Archive for December, 2016

Open Letter to Arkansas Government Leaders

December 29, 2016

The Gene McVay Open Letter to Members of the Arkansas Executive and Legislative Branches of Government:

arcap

After a century of leadership by mostly liberal Democrats and Republicans, we find ourselves in a precarious situation. I pen this epistle with love and with the background of a fifth generation Arkansan whose great-great-grandfather fought for the Union Army to free the slaves. My dogged determination to stay in Arkansas has been a challenge. It pains me because I know we can do so much better.

I retired 20 years ago at age 54. I was able to do that debt free by planning and sometimes sacrificing. Arkansas has a large retirement community in some of the nation’s premier communities such as Hot Springs Village, Bella Vista, Cherokee Village, Fairfield Bay, Holiday Island and others. Yet, Arkansas is ranked 40th in best places to retire by WalletHub. They rank Arkansas quality of life at 48th and healthcare at 46th. You will not find any surrounding state ranked that low.

When looking at the 2016 rankings of America’s Top States for Business by CNBC, Arkansas ranks 41st. That’s a pretty high mark for Arkansas but remember many giants of business came from Arkansas including Sam Walton, Don Tyson, Jack Stephens, J. B. Hunt and William Dillard. Arkansas could learn a lot from these men and their relatives if our leaders would only listen. About 20 years ago, Jackson T. Stephens and the Murphy Commission developed a wall chart of Arkansas government. While I was seeking the gubernatorial nomination, Mr. Stephens was displaying that 8 by 16 foot chart around the state. One would have thought that just looking at the discombobulated nature of Arkansas government structure would have spurred some interest in downsizing and streamlining our bureaucracy but, alas, that never dawned on our politicians. The mentality of “if it don’t work, hire more bureaucrats and spend more tax money” continued to permeate the marble halls of the Capitol.

Here are some findings of the Murphy Commission way back then: “Today, Arkansas’ state government comprises 52 executive branch agencies–a 400% increase since Governor Bumpers’ 1971 restructuring that reduced the number of agencies from 171 to 13. It also comprises 388 boards and commissions–more than double the 175 that existed in the early 70s. More than 4000 operational units are structured into state government’s various divisions and agencies according to state government organizational charts. The actual number is estimated to be more in the range of 7000-8000 distinct operational units.

Total state payroll for all state employees is $1.4 billion (1997) and the amount of travel expenses paid state employees in 1997 was $34.5 million. The State of Arkansas owns 1,073,522 acres of land making it the third largest land owner in the state (the Federal government is the largest). Of the state’s property, 38,170 acres are in 48 state parks. Museums occupy 58 acres. The state owns 5,302 buildings. The total number of vehicles owned by the State of Arkansas is 7,281 and the number of airplanes is 30. Arkansas’ highway miles total 16,254. The Federal Interstate System in Arkansas comprises 542 miles.

Arkansas’ state government is the largest single employer in the state. Figures from the state’s Employment Security Division (ESD) put the current number–including higher education employees–at 60,500, more than Wal-Mart, 32,412, Tyson’s Foods, 21,500, and the Baptist Hospital System, 6,200. Factor in some 101,500 1ocal government employees and the combined state/local government employee figure hits 162,000. Add in the 21,400 federal employees working in Arkansas and the total government employment figure (for all governmental levels) tops out at 183,400. The number of state employees, excluding the state’s 57,257 public school employees, has risen 228% since 1965.

Among the fifty states, Arkansas ranks 33rd in population but 12th in numbers of state employees as a percentage of total state employment–4.29% (the national average is 3.2%). Expressed as numbers of state employees per 10,000 citizens, Arkansas ranks 23rd among the states at 220. The national average of state workers per 10,000 citizens is 182.” Remember, this was 20 years ago!

This year CATO Institute had some Arkansas observations I will share here: “Arkansas has been mediocre on economic freedom. Its personal freedom has declined relative to other states in recent years.

Arkansas is highly fiscally centralized. State taxes are way above the national average.
However, it does better than most other southern states, and indeed the national average, on its civil liability regime. It has also started to deregulate telecommunications and in 2013 enacted statewide video franchising. The extent of occupational licensing, according to two different measures, is more than a standard deviation worse than the national average. Hospital construction requires a certificate of need, and there is an anti-price-gouging law and also a general law against “unfair pricing” or sales below cost.

