state and localagencies that hold some responsibility foreither altering or supplementing their pro-grams to accommodate homeland securitymandates. Consider the vast number of pri-vate sector entities that hold much of thenation’s critical infrastructure and the mul-tiple, often uncoordinated, funding pro-grams that have been funneled through thestates in the past four years.

It is then easy to understand why statesare desperately seeking the best approach-es to solving this complex puzzle.

So how can states bridge the many gapsthat exist among the diverse interests andvarious local, state and federal agenciesinvolved in implementing new homelandsecurity initiatives?

In the summer of 2002, MitretekSystems, a nonprofit corporation, approa-ched the National Emergency ManagementAssociation and the Adjutants GeneralAssociation of the United States with anidea: to create, in partnership, a nonprofitcenter to assist states in implementing theirhomeland security missions by facilitatingwidespread and timely access to the bestavailable information, facilities and tools.

After several months of discussions amongthe two associations and Mitretek, theCenter for State Homeland Security wasofficially launched on April 1, 2003.

An honest broker for the states

The center’s mission is to supportstates and territories and their localjurisdictions in carrying out their home-land security responsibilities. Thisincludes providing integrated planning,engineering, implementation, testingand exercise support to state, local andNational Guard entities involved inhomeland security.

“The center will assist states in achiev-ing consistency and economies of scalethrough reuse of ideas, approaches and bestpractices that apply to activities common tothe majority of state and local entities,” saidGlen Woodbury, Washington State emer-gency management director and NEMApresident.

States are looking for research, recom-mendations and best practices thatencompass the full scope of homelandsecurity – from detection to prosecution.By taking a collaborative approach to thisneed, states can share their experiences inimplementing homeland security initia-tives. In addition, by partnering withMitretek, the center can serve as a ven-dor-neutral environment in which to eval-uate products, services and technologies.

Mitretek will provide staffing and workplan support under the guidance of thecenter’s board of directors. The board con-sists of three representatives each fromNEMA and AGAUS, a nonvoting seat forMitretek, and one nonvoting liaison eachfrom the National Guard Bureau and TheCouncil of State Governments.

“Mitretek is uniquely positioned tosupport the center given its technical cre-dentials, knowledge and involvement infederal programs, objectivity with regardto commercial products and services, and

State emergency management and adjutantsgeneral team up to createhomeland security lab

BY AMY C. HUGHES

The Center for StateHomeland Security

AA


homeland securityhomeland security

work at the state and local level, includingsuccessful partnerships in collaborativecenters and institutes that focus on topicsof interest to the public sector,” said RichGranato, executive vice president and chiefoperating officer of Mitretek.

The center will be based in theWashington, D.C. area. An executive direc-tor will be named in June.

A template for homeland security

The center’s activities are intended to beflexible and to adjust to the rapidly chang-ing homeland security environment, but itsinitial focus will revolve around six pro-gram elements that form the essentialframework of a robust state homelandsecurity program.

The center will provide direct supportto states in key areas, such as engineering,ad hoc analysis, program planning, man-agement, procurement and grant writing.States can choose to contract with the cen-ter to provide these services when statestaff levels or resources are low.

Through a Web site currently underdevelopment, the center will publishinformation, studies and best practices toensure that the relevant knowledge isshared among homeland security staff atthe various levels of government. Stateswill have access to a formal library ofdocuments, plans, procedures, strategiesand model language covering everyaspect of homeland security. Conferencesand educational seminars will be devel-oped to provide opportunities for federal,state and local emergency responders toshare experiences and collaborate onprojects of mutual interest.

The center will also develop prototypesfor risk mitigation and conduct feasibilitytests to identify gaps in state and localemergency management systems anddevelop “building block” projects withinthe states to enhance existing programssuch as public health monitoring, warningand alert systems, critical infrastructurevulnerability, incident management, wire-less communications, radio interoperability,and intelligence integration/sharing.

A central project will be the develop-ment of a Functional Reference Model,which will provide a strategic framework,or baseline, for comprehensive homelandsecurity. This baseline will allow states to

compare their organizations to a bench-mark. The Functional Reference Modelwill take into account the many layers andentities involved in homeland security, con-sider the many threats we face from naturaland man-made hazards, and incorporatethe perspectives of the public and privatesectors.

The center will also serve as a technicalreference for the homeland security com-munity, as it will provide ongoing systemsengineering and architecture evaluationthrough the entire life cycle of a system’simplementation – from its design, to devel-opment, to procurement, and through thefinal evaluation of its effectiveness.

The center will also evaluate commer-cially available products for the emer-gency management community. An engi-neering facility is in the works to rapidlydevelop products and systems for unfore-seen needs and missions of the emergencymanagement and response community.

Great expectations

The endeavor’s ultimate goal is to assiststates in executing their homeland securityresponsibilities by doing the following:

• achieving shared responsibility andaccountability for homeland security;

• developing well-rounded policiesand targeted strategies;

• evaluating existing programs andoperations and identifying those thatmaximize staff levels and are cost-efficient;

• achieving appropriate levels of fund-ing through grants and ensuring thatany appropriations are rapidly andresponsibly distributed; and

• making sound investments in tech-nology and systems that are road-tested and compatible.

“This is our national lab,” saidWoodbury.

Next steps

The board of directors and MitretekSystems are currently finalizing the goalsand objectives of the center’s work pro-gram, and continuing discussions on afive-year funding plan. As one of the firstdeliverables, the center will launch itsWeb site in June.

For more information about the Centerfor State Homeland Security, contact TrinaHembree, NEMA executive director, at(859) 244-8233 or Rich Granato ofMitretek Systems at (703) 610-2500.

— Amy C. Hughes is a policy analyst withthe National Emergency ManagementAssociation, an affiliate of The Council ofState Governments.

Center for State Homeland Security:Achieving Shared Responsibility and Accountability

Policy &Strategy

Funding &Investments

Programs &Operations

StateHomelandSecurity

Requ

irem

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Guidance

Needs

Funding

Efficiency

Ops E

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personnelpersonnel

lorida’s 20-year-old Human ResourceInformation System was simply

unable to keep up with the demands beingplaced on it. To make matters worse, pro-grammers had difficulty maintaining andrepairing the software, because it was writ-ten in an outdated programming language.

With system difficulties becomingcommonplace, the Florida Department ofManagement Services began to investi-gate the option of buying a new HR soft-ware system.

Estimates to replace the system –which supported 29 state agencies, 67county health departments, the statecourts and the justice administration, inaddition to providing payroll support forthe state university system, Legislatureand auditor general – ranged from $65million to $90 million.

With limited funding available, thisprice tag was much too steep for somethingthat wasn’t considered a “core” govern-ment function. In addition, Gov. Jeb Bush’sdirective, known as the Service FirstInitiative, required all state agency heads toexplore public and private sector best prac-tices in their areas. Specifically, the Depart-ment of Management Services, whichoversees the state’s Division of HumanResources, was asked to look at the poten-tial of outsourcing HR functions, since thatwas becoming a best practices trend.

So in December 2000, the departmentbegan work with a consultant to identify itsoptions and determine if outsourcing wasthe best option. By identifying the activities

that weren’t core functions of government,they developed a business case showingthat outsourcing a number of processes andfunctions was clearly the way to go.

With business case in hand, the depart-ment released an Invitation to Negotiate(Florida’s version of a Request forProposal) and received responses frominterested service providers. Ultimately,Florida-based Convergys Employee Care,a global leader in integrated billing,employee care and customer care services,was chosen as the company that would takeFlorida to this next level.

The outsourcing agreement

In August 2002, Florida and Convergyssigned a seven-year, $280 million dollarcontract that is expected to save the state$173 million over the life of the contract.It’s believed to be the largest governmentoutsourcing project of its kind to date.

