Reprinted from National Municipal Review, Vol. XI, No. 7, July, 1922. NEBRASKA’S REORGANIZED STATE ADMINISTRATION t BY A. E. BUCK New York Bureau of Municipal Research The reorganization in 1917 of the Illinois state administration into j v -j - an orjdwly group of departments has already been copied by several statesy as related in our pamphlet '^Administrative Consolidation in State Governments.^^ The results in Illinois are dealt with in our pamphlet "Administrative Reorganization in Illinois.'^ The Ne¬ braska reorganization of 1919 has now reached the point where the re¬ sults are demonstrable^ as set forth in this article prepared after a visit by the writer to Lincoln. :: :: :: :: :: :: irRArtV dr iriii War lo im One of the most unusual and sig¬ nificant things that has ever happened in American state administration, took place this year in Nebraska. Gover¬ nor McKelvie called a special session of the legislature during the closing days of January to cut down the appro¬ priations for the current biennium that began July 1, 1921. In less than a year after the legislature had made the appropriations for the biennial period, the governor knew that nearly one- tenth of the total sum appropriated for state activities could be saved. In order to give the people of the state the advantage of an immediate saving in the reduction of their taxes, he called the legislature together. By a special message he instructed that body to re¬ peal the law making appropriations for the bienniuna and enact an appro¬ priation bill carrying the reductions recommended by him. The legislature followed the governor’s recommenda¬ tions, the result being that the total appropriations for the biennium were reduced from $22,451,666.33 to $20,- 399,910.48—a reduction of $2,051,755.- 85. This reduction made it possible to cut the state tax levy for the second year of the biennium from three to two mills, or 333^ per cent. 10.0 .1 iuiNT-) THE 1919 CODE What enabled Governor McKelvie to do this, and how did he get the facts upon which to act? The answer is found in the operation of the central¬ ized and responsible system of admin¬ istration established by the civil ad¬ ministrative code. This code was enacted by the 1919 legislature and went into effect in August 1919. It eliminated twenty-four statutory boards, commissions, and agencies, and consolidated their functions under six departments; namely, finance, agricul¬ ture, labor, trade and commerce, public works, and public welfare. The code vests the civil administration of the state in the governor, who has as his chief assistants the six department heads. These heads are called secre¬ taries and are appointed by the gov¬ ernor with the consent of the legis¬ lature. While they are appointed for a definite term of two years, they may be removed at any time by the gov¬ ernor. Each secretary receives an annual salary of $5,000. All subordi¬ nate officers and employees of the code departments are appointed by the department heads with the approval of the governor. Departmental regu- 1 2 NATIONAL MUNICIPAL REVIEW lations are prepared by the secretaries and are promulgated with the gov¬ ernor’s approval. The code administration has now been in actual operation for almost three years. The important results that have been brought about by the application of the code during this period are: (1) the integration and departmentalization of related activi¬ ties of the state government; (2) the application of the cabinet idea to the work of the state administration; (3) the establishment of a budget system with uniform financial control over state expenditures; (4) the installation of a central accounting system; (5) the establishment of a system of employ¬ ment and personnel control; and (6) the inauguration of a state purchasing system. RELATED ACTIVITIES DEPARTMEN¬ TALIZED The co-ordination of related activities of the state government is one of the most important accomplishments of the code system. It took activities that were operating independently of each other but that were part of the same major function of government and brought them together into one department with a single administra¬ tive head. In this way definite re¬ sponsibility has been fixed for each field of work. This arrangement has not only greatly increased the output of the services rendered, but it has tended to reduce the cost of operating the govern¬ ment. All departments are now located at the state capital, whereas some of the agencies used to be located at various points over the state. One of the most important of the code departments, since Nebraska is mainly an agricultural state, is the de¬ partment of agriculture. The func¬ tions of five independent agencies [July whose activities related to agriculture were consolidated in this department. Not only was the work of these agen¬ cies brought together into one depart¬ ment, but it was systematized and arranged into five groups. These groups are designated as (1) bureau of foods, drugs and oils, (2) bureau of animal industry, (3) bureau of markets and marketing, (4) bureau of game and fish, (5) clerical and records division. The inspectional work is a very im¬ portant feature of this department. It includes the inspection and testing of animals for diseases, the inspection of dairy, food and oil products, the inspection of farm products for ship¬ ment, and the testing of weighing de¬ vices. In order to accomplish this work, the department inspectors are usually assigned a definite section of the state and are required to establish headquarters at the most convenient point in this section. Each inspector is required to send to the department a daily report of work performed, and a