The state does a bit worse than one might expect on gun rights, with heavy training requirements and significant limitations on the right to carry concealed. School choice particularly looks like an opportunity for improvement, given the state’s fiscal centralization (so there’s not much choice among public schools), its generally conservative ideological orientation, and its minority student populations.” That’s just a glimpse of what is coming out of CATO, an organization that has followed me on social media for many years and an organization I have great respect for.

Arkansas ranks 46th in poverty rate and 48th in median family income. Sadly, our politicians think throwing more money at poverty is the solution. Just as education is not about money, it is about learning; poverty is not about money, it is about opportunity and motivation. You won’t walk into a shack in Elaine or Lexa and see a sign saying “Arkansas Governor Slept Here.” Too many of our politicians look past Arkansas poverty as though it does not exist. You might recall the story of Marie-Antoinette being told that her French subjects had no bread and her response was, “Let them eat cake.” I happen to think Arkansas is much worse than the stats show. The success of a few counties skews the real picture but seven Arkansas counties are among the list of 100 lowest-income counties in the U.S. They include Lincoln, Lee, Sevier, Fulton, St. Francis, Johnson and Newton Counties.

No Arkansas counties are in the top 100 highest-income counties list but our top ten median family income counties in order are: Grant, Saline, Lonoke, Benton, Faulkner, Pulaski, Perry, miller and Crawford. Loudoun County, Virginia is the highest income county in the U.S. with a median family income of $117,876. Several other northern Virginia counties are close behind including Arlington County where the Pentagon is located. The highest median family income county in Arkansas has less than half the income of Loudoun County. When considering the highest per capita income, Pulaski and Benton Counties float to the top at more than double the $13,103 per capita income of Lee County.

If you survived these few statistics without your eyes glazing over and your minds wandering too far afield, please allow me to suggest some solutions.

Robert Townsend is a perfect example of a leader who took the bull by the horns when he became CEO of Avis Rent-a-Car in 1962. Townsend was a WWII Navy Veteran who worked for the American Express Company for 14 years becoming senior vice president for investment and international banking operations before moving to Avis.

Over the years he was also an officer, a director or an adviser to Dun & Bradstreet, 20th Century Fox, Psychology Today and other enterprises. At the time of his death in 1998, he was chairman of the executive committee of Leadership Directories Inc., which publishes institutional directories.

Mr. Townsend’s book, ”Up the Organization: How to Stop the Corporation from Stifling People and Strangling Profits,” published in 1970, was on the New York Times nonfiction best-seller list for 28 weeks. For seven of those weeks it was No. 1 on the list. 1970 was almost 47 years ago and I doubt anyone bothering to read this remembers him.

Avis was founded in 1946 by Warren Avis at Willow Run Airport in Detroit with an $85,000 investment. By the time Robert Townsend took the reins in 1962, the company had been sold a couple of times but it had never made a profit. Instead of hiring more people and spending more money, the new CEO cut people and spent less money. He did away with the perquisites of a top executive including the two secretaries, a huge office staff, fancy office, company airplane and country club memberships. In fact, Townsend did not even have an office during the first year.

Townsend wore the same blazer worn by Avis Agents at airport counters and asked his employees this simple question: “What would it take for you to be able to do your job a whole lot better?”

Guess what, they were eager to tell him and he was eager to listen. When agents told him the rental agreements needed to be shortened, the bean counters objected strenuously. Townsend shortened the rental agreements. When his employees told him Avis needed better advertising, Townsend contacted Bill Bernbach, one of the three founders in 1949 of the international advertising agency Doyle Dane Bernbach (DDB). One of the agencies big clients was Campbell’s Soup. The Campbell’s CEO once asked Bernbach why he never promoted Campbell’s Tomato Soup since it was their best selling product. Bernbach said it was because Campbell’s Tomato Soup was terrible. He said if you change the recipe, I’ll promote it. The CEO sampled his soup and agreed to change the recipe after which DDB advertised it.

DDB developed the “We Try Harder” advertising and marketing campaign in 1963 that really took off. It was a huge success for Avis. In a matter of a single year, that campaign reversed the company’s fortunes, helping it to go from losing $3.2 million to turning a profit of $1.2 million. That tag line lasted 50 years until Avis rolled out “It’s Your Space” in 2012.

Once things started to take off at Avis, Townsend settled into his office and was off to the races. One day his secretary told him she would help him get organized if he would come to work at seven the following day. Townsend said he comes to work at eight. His secretary repeated, “If you want to get organized, be here at seven.” The CEO reported to work at seven! I’m doing most of this from memory but as I recall the story, his secretary said she was an important part in organizing his time and needed to be in the loop from the very beginning. She said at eight, people were lined up waiting to get into his office and occupy his time. If she could get together with him for five minutes and help structure his activities, everything would work much more efficiently. She got her five minutes each morning and things got much less frantic.