“Working with Convergys enables us toprovide the highest quality humanresources services possible to the men andwomen who dedicate their careers to pub-lic service,” said Gov. Jeb Bush. “By lever-aging Convergys’ service delivery expert-ise, resources, and technology, we canexpand and improve the human resourceservices our employees receive, while sav-

ing Florida taxpayers millions of dollars.”Convergys, which already has the latest

technology to meet the demands of thestate’s 189,000 employees, will provide thefollowing transactional processes and func-tions to Florida: staffing, payroll prepara-tion, human resource administration(workforce data management, humanresource learning and performance man-agement), and benefits administration(open enrollment and general benefitsadministration). The contract also providesthat Convergys will maintain HR call cen-ters in Tallahassee and its campus inJacksonville to support the state’s contract.

What HR functions are not included inthe contract and will remain the state’sresponsibility? In a nutshell, policy andmanagement responsibilities – maintainingthe critical infrastructure of government.These include selection of candidates andspecialized recruitment, labor relations,grievances, disciplinary actions, collectivebargaining agreements, employee perform-ance appraisals, criminal backgroundchecks, and management of employee sep-arations and reductions in force.

Implementation

The outsourcing project, now known asthe People First Initiative, is scheduled to

Florida’s “People FirstInitiative” takes outsourcingto a new level

BY LESLIE SCOTT

Outsourcing humanresources

FF

• Allows agencies to focus on core business and mission• Better service for employees and managers• Reduction of expenses – $73.4 million• Estimated cost avoidance – $80 million• Redirection of funds to other priorities• Immediate access to “state of the art” technology and “best in class” services• Movement of Florida into the e-government forefrontSource: Florida Department of Management Services.

Benefits of outsourcing


personnelpersonnel

be implemented in four phases, with fullimplementation by January 2004. Thescheduled phases are as follows:

• May 2003 – Staffing• June 2003 – Payroll Preparation• June 2003 – Human Resource Admin-

istration• October 2003-January 2004 – Bene-

fits Administration.

No lost jobs

Gov. Bush was clear that he didn’t wantstate employees in the unemployment linebecause of this outsourcing project. The1,300 state employees who supported thestate’s HR functions have all maintainedemployment. As part of the contract,Convergys was obligated to offer jobs to anumber of employees. The rest eitherremained in their current positions or wereoffered other positions with the state.

Effects of outsourcing

The Department of ManagementServices believes all state employees willbenefit from the outsourcing. Clearly, thereis a projected cost-savings, but it is antici-pated that employees, particularly man-agers and supervisors, will have more timeto concentrate on their agency’s core serv-ices. In addition, there will be self-serviceportals that will allow employees to changetheir personal information in the state sys-tem, such as an address change or a namechange due to marriage.

Take the hiring process as an example ofhow this system will work. A hiring man-ager will post a vacancy via the Convergyssystem. Convergys will solicit applications,receive and input applicants into the sys-

tem, all under the name of Florida stategovernment. The state hiring managers willconduct interviews, make the hiring selec-tions, and then contact Convergys to letthem know who they have decided to hire.Convergys will then take over the adminis-trative functions, from sending the letter ofhire to conducting the employee orienta-tion. This leaves the hiring manager time toconcentrate on core business functions, notroutine functions and transactions.

Monitoring success of the Florida-Convergys partnership

The Florida-Convergys relationship hasbeen a true partnership, committed to suc-cessful outcomes, said Brian Andrew, sen-ior director for Convergys. “Both sideshave done their part and we have workedtogether to eliminate any obstacles that mayhave come up.”

Bill Simon, secretary of Florida’sDepartment of Management Services,agreed. “People First is about giving worldclass tools and services for state employ-ees,” he said. “We have a unified missionand our efforts have been aligned. Our stateemployees deserve the best, which is exact-ly what the process will deliver.”

Andrew added that Convergys has seenno significant differences in working with apublic-sector entity. “Overall, there aremore similarities than differences,” he said.

To ensure that both sides are meetingtheir obligations to the contract, an inde-pendent third party contract monitor hasbeen retained to oversee the qualityassurance surveillance plan and perform-ance measures.

The contract has guidelines and safe-guards in place to assure Florida has a con-

tingency plan should there ever be issuesregarding Convergys’ performance.

The future of outsourcing in state government

“Outsourcing made perfect sense forFlorida because of the huge financial bur-den the state would have faced in replac-ing its outdated systems,” said Jeff Schutt,president-elect of the National Associa-tion of State Personnel Executives anddirector of the Colorado Division ofHuman Resources. “NASPE membersaround the country are monitoring theFlorida/ Convergys partnership veryclosely. If Florida and Convergys are suc-cessful, more states are going to looktoward solutions such as this.”

In addition, Florida already has anotherproject called MyFlaMarketplace, an e-pro-curement system that will outsource pur-chasing for the state.

“There’s been a high level of curiosi-ty,” Andrew said of other state govern-ments. He thinks more states are goingto follow the outsourcing route, butmaybe not to the extent Florida has withits HR project. “With tight budgets,states are finding outsourcing an attrac-tive solution because of its ability to savethem money.”

For more information, visit www.myflorida.com/dms/hrm/hrout/HR_Outsourcing_Project.html or www.convergys.com.

— Leslie Scott is association manager ofThe National Association of StatePersonnel Executives, an affiliate of TheCouncil of State Governments.

• Establish a steering group to run interference and provide executive level viewof the initiative.

• Involve the personnel directors in the agencies.• Make sure you have commitment, not just involvement.• Have a good data collection plan.• Communicate with employees early, often and honestly.• Numbers are the language of management; have your house in order.• Expect a battle around every corner; this is major change.• Be patient and persistent.Source: Florida Department of Management Services.

Lessons learned

Outsourcing: Retain ownershipof functions (focus on the policy of“what” we do, not the process of“how” we do it).

Privatization: Relinquish owner-ship of the functions (getting outof the business).Source: Florida Department ofManagement Services.

Outsourcing vs.privatization


educationeducation

chool choice advocates lament thattoo many of the nation’s public

schools are a wasteland. Parents, theyinsist, should have ownership in their chil-dren’s education.

Critics charge that public schools willlose desperately needed funds throughvoucher programs and charter schools, andthat all schools – including private andparochial – must be held accountable.

Last summer, the U.S. Supreme Courtruled by a vote of 5-4 that Cleveland’sscholarship program allowing low-incomeparents to use vouchers at private schools –including religious schools – is constitu-tional. Encouraged by the ruling and by apresidential proposal that would allocatemore than $756 million in the fiscal year2004 budget to expand school choice pro-grams, including $75 million for voucherpilot programs, advocates across the nationcontinue to capitalize on the momentumthat voucher and charter programs gainedlast year.

Federal support for charter schools

Charter schools, according to the U.S.Department of Education’s Web site, “areindependent public schools designed andoperated by educators, parents, communi-ty leaders, educational entrepreneurs, andothers. They are sponsored by designated

local or state educational organizations,who monitor their quality and effective-ness but allow them to operate outside ofthe traditional system of public schools.”

According to the Education Comm-ission of the States, 39 states, the Districtof Columbia and Puerto Rico have enactedcharter school laws since Minnesotapassed the first one in 1992. There areabout 2,700 charter schools operating thisschool year around the country.

Last October, the U.S. Department ofEducation appropriated $198 million tohelp set up, develop and expand charterschools and to promote the exchange ofinformation among charter schools acrossthe nation regarding what works toimprove student performance. Arizona,Arkansas, Connecticut, Delaware, Florida,Hawaii, Idaho, Illinois, New Hampshire,New Jersey, New York, North Carolina,Oklahoma, Oregon, Tennessee, Utah,Wisconsin and Wyoming gained grantstotaling $71 million last October 7.

Days before, the department announced$23.8 million in grants to Arkansas,Florida and Minnesota – and to 10 schooldistricts or partnerships in California,Connecticut, Florida, Illinois, NewHampshire, New York and Oregon – underthe Voluntary Public School ChoiceProgram. Authorized by the No Child LeftBehind Act of 2001, the program isdesigned to ensure “the widest possiblereach and participation” in innovative,public school choice programs.