statement of his routing for the follow¬ ing two or three days so that the de¬ partment can communicate with him at any time without delay. In this way the department keeps a complete record of the work of all its field men. Among the more important activi¬ ties of the department of finance are the classification and control of ex¬ penditures, the installation of uniform accounting methods, the purchasing of supplies, the supervision of state em¬ ployees, and the preparation of the budget. This department is the hub of the administrative wheel. As a re¬ sult of the constant control that it exercises over all expenditures, it is continuously gathering information which is not only of great value in the day-to-day operation of the govern¬ ment but constitutes the basis for the preparation of the budget. The work of this department is arranged in two B ^5ti 1922] NEBRASKA’S REORGANIZED ADMINISTRATION 3 divisions, namely, accounts and bud¬ get, and purchases and supplies. The department of labor administers the workmen’s compensation laws, en¬ forces the child labor laws and employ¬ ment and safety regulations. It col¬ lects and publishes labor statistics and maintains a free employment office. Its work is divided into two groups— division of compensation and investiga¬ tion, and division of free employment. The regulation of banking and in¬ surance companies, the administration of fire prevention, and the enforcement of the blue sky law are functions of the department of trade and commerce. It also collects and publishes commer¬ cial and industrial statistics. Its activ¬ ities are divided into (1) bureau of banking, (2) bureau of insurance, (3) bureau of securities, (4) division of fire prevention, (5) division of hail in¬ surance, and (6) clerical and records division. The department of public welfare has supervision over all matters relat¬ ing to public health and social welfare, issues professional licenses, and records vital statistics. Its activities are grouped under (1) bureau of health, (2) bureau of social service, (3) bureau of child welfare, (4) bureau of examin¬ ing boards, and (5) division of athletics. The head of the department appoints upon the recommendation of each pro¬ fession an examining board for that profession which board prepares and conducts the examinations for profes¬ sional licenses. Licenses are granted by the department head upon the rec¬ ommendation of these boards. All records are kept in the department at the state capitol. Supervision over the construction of highways, bridges and public improve¬ ments is exercised by the department of public works. For the supervision of irrigation the state is divided into two water districts with a superintend¬ ent at the head of each district, ap¬ pointed by the department head and under his supervision. This depart¬ ment licenses the motor vehicles of the state. It is organized under a bureau of roads and bridges, a bureau of irri¬ gation, water power and drainage, and a clerical and records division. At the present time the federal government is co-operating with this department in the building of a system of state high¬ ways. This system of departmentalization inaugurated by the code has brought abler men into the service of the state government. Instead of more than fifty officials giving, in some cases, only a fraction of their time to the work of the state government, there are now six men giving their entire time to the work. These men are paid salaries commensurate with the service they are rendering, and are chosen because of their experience and special fitness for the particular field of work they are directing. It is not possible to secure such men under the non-integrated form of state government, or where the department heads are elected by the people. THE CABINET IDEA APPLIED In order to bring about the greatest cooperation between the work of the code departments. Governor McKelvie introduced the cabinet idea that works similar to that feature of the national government. Whenever important matters arise that concern the general administrative policy, the governor calls a meeting of the department heads. Sometimes the bureau and di¬ vision chiefs are present at these meet¬ ings . The matters under consideration are thoroughly discussed and a general and uniform policy is adopted. Follow¬ ing the cabinet meetings written in¬ structions are sent to each department outlining in detail the application of the policy to the work of that depart- 4 NATIONAL MUNICIPAL REVIEW ment. These meetings have proved a very effective means of defining and harmonizing the general administrative policy which under the old system of government was impossible. They also keep the governor in direct touch with the work of the different depart¬ ments and enable him actually to lead in the administration of the state’s affairs. Besides, weekly reports are filed with the governor by each of the departments telling of the nature and amount of work performed by each bureau and division of the department. While the people look upon the gov¬ ernor as the chief executive, in most states he is not in a position to direct the administration because of the ram¬ shackle organization. Nebraska has in a measure overcome this diflSculty by the adoption of the code organiza¬ tion, and has placed the governor in a position where he is more nearly re¬ sponsible for administrative policies. BUDGET CONTROL ESTABLISHED The code makes the governor re¬ sponsible for the financial policy of the state by requiring him to submit the budget to the legislature. The budget is prepared by the department of finance from information gathered through estimates and through its audit and review of