2017 Annual Report by VolckerAlliance

2017 Annual Report

017 Annual report Working for Effective 2Government

The volcker alliance

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vo lc ker Alliance

2017 Annual Report

The volcker alliance

2017 Annual report

ISSUE PAPER • October 2017

Reshaping The Financial Regulatory System

State Budget Sources

Truth and Integrity in State Budgeting

People On People On People THE CONTINUED THICKENING OF GOVERNMENT

AN ANNOTATED REFERENCE GUIDE TO STATE BUDGETS, FINANCIAL REPORTS, AND FISCAL ANALYSES ••• Katherine Barrett and Richard Greene October 2016

LESSONS FROM thREE StAtES

InItIal RepoRt of the

LONG DELAYED, NOW cruciAL

Paul C. Light

Consolidated Financial Regulation: Six National Case Studies and The Experience of The European Union

Memorandum Concerning The Securities and Exchange Commission and The Commodity Futures Trading Commission

ELIZABETH F. BROWN, J.D.

tRuth and IntegRIty In goveRnment fInance pRoject

Clearinghouses for Over-the-Counter Derivatives

Tenure and Promotion at Schools of Public Affairs

COLLEEN M. BAKER

JOHN CRAWFORD

Georgia State University

TIM KARPOFF

•

ANGELA ALLEN

Date: April 14, 2015

November 2016 WORKING PAPER

NICOLE ALLEN MICHAEL MARGOLIS

APRIL 2017 WORKING PAPER

This research paper was prepared for the Volcker Alliance for its project on financial system stability. The analysis and conclusions contained in this paper are those of the author and should not be interpreted as reflecting the position of the Volcker Alliance, the Alliance Board of Directors, or the staff of the Alliance. Any errors and omissions are the responsibility of the author.

This paper was prepared for the Volcker Alliance as background for its project on structural reform of the federal financial regulatory system. The views expressed in this paper are those of the author(s) and do not necessarily reflect the position of the Volcker Alliance. Any errors or omissions are the responsibility of the authors This paper was prepared for the Volcker Alliance as background for its project on structural reform of the federal financial regulatory system. The views expressed in this paper are those of the author(s) and do not necessarily reflect the position of the Volcker Alliance. Any errors or omissions are the responsibility of the authors.

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Mr. John Crawford is an associate professor at the University of California, Hastings College of Law. Mr. Tim Karpoff is a partner at the law firm of Jenner & Block, and previously served as Counsel to the Chairman of the Commodity Futures Trading Commission and as Director of the United States Department of the Treasury’s Office of Financial Institutions Policy. Ms. Angela Allen, Ms. Nicole Allen, and Mr. Michael Margolis are associates at Jenner & Block.

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CONTACT THE AUTHOR colleenbaker04@gmail.com

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Unfinished Business

The True Size of Government TRACKING WASHINGTON’S BLENDED WORKFORCE, 1984–2015

Banking in the Shadows

WHY GOVERNMENT DAYDREAMS AND HOW TO STOP THE CASCADE OF BREAKDOWNS THAT NOW HAUNTS IT

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ISSUE PAPER • October 2017

ISSUE PAPER • December 2015

Vision + Action = Faithful Execution

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Paul C. Light Paul C. Light

Volcker at 90

Rethinking Effective Government

MEMO #7 (NAPA/ASPA MEMOS TO NATIONAL LEADERS 2016)

Performance Accountability, Evidence, And Improvement

Memorandum on the Asset Management Industry

Beyond the Basics

Volcker at 90

BEST PRACTICES IN STATE BUDGET TRANSPARENCY

Rethinking Effective Government

BI-PARTISAN REFLECTIONS AND RECOMMENDATIONS TO THE NEXT ADMINISTRATION

SHELLEY H. METZENBAUM

RICHARD GREENE

A symposium to discuss thE cRiticAl GovERnAncE chAllEnGEs fAcinG thE unitEd stAtEs

ROBERT SHEA

JOHN CRAWFORD

KATHERINE BARRETT AND

•••

October 2016 WORKING PAPER

December 2015

WORKING PAPER

October 2016

This paper was prepared for the Volcker Alliance as background for its project on truth and Shelley H. Metzenbaum smetzenbaum@outlook.com

integrity in government finance. The views expressed in this paper are those of the authors

CONTACT THE AUTHORS

and do not necessarily reflect the position of the Volcker Alliance. Any errors or omissions

Robert Shea Robert.Shea@us.gt.com

are the responsibility of the authors.

November 9, 2017 institute of peace headquarters Washington, dc

The analysis and conclusions contained in this paper are those of the authors and should not be interpreted as reflecting the position of the National Academy of Public Administration, the Volcker Alliance, the Board of Directors of either organization, or the staff of either organization. Any errors and omissions are the responsibility of the authors.

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THE VOLCKER ALLIANCE, 560 LEXINGTON AVENUE, SUITE 16B, NEW YORK, NY 10022 (646) 343-0155 | INFO@VOLCKERALLIANCE.ORG | WWW.VOLCKERALLIANCE.ORG

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CONTACT THE AUTHOR crawforj@uchastings.edu

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ISSUE PAPER • December 2016

Preparing Tomorrow’s Public Service what the next generation needs

What Americans Want From Government Reform Paul C. Light

Doing The People’s Business

Truth and Integrity in State Budgeting

KEY COMPETENCIES FOR EFFECTIVE PUBLIC PROCUREMENT

WHAT IS THE REALITY?

The volcker alliance

2017 Annual report

Paul A. Volcker

The Volcker Alliance advances effective management of government to achieve results that matter to citizens. The nonpartisan Alliance works toward that objective by partnering with other organizations—academic, business, governmental, and public interest—to strengthen professional education for public service, conduct needed research on government performance, and improve the efficiency and accountability of governmental organization at the federal, state, and local levels. The Volcker Alliance was launched in 2013 by former Federal Reserve Board Chairman Paul A. Volcker, who served in the federal government for almost thirty years. Mr. Volcker is known for his commitment to effective government for the public good. The Alliance’s work is inspired by his legacy of public service and grounded in a set of beliefs about what constitutes effective government. We believe the following: • Government should be responsive to its citizens, transparent in its operations, accountable for delivering on its promises, and visibly held to the standard of robust and unbiased measures. • Public service is a high calling, and that it is critical to engage our most thoughtful and accomplished citizens in service to the public good. • Government functions best when its system of civil service is independent, stable, and staffed by civil servants who are experienced and expert in their domains. • Our public workforce and government institutions must be dynamic—designed to encourage innovation, leverage technology, and adapt to the needs of a changing nation in an evolving global context. 3

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â&#x20AC;˘ The performance of our government institutions depends critically on the training and education of talented public servants, and that this responsibility is shared by our government, our institutions of higher education, and by leading institutions in every sector of society. â&#x20AC;˘ Government must be a responsible steward of financial resources, diligent in avoiding waste, assiduous in seeking evidence to assess the effectiveness of its initiatives, and proactive in helping citizens understand the long-term sustainability of its operations. We are steadfastly nonpartisan in our selection of issues and partners and in our approach to seeking solutions.