Debate continues in the statesCharter schools

In 2003, the choice debate continues toheat up across the nation. Indiana lawmak-ers debated a moratorium on the state’sone-year old charter law and its 11 charterschools, but they ended up passing abudget with $40.5 million in new funds

for charter schools over the next two years.However, they agreed to limit the numberof new charter schools through 2005.

In Minnesota, Senate Democratic-Farmer-Labor Party leaders proposed amoratorium on new charter schools as partof a K-12 education finance bill proposedin late April.

Meanwhile, Illinois Gov. Rod Blago-jevich signed legislation in April thatwould allow Chicago to authorize 15 newcharter schools, but the bill also restoredsome bargaining powers city teachers lostunder a 1995 school reform measure.

Ohio’s charter schools scored big incourt on April 21, when a Franklin Countyjudge dismissed major constitutional chal-lenges to the state’s 6-year-old charterschool law. The ruling by Judge PatrickMcGrath helps keep afloat the $200 mil-lion program, often criticized for its lowtest scores. McGrath’s decision was a clearsetback for the Ohio Federation ofTeachers, the Ohio School BoardsAssociation, the Ohio League of WomenVoters and the Buckeye Association ofSchool Administrators.

And in April, Maryland became thenation’s 39th charter state. However, thestate’s new charter law is not an unquali-fied victory for school choice proponents.Jeanne Allen, president of the Washington,D.C.-based Center for Education Reform,a charter-advocacy group, told TheWashington Times the law was weak. Shesaid she would have preferred Marylandnot to have a law on charters than to havethe one that passed both chambers minutesbefore the session ended in April.

The new law allows local school boardsto create charter schools, and requiresteachers to join unions. Charter proponentshad called for multiple chartering authori-ties, including the state school board andpublic universities, and they wanted teach-ers to have the option not to join unions.

Although school choice isstill controversial, recentcourt rulings and federalactions have fueled the charter and voucher movements in the states

BY CHARLOTTE C. POSTLEWAITE

SS

School choice gainsmomentum

Vouchers

When Colorado Gov. Bill Owenssigned his state’s voucher law in mid-April, Colorado became the first statesince the Cleveland ruling to allow publicfunds for tuition at private schools, includ-ing religious ones. The bill’s authorsexpect a legal challenge from the ColoradoEducation Association. If Texas does notpass a similar bill, the Colorado programcould become the largest in the UnitedStates, with nearly 20,000 students quali-fied to join by the 2007-2008 school year.

In Texas, San Antonio school districtofficials have complained they could losemore than $10 million and thousands ofstudents if a proposed private schoolvoucher program becomes law. The“Education Freedom” program would pro-vide low-income students with publicmoney for scholarship certificates – orvouchers – to attend private schools. TheTexas Education Agency estimates theprogram would fund about 22,800 stu-dents, while the Texas PTA puts the num-ber closer to 26,458.

In Florida, Republican House leaderspushed for a massive expansion of thestate’s voucher program in late April, tyingit to a bill designed to carry out a constitu-tional amendment voters passed last fall toreduce class sizes.

According to the ECS, only “a handful”of states have voucher programs, and mostof them on a limited basis. Florida, Ohio,Wisconsin, Maine and Vermont have somesort of publicly funded voucher program.In addition, Arizona, Florida, Illinois,Iowa, Minnesota, Pennsylvania and PuertoRico have tax deduction or tax credit pro-grams for private school tuition.

Although the U.S. Supreme Court ruledthat Cleveland’s voucher program is con-stitutional, vouchers are still controversial,because many state constitutions prohibitthe use of state funds in religious schoolsor institutions. Last summer, for instance, astate court found that Florida’s voucherprogram violates the state constitution.The state has appealed the ruling.

Thirty-seven states have constitutionalamendments, known as “Blaine Amend-ments,” that prohibit the use of state fundsin sectarian schools. The Center forEducation Reform and the Institute forJustice submitted an amicus (friend of the

Court) brief this spring requesting that theU.S. Supreme Court consider a case fromWashington State (Davey v. Locke) thatchallenges the constitutionality of theseprovisions. The brief says the amendments“are not a benign expression of a desire forstricter separation of church. Rather, theyare a shameful legacy of this Nation’sProtestant majority’s historical anti-Catholic bigotry.”

Louisiana debates vouchers

Nowhere was the debate more passion-ate and fervent than in Louisiana, wherestate legislators and Catholic school leaderscontinued to spar with Gov. Mike Fosterthis spring over whether or how to enact avoucher pilot program for failing schools.

Foster initially proposed a small pilotprogram that would give students in a lim-ited number of failing schools the right totransfer to a private school. His proposedprogram would affect only a few hundredstudents, mostly in New Orleans, where21 of the state’s 23 academically unac-ceptable schools are located.

The governor also wanted any privateschool accepting vouchers to submit toaccountability measures similar to theones public schools face. Public schoolstudents take the Louisiana EducationalAssessment Program, an accountabilityexam Foster would eventually like to seethe private school participants take.

The Archdiocese of New Orleans andthe state’s seven Catholic school superin-tendents supported the initiative, whilestanding firm against standardized testingrequirements or publication of test results.They said that Catholic schools areaccountable only to the parents who sup-port them.

When vouchers were set for discussionin the Louisiana Legislature, New OrleansParish school board members drafted ananti-voucher resolution calling for legisla-tors to vote against what they see as vouch-ers’ negative impact on the public educa-tion system. Citing deep disappointmentand extreme concern over the SupremeCourt’s decision, the resolution chargedthat the Court’s decision “will aid and givefurther help to those critics who seek thedemise of our public education system.”

Newly appointed Superintendent TonyAmato supports the parish board’s anti-

voucher resolution. Amato inherited notonly academic problems, but also financialproblems when he came to New Orleans inFebruary. He had ardent support fromLouisiana State Superintendent of Edu-cation Cecil Picard and the state board ofeducation.

Last year, the state Legislature approveda pilot pre-kindergarten voucher program,which allowed participants in the state’sprogram for at-risk 4-year olds to usevouchers at private institutions, includingreligious ones.

Louisiana state Sen. Donald R. Cravinswanted to see that pilot expanded to ele-mentary schools.

State Sen. John Hainkel authored a billthat would apply the governor’s proposedvoucher system only to children comingout of last year’s pre-kindergarten voucherpilot program. That highly successful pro-gram, Cravins said, has one problem. Manyof those kids leave the pre-kindergartenprogram and go on to failing schools.

“The pre-kindergarten program didn’thave the effect that we were trying to get,”he said. “Hainkel’s voucher bill, if it takeseffect, would allow those same children toextend the voucher from pre-kindergarteninto kindergarten and first grade,” Cravinssaid. “That would make the big difference,so that you wouldn’t just take kids out of ahigh performing school and then drop themback into the failing system.” The bill hasbeen deferred.

A second bill, co-authored by Cravins,was passed by both the Senate and theHouse in late April. “It’s not a voucher, buta different twist to the whole public educa-tion crisis,” Cravins said. Senate Bill 710would place a “failed school” under thecontrol of the State Board of Elementaryand Secondary Education. Among thebill’s other provisions, a failing school


educationeducation

To read more about the schoolchoice movement in the Midwest-ern states, see the January 2003issue of Firstline Midwest,published bythe Midwestern office of The Coun-cil of State Governments, available athttp://www.csgmidwest.org/member_services/flmw/2003/0103.pdf.

Internet resources

could become a charter school as allowedby current state law.

Cravins does not leave the voucherdebate at the state capitol when he headshome. He often continues the debate withhis wife, who is a public school teacher.“We debated the voucher system just lastweek,” Cravins admitted. “I thought Imight have to leave home. It was ugly,” he

laughed. “I had to call back and apologize,it got so hot.”

No magic bullets

The battle and debate rages on – inchurches and private homes, in state capitolchambers and in higher education.University research wars on the effective-

ness of charters and vouchers are heated.For example, a February 2002 study by

a Harvard University professor andMathematica Policy Research Inc. foundthat African-American students who hadwon privately financed tuition vouchers ina 1997 lottery scored 5.5 percentile pointshigher on national standardized tests threeyears later than did black peers who hadsought but did not receive the vouchers.