expenditures. The first state budget under the code was prepared by the department of finance and submitted by Governor McKelvie to the 1921 legislature. This budget, a document of 150 pages, gave for the first time in the history of the state a picture of the government’s finances, analyzed its various activities, told what each activity spent during the preceding biennium, and estimated what each activity should spend during the next biennium. Prior to this the members of the legislature had been without accurate and detailed informa¬ tion upon which to base their examina¬ [July tion of the requests for appropriations. In order to make the budget pro¬ cedure work more effectively, the budget provisions of the code were amended by chapter 210 of the 1921 laws. Under this law all agencies of the state government must report their expenditures each month to the depart¬ ment of finance. The department of finance can investigate any agency of the state government to determine whether or not the appropriations are being judiciously and economically ex¬ pended. This department also has the authority to recommend and require the installation of a uniform system of record keeping for all agencies receiving appropriations from the state. In this way the department of finance can de¬ termine the character and classification of the financial information that is sub¬ mitted to it by the various state agen¬ cies. This uniformity greatly assists in the preparation both of financial statements and the budget. Hereafter the governor will submit along with the budget an appropriation bill, contain¬ ing all the budget proposals for ex¬ penditures, which the legislature must pass by a three-fifths vote should it decide to increase the governor’s recommendations. Several other important changes affecting the budget procedure were made by the 1921 laws. A uniform fiscal year, beginning July 1st and end¬ ing June 30th, was adopted. Pre¬ viously the appropriation year and the fiscal year of the state had been differ¬ ent and neither agreed with the federal fiscal year. All fees are now required to be turned into the state treasury, instead of being held out as formerly and used by the agency collecting them. All mill taxes, including the mill tax for the state university and normal schools, have been repealed. This means that in the future expenditures will be by definite appropriations made each time the legislature meets. Prac- 5 1922] NEBRASKA’S REORGANIZED ADMINISTRATION tically all special funds have been abol¬ ished and the money turned into the general fund. This has been done bex- cause it is evident that special funds restrict not only legislative authority but also administrative control and supervision. Besides, such funds greatly complicate any system of accounting and reporting. The department of finance has de¬ vised an expenditure classification that is used in setting up the accounts and in systematizing the information for the budget. Appropriations are mado to the various spending agencies in what may be regarded as lump-sum appropriations. Before the appropria¬ tion to any spending agency becomes available for use, the agency must sub¬ mit to the department of finance an executive allotment of the amount esti¬ mated to be required to carry on the work of the agency during the next quarter of a year and this allotment must receive the approval of the gover¬ nor. As the vouchers for the agency pass through the department of finance and are audited for payment, the ap¬ propriation of the agency is encum¬ bered by this department with the amount of each voucher. In this way the department of finance knows when the allotment for any quarter is being overdrawn. As a reserve against con¬ tingencies, the department of finance sets aside at the beginning of the bien¬ nium 10 per cent of the appropriation to each agency for that period and at the end of each quarter retmns one- eighth of this amount to the agency for distribution in its next quarter’s allotment. In this way the possibility of the legislature having to make defi¬ ciency appropriations every time it meets is reduced to a minimum. The allotment system makes it possi¬ ble for the department of finance to determine long before the end of the biennial period whether or not there is going to be an unused surplus in the appropriations and approximately how much this surplus is going to be in the case of each spending agency. As a re¬ sult of the operation of this system by the department of finance, the gover¬ nor was supplied with the facts that enabled him to call the special session of the legislature referred to in the first paragraph of this article, to cut down the appropriations for the current biennium. In this connection mention should be made of the very valuable work that the department of finance is doing in educating the people to appreciate the significance of the budget and to understand something of the problems connected with financing the state and local governments. This department prepares monthly statements relative to the state’s finances and occasionally a bulletin on the distribution of taxes between the different activities of the state and local governments and sends these to the newspapers and various organizations throughout the state. central accounting system INSTALLED In the installation of a central ac¬ counting system Nebraska has made notable progress under the code admin¬ istration. The department of finance has not only established a uniform sys¬ tem of financial records for all spending agencies of the state, but practically all bookkeeping, especially for the code departments, is done by this depart¬ ment. Under this procedure the ac¬ counting