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Thomas W. Ross, Paul A. Volcker

Letter from the Chairman and President On September 5, 2017, the Volcker Alliance celebrated a milestone: the ninetieth birthday of our chairman and founder, Paul A. Volcker. To celebrate and recognize Mr. Volcker’s ninety years and his remarkable service to our nation we convened a symposium, Volcker at 90: Rethinking Effective Government, on November 9 at the United States Institute for Peace in Washington, DC. This event was a high watermark for our young organization, weaving together our chairman’s legacy of public service and a forwardlooking program about the critical governance challenges facing the United States. We were gratified to attract a group of high-caliber public servants and distinguished intellectuals, including several members of our board of directors, to speak at the symposium before an audience of more than 150 people. It was an exhilarating and successful event, and we have attempted in this annual report to capture some of the ideas that emerged during the day’s discussion. The event left us all reenergized about our work and rededicated to the importance of the Alliance’s mission to advance effective management of government to achieve results that matter to citizens. We also present in this annual report a set of beliefs about what constitutes effective government that we adopted in order to refine a strategy that defines high standards of rigor in our work and sharpens our focus on driving changes in institutions and practices. These beliefs serve as

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2017 Annual report

our guiding lights as we navigate the next era of our evolution as an organization. Our goal is to become more and more an agent for change in institutions and practices, working across a set of strategically selected core issues and measuring our success in terms of tangible impact on the effectiveness of government in the domains we select. The goal is a lofty one, we realize, but it is one worthy of our efforts and resources. So, where did this approach lead us in 2017? In November, the Volcker Alliance released Truth and Integrity in State Budgeting: What Is the Reality?, an in-depth analysis and grading of the budget practices of all fifty states. This report was the result of a multiyear study conducted in partnership with a research team of more than fifty faculty and students from eleven universities. The analysis is grounded in a broad set of best practices necessary for accurate, sustainable, and transparent budgeting by states. We also published two new issue papers by Paul C. Light, a nonresident senior fellow at the Volcker Alliance and the Paulette Goddard Professor of Public Service at New York University’s Wagner School of Public Service, analyzing the size, growth, and composition of the federal government since the 1980s. In the summer, we launched an initiative in collaboration with the Partnership for Public Service, Renewing America’s Civil Service, to press for modernization of what has become an outdated federal civil service system. Backed by a bipartisan group of leaders from across sectors, we are focused on identifying legislative and executive branch solutions to the most severe problems in the government personnel system while protecting the principle of a civil service free from political interference. We worked on a range of other initiatives, which are presented in this annual report. They include our multiyear effort to identify regulatory gaps contributing to systemic risk in the financial markets that could again disrupt the nation’s economy and to set out policy options designed to mitigate those risks, as well as research on what is needed to best prepare tomorrow’s public servants. We issued white papers, published commentary, convened experts, forged partnerships, commenced new projects, and—throughout—remained steadfastly nonpartisan and committed to seeking solutions that help government work more effectively. With our new focus on stimulating change in the management of government, we plan to continue our efforts to call attention to best practices while urging improvements and innovations that will result in a more effective government that better serves our citizens. We are grateful for your interest in the work of the Volcker Alliance and hope that you will continue to engage with us and support our work as we strive to deepen our impact on effective management of government. The challenges we face are great, while the need to accomplish positive change has never been more important.

Paul A. Volcker

Chairman

Thomas W. Ross President

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2017 Annual report

We believe that public service is a high calling, and that it is critical to engage our most thoughtful and accomplished citizens in service to the public good.

Volcker at 90: Rethinking Effective Government On November 9, 2017, the Alliance held a daylong symposium in Washington, DC, in honor of Mr. Volcker’s 90th birthday and his legacy of public service. The Volcker at 90 symposium brought together more than 150 practitioners and scholars concerned with key governance challenges to discuss the disruptions that will change the context in which government operates and the adaptations that will be required of our governing institutions in the decades ahead. Speakers included former cabinet officials and members of Congress, prominent professors and deans from schools of public affairs, and leading thinkers about government. The program was interspersed with clips from the forthcoming documentary film Volcker–Saving America from the Brink, produced by Mr. Volcker’s nephew and niece, Andy and Victoria Streitfeld, and Brad Osborne. The day was filled with deep and thoughtful analysis about the future of government, and the program was a tribute to Mr. Volcker and all he has accomplished in his career. Mr. Volcker himself felt that the day’s conversations revealed the need—and a larger appetite than he had expected— for radical efforts to reform government.

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The challenge of an effective public service has been a preoccupation of mine for years. We now debate, loudly and endlessly, the big political and social issues and the small political and social issues, but somehow the actual management of the public enterprise—federal, state, and local, day by day, month by month, year by year—does not consistently get the attention that we think it deserves. And it shows: There are simply too many breakdowns in administration at too many levels to sustain confidence in the democratic government of a complex society. And if that didn’t seem to me a big problem decades ago—and it did—it can’t be escaped by anyone today. That is the challenge of which I speak. It’s a challenge for governmental organizations. It is, or should be, a challenge for our universities. Public administration needs a new level of attention, and thinking, and practice, and pro-

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A panel talks about the challenges and demands of effective government, from left Paul Verkuil, Beth Cobert, Donald F. Kettl, Ramayya Krishnan.

fessorships. That’s why I appreciate so much your participation—you come from many different points of view, as scholars, as practitioners, simply as old friends—in a common effort.” —Paul A. Volcker, chairman, the Volcker Alliance Video address at Volcker at 90: Rethinking Effective Government symposium, November 9, 2017

Panel Discussion: Framing the New Governance Era The program opened with a discussion on the state of government. Paul Verkuil, former chairman of the Administrative Conference of the United States, moderated a panel that included Donald F. Kettl, nonresident senior fellow at the Volcker Alliance and professor and academic director of the LBJ Washington Center of the University of Texas at Austin; Ramayya Krishnan, dean of Heinz College at Carnegie Mellon University; and Beth Cobert, chief executive officer of Skillful, Markle Foundation, and former director of the US Office of Personnel Management. The panelists explored social, technological, and economic changes expected to shift the context in which government works in the future.

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Over the years our merit-based civil service system has become the envy of the world. We have it—or we had it, I should say. Unfortunately, it’s not assured for the future, which is why, among

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other things, we need the Volcker Alliance alerting us and telling us that this is a crisis moment.”