A recent Princeton University study,however, challenges these findings, sayingthey are “blown out of proportion.” ThePrinceton researchers say the study’sdesign was flawed and produced mislead-ing conclusions. They conducted their ownstudy, correcting what they saw as the orig-inal design flaws, and found that blackchildren who had received vouchers scoredonly 1.44 percentile points higher on teststhree years later than their peers.

Meanwhile, an Indiana Universityreport concludes that children usingCleveland’s publicly funded vouchers toattend private schools aren’t performingany better than children in the city’s publicschools. A Michigan study says the state’scharter academies don’t fare any betterthan traditional public schools on meetingfederal testing standards.

This is music to the ears of schoolchoice critics like the National EducationAssociation. “Education is hard work andthere are no magic bullets,” said DeannaR. Duby, NEA’s associate director ofexternal partnerships and advocacy.“After well over a decade of experimenta-tion with vouchers, charters, tuition taxcredits and privatization of publicschools, we see no evidence that choice,in and of itself, improves student achieve-ment. We continue to believe, as we haveall along, that working to improve thequality of public schools, creating greatpublic schools for every child, is the mostproductive way to improve studentachievement across the board.”

For many state legislators pressed bylobbyists, federal officials, private con-stituents – and sometimes, even spouses –to take up their causes, school choicedecisions become, in fact, a very hardchoice to make.

— Charlotte C. Postlewaite is the chiefeducation policy analyst at The Council ofState Governments


educationeducation

• Diverts needed resources from publicschools, decreasing the overall qualityof public education.

• Programs that pay only a portion ofcost of attending private schools pri-marily benefit affluent families whocan afford to pay the rest.

• Programs that force public schools tocompete in open marketplace reducethe importance of education's civicand socializing missions.

School ChoicePro Con

• Potential to motivate change in publiceducation system through competition.

• Levels the playing field to give low-income and minority students access tohigh-quality education.

• Parents and children aren't penalizedbased on where they live.

Source: Education Commission of the States.

VouchersPro Con

• Offers families a wide range of educa-tional opportunities, especially whentargeted to students from low-per-forming schools or low-income families

• Encourages competition and forcepublic schools to improve.

• Increases demand and revenues forprivate and parochial schools.

• Diverts dollars from publicly account-able schools.

• Lowers quality of public education byeasing departure of students who aremost informed about educationchoices; increase segregation alongsocio-economic lines.

• Forces state to inappropriately end-orse religion; cross the lines separat-ing church and state.

Charter SchoolsPro Con

• Present students and parents with arrayof options.

• Competition forces school districts toimprove to attract and retain studentsand dollars.

• Can serve as laboratories for educationexperimentation and innovation.

• Schools have to perform or risk closure,which increases student achievement

• Because they operate as a business,they are subject to market forces thatmay force them to close, deprivingstudents of a continuous education.

• Sometimes segregate children alongracial and class lines and fail to servestudents with disabilities or limitedEnglish proficiency.

• Accountability for student perform-ance is difficult to measure andenforce.

• The emergence of education manage-ment organizations creates "pseudo-school districts" in which decisions aremade far removed from the school.


Increased workload, changes in jobtasks, and increased record-keepingrequirements, along with an enhance-ment in available technology for infor-mation management, have promptedprobation agencies to automate case-management systems.

The American Probation and ParoleAssociation, with a grant from the U.S.Department of Justice, Bureau of JusticeAssistance, has developed a documentdefining functional standards to assistprobation agencies in implementingeffective automated case-managementsystems.

There have been no guidelines or stan-dards to assist probation agencies in thedevelopment, implementation, mainte-nance or enhancement of automated case-management systems. Limited availability

of shared information among agencies hasforced each agency to struggle through anexpensive independent developmentprocess that included identifying its orga-nizational needs, translating those needsinto functional requirements for a case-management system, and communicatingthose needs appropriately to a systemsarchitect. APPA has administered this proj-ect to produce standards to:

• alleviate the burden faced by proba-tion agencies for individual systemdevelopment;

• facilitate dialogue between proba-tion agencies and case-managementsystem providers;

• encourage conformity in probationautomated case-management sys-tems by recommending these asnational standards.

APPA is pleased to announce that incollaboration with the National Centerfor State Courts they have producedthese draft functional standards for auto-mated case-management systems forprobation agencies. The standards werereviewed, edited and enhanced by aStandards Development Team composedof probation practitioners, criminal jus-tice information technology experts, andinformation system vendors. The stan-dards have been revised to reflect theteam’s recommendations, and they arecurrently posted to APPA’s Web site forexamination and comment from thefield.

For further information, contact LindaSydney, project director, at (859) 244-8192 or visit APPA’s Web site atwww.appa-net.org.

excellence in action: spotlighting CSG activities, events, resources and affiliated organizations

APPA develops functional standards for automated probation case management

Information-system planning for Interstate Compact for Adult Offender Supervision

The American Probation and ParoleAssociation is pleased to announce that itrecently received a grant from the U.S.Department of Justice, Bureau of JusticeAssistance, to oversee a project to assist inplanning an information system for thenew Interstate Compact for Adult OffenderSupervision.

The new Interstate Compact replacesthe antiquated Interstate Compact for theSupervision of Probationers and Parolees.It offers the opportunity to significantlyimprove the system for providing effectivesupervision for adult offenders who movefrom the state in which they were sentenced. Key to effective interstatesupervision of offenders is timely, accu-rate, efficient transfer of information, andto address this, the Interstate Compactrequires the creation of a national databaseusing current communications technologythat will allow states to share criticaloffender information.

To plan this information-managementsystem, APPA has assembled a workinggroup composed of state interstate com-pact administrators, state chief informa-tion officers, and other content or technol-ogy experts. The group will work in con-cert with the newly formed InterstateCompact Commission to identify theissues, challenges, and goals to beachieved. The workinggroup, assisted by a tech-nology consultant, willcomplete a needs assess-ment that will form thebasis for the developmentof standards and require-ments for the information-management system.

By building on the col-lective experience andexpertise of the workinggroup’s members, and bydevoting adequate and

appropriate attention to the planning stageof development, APPA expects to producea well-considered and well-designed planto facilitate and enhance later steps in theimplementation of the Interstate Compactinformation-management system.

For more information, please contactLinda Sydney, project director, at (859)244-8192.



Fiscal relief for states (Federal government sends states $20 billion)