control is not only centralized, but it becomes unnecessary for each department to maintain a force to keep a set of books for it. Only such rec¬ ords as relate directly to the work of the department are now kept by the code departments. Records giving complete information relative to the appropriations and expenditures of all departments are kept by the depart- 6 NATIONAL MUNICIPAL REVIEW ment of finance. The accounting sys¬ tem in this department shows at all times, for each department, bureau and division, the expenditures, the unex¬ pended balances and the free and un¬ encumbered balances. The spending agencies that are independent of the code departments, such as the Univer¬ sity, the board of control, and the con¬ stitutional oflacers, keep their own books. However, the general form of these books is prescribed by the depart¬ ment of finance, and these agencies must report monthly to the depart¬ ment of finance an itemized and classi¬ fied statement of all their expenditures. All spending agencies are required by the department of finance in making their reports to distribute their ex¬ penditures according to nine standard expenditure accounts. These accounts and the sub-groups under each have been built up largely on an object basis and are used by the department of finance for budget-making as well as accounting purposes. It is possible by the use of this classification not only to determine when expenditures have been properly made, but also to com¬ pare the expenditures of different de¬ partments and institutions. As has already been pointed out, the department of finance exercises the powers of pre-audit. Every depart¬ mental expenditure, before it is con¬ tracted, must have the approval of this department. This approval involves not only passing upon the availability of funds to meet the expenditure, but also the advisability of making the expenditure. Upon approval the ap¬ propriation of the department making the expenditure is encumbered by the amount of the proposed expenditure. After the expenditure has been made a voucher signed by the department head is sent to the department of finance where it is checked and approved be¬ fore going to the auditor’s office. The auditor, an elective constitutional [July officer, approves all vouchers as to the legality of the expenditures. A useless step in the procedure is the requirement that the secretary of state likewise approve all vouchers before payment by the state treasurer. The centralization of the accounting control in the department of finance is not only necessary to the proper carrying out of the budget plan, but also to the intelligent preparation of the budget. By this means the staff that prepares the budget for the governor is kept in daily touch with the expendi¬ tures of all agencies, and the facts that are essential to the criticism of the esti¬ mates are gathered from day to day. EMPLOYMENT CONTROL ESTABLISHED The department of finance has developed a rather unique system of employment control. While it does not conduct examinations to test the fitness of individuals to enter the state service, as civil service commissions do, it is, nevertheless, more effective in its management and control of state em¬ ployees than most of the civil service commissions. Any person desiring to enter the state service must fill out and file with the department of finance a blank, stating position desired, edu¬ cational and experience qualifications, age, marital relations, sex, name and address of last employer, last position and salary earned, and the names and addresses of at least three persons as references. The department of finance then asks each one of the references to fill out a blank that contains a number of questions about the character, edu¬ cation and general qualifications of the person to fill the position. If the per¬ son’s record is satisfactory, he is rec¬ ommended for appointment to the position by the department of finance. The appointment is made by the de¬ partment head with the approval of the governor. After the appointment has 1922] NEBRASKA’S REORGANIZED ADMINISTRATION 7 been made a permanent card record for the employee is filed in the depart¬ ment of finance. Any change in the salary rate of the employee must be approved by the department of finance. Before the adoption of the code there was practically no record of the state’s employees. Each employee in the different bureaus and divisions of the code de¬ partment is required to sign a daily time report, giving the time of arrival, the time at lunch, and the time of leav¬ ing. All field employees mail daily time reports to the departments. These reports are collected by each department and are sent each month together with a summary to the depart¬ ment of finance. The summary shows the number of days during the month that each employee has worked less than eight hours, the number of days each has worked over eight hours, and the number of days and time that each has been absent without pay, on sick- leave, or on vacation. As a result the department of finance has a work re¬ port of every person employed in the code departments. From these re¬ ports the department of finance makes up each month the payrolls of all the code departments. Under this system the department of finance has the origi¬ nal signature of each employee for each day he or she has been paid during the month or year. These records are also used in making promotions. Prior to the adoption of the code there was little relation between the duties performed and the pay received by the employees of the various boards. The department of finance has worked out a salary standardization plan that provides for standard titles of