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—Paul Verkuil, former chairman, Administrative Conference of the United States

We have this complex system of government, especially at the federal level, where our interaction with government is large and growing, but the line of sight between us as citizens and the government that provides services is increasingly indirect.” —DONALD F. Kettl, professor and former dean, School of Public Policy, University of Maryland

Devising solutions requires a holistic understanding of policy and technology and how the two interact with one another. ... What is the nature of the skill sets our employees need; what is the nature of work itself, and how might we think strategically about transforming both our human capital as well as the skill sets that they have to be able to provide services to citizens who have ... expectations based on the expediency they’ve experienced from the private sector?” —Ramayya Krishnan, dean, Heinz College, Carnegie Mellon University

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One of the challenges is trying to think about, in a government context, how do you create enough flexibility but still retain the oversight and control that both respects the separation of powers and also provides what citizens demand of our government?” —Beth Cobert, CEO, Skillful, Markle Foundation; former director, US Office of Personnel Management

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press coverage

» The seismic battles that regularly shake Washington all too often discourage even the most hopeful players. But the symposium pointed to an exciting future for government. It also established the great honor and reward that goes to many who devote their careers to it. That might sound hokey. There’s often a lot of lip service to the critical importance of public service. It was impossible to listen to the discussions throughout this symposium, however, without understanding just how visceral and important this thing we call “public service” truly is. It would be hard to think of a better legacy for Volcker’s own distinguished career of public service.”

DONALD F. Kettl •

Nonresident senior fellow at the Volcker Alliance, professor and academic director of the LBJ Washington Center of the University of Texas at Austin, writing about the Volcker at 90 symposium, in Government Executive, “Celebrating the Legacy of a Public Service Legend,” November 13, 2017

Address: What Should Government Do? Francis “Frank” Fukuyama, a Volcker Alliance board member and Olivier Nomellini Senior Fellow at the Freeman Spogli Institute for International Studies at Stanford University, delivered a thoughtprovoking address on what the intrinsic functions of government are, and which functions can safely be delegated to bodies outside the government.

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We are in a sense trapped in a low-level equilibrium: Citizens distrust government and are therefore unwilling to pay higher taxes or grant it greater authority, which then undercuts the ability of gov-

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ernment to deliver the high-quality services they expect. This then confirms their original view that government cannot be trusted.” —Frank Fukuyama, Olivier Nomellini Senior Fellow, Freeman Spogli Institute for International Studies, Stanford University

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[T]he intrinsic function of government that may not be delegated outside of the public sector is the exercise of significant authority, not just as an agent of the sovereign people, but as a proxy who can at times go beyond the law.” —Frank Fukuyama

Keynote Address: America’s Legacy of Public Service Former US Senator Bill Bradley, also a Volcker Alliance board member, gave an uplifting keynote speech on the importance of public service to the nation.

Frank Fukuyama gives a thought-provoking presentation to the symposium audience.

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Paul [Volcker] is the quintessential public servant, blessed with great competence and courage and possessed of an unshakeable integrity. Paul knows that public service is a calling that can change the world for the better. ... Whether it has been enhancing preparation for public service, integrating risk to the financial system, or bringing clarity to the budget process, Paul by his life and actions has stated clearly and emphatically that public service is a noble profession.” —Bill Bradley, former US senator, New Jersey

Public service at its best requires integrity, commitment to the law, perseverance in the face of obstacles and yes, professional courage. ... Public service creates the foundation of a more just and prosperous world.” —Bill Bradley

Panel Discussion: Responding to a New Governance Era Teresa Gerton, president of the National Academy of Public Administration, moderated an afternoon panel on how government can deliver in the public interest in the face of current and future social, technological, and economic disruptions. Thomas M. Davis, former US representative from Virginia; Anthony Foxx, former secretary of the US Department of Transportation and

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Panel participants discuss compelling issues in governance, from left Teresa Gerton, Tom M. Davis, Anthony Foxx, Stephanie Miner, Judith Rodin.

former mayor of Charlotte, North Carolina; Stephanie Miner, former mayor of Syracuse, New York; and Judith Rodin, former president of the Rockefeller Foundation, discussed the opportunities and challenges posed by federalism, public-private partnerships, contracting, and quasi-governmental corporations.

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We have witnessed . . . such a thinning of public discourse that we don’t listen to each other, we don’t hear across the divide, and we speak in Bill Bradley delivers the keynote address to symposium ever more simple sentences and ideas. And that attendees. thinning of public discourse is a very high risk to our democracy. ... Building back civic engagement is a first step to building back the ability to see one’s vote as mattering and to really feel that one’s voice can make a difference.” —Judith Rodin, former president, Rockefeller Foundation

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We need government to reinvent itself, but it’s going to take risk among agency leaders to do that.” —Anthony Foxx, former secretary of the US Department of Transportation; former mayor, Charlotte, North Carolina

You have a responsibility too. And if you think that the country should go in a different direction than it has been going, then what have you done to do that? Not only participating, but also participating as members of a democracy.” —Stephanie Miner, former mayor, Syracuse, New York

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I am so pleased to be here on behalf of the National Academy of Public Administration. Chairman Volcker became a fellow of the academy in 1987. And so this year as the academy celebrates its fiftieth birthday, I am incredibly honored to be here to celebrate his ninetieth.” —Teresa Gerton, president, National Academy of Public Administration

Panel participants, from left, Thomas W. Ross, Jack Lew, David Gergen, and Barney Frank discuss the difficulties and rewards of public service.

Panel Discussion: Lives of Public Service Thomas W. Ross, president of the Volcker Alliance, moderated a panel that focused on personal experience in public service and how to prepare the next generation of leaders to carry on the nation’s legacy of public service. Barney Frank, former US representative from Massachusetts; David Gergen, former White House adviser; and Jacob Lew, former secretary of the Treasury, former director of the Office of Management and Budget, and former White House chief of staff, discussed their lives of service and how public service leaders can effectively collaborate across ideological divides and in times of crisis.

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One of the big problems we have today in America—perpetuated by people’s ideologies, by negativism in the media—is that people have lost confidence in the government.” —Barney Frank, former US representative, Massachusetts

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I was always impressed in those days by the courage of [Paul Volcker]’s convictions. You had to do hard things—and you weren’t necessarily going to be popular—but if you believed it you had to do it, and explain it, and have the courage of your convictions. ... Having the integrity of your views, being able to make the case and use ... the credibility that you have to lend it to things that are of public purpose— those are really important attributes that I wish more people who were leaders in public life carried with them, both while they were in official positions and afterwards.” —Jacob Lew, former secretary of the Treasury, former director of the Office of Management and Budget, former White House chief of staff

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One of the things I think is difficult in federal services: Increasingly in Washington you’re removed from the people you’re trying to help or do something good for in terms of policy. One of the good things about working in local government, or city or state, is you actually can talk to people who are being affected by what you’re doing; you can actually see the difference in lives.” —David Gergen, former White House adviser

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If I were to ban something, I’d make it a misdemeanor to use pragmatism and idealism as if they were opposites. Your ideals are of no value ... if you’re not pragmatic about getting them implemented.” —Barney Frank (From top) Back row, from left: Inai Bradfield, Janice Volcker Zima; front row, from left: Sam Y. Cross, Nancy Jacklin. From left: James Volcker, Anthony Walton. From left: Norman J. Ornstein, Donald F. Kettl, Shelley H. Metzenbaum.

