Innovations for Successful Societies

When Indiana governor Mitch Daniels took office in January 2005, he sought to change the performance and culture of state government. The state’s economy was stagnant, and the accumulated budget deficit was topping $600 million on a total budget of $22.7 billion for 2003–05. (The state legislature passed a new budget every other year.) State agencies received funding without having to show results, and when funds were available, state workers received pay raises in some years regardless of performance. Daniels recognized that the delivery of bold reforms, including the promise to close the deficit and improve economic growth, required changing the way state government worked. A former corporate executive, Daniels had served as director of the Office of Management and Budget, which, among other responsibilities, helps the US government’s executive branch prepare its version of the federal budget, but he had never held elected office. To implement his agenda, Daniels needed new systems and new processes in his office, the center of Indiana state government. He created an Indiana office of management and budget and established a new group within that office to set goals, monitor performance, and link budgets to outcomes. Policy teams in Daniels’s office reported progress on agency-level reforms and helped unclog bottlenecks. And Daniels created a performance-based pay system to encourage state workers to focus on results. Daniels’s reforms were not without controversy. For example, he scrapped state workers’ rights to collective bargaining, and he privatized services previously delivered by government, which led to employee layoffs. By 2012, the final year of his second term, Daniels’s reforms had produced marked changes, including a budget surplus every year from 2006 to 2012, and he won praise from both his own Republican Party and opposition Democrats.