Gr andState 2003 2004 Total HH 2.95 Total HH 2.95 Total TotalAlabama $75,612 $75,612 $151,224 $0 $45,916 $45,916 $0 $68,367 $68,367 $265,508Alaska 25,000 25,000 50,000 0 10,232 10,232 0 15,959 15,959 76,190Arizona 87,234 87,234 174,468 0 62,102 62,102 0 108,992 108,992 345,562Arkansas 45,455 45,455 90,909 0 33,125 33,125 0 51,945 51,945 175,979California 575,905 575,905 1,151,811 199,369 420,099 619,468 0 667,789 667,789 2,439,067Colorado 73,133 73,133 146,265 0 35,615 35,615 0 56,670 56,670 238,549Connecticut 57,903 57,903 115,807 0 51,764 51,764 0 82,460 82,460 250,031Delaware 25,000 25,000 50,000 0 9,784 9,784 0 14,971 14,971 74,755District of Columbia 25,000 25,000 50,000 0 17,072 17,072 0 26,551 26,551 93,623Florida 271,742 271,742 543,483 0 156,545 156,545 0 247,540 247,540 947,568Georgia 139,191 139,191 278,382 0 92,093 92,093 995 146,780 147,776 518,250Hawaii 25,000 25,000 50,000 0 11,499 11,499 0 18,702 18,702 80,201Idaho 25,000 25,000 50,000 247 12,126 12,372 3,318 19,578 22,897 85,269Illinois 211,160 211,160 422,320 0 125,351 125,351 0 222,259 222,259 769,930Indiana 103,384 103,384 206,768 1,464 61,689 63,153 0 104,885 104,885 374,805Iowa 49,755 49,755 99,510 0 32,454 32,454 0 53,253 53,253 185,218Kansas 45,710 45,710 91,420 431 25,428 25,859 0 36,937 36,937 154,217Kentucky 68,721 68,721 137,441 931 54,913 55,844 0 83,039 83,039 276,324Louisiana 75,984 75,984 151,968 0 60,854 60,854 0 96,314 96,314 309,137Maine 25,000 25,000 50,000 2,725 22,333 25,058 2,670 37,514 40,184 115,242Maryland 90,054 90,054 180,108 0 57,918 57,918 0 95,283 95,283 333,309Massachusetts 107,951 107,951 215,902 0 128,941 128,941 0 204,453 204,453 549,296Michigan 168,979 168,979 337,958 35,965 112,869 148,834 0 168,388 168,388 655,180Minnesota 83,644 83,644 167,288 0 73,652 73,652 0 121,443 121,443 362,383Mississippi 48,367 48,367 96,733 0 42,841 42,841 0 71,099 71,099 210,674Missouri 95,133 95,133 190,266 0 72,929 72,929 0 112,383 112,383 375,579Montana 25,000 25,000 50,000 0 8,562 8,562 522 13,988 14,510 73,072Nebraska 29,096 29,096 58,192 196 19,263 19,459 0 30,867 30,867 108,518Nevada 33,976 33,976 67,951 0 14,031 14,031 0 22,923 22,923 104,905New Hampshire 25,000 25,000 50,000 0 12,509 12,509 0 21,202 21,202 83,711New Jersey 143,066 143,066 286,131 0 106,231 106,231 0 169,128 169,128 561,491New Mexico 30,928 30,928 61,857 0 28,032 28,032 0 46,180 46,180 136,069New York 322,649 322,649 645,298 0 567,574 567,574 0 950,854 950,854 2,163,726North Carolina 136,859 136,859 273,718 0 101,876 101,876 0 176,000 176,000 551,594North Dakota 25,000 25,000 50,000 3,486 6,810 10,296 182 10,713 10,894 71,190Ohio 193,033 193,033 386,065 0 147,079 147,079 0 237,807 237,807 770,952Oklahoma 58,670 58,670 117,340 0 37,250 37,250 6,164 56,826 62,990 217,580Oregon 58,173 58,173 116,345 0 41,437 41,437 0 58,754 58,754 216,536Pennsylvania 208,810 208,810 417,619 0 184,815 184,815 0 297,917 297,917 900,351Rhode Island 25,000 25,000 50,000 0 19,932 19,932 0 31,814 31,814 101,746South Carolina 68,215 68,215 136,429 0 46,370 46,370 0 72,569 72,569 255,368South Dakota 25,000 25,000 50,000 1,716 7,908 9,624 0 12,036 12,036 71,660Tennessee 96,732 96,732 193,465 0 86,754 86,754 8,678 134,742 143,420 423,639Texas 354,535 354,535 709,070 12,617 206,773 219,390 0 349,609 349,609 1,278,068Utah 37,970 37,970 75,939 0 15,453 15,453 0 25,886 25,886 117,278Vermont 25,000 25,000 50,000 2,180 9,892 12,072 5,540 15,273 20,812 82,884Virginia 120,353 120,353 240,706 16,752 53,716 70,468 15,844 88,191 104,035 415,209Washington 100,215 100,215 200,431 9,010 71,833 80,843 0 119,252 119,252 400,526West Virginia 30,747 30,747 61,493 1,874 24,042 25,917 0 37,438 37,438 124,848Wisconsin 91,196 91,196 182,393 3,174 66,879 70,053 673 99,213 99,885 352,331Wyoming 25,000 25,000 50,000 1,016 4,613 5,630 3,842 7,312 11,154 66,784Puerto Rico 64,763 64,763 129,526 0 4,879 4,879 0 4,879 4,879 139,284Territories 20,000 20,000 40,000 0 501 501 0 501 501 41,002Tota l $5,000,000 $5,000,000 $10,000,000 $293,152 $3,725,160 $4,018,312 $48,428 $6,025,429 $6,073,857 $20,092,169

Copyright © 2003 FFI S Federal Funds Inform ation for States. All rights reserved. 23-May-03

Flexible Grant FMAP 2003 FM AP 2004

FMAP=Federal Medical Assistance Percentage for MedicaidHH=Hold Harmless FY 2003 holds states whose FMAP's declined in FY 2003 at the FMAP's for final two quarters of FY 2003.HH for 2004 for first three quarters of FY 2004 holds states whose FMAP's are slated to decline at their FY 2003 FMAP's.Flexible Assistance grants are allocated based on population and can be used for financing essential government services or covering the state cost of complying with an unfunded intergovernmental mandate.



State legislators from nine of the 10U.S.-Mexico states convened on April 11to discuss immigration and water at theSpring Forum of the Border LegislativeConference in Austin, Texas.

The forum featured the participation ofthe U.S. Ambassador to Mexico, TonyGarza, who made a candid and informativepresentation on U.S.-Mexico affairs and on the unlikely possibilities, in the shortterm, of a bilateral immigration accord.Ambassador Garza cited the U.S. focus onhomeland security and counter-terrorismas some of the reasons that U.S. leadershave not been receptive to such an agree-ment. However, Ambassador Garza didpoint out unique opportunities that bothcountries have to maintain and enhance the

strong relationship between them.For their part, members of the BLC

unanimously adopted a resolution callingon the federal governments of both nationsto resume binational discussions on theissue of immigration, and urging the accel-eration of safe and efficient movement ofpeople and products through the use ofintelligent transportation technologies.

BLC members also heard from RaulRodriguez, managing director of theNorth American Development Bank, onthe agency’s reform efforts, and fromthe Commissioners of the InternationalBoundary and Water Commission on the1944 Water Treaty and on possibleefforts to improve the treaty to meet thewater quantity and quality needs of the

border region. For a copy of the resolution and addi-

tional information on the BLC Springmeeting, please contact Edgar Ruiz, pro-gram manager of the BLC at (916) 553-4423 or Chris Whatley, director of international programs for CSG at (202)624-5460.

Ambassador Garza addresses border legislators at spring conference

Midwest radioactive materials panel meets with NRCSeveral members of The Council of

State Governments’ Midwestern Rad-ioactive Materials TransportationCommittee participated March 19 in aroundtable discussion on the U.S.Nuclear Regulatory Commission’spreliminary plan to conduct full-scaletests of the shipping casks for spentnuclear fuel. The commission is con-

sidering the tests in part to enhancepublic confidence in the shippingcasks’ safety.

In 1995, the Midwestern LegislativeConference adopted a resolution (spon-sored by the CSG committee) in sup-port of such testing. At the request ofCSG’s Midwestern Office, the NRCagreed to hold one of its public work-

shops in the Midwest. The Chicago-area roundtable included committeemembers from Illinois, Indiana, Iowa,Michigan and Nebraska, as well as rep-resentatives of member states Missouriand Ohio.

For more information, contact Lisa R.Sattler at (920) 803-9976 or [email protected].

Ambassador Garza, left, talks with attendeesat the Border Legislative Conference.

Lieutenant governors support troopsThe National Lieutenant Governors

Association supports the men andwomen in the armed forces through aresolution passed April 3, 2003.

“As first in the line of succession tothe office of governor, lieutenant gover-nors can be called to lead a state at anymoment. Such a transition, by its nature,often occurs under adverse circum-stances. Lieutenant governors know theresponsibility, commitment and dedica-tion required to be prepared to be calledto action at a moment’s notice,” said

NLGA Director Julia Hurst. Rhode Island Lt. Gov. Charles J.

Fogarty, NLGA chair, and Montana Lt.Gov. Karl Ohs, NLGA vice chair, spon-sored the resolution. The resolution stat-ed, while “we as individuals and as lead-ers may have reservations about variousmilitary operations, our praise and sup-port for the members of the armed forcesis unconditional … It requires profes-sionalism, dedication, patriotism, andcourage to heed the call of duty, andmembers of the armed services, as a

result of being directed to action, willmake many sacrifices.”