It is clear that, as we enter a new governance era, our nation has considerable work to do to ensure that we continue to deliver on the prom-

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(Clockwise from top) From left: Teresa Gerton, Trevor Brown, Jack Knott. John DiIulio, asks a question from the audience. From left: Thomas W. Ross, Anthony Walton. David Van Slyke presents a tribute to Paul A. Volcker.

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ise of effective government. We need to help bring innovation and intergovernmental cooperation to long-term needs such as infrastructure and regulation, while doing all we can to ensure that the best and brightest Americans can be called to and feel valued in a career in public service. I leave today reminded that we are blessed with men and women of extraordinary capacity and character who love and will carry forward this nation’s legacy of public endeavors. There is serious and significant work to be done, and the Volcker Alliance stands ready to do our part to join with all of you to meet the challenges ahead.” —Thomas W. Ross, president, the Volcker Alliance

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Yes, [Paul Volcker]’s done enormous service in regard to financial reform, but he’s done further service by insisting that people understand that what he did with the Volcker Rule was an example of what the government can do and why you need government.” —Barney Frank

Tributes to Paul A. Volcker Four sitting senators—Senator Elizabeth Warren of Massachusetts, Senator Jeff Merkley of Oregon, Senator Bob Corker of Tennessee, and Senator Mark Warner of Virginia—sent remarks by video honoring Mr. Volcker’s life in public service. The program closed with personal tributes to his accomplishments from David Van Slyke, dean of the Maxwell School of Citizenship and Public Affairs at Syracuse University, and from Paul C. Light, nonresident senior fellow at the Volcker Alliance and Paulette Goddard Professor of Public Service at the Wagner School of Public Service at New York University.

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There are few people who have had more impact on our modern financial system than Paul Volcker.” —Senator Elizabeth Warren, Massachusetts

Congratulations Chairman Volcker on ninety incredible years. You’ve served under multiple presidents, under both parties, you have served in times of challenge and in times of prosperity. You have done it with sincerity, good spirit, dedication, and patriotism.” —Senator Jeff Merkley, Oregon Paul [Volcker]’s career in public service turned yet another page with his founding of the Volcker Alliance. In just four years, this organization has grown into an influential voice on smart government. Without a doubt, Paul’s work with the Alliance continues to be truly important.” —Senator Mark Warner, Virginia

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From left, Henry Brady, Bill Bradley, and Barney Frank share a moment during a break.

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Whether strengthening professional education or researching government performance or improving the accountability of government, [Paul Volcker has] worked tirelessly to help our governing institutions adapt to changing times. Without a doubt, [he] always pursued [his] interest with a full heart and a direct vision.” —Senator Bob Corker, Tennessee [Paul Volcker] exemplifies this kind of eminent person. A person whose legitimacy and credibility is built on a lifetime of commitment to public service, and not just any one act.” —David Van Slyke, dean, Maxwell School of Citizenship and Public Affairs, Syracuse University

[Paul Volcker is] a gift to work for. He’s an inspiring individual, a committed public servant, but for all of us who’ve worked with him, and all of us who’ve worked for him … he’s a joy.” —Paul C. Light, Paulette Goddard Professor of Public Service, Wagner School of Public Service, New York University

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Ou r Wor k i n 2 0 1 7 We believe that government must be a responsible steward of financial resources, diligent in avoiding waste, assiduous in seeking evidence to assess the effectiveness of its initiatives, and proactive in helping citizens understand the long-term sustainability of its operations.

Truth and Integrity in Government Finance On November 2, 2017, the Volcker Alliance released a report examining and grading the budgeting and transparency practices of all fifty US states, in order to highlight states with the most effective procedures and those that fall short, while outlining best practices in each press coverage assessment category. Truth and Integrity in State Budgeting: What is the Reality? was released at a press conference at the Roosevelt House Public Policy Institute at Hunter College. The result of a multiyear study conducted in partnership with more Truth and than fifty professors and graduate stuIntegrity in dents in public finance and budgeting State Budgeting at eleven US schools of public adminisWhat Is the RealIty? tration or policy, the report assesses the quality of states’ budgeting practices. The Alliance graded states in five categories: budget forecasting, budget maneuvers, legacy costs (such as public employee retirement and health care benefits), reserve funds (such as rainy day funds), and transparency from fiscal 2015 through October 2017. Grades of A to D-minus were given based on best practices the Alliance has identified to be necessary for accurate, sustainable, and transparent budgeting.

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» Many U.S. states are

balancing their budgets by underfunding retirement plans and taking other short cuts that create more problems down the road, according to a report released on Thursday by the Volcker Alliance.”

Reuters, “States struggle with retirement costs to balance budgets–report,” by Laila Kearney

» Nineteen states face steep legacy-cost burdens, according to a study the Volcker Alliance released Thursday.” The Bond Buyer, “Pensions, OPEB rank as states’ biggest problem,” by Paul Burton

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(From left) William Glasgall delivering remarks on the state budget findings at the November 2 press conference. Richard Ravitch speaking to a meeting of the research team on June 8 in New York City.

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The mission of the Volcker Alliance is to improve the effectiveness of the administration of government at all levels. Making processes such as state budgeting more transparent is important to that goal. By pursuing this investigation, the Volcker Alliance hopes that drawing attention to prevailing practices—and identifying the strongest and weakest among them—will encourage new efforts to raise standards for all states.” —Paul A. Volcker, chairman, the Volcker Alliance

The Volcker Alliance’s Best Practices for State Budgeting States should use a multiyear, consensus approach to establishing single, binding estimates for revenues and expenditures before the budgeting process begins. Budget Maneuvers States should pay for expenditures in the same year they are accrued and avoid deferring them into the future. Legacy Costs States should consistently contribute to pension funds and retiree health care benefits those amounts that

actuaries determine to be necessary. Reserve Funds States should enact clear policies for withdrawals from rainy day funds and other fiscal reserves, as well as rules for replenishing spent funds and tying the size of fund balances to revenue volatility. Transparency States should have consolidated budget websites that provide one point of access to all information about the state’s budget, including its budgeting practices, tax expenditures, and infrastructure replacement and debt service costs.