The Townsend turnaround lasted just three years before the new and improved Avis was sold to ITT Corporation for $51 million.

During my day, I was in charge of many Federal and Arkansas State employees. Many of them wanted to make life easier on themselves. I had supervisors asking to hire temporary employees to do their jobs for them. I had the money so why not? Because it did not serve the people we were supposed to be serving, that’s why. I told the supervisors I wanted them to be doing their own jobs. I don’t think they loved me but they respected me. I have talked to many former Arkansas State employees who told me horror stories. One Game Warden told me that many times the supervisor would show up and tell the seven or eight wardens sitting around the office he didn’t want to see them until quitting time. They would go out into the woods and lay around reading, drinking or sleeping all day courtesy of taxpayers.

Recreation areas that were once open year round are now closed about nine months a year. Nine months is a long time to sleep and drink. In Arkansas, we are blessed with great days during winter. I was wearing a short sleeve shirt on Christmas this year. What are state employees doing who were hired to take care of closed recreation areas?

I once spoke to the state convention of Farm Bureau and told the story about my neighbor, Mr. Parks. One very hot day as a ten year old boy helping Mr. Parks haul hay, I suggested it would be nice to have some help. Mr. Parks told me that one boy will do the work of one boy, two boys will do the work of half a boy and three boys will do no work at all. What would be wrong with taking a fresh look at Arkansas government to determine if we really need all the agencies, departments, boards, commissions and functions?

Arkansas has 19 statewide law enforcement agencies. Per capita government spending in Arkansas is $7,935. In California the number is $6,452, Illinois is $5,397, New York is $7,091, Oklahoma is $5,637, Tennessee is $4,843, Texas is $4,098 and Missouri is $3,965. I’m just saying, can’t our government do a little belt tightening? Does every bureaucrat have to drive a state SUV? Do we need so many public school superintendents, vice superintendents, assistant superintendents and superintendent’s office staff members? When talking about cutting taxes the question of how to replace that revenue arises. Why not talk about how to eliminate the need for the revenue in the first place. Who can spend your money wiser, the government or you?

Why does everything have to be so complicated? Every time our income tax becomes more complicated and burdensome, more bureaucrats have to be hired to count the beans and make sure the t’s are crossed. Seven states do not even have state income tax and five states have no state level sales tax. I get it that taxes are necessary but is it necessary to make criminals out of people? When I ran for governor I promised to reduce Arkansas State Personal Income Tax forms to a single sheet of paper. If some states have no income tax, why can’t Arkansas income tax at least be simple?

The burden of an income tax can be divided into two parts, one visible and the other hidden. The first burden is obvious—it is the actual tax payment. The second burden is less obvious. A major part of this burden arises from the costs of complying with the system: the hours spent preparing forms, gathering documents, and reading instructions; or the money a tax filer pays someone to do the tax preparation. Compliance costs for the individual income tax in the United States have been estimated at 10 percent of tax revenue collected, as much as ten times the level of some European countries. I believe help is on the way for Federal Income Tax but I do not see much on the home front. Arkansas taxpayers could save millions of dollars if our government was willing to simplify our income tax forms with a resulting decrease in the size of the Department of Finance and Administration. That might also help assuage the parking problem at the Capitol?

Arkansas employs 119 full time equivalent state employees per 10,000 population now, almost unchanged from the Murphy Commission report of 1979. That is more than double Ohio’s 55, Florida’s 56 and close to double California’s 61 along with Arizona’s and Colorado’s 63. Kansas has 94, Louisiana has 97, Missouri has 92, Oklahoma has 94, Tennessee and Texas have 65. When I ran for governor I said Arkansas had too many vehicles, too many airplanes, too many bureaucrats and too many marble buildings. I guess bureaucrats and politicians work harder when surrounded by Italian marble? Anyway, the speeches I made in the Capitol and the testimony I gave before legislative committees seemed to sound better?

I’m not a Rocket Scientist but even I can figure out that if Arkansas can get by with the same ratio of state employees as Arizona and Colorado, we can save about a billion dollars in salaries, benefits, office space and transportation.

I know there are visionary leaders out there but will anybody listen to them and can they move the needle in my beloved Arkansas?

Advertisements