“The National Lieutenant GovernorsAssociation expresses its gratitude tothe men and women of the armed forcesfor their commitment in serving thenation at a moment’s notice, often underadverse conditions,” the resolution con-tinued. “The nation’s lieutenant gover-nors stand behind and honor the armedforces personnel, the people who makeup the very fabric of our local towns andcommunities.”



Registration for MLC meeting draws nearThe deadline to register for this

year’s Midwestern Legislative Confer-ence Annual Meeting in Milwaukee isJuly 18. The four-day event, which willbe held August 24-27, will offer policy-makers the opportunity to participate ina wide array of public policy sessions,hear from renowned speakers and net-work with fellow Midwestern state lawmakers.

State-federal relations, the future ofMedicaid and the environment are justthree of the many issues that will be

addressed during this year’s meeting. Featured speakers will include Jim

Miklaszewski, chief Pentagon corre-spondent for NBC News, and MichaelBeschloss, an award-winning authorand presidential historian.

Attendees will also have plenty oftime to meet with colleagues from acrossthe Midwest, share ideas and forge newrelationships during various MLCAnnual Meeting events, including: com-mittee meetings, table topics breakfasts,luncheons, professional development

sessions, evening events and afternoonpolicy roundtables.

Spouses, guests and children willhave the chance to enjoy day trips andtake part in great evening events, such asan ethnic culinary celebration at theMilwaukee Public Museum and theState Dinner at the renowned Calatrava-designed Milwaukee Art Museum.

For more information on the meet-ing, visit www.csgmidwest.org or con-tact CSG's Midwestern Office at (630)810-0210.

states to comply not only with the education department’s defini-tion of scientifically based research, but also with the depart-ment’s list of reviewed and approved assessments. The depart-ment’s assessment review team admitted in an executive summa-ry last year that the list was hurried and incomplete.

Current assessment legislation in the states sometimes runs afoul of Reading First reviews and technical assistance sug-gestions.

One example is the absence of the Developmental ReadingAssessment in funded Reading First state grants. While DRA hasbeen the assessment tool in several state reading initiatives prior toNCLB – assessments for which states say they have gathered dataand found effective results – DRA has been conspicuously absentfrom all but two funded state grant applications. And on one of thosetwo approved applications, the USDE asked for additional technicalinformation four months after the state gained approval.

Part of the reason DRA’s have been absent from state applica-tions is because the Reading First assessment reviewers failed toreview DRA and thus it did not appear on the approved list ofassessments. And after unfavorable assessment reviews, severalstates dropped DRA from their applications.

“We selected DRA to help teachers reach at-risk students. It’s avaluable source of information,” said one applicant. “There seemsto be a disconnect to test and sort kids (in previous years) and thennot have the information at hand to guide instruction. With DRA,the state had ample information to help direct their instructionalstrategies. DRA helped us with that using our online database. Wecould take each single part of the assessment and break it down tofind where we needed to individually adjust instruction for a spe-cific child. We thought DRA had met their requirements, but they

told us it was inappropriately placed in our grant.”Several states that initially included DRA have switched to the

Dynamic Indicator of Basic Early Literacy (DIBELS) – an assess-ment named on almost every state application that has receivedapproval and funding. That claim is included in advertising bySopris West, the official distributor of DIBELS. Respondents to aCSG Reading First survey say that while the education departmentnever directly told the state to use a particular program or test, theywere often directed to the University of Oregon education Web sitefor information concerning analysis of DIBELS and other assess-ments. The University of Oregon education department Web sitealso houses the official home page for DIBELS.

And at least two corporate trainers for DIBELS and severalUniversity of Oregon education graduates or professors are embed-ded in the 72-member federal education department’s panel ofreviewers – reading experts who score the details of other stateapplications.

But those are not enough numbers to have an impact on states’reviews, according to the U.S. Department of Education.

Department attorneys found no conflict of interest in the selec-tion of Reading First reviewers, said Reading First spokeswomanSandy Jacobs. “We discussed with attorneys at great length. Withfive members, no single individual can keep a state from gainingapproval. The panel must come to a consensus,” said Jacobs. “Ican’t see that the review panel has had any influence over whatstates have selected. They’ve told states that things do not meetstandards, but they do not recommend alternatives.”

— Charlotte Cornell Postlewaite is chief education policy analyst atThe Council of State Governments.

Continued from page 18

Controversy surrounds Reading First


states are a part of this alliance. Although the idea of bulk purchasing

seems relatively simple in theory, putting itinto practice is another matter. States haveto determine whether to combine singleprograms, such as Medicaid, or whether toadd state employees, prison health care andother programs that provide prescriptiondrugs. Although adding programs expandsthe pool of customers, it can also add toadministrative complexity.

Another issue is whether to contractwith a private sector pharmacy benefitsmanager or PBM. In the case of Michiganand Vermont, working with a PBM may

make combining forces easier. Recentreports about some for-profit PBM busi-ness practices, however, have causedsome states to be wary. NELA is lookingat forming a nonprofit PBM of its own.

The question of administration andgovernance of multistate alliances is alsoproblematic. For instance, should thealliance be housed with one state orshould there be an independent entity thatmanages operations?

Governance and decision-making isalso an issue. If states must establish apreferred drug list to participate in analliance, there is a question of whetherdecisions about a state’s drug coveragemight be made by others out-of-state.

There is also no way to know exactly howmuch a state will save from participatingin a drug purchasing pool.

Despite some of these challenges,many state leaders remain committed tomaking prescription drug purchasingpools work. As Iowa Sen. MaggieTinsman said in CSG Midwest’sStateline, “We’re all having a terribletime with our budgets. Still, we want toprovide health care to the poor, disabledand senior citizens. Let’s see if we can’tdo it in a more cost-effective way.”

— Trudi Matthews, chief health policyanalyst – [email protected]


here is no question that states lie atthe heart of infrastructure protection

issues. Following the attacks ofSeptember 11, many states started to real-ize the challenges faced when developinga comprehensive strategy to protect criti-cal assets and infrastructure from thethreat of terrorism.

As defined in the USA Patriot Act andthe National Strategy for the PhysicalProtection of Critical Infrastructures andKey Assets, critical infrastructure are con-sidered to be “systems and assets, whetherphysical or virtual, so vital to the U.S. thatthe incapacity or destruction of such sys-tems and assets would have a debilitatingimpact on security, national economicsecurity, national public health or safety, orany combination of those matters.”

One regional partnership has taken theinitiative to identify vulnerabilities in theseareas and formulate plans to deal withthem. Last summer, the Pacific North WestEconomic Region (PNWER) held the sec-ond in a series of exercises as part of anongoing initiative known as the Partnershipfor Regional Infrastructure Security.

In existence since 1991, PNWER is apublic/private partnership formed to facil-itate cooperation, coordination and com-munication among its members with thegoal of enhancing the economic develop-ment of its eight U.S. and Canadian mem-ber jurisdictions – Alaska, Idaho, Oregon,Montana, Washington, Alberta, British

Columbia and the Yukon Territory. Determining that a better understanding

of the region’s critical infrastructure andassociated interdependencies was needed,

the Partnership for Regional InfrastructureSecurity was launched in late 2001 with akickoff meeting of more than 120 publicand private sector organizations from allthe PNWER jurisdictions. The goal of thispartnership is to develop a cooperativepreparedness strategy that will enhancethe security of critical infrastructure sys-tems throughout the region.

The tabletop exercise conducted last

summer, titled “Blue Cascades,” broughttogether more than 150 representativesfrom 70 public and private sector organi-zations for a cross-border, multijurisdic-

tional exercise to examine infrastructureinterdependencies.

Conducted by PNWER and cospon-sored by the Federal EmergencyManagement Agency, the U.S. Navy andthe Canadian Office of CriticalInfrastructure Protection and EmergencyPreparedness, “Blue Cascades” focusedon the vulnerabilities of and linkagesbetween infrastructures that could result

Infrastructure – Protecting state resources

TT


in cascading impacts in the event that oneor more sectors were disrupted.