Budget Forecasting

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With state revenue growth estimates being revised downward in 2017 and 2018 despite more than eight straight years of economic recovery, the pressure is great to balance budgets using one-time maneuvers or underfunding long-term obligations for such areas as infrastructure, education, and public employee retirement.” —William Glasgall, senior vice president and director, state and local initiatives, the Volcker Alliance

Pedagogical Influence The unique design of the Truth and Integrity in State Budgeting study has had influence far beyond the report itself—at some schools, it has changed the way professors are teaching public finance and budgeting.

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press coverage

» Nine states in the U.S. have received the lowest possible grades on legacy costs in a new report on budget practices and transparency from the Volcker Alliance released Thursday.”

Pensions & Investments, “Unfunded pension liabilities factor into some states’ poor grades on legacy costs– report,” by Rob Kozlowski

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This applied learning gives students a deeper appreciation of the budgeting process, and exposure to different budgeting practices.” —David Swindell, director, Center for Urban Innovation,School of Public Affairs, Arizona State University

In my view, this is the best way to learn. Students are digging into individual lines of state budgets and researching the story behind each number. Their research will not only contribute to a comparative study of all fifty states, but also have the power to influence future policies and practices.” —Carolyn Bourdeaux , associate professor, public management and policy; director, Center for State and Local Finance; and associate director, research, Fiscal Research Center, Andrew Young School of Policy Studies, Georgia State University

Truth and Integrity in State Budgeting: What is the Reality included a Report Card for each state, detailing the grades and ratings the state received in each of the five categories: budget forecasting, budget maneuvers, legacy costs, reserve funds, and transparency from fiscal 2015 through October 2017.

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From left, William Glasgall, Paul A. Volcker, Richard Ravitch, and research team members Matt Fabian and Merl Heckbart speak on a panel at the press conference.

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This project brings the importance of transparent budgeting practices to life for our students. Through its partnerships with universities such as the University of Illinois at Chicago, the Alliance is reaching the next generation of public finance officials. It’s one thing for a student to complete a problem set about budgets, but it’s quite another for a student to use the same skills to calculate a state’s underfunding of obligations for infrastructure, education, or public employee retirement benefits.” —David Merriman, professor, Institute of Government and Public Affairs and department of public administration, College of Urban Planning and Public Affairs, University of Illinois at Chicago

Research Partners The Truth and Integrity in State Budgeting study was conducted in partnership with more than fifty professors and graduate students in public finance and budgeting from academic institutes and schools of public administration or policy at the following universities: • Arizona State University •C ity University of New York

• Cornell University • F lorida International University

• Georgia State University

•U niversity of California,

•U niversity of Illinois

• I nstitute of Government

• University of Kentucky • University of Minnesota • University of Utah

Berkeley

and Public Affairs, University of Illinois

•U niversity of Illinois at Chicago

Springfield

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2017 Annual report

We believe government functions best when its system of civil service is independent, stable, and staffed by civil servants who are experienced and expert in their domains.

Renewing America’s Civil Service Renewing America’s Civil Service is a joint initiative of the Partnership for Public Service and the Volcker Alliance to press for an overhaul of the outdated federal civil service system. Backed by a bipartisan group of leaders from across sectors, the initiative is focused on identifying tangible legislative and executive branch solutions to the most severe problems in the government personnel system. The Need It has been forty years since the last meaningful civil service reform legislation. Even as the challenges facing the nation have changed dramatically, the system governing more than two million federal civilian employees has remained stuck in the past, serving as an impediment rather than an aid in attracting, hiring, retaining, and managing a highly skilled workforce. There is no better time than this fortieth anniversary to secure the workforce of the future. The Response Working together, and guided by an advisory panel, the Partnership for Public Service and the Volcker Alliance have developed a set of recommendations to renew America’s civil service. We are partnering with agency and elected leaders within government, as well as experts and advocacy groups outside government, to mobilize change and inspire adoption of these recommendations to prepare the civil service system for the future. The US government’s approach to recruiting, developing, and retaining a highly skilled workforce requires modernization to keep pace with the changing market for talent. We believe America needs a civil service that • can deliver effective and efficient government to meet the most critical challenges facing the American people;

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2017 Annual report

• is independent, free from undue political influence, and preserves the Merit System Principles; • reflects the increasing need for knowledge-based skills in the rapidly changing, complex, globalized environment in which government operates; and • upholds a culture of excellence in service that will inspire trust from the American people and attract the best and brightest to public service. In May, the Partnership for Public Service and the Volcker Alliance jointly submitted to the staff of the Senate Armed Services Committee legislative language for fifteen reforms for potential inclusion in the National Defense Authorization Act. The specific reforms suggested greater flexibility for agencies on hiring, including measures such as direct hire authority for recent graduates and temporary appointments; market-based pay for employees with critical skills and competencies; and other tools, such as delegated authority to agencies to issue bonuses, voluntary separation incentive payments, and voluntary early retirement incentives.

Advisory Panel The Partnership for Public Service and Volcker Alliance are joined by an advisory panel of public and private sector leaders in calling for civil service reform: • Paul A. Volcker, chair; chairman, the Volcker Alliance; former chairman, Federal Reserve Board of Governors • Mitch Daniels , president, Purdue University; former governor, Indiana; former director, Office of Management and Budget • Tom Davis, director, federal government affairs, Deloitte; former US representative, Virginia; former chairman, House Committee on Oversight and Government Reform • Ted Kaufman , former senator from Delaware • Lester Lyles, chairman of the board, USAA; former vice chief of staff, US Air Force; former commander, Air Force Materiel Command • Hank Paulson, chairman, Paulson Institute; former secretary, US Treasury; former chairman and CEO, Goldman Sachs • Penny Pritzker, co-founder and chairman, PSP Capital Partners and Pritzker Realty Group; former secretary, US Commerce Department

The volcker alliance

2017 Annual report

We believe that our public workforce and government institutions must be dynamic: designed to encourage innovation, leverage technology, and adapt to the needs of a changing nation in an evolving global context.

Mitigating Systemic Risk in the Financial Markets Building on the successful release in December 2016 of the Volcker Alliance’s Unfinished Business: Banking in the Shadows, the Financial Regulation Initiatives team spent 2017 studying the changes being considered in federal financial regulation, particularly those related to the Dodd-Frank Wall Street Reform and Consumer Protection Act. As part of this work, the Alliance convened private roundtable discussions with leading academics and experts on the future of financial reform, and met with policy makers and their staffs to share our analysis. Gaurav Vasisht, senior vice president and director of financial regulation initiaIn the News tives, presented the Alliance’s analysis at Mr. Volcker and Sheila Bair, a Volcker Alliance board memconferences around the country, includber and former chair of the US Federal Deposit Insurance Corporation, partnered in late May to write a powerful ing events at Duke University School of op-ed for The Washington Post on the importance of Law, the Milken Institute, the University preserving Dodd-Frank’s Orderly Liquidation Authority of California’s Hastings College of Law, and living wills requirement. » “During the financial crisis of 2008, it became clear and Baruch College.

