public employee unions

Mitch Daniels, Governor

Ref Batch
H
Focus Area(s)
Ref Batch Number
2
Country of Reform
Interviewers
Michael Scharff and Richard Messick
Name
Mitch Daniels, Governor
Interviewee's Position
Governor,
Interviewee's Organization
State of Indiana
Language
English
Nationality of Interviewee
American
Place (Building/Street)
Office of the Governor
Town/City
Indianapolis, Indiana
Country
Date of Interview
Reform Profile
No
Abstract

Mitch Daniels discusses the changes he implemented in his office, the center of Indiana state government, during his two terms as governor of Indiana. He begins by explaining the importance of enacting reforms quickly once in office. On his first day in office, he issued an executive order creating an Office of Management and Budget, which oriented the various state agencies that dealt with fiscal issues around a common set of goals. And he created an efficiency unit in the Office of Management and Budget that identified cost saving opportunities and measured and tracked agency performance. Also on his first day in office, despite concerns that the political fall-out would distract from other reforms, he scrapped public employees’ rights to collective bargaining with the unions, thus paving the way for sweeping organizational changes. He implemented a new performance management program and tied employees’ pay to their performance. Governor Daniels discusses how he built his reform team by recruiting talented people who were excited about the transitions he sought. He describes the process for conducting fair employee evaluations to monitor performance. He notes the advantages and difficulties of applying business skills to public sector work. Finally, he considers the durability of his reforms.

Case Study:  A New Approach to Managing at the Center of Government: Governor Mitch Daniels and Indiana, 2005-2012

In 2012, Mitch Daniels spoke at Princeton University about his reform efforts while governor of Indiana. Video of his speech is posted online.

Profile

Mitch Daniels is the 49th Governor of the State of Indiana and the author of the best-selling book, “Keeping the Republic: Saving America by Trusting Americans.” Although he had served as Chief of Staff to Senator Richard Lugar, Senior Advisor to President Ronald Reagan and Director of the Office of Management and Budget under President George W. Bush, his approach was molded in the private sector.

Before his service to Indiana, he had a successful career in business, holding numerous top management positions. And his work as CEO of the Hudson Institute and President of Eli Lilly and Company's North American Pharmaceutical Operations taught him the business skills he brought to state government.

And with those skills he led Indiana to its first balanced budget in eight years and, without a tax increase, transformed a $700 million deficit into an annual surplus of $370 million. He also repaid millions of dollars the state had borrowed from its public schools, universities and local units of government in previous administrations, while presiding over record-breaking investment and job growth. Today, Indiana has a AAA credit rating (the first in state history) and ranks near the top of every national ranking of business attractiveness.

His other groundbreaking accomplishments include the 2006 lease of the Indiana Toll Road, the largest privatization of public infrastructure in the United States to date, generating nearly $4 billion for reinvestment in the state’s record breaking 10-year transportation and infrastructure program; the creation of the Healthy Indiana Plan to provide healthcare coverage for uninsured Hoosier adults; a sweeping property tax reform in 2008 resulted in the biggest tax cut in Indiana history; and an emphasis on government efficiency that has led to many state agencies, including the Bureau of Motor Vehicles, Department of Child Services, and Department of Correction winning national performance awards.  Indiana now has the fewest state employees per capita in the nation, and the fewest the state has had since 1975.

He was re-elected in 2008 to a second and final term, receiving more votes than any candidate for public office in the state’s history. Unsurprisingly, his second term has been as innovative as his first. In fact, earlier this year, under his guidance Indiana passed the most expansive education reforms in the country.  In 2012 Indiana became the first industrial northern state to adopt a Right to Work law. 

His tenure as Indiana's governor comes to an end in January 2013, when he begins the next chapter in his career as the 12th president of Purdue University. 
Full Audio File Size
61 MB
Full Audio Title
Mitch Daniels Interview

A New Approach to Managing at the Center of Government: Governor Mitch Daniels and Indiana, 2005-2012

Author
Michael Scharff
Country of Reform
Internal Notes
Case published 11/16/2012 by SM.
Case updated 02/13/2013 by SM.
Case minorly updated 03/06/2013 by SM.
Abstract
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.
 
Michael Scharff drafted this case study based on interviews conducted in Indianapolis, Indiana in July 2012. Rick Messick—formerly of the World Bank, and chief counsel and research director of the National Republican Senatorial Committee from 1983-84 when Governor Daniels was executive director—provided guidance, editorial suggestions, and interview support. Case originally published November 2012. Case revised to clarify budgetary results and republished in February 2013. 
 
Associated Interview(s):  Mitch Daniels, Governor, Cristopher Johnston