The Future of California’s Government

Overview

The average person checks their smartphone 46 times a day. We, as consumers and citizens, have developed behaviors and expectations in our daily lives driven by service providers who simultaneously play catch-up to where others have set the bar, defining the next generation of ideas to capture our attention.

The transformation of California’s businesses and government is less self-directed, and more market-driven. Alex Castro’s educational session at Government Transformation highlighted how other states are addressing the expectations generated by private sector performance, and our own needs as they relate to California’s future.

Economics

The economics are driving California’s transformation because the more the constituency has in terms of its ability to fund programs, the more the expectations of government rise.

Post-recession, California has seen a fluctuating recovery in its tax revenue, in part due to the state raising its taxes, contributing to gains stimulated by economic growth.

Post-recession, California has seen a fluctuating recovery in its tax revenue, in part due to the state raising its taxes, contributing to gains stimulated by economic growth. Much like in Texas and in Florida, California saw a sharp peak in 2010 from federal dollars, eventually falling back within its historical range. The data is showing that California’s overall federal funds are lower than states like Texas and Florida.

In Texas, tax revenue gradually increased after the recession due to a large portion generated by an increase in taxes from oil and gas production. From 2003 to 2013, Texas more than doubled its estimated onshore crude oil reserves. Fracking booms led to significant growth in the domestic oil and gas industry, increasing local government revenue through increases in property and sales taxes.

Florida has seen a slow improvement since the recession and has not yet reached the same levels of tax revenue as they stood in 2008. A good deal of Florida’s revenue is centered on the tourism industry.

Other States – Texas and Florida

It is important to note that generally when dealing with public sector, trends in policies and governance shift from East to West in the United States.

According to McKinsey Center for Government, 44% of large scale government transformation efforts meet their targets. By that same vein of thought, that means an overwhelming 56% of initiatives fail.

Florida’s legislature directly measures the success of their initiatives on a yearly basis. The constant act of justification each year drives the model of budgeting based on performance on transformation. Florida TaxWatch measures government efficiency. Associated Industries of Florida are pro-business and enforce lower taxation rates. Since 2005, Florida has eliminated the policy branch of the State CIO two times in order to drive consistency and accountability. Only recently has the branch been reinstated.

In Texas, they experienced a major multimillion dollar scandal which drove procurement reform, and resulted in Senate Bill 20, a measure to eradicate bad procurement practices. In 2015, the state of Texas stopped all active procurements for 6 months to revamp the structure of the procurement process.

Private Sector

What we are seeing in the private sector is a constant sense of self disruption. Companies are in an endless battle to anticipate trends, capture market share, and lead industries. Several examples can be seen as a manifestation of private sector’s transformative capabilities to push markets into transition.

  1. The hearing aids market saw a huge and rapid-fire shift from the impact of 3D printing. Within the span of a little over a year, companies who did not adopt digital printing techniques were wiped out of manufacturing hearing aids completely.
  2. Wang Laboratories created an early model CPU which would then be categorized as a personal computer. Eventually the onset of microcomputers phased out the company’s development.
  3. Lucent Technologies, a telecommunications company adapted to changes in technology by incorporating VoIP into their product lines, replacing outdated business telephony solutions.
  4. Cisco released a handheld video camera named Flip, only to be destroyed by the rise of Apple’s iPhone 3G S when it was released on the market.

The largest transitions that are currently dominating the technology sector are cloud-based tools and services, mobile, and Internet of Things (IoT).

With the time between product iterations lasting 12 months, it’s not enough to retain the current model of operations.

Under cloud-based services, Amazon Web Services surpassed many enterprise suppliers in its ability to capture market share while sustaining a 78% growth in revenue. AWS has more than 10 times the computing capacity of all of its 14 closest rivals combined.

According to Alex Castro’s model of transformation, the overlap between where your business is today and where you go tomorrow is what you retain. However in order to support the new model, there are major enhancements which need to be made, hence the gap in readiness.

AlexCastroModelofTransformation

Conclusion

With the average transition time between product iterations lasting 12 months, it is not enough to sustain and retain the current model of operations. We currently live in a world where the pace of private sector transformation in order to keep up with consumer demands, coupled with government reforms in other states is forcing its hand with California’s pace of transformation.

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