‘‘

that policymakers lacked the tools to handle the failure of a systemic financial firm without destabilizing the entire financial system. The normal bankruptcy process — and the firms themselves — were ill-equipped to manage such a failure. … Over the years, the [Federal Deposit Insurance Corporation] has rightfully gained the respect and the confidence of the American public and Congress. Let’s make sure it has the authorities it needs before another great crisis occurs.”

On April 19, Mr. Volcker delivered a speech before the Bretton Woods Committee Annual Meeting, held at International Monetary Fund headquarters in Washington, DC. In wide-ranging remarks, Mr. Volcker encouraged regulators and policymakers globally to stay committed to a shared reform program and resist the temptation to retreat into idiosyncratic domestic approaches. Citing data on unemployment, bank profits, loan growth, and market liquidity, Mr. Volcker challenged

Paul A. Volcker and Sheila Bair, “These rules could stop the next big financial crisis. Don’t get rid of them.” The Washington Post, May 25, 2017.

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the claim that Dodd-Frank had somehow gravely damaged the financial markets. He also urged policymakers to (1) preserve Dodd-Frank’s Orderly Liquidation Authority, emphasizing its importance as a weapon in the fight against taxpayer-funded bailouts, (2) maintain the Volcker Rule ban on proprietary trading and speculative hedge fund and private equity fund investments, (3) reduce regulatory burdens on “true” community banks, and (4) reorganize the highly fragmented regulatory framework.

Paul A. Volcker Delivers Speech at the Bretton Woods Committee Annual Meeting “A few years of greater stability should not mislead us. Relaxation of key reforms and the temptation to retreat inward into idiosyncratic domestic approaches needs to be resisted. Fragmented approaches toward what are inherently international markets and financial institutions would have costs in terms of fair competition, global market efficiency, and the ability to reach a concerted approach in the event of a serious future crisis.” —Paul A. Volcker, IMF headquarters, Washington, DC, April 19, 2017 Mr. Volcker’s remarks flowed into a question and answer session moderated by William Rhodes, a Volcker Alliance board member and president and CEO of William R. Rhodes Global Advisors, LLC, who raised important questions about the future of international cooperation in the shifting political setting. Later in the evening, Mr. Volcker was interviewed by Kathleen Hayes on Bloomberg Television, which aired the interview that evening in the United States and internationally, and throughout the following day. Mr. Volcker’s remarks also received coverage in the Financial Times, Bloomberg News, The Wall Street Journal Pro, Market Watch, and American Banker.

Paul A. Volcker and William Rhodes on stage at the 2017 Bretton Woods Committee Annual Meeting.

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2017 Annual report

We believe that the performance of our government institutions depends critically on the training and education of talented public servants, and that this responsibility is shared by our government, our institutions of higher education, and by leading institutions in every sector of society.

Preparing Tomorrow’s Public Service Preparing Tomorrow’s Public Service is an initiative focused on spurring educational innovation to meet the challenges of complex governance in the future. This project furthers one of the primary objectives of the Alliance: supporting the development of new educational approaches to achieve public service excellence. Preparing Tomorrow’s Public Service is a research-based project intended to contribute to the vital work of governance by • identifying the essential skills and competencies required of an effective managerial public servant of 2025 based on input from government practitioners and educators; and • generating ideas for educational innovations that can support future public managers in attaining those skills and competencies. The Volcker Alliance has gathered substantive contributions from a diverse range of stakeholders with expert perspectives on public management. They include:

• An advisory group of senior leaders from government, higher education, and government partnership organizations provided guidance to the Volcker Alliance throughout the initiative. • Focus groups held in four cities and survey data from more than 900 next generation public managers and leaders—individuals with five to fifteen years’ experience in advancing public management careers—revealed data and insights about the skills, competencies, and educational experiences they believe can best support their performance as effective and adaptive practitioners. • A wide range of government, education, and professional development specialists offered ideas on how lessons from the initiative can be translated into concrete and actionable recommendations for preparing public managers through education and training innovations.

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2017 Annual report

Maggie Mello, associate director at the Volcker Alliance, and Peter Morrissey, senior program associate at the Volcker Alliance, presented on the study’s preliminary results at several conferences, including the Dean’s Summit, hosted by the LBJ Washington Center for deans of schools of public policy, affairs, and administration; the 2017 Network of Schools of Public Policy, Affairs, and Administration (NASPAA) Annual Conference; the Presidential Rank Awards Leadership Summit, hosted by the Senior Executives Association; and the 2017 Career Professionals Conference, hosted by NASPAA and the University of Nebraska at Omaha.

Advisory Group for Preparing Tomorrow’s Public Service • Jason Briefel, Senior Executives Association • Karl Brooks , University of Texas at Austin, Lyndon B. Johnson School of Public Affairs • Daniel Chenok , IBM Center for The Business of Government • Suzanne Cooper, Harvard University, John F. Kennedy School of Government • Kevin Desouza, Arizona State University, College of Public Service and Community Solutions

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Commentary on the training and education of talented public servants

There are many reasons to think twice about working in government: The private sector is more competitive; pension and health-care benefits are being scaled back; and salaries are largely stagnant. Because of all that and more, HR directors are struggling to fill the vacancies left by retiring baby boomers. … States and localities have long used professional development as a way to address their personnel needs.” —Katherine Barrett and Richard Greene, special project consultants, the Volcker Alliance, “Governments are Upping Their Professional Development Game,” originally published in Governing on February 9, 2017, and republished on the Volcker Alliance blog.

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We need government. We need government to work well. … In addition, for government to work well, we need good people working in government. That is, we need workers equipped with the right set of skills, knowledge, and authorities to do their jobs well to advance the public’s well-being. Beyond that, we need them to learn continually from past experience, both what worked well and what did not.” —Shelley H. Metzenbaum, nonresident senior fellow, the Volcker Alliance, “Learning from Experience for Better Government,” originally published in The Regulatory Review on December 12, 2017, and republished on the Volcker Alliance blog.

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2017 Annual report

The advisory group for Preparing Tomorrow’s Public Service meet with the Volcker Alliance team at the LBJ Washington Center in Washington, DC, on April 28, 2017.