Also aimed at identifying how suchdisruptions could complicate responseand recovery efforts, the exercise wasdesigned to help stakeholders, through achallenging scenario of disruptions, iden-tify their needs and priorities so as tofacilitate the development of a plan toassist the PNWER region in becomingmore disaster-resistant.

Developed by PNWER members repre-senting both the public and private sectors,the scenario focused on attacks that had theability to cause cascading, long-termimpacts. Therefore, the scenario beganwith disruptions to physical infrastructurethat quickly spread to other critical areas.

The simulated attacks caused region-widepower outages that spread to otherWestern states and were followed by dis-ruptions of the region’s natural gas distri-bution, telecommunications systems andsimulated threats to the water supply sys-tems. Other interdependent infrastructureand critical services throughout the regionwere affected by the disruptions, includ-ing transportation, law enforcement andemergency services.

As a result, the scenario highlightedthe challenges and cross-border issuesthat could arise from such disruptionsand helped public and private sector par-ticipants identify the myriad of chal-lenges that result from infrastructureinterdependencies. In addition, in its sub-

sequent evaluation, the majority of bothpublic and private sector participantsrated the exercise as extremely helpfuland expressed the need for future similarmultistate and cross-border activities.

Lauded by the National InfrastructureProtection Center of the Department ofHomeland Security as an excellent exam-ple of efforts to implement the NationalStrategy for Homeland Security, it is alsoan example of how a greater level of pro-tection for our valuable infrastructure canbe achieved when states, along with theprivate sector, cooperate.

— Barry Hopkins, lead infrastructurepolicy analyst – [email protected]


Public safety and justice – Regulating transferred offendersince 1937, the Interstate Compactfor the Supervision of Parolees and

Probationers has provided the sole statu-tory authority for regulating the transferof adult parole and probation supervisionacross state boundaries. All 50 states aremembers of this interstate agreement, asare the District of Columbia, Common-wealth of Puerto Rico and the U.S.Virgin Islands.

At 65 years old, the compact authorityand structure are seriously outdated.With more than 4.5 million offenders onprobation and parole, overseen by 3,285different local probation and paroleoffices, and operated by more than 860separate agencies, the compact is in needof significant revision.

First introduced in January 2000, theAdult Compact was quickly enacted inseveral states, the first being Colorado onApril 10, 2000. A little more than 26months later, on June 19, 2002, the com-pact was enacted by the 35th state,Pennsylvania. Although the compact hasbeen enacted in record time (most inter-state compacts and agreements takebetween five and seven years before theyare enacted), considerable effort went intodeveloping a national campaign to edu-cate state policy-makers about the needfor change and how the revised compactwould improve public safety in the states.

In November 2002, the Adult Compactconvened its first Interstate Commissionmeeting and is now operational. Over thenext year, the commission will hire staff,develop training and technical assistancemodels for states and promote the devel-opment of a national data – sharing sys-tem that will allow states to more quick-ly and accurately collect and share criti-cal information on those 250,000parolees and probationers moving acrossstate lines each year.

The Interstate Compact for AdultOffender Supervision is a new breed ofinterstate compact – one that empowersthe states to maintain control over areasthat rightly are their purview; one thatseeks a modernized structure and pro-motes flexible rule-making procedures;one that promotes enforcement andaccountability among the states and theoffenders the compact controls; and onethat uses modern communication anddata-sharing to more quickly and effi-ciently do the work of the compact.

While the theory and purpose behindinterstate compacts has changed little overthe last 227 years, modern compacts differgreatly, tackling broader public policyissues and forging state partnerships forproblem solving and cooperation.

As public policy issues become morecomplex and affect more states in our

boundary-less world, new interstate com-pacts could prove to be the answer to sev-eral multistate, regional and national policy problems. States should furtherutilize interstate compacts to address newproblems and create new methods ofinterstate cooperation. If not, federal pre-emption in certain policy areas is a dis-tinct possibility.

—John Mountjoy, associate director ofpolicy – [email protected]

SS

TrendsAlertCritical information for state decision�makers

The Council of State Governments

The Councilof State Governments

www.csg.org

Preparing states for tomorrow, today . . .

TrendsAlert: The State Fiscal CrisisState governments may lose an additional $24.8 billion in lower-than-expected tobacco settlement funds and lost excise taxes from Internet cigarette sales over the next eight years. In addition to this potential loss of revenue, Trends Alert: The State Fiscal Crisis looks at factors leading to the current crisis and offers a comprehensive menu of steps states can take to redress their budgetary problems.

To read the report in its entirety, visit www.csg.org (keyword: fiscal trendsalert).

TrendsAlert: The Medical Malpractice CrisisTrendsAlert: The Medical Malpractice Crisis puts the current medical malpractice situation into perspective for state leaders by reviewing past policy responses. It also examines the three sectors that combine to create the problems—the health care system, the legal system and the insurance industry—and outlines a host of policy options from which state officials may choose to address the specific circumstances of their states.

To read the report in its entirety, visit www.csg.org (keyword: medical malpractice).

• Investment banking firms must adoptthe conflict-of-interest principles setforth in the agreement that AttorneyGeneral Spitzer reached with MerrillLynch in May 2002 (now comm-only referred to as “the InvestorProtection Principles”).

• Money management firms must makedisclosures regarding: portfolio man-ager and analyst compensation, theuse of any broker dealers that have notadopted the Investor ProtectionPrinciples, and any potential conflictsof interest arising from client and cor-porate parent relationships.

• Money management firms must adoptsafeguards to ensure there are no poten-

tial conflicts of interest resulting fromthe method of compensation for ana-lysts that could influence investmentdecisions they make on behalf of thepension funds. These firms must scruti-nize more closely the auditing and corporate governance practices of com-panies in which pension fund moniesare invested.

“In North Carolina we have made itvery clear to all of our fund managersthat they must institute a review of cor-porate responsibility and transparency. Iam happy to say that we have madetremendous progress in this area,” saidTreasurer Moore.

In addition to North Carolina and New

York, various states across the nation havealso endorsed and implemented theseenhanced corporate governance standards.

Strengthening the states’ role

States and state officials have a specialrole in protecting citizens against practicesthat will adversely affect them. State treasur-ers are helping protect their citizenry by tak-ing an active role in holding corporationsdoing business in their states to higher cor-porate governance standards.

— The National Association of StateTreasurers is an affiliate of The Council ofState Governments.

Corporate governance

conference calendar

This calendar lists meetings as desig-nated by CSG’s Annual MeetingCommittee. For details of a meeting,call the number listed. “CSG/”denotesaffiliate organizations of CSG. Visitwww.csg.org, for updates and moreextensive listings.

Other meetings have value to state offi-cials. Purchase a meeting listing bycalling 1 (800) 800-1910 or by email-ing [email protected]. Announce yourmeetings to thousands in the state gov-ernment market through an advertise-ment, a Web listing,or a banner ad in Inthe News, CSG’s weekly electronicnewsletter. Get your free subscriptionto In the News at www.csg.org.