positions and uniform salaries for the same class of work in all of the code departments. It fixes a minimum salary rate with ad¬ vancement to a higher rate at specified times, and promotion from a lower to a higher grade of service upon the recom¬ mendation of the department head. PURCHASING SYSTEM INAUGURATED The division of purchases and sup¬ plies in the department of finance buys oflSce supplies for all agencies of the state government except the University and normal schools. Prior to the adoption of the code each agency pur¬ chased its supplies in small quantities at frequent intervals. Under this scheme the various agencies frequently spent more than was necessary, proper scrutiny could not be exercised on the part of the state, and favoritism was often shown in the selection of vendors. Now, every department and agency must file a requisition for supplies with the purchasing agent. After this req¬ uisition has been approved by the accountant of the department of fi¬ nance to the effect that there is suffi¬ cient unencumbered balance in the appropriation of the department or agency to pay for the supplies, the pur¬ chasing agent makes up a schedule, combining like classes of supplies from several requisitions, and solicits bids from dealers. An order is then placed with the successful bidder by the pur¬ chasing agent. A copy of this order is retained by the purchasing agent, a copy is sent to the accounting division of the department of finance, and two copies are sent to the department or agency receiving the goods. The de¬ partment or agency files one copy of this order with its copy of the requisi¬ tion and checks the other when the goods are received, returning the latter copy to the purchasing agent. Pay¬ ment for the goods is then authorized by the purchasing agent upon a voucher that is approved by the head of the de¬ partment or agency receiving the goods and by the secretary of finance before going to the state auditor. The purchasing agent buys and con¬ trols the use of mileage books that are 3 0112 061967003 8 furnished to the several employees in the different departments whose work necessitates their traveling over the state. Each employee must file with the purchasing agent a report showing the trips that are made with the mile¬ age. In this way the department of finance has on file a complete record of all mileage books used by the code de¬ partments. The purchasing division does mimeographing and addresso- graphing for the different departments and agencies and charges them only for the material and labor involved. All printing contracts are let by the purchasing agent. In the printing of reports each department must furnish a manuscript copy of its report to the purchasing agent who goes over it care¬ fully to see if it contains any unneces¬ sary or repeated matter. He may re¬ quire the department to eliminate such matter from the report before he con¬ tracts for the printing. The contract is let upon the basis of cost per page,— the character of the matter, that is, whether it is descriptive or statistical, being the determining factor in the page cost. All printing must be done and the reports delivered within thirty days. Formerly, it was not unusual for the printing of reports to be delayed after the contracts had been let for a period of from one to four years. It is estimated that this system of centralized control of purchasing and printing has resulted in a net annual saving to the state of about 20 per cent. The operation of the system has also contributed to the success of the budget system by establishing control over expenditures for supplies. ******* It is to be regretted that the consti¬ tutional convention of 1920, instead of reducing the number of administrative oflScers and boards under the constitu¬ tion, saw fit to add four more such agencies, making a total of sixteen. [July Thus the present administrative sys¬ tem includes sixteen constitutional offi¬ cers and boards, six statutory boards, and the six departments created by the code. The revised constitution of 1920 con¬ tains a provision that gives the legisla¬ ture the power to eliminate the heads of the code departments and to place the work of these departments under the constitutional administrative offi¬ cers. If this were done, it would be a decided step backward. It would practically amount to setting up a eom- mission form of government for the state. The heads of the departments would then be elected just as the gov¬ ernor is and there could be no central¬ ized or responsible supervision of the administration. As a result the state would have six or eight governors in¬ stead of one. One of the serious and inevitable defeets of this arrangement, even worse than under the old scheme of organization that existed before the adoption of the code, would be the tendency of each one of these inde¬ pendent administrative officers to mag¬ nify his own problems and importance, constantly to expand his activities, and to work for and spend as large appropriations as he could obtain in competition with the other administra¬ tive officers. There would be few in¬ centives to real economy and no estab¬ lished avenues of mutual interest and co-operation. Under the code system of organiza¬ tion the departments have nothing to gain by competing with each other for appropriations. Co-operation takes the place of interference. The result— a most important one—is the develop¬ ment of the idea of unity in administra¬ tion. The worth of the code system has already been clearly demonstrated by its successful operation. Undoubt¬ edly, the next step should be in the direction of strengthening and extend¬ ing this system. NATIONAL MUNICIPAL REVIEW