• Elizabeth Kellar , Center for State and Local Government Excellence • Laurel McFarland , Network of Schools of Public Policy, Affairs and Administration • Christopher Mihm, United States Government Accountability Office • Sharon Minnich, Pennsylvania Office of Administration • Jon Nehlsen , Carnegie Mellon University, H. John Heinz III College Understanding Tenure and Promotion at Schools of Public Affairs As part of its interest in promoting collaboration between research and practice, the Volcker Alliance partnered with leading schools of public policy and administration to get a clearer view on how the community balances the consideration of faculty research, teaching, and service. In April 2017, the Alliance published a working paper, Tenure and Promotion at Schools of Public Affairs, that draws on insights from the scholarly community to describe current practices in tenure and promotion. The Volcker Alliance believes that public affairs schools have an important role to play in strengthening the nation’s public service through their research, teaching, and service missions. Engagement beyond the academy can help schools fulfill that role and their essential public mission. While the Alliance does not prescribe a set of tenure and promotions practices, we do hope that this study will assist schools in determining how to best meet their public service missions when designing their internal faculty incentive structures. Advisory Group for Understanding Tenure and Promotion at Schools of Public Affairs • Kirsten Gronbjerg, School of Public and Environmental Affairs, Indiana University • Michael Nichol , Price School of Public Policy, University of Southern California • Mark Rom, McCourt School of Public Policy, Georgetown University • Allan Stam, Batten School of Leadership and Public Policy, University of Virginia 27

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2017 Annual report

We believe government should be responsive to its citizens, transparent in its operations, accountable for delivering on its promises, and visibly held to the standard of robust and unbiased measures.

The True Size of Government On October 5, the Volcker Alliance released research by Paul C. Light, a nonresident senior fellow at the Volcker Alliance and the Paulette Goddard Professor of Public Service at New York University’s Wagner School of Public Service, that provides a new level of clarity about the size and composition of the federal workforce. In two papers presented at a press conference at the National Press Club in Washington, DC, Prof. Light demonstrates that the number of federal employees has remained almost constant since 1984. His analysis may come as a surprise to many who assume that the number of federal employees has climbed steadily over time. Prof. Light shows that the storied growth (and the occasional ebb) of the size of the federal workforce over the past four decades is instead largely driven by upticks and reductions in the number of contract and grant employees. In his paper, The True Size of Government: Tracking Washington’s Blended Workforce, 19842015, Prof. Light draws attention to the question of why the federal government turns to contract and grant employees when its staffing needs surge. After demonstrating that this reliance has held true for every administration since that of Ronald Reagan, Prof. Light details fifteen demographic, bureaucratic, and political pressures that weaken the case for using federal employees to execute federal laws. In addition to a thorough tally of the federal workforce, The True Size of Government digs into the worsening bureaucracy in the layers of government and the resulting Number of Federal, Contract, and Grant Employees (in millions) ISSUE PAPER • October 2017

total contract + grant

federal

The True Size of Government

TRACKING WASHINGTON’S BLENDED WORKFORCE, 1984–2015

Paul C. Light

1984

1990

1993

1996

1999

2002

2005

2010

2015

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2017 Annual report

‘‘

pressures responsible for driving this cycle, including

press coverage

» How big is the federal

• skill gaps in mission-critical occupations; • barriers to federal employee engagement; • apples-to-oranges pay comparisons; • weakened internal oversight; and • the sluggish presidential appointments process.

workforce? Much bigger than you think. A new study on “The True Size of Government,” by Paul C. Light, professor of public service at New York University, says the government’s “blended” workforce is 7 to 9 million strong — including contractors and grantees.”

Commenting on his findings, Prof. Light said, “Americans are so focused on debating the size of government and the need for the 7.3 million people working for the government that we’ve lost track of what I view as a more important issue: Are we selecting the The Washington Post, “How right people to implement federal government policy? The number big is the federal workforce? Much bigger than you think.” of people working for the government is driven more by concerns by Joe Davidson of war and peace than it is by the goals an incoming administration may have with respect to policy, cuts, or freezes. What we need is to devote more time to weighing whether the American people are best served by a federal employee or a contractor in each given function.” One of the political pressures at play in the use of contract and grant employees is expanded on in the other paper People On People People On People On People: The Continued Thickening of Government. The title plays on On People a remark President Donald J. Trump made on Fox & Friends in March 2017: “You know we have so many people in government, even me, I look at some of the jobs and it’s people over people over people. … There are hundreds and hundreds of jobs that are totally unnecessary jobs.” Prof. Light agrees that there are a lot of jobs to fill: President John F. Kennedy faced seven cabinet departments with seventeen layers of appointees; President Trump faces fifteen cabinet departments with seventyone layers of appointees. However, Prof. Light said, “Trump is wrong to think he can implement an ambitious agenda without making appointments. He will be left with a neckless government that ISSUE PAPER • October 2017

THE CONTINUED THICKENING OF GOVERNMENT

Paul C. Light

Leaders per Layer, 1960–2016 number of layers of leaders 1960

2016

number of leaders in layers

increase

1960

318%

2016

increase

451 3,265 624% 29

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2017 Annual report

‘‘

press coverage

» The Trump administration

Paul C. Light speaking about his findings concerning the federal workforce at the National Press Club on October 5, 2017.

is breathing new life into the age-old question about the size of the federal workforce, as agencies prepare to reorganize, shift resources and cut personnel in the name of efficiency. … But according to Paul Light, a public policy professor at New York University, and a special adviser to the chairman of the Volcker Alliance, the number of federal employees has remained more or less the same over the past several decades. Rather, it’s the number of contractors and grant employees supporting government work that’s trended upward over the years.”

Federal News Radio, “Even a government reorg may not break decades of federal workforce trends,” by Nicole Ogrysko

he cannot control. I would be the first to argue that there are too many layers of government. But, since there are, the most effective strategy for the administration would be to fill the positions, and then conduct a thoughtful and targeted downsizing of the hierarchy.” The Federal Government’s Blended Workforce by Federal Agency, 2015 (federal, contract, and grant employees) Joe Davidson, columnist for The WashDEFENSE 3 million NONDEFENSE 4.2 million ington Post, led a discussion with Prof. Light about his research and moderated a panel in which they were joined by Danielle Brian, executive director of the Project on Government Oversight; and Norman J. Ornstein, a Volcker Alliance board member and resident scholar at the American Enterprise Institute, and Thomas W. Ross, president of the Volcker Alliance. Energy

Transportation

Homeland Security

Justice

Health and Human Services

Agriculture

Commerce

Treasury

HUD

SSA

Interior

EPA

State

Labor

Veterans Affairs

NASA

DOE

NSF

GSA USAID

The volcker alliance

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2017 Annual report

Commentary on government’s responsiveness, transparency, and accountability

The foundation for building trust begins with the argument for transparency. The central idea, developed during the Enlightenment, is that government’s legitimacy builds on the consent of the governed. But, to give consent, citizens must know what government is doing and find effective levers of influence.” —Donald F. Kettl, nonresident senior fellow at the Volcker Alliance, professor and academic director of the LBJ Washington Center of the University of Texas at Austin, an excerpt published on the Volcker Alliance’s blog in July 2017 of his book, Can Governments Earn Our Trust? published in September 2017 by Polity.