JUNE 2003

May 31-June 4 — NASTD—The Asso-ciation for Telecommunications andTechnology Professionals Serving StateGovernment Western Region Meeting— Coeur d’Alene, ID — The Coeurd’Alene Resort. Contact Karen Britton at(859) 244-8187 [email protected]

June 4-6 — CSG/National YouthCourt Center, “Youth Courts: AnImplementation Training Seminar”—Austin, TX. Contact the National YouthCourt Center at (859) 244-8193 [email protected]

June 8-11 —CSG/National Associationof State Treasurers – Northeast StateTreasurers Conference — Newport,RI— Marriott Newport Hotel. ContactAdnee Hamilton at (859) 244-8174 [email protected]

June 17-19 — CSG/CSG Midwest/Midwestern Radioactive MaterialsTransportation Committee Meeting— Lincoln, NE. Contact Lisa Sattler at(920) 803-9976 or [email protected]

June 21-25 — CSG/National Assoc-iation of State Facilities AdministratorsAnnual Conference & Tradeshow —Overland Park,KS — Sheraton OverlandPark Hotel. Contact Marcia Stone at (859)244-8181 or [email protected]

June 21-25 — CSG/ NASTD SouthernRegion Summer Meeting —Covington,KY — Embassy Suites HotelRiver Center. Contact Karen Britton at(859) 244-8187 or [email protected]

JULY 2003

July 11-15 — CSG/MidwesternLegislative Conference NinthAnnual Bowhay Institute forLegislative Leadership Develop-ment — Madison, WI — FlunoCenter for Executive Education.Contact Laura Tomaka at (630) 810-0210 or [email protected]

July 15-20 — CSG/National LieutenantGovernors Association Annual Meeting— Little Rock, AK — Peabody Hotel.Contact Julia Hurst at [email protected] or(859) 244-8111 or visit www.nlga.us

July 19-23 — CSG/National Assoc-iation of State Personnel Executives

Annual Meeting — Portland, ME —Eastland Park Hotel, (207) 775-5411 or(888) 671-8008. Contact Leslie Scott at(859) 244-8182 or [email protected].

July 21-25 — National Conference ofState Legislatures Annual Meeting—San Francisco, CA — Hotel TBA

July 29-August 1 — CSG/CSG-WESTAnnual Meeting — Honolulu, HI —Hilton Hawaiian Village. ContactCheryl Duvachelle at (916) 553-4423 [email protected]

AUGUST 2003August 9-13 — CSG/SouthernLegislative Conference AnnualMeeting — Fort Worth, TX — TheRenaissance Worthington Hotel andThe Radisson Plaza Hotel. ContactNai Vienthongsuk at (404) 266-1271or [email protected] or visit www.slcat-lanta.org

August 15-17 — CSG/EasternRegional Conference ExecutiveCommittee Meeting — Camden, ME— MBNA Conference Center. ContactPamela Stanley at (212) 912-0128 [email protected]

August 16-19 — National GovernorsAssociation Annual Meeting —Indianapolis, IN. Contact SusanDotchin at (202) 624-5327

August 24-27 — CSG/MidwesternLegislative Conference 58th AnnualMeeting — Milwaukee, WI — HyattRegency Milwaukee. Contact MikeMcCabe at (630) 810-0210 or [email protected]

August 24-27 — CSG/AmericanProbation and Parole Association28th Annual Training Institute —Cleveland, OH. Contact Kris Chappellat (859) 244-8204 or visit www.appa-net.org

SEPTEMBER 2003

September 6-10 — CSG/NationalEmergency Management Associa-tion Annual Conference — Seattle,WA — Elliot Grand Hyatt. Visitwww.nemaweb.org

September 6-11 — CSG/NASTDAnnual Conference and Trade Show— St. Louis, MO — Hyatt Regency St.Louis at Union Station. Contact KarenBritton at (859) 244-8187 or [email protected]

September 7-11 — CSG/NationalAssociation of State Treasurers &National Association of UnclaimedProperty Administrators AnnualConference — Colorado Springs, CO— The Broadmoor Hotel. Contact AdneeHamilton at (859) 244-8174 or [email protected] or visit www.nast.net.

September 13-18 — CSG Henry TollFellowship Program— Lexington,KY.— Hilton Suites Lexington — ContactAllison Spurrier at (859) 244-8249 [email protected] for applications

September 21-23 — CSG/SouthernGovernors’ Association AnnualMeeting — Charleston, WV — HotelTBA. Contact Liz Purdy at (202) 624-5897 or [email protected]

September 22-24 — CSG/NationalYouth Court Center, “Youth Courts:An Implementation TrainingSeminar” — Nashville, TN. Contactthe National Youth Court Center at (859)244-8193 or [email protected]

OCTOBER 2003

October 14-17 — CSG/CSG-WESTWestern Legislative Academy —Colorado Springs, CO — DoubletreeHotel. Contact Cheryl Duvachelle at(916) 553-4423 or [email protected]

October 18 — CSG/CSG-WESTExecutive Committee Meeting —Colorado Springs, CO — DoubletreeHotel. Contact Cheryl Duvachelle at(916) 553-4423 or [email protected]

October 23-26 — CSG Annual StateTrends and Leadership Forum —Pittsburgh, PA — Hilton Pittsburgh. Visitwww.csg.org or contact Wanda Hines at(859) 244-8103 or [email protected]

NOVEMBER 2003November 6-7 — CSG/MidwesternGovernors’ Conference — St. Louis,MO — Renaissance Grand Hotel.Contact Ilene Grossman at (630) 810-0210 or igrossman@ csg.org

November 7-11 — CSG/SLC FallLegislative Issues Conference —Point Clear, AL — Marriott GrandHotel Resort and Golf Club. ContactNai Vienthongsuk at (404) [email protected] or visit www.slcat-lanta.org.

November 23-25 — CSG/NationalAssociation of State TreasurersIssues Conference — New York,NY — The Waldorf-Astoria Hotel.Contact Adnee Hamilton at (859)244-8174 or [email protected] orvisit www.nast.net

DECEMBER 2003

December 6-9 — CSG/EasternRegional Conference Annual Meet-ing — San Juan, PR — Ritz Carlton.Contact Pamela Stanley at (212) 912-0128 or pamela@csg east.org or visitwww.csgeast.org

JANUARY 2004

January 31-February 3 — NASTDSouthern Region Winter Meeting —Biloxi, MS — Beau Rivage Resort.Contact Pamela Johnson at (859) 244-8184 or pjohnson@ csg.org

FEBRUARY 2004

February 21-24— NationalGovernors Association WinterMeeting — Washington, D.C. —Hotel TBA. Contact Susan Dotchin at(202) 624-5327

National Lieutenant GovernorsAssociation Winter Meeting —Washington, D.C. — Contact JuliaHurst at (859) 244-8111 [email protected] or visit www.nlga.us

JUNE 2004June 26-July 1 — CSG Henry TollFellowship Program — Lexington,KY — Hilton Suites Lexington Green.Contact Allison Spurrier at (859) 244-8249 or [email protected].

JULY 2004July 7-11 — CSG/National Lieut-enant Governors AssociationAnnual Meeting — Big Sky,Montana — Big Sky Resort. ContactJulia Hurst at (859) 244-8111 [email protected].

July 11-14 — CSG/MidwesternLegislative Conference 59th AnnualMeeting— Des Moines, IA — Marriott.Contact Mike McCabe at (630) [email protected]

July 18-25 — National Conference ofState Legislatures Annual Meeting—Salt Lake City, UT — Hotel TBA

July 28-August 1 — AmericanLegislative Exchange Council AnnualMeeting — Seattle,WA — Hotel TBA

July 31-August 3 — National GovernorsAssociation Annual Meeting — Seattle,WA — Hotel TBA. Contact SusanDotchin at (202) 624-5327

AUGUST 2004

August 14-18 — CSG/SouthernLegislative Conference AnnualMeeting — Little Rock, AR — HotelTBA. Contact Nai Vienthongsuk at(404) 266-1271 [email protected] or visitwww.slcatlanta.org

August 21-26 — NASTD AnnualConference and Trade Show —Providence, RI — Westin Providence& RI Convention Center. ContactKaren Britton at (859) 244-8187 [email protected]

SEPTEMBER 2004

September 25-29 — CSG Annual StateTrends and Leadership Forum —Anchorage, AK — Hotel TBA. Visitwww.csg.org or contact Wanda Hines(859) 244-8103 or [email protected]

FEBRUARY 2005

February 26-March 1 — NationalGovernors Association Winter Meeting— Washington, D.C. — Hotel TBA.Contact Susan Dotchin at (202) 624-5327

JULY 2005

July 30-August 3 — CSG/SouthernLegislative Conference Annual Meet-ing — Mobile, AL — Hotel TBA.Contact Nai Vienthongsuk at (404) 266-1271 or [email protected] orvisit www.slcat-lanta.org


STATES COOPERATE OUTSOURCING SCHOOL CHOICE

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