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With newspapers and scholarly reports full of discussion about states and their shortages—or surpluses—of tax revenues, it would be easy to focus exclusively on the dollars brought in through sales taxes, income taxes and so on. That kind of analysis misses out on the revenue elephant in the room, though: the money that comes from the federal government. … This heavy reliance on federal dollars keeps budget officers awake at night.” —Katherine Barrett and Richard Greene, special project consultants, the Volcker Alliance, “How Much Does a Federal Dollar Cost the States?” originally published online by the Council of State Governments and republished on the Volcker Alliance blog.

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Over the past few decades, noteworthy strides have been made around the world, both at national and sub-national levels of government, embracing more sophisticated performance and evidence-informed management practices. These practices have resulted in greater beneficial government impact, often at lower cost. Progress has been made on outcomes as diverse as reducing crime, disease, teen pregnancy, and smoking, and improving air quality and the speed of pothole repairs. Well-framed goals, measurement, and analysis also strengthen public understanding of what government does and why. … At the same time, problems can and do arise when unreasonable accountability expectations are established.” —Shelley H. Metzenbaum, nonresident senior fellow, the Volcker Alliance, “Accountability Expectations: Getting Them Right to Enable Public Servants to Serve,” originally published online by the National Academy of Public Administration on May 10, 2017, and republished on the Volcker Alliance blog.

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2017 Annual report

Board of Directors and Advisers BOARD OF DIRECTORS

Paul A. Volcker CHAIRMAN Sheila Bair

Francis Fukuyama

Charles Arthur Bowsher

Stephanie Miner

William “Bill” Bradley vice chairman

Norman J. Ornstein

Thomas M. Davis

Richard Ravitch

William H. Donaldson

William Rhodes

Anthony J. Dowd TREASURER

Thomas W. Ross PRESIDENT

Anthony Foxx

Anthony Walton

Shirley Clarke Franklin

Antonio Weiss

ADVISERS AND FELLOWS

Katherine Barrett and Richard Greene SPECIAL PROJECT CONSULTANTS Donald F. Kettl NONRESIDENT SENIOR FELLOW Paul C. Light NONRESIDENT SENIOR FELLOW Shelley H. Metzenbaum NONRESIDENT SENIOR FELLOW

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2017 Annual report

Welcoming Our New Board Members Anthony Foxx joined the Volcker Alliance’s

board of directors in September 2017. Mr. Foxx, a North Carolina native and lawyer, served as mayor of Charlotte, North Carolina, from 2009 to 2013 and US Secretary of Transportation from 2013 to 2017. Earlier in his career, he worked for the Justice Department and House of Representatives Judiciary Committee; he also clerked for Judge Nathaniel R. Jones of the US Court of Appeals for the Sixth Circuit in Cincinnati. He received his undergraduate degree from Davidson College, where he was the first African-American student body president, and a JD from New York University School of Law. “My experience in both local government and at the national level has taught me how important it is to our future that we attract the best and brightest workers we can find into government service. A talented workforce is the key to a high-performing government, and that is what is needed to help restore the trust of our people in our government.” Stephanie Miner joined the Volcker Alliance’s

board of directors in December 2017. Ms. Miner served as the mayor of Syracuse from 2010-18 and became know as one of America’s most innovative mayors. While in office, she streamlined the planning and permitting process, and witnessed more than $1.5 billion in new development across the city. She made fiscal reform and infrastructure signature issues and launched the Office of Innovation, working to implement novel solutions to historic challenges. She also worked with leaders from across New York State to address the growing pension and health care crisis facing cities and how those decisions impact the ability of communities to invest in modern infrastructure. Ms. Miner is currently an independent candidate

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2017 Annual report

for governor of New York State. “After spending eight years working to build Syracuse into a twenty-first century city, I am eager to help others in government harness the many tools that exist to implement innovative new policies, respond to constituents, and pave the way forward for a new generation of governance.” Antonio Weiss joined the Volcker Alliance’s

board of directors in December 2017. A senior fellow at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School, Mr. Weiss previously served as counselor to the secretary of the Treasury, where he worked on issues related to financial markets, regulatory reform, consumer and housing finance, job creation, and broadbased economic growth. He also led the Treasury response to the debt crisis in Puerto Rico, working closely with Congress to pass legislation to allow an orderly restructuring of Puerto Rico’s debt. Before joining the Treasury, Mr. Weiss served in various leadership roles in the US and in Europe at the financial advisory and asset manager Lazard, most recently as global head of investment banking. “The Alliance seeks to work across sectors—with government as well as with the private sector, academic, and nonprofit groups—and I look forward to helping deepen and expand those partnerships to improve the management and implementation of public policies.”

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2017 Annual report

From left, Robert Johnson, Tom Hoenig, Michael Bradfield, and Kevin Warsh. Mr. Bradfield speaking on a panel about closing the gaps in financial regulation at the National Press Club in Washington, DC on December 5, 2016 at an event hosted by the Institute for New Economic Thinking and the Volcker Alliance.

Remembering Michael Bradfield Michael Bradfield

1934–2017 Founding Member of the Volcker Alliance’s Board of Directors and General Counsel Michael Bradfield was a special member of the Volcker Alliance family, playing a key role in launching our organization and advising our work on financial regulation. Beyond that, he was a loyal adviser to Mr. Volcker ever since serving as general counsel to the Federal Reserve Board of Governors while Mr. Volcker was chairman. He was a spirited intellectual who relished the law and loved the nation, was guided by a strong moral compass, and was a deeply kind man, sending our team holiday e-cards and homegrown tomatoes. We miss him. “Michael Bradfield was the intellectual engine guiding the Volcker Alliance’s program on financial regulation. He was a brilliant and tenacious lawyer with an iron backbone, a deep commitment to public service, and a steadfast belief in the promise of the Volcker Alliance. A kind-hearted soul, Mike was a hero, a friend, and a mentor from whom I learned and benefited immensely. His loss was devastating for the Alliance and we will all miss him dearly.” —Gaurav Vasisht, senior vice president and director, financial regulation initiatives, the Volcker Alliance 35

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2017 Annual report

A Life in Public Service: A Tribute to Michael Bradfield by Paul A. Volcker Washington DC is in political turmoil. Congress is in partisan gridlock. Major agencies have leadership vacuums, with policy uncertainties. Trust in government is at a low point. But government—effective government, respected government—is not something we can do without, turn on and off. Whatever policies are decided by elected officials, we count on a cadre of skilled, professional, committed men and women to steer the ship of state, year in and year out, in fair weather or foul. One long-serving member of that crew died July 26 at age 83, a few years out of public office but dedicated to his end to the cause of good government. Michael Bradfield was a Columbia University-trained lawyer and student of international affairs. He spent a part of his life in private practice, for a time as a senior partner of the distinguished Jones Day firm. But his heart was in public service. It started more than fifty years ago, as Treasury assistant general counsel. It extended over time to general counsel of the Federal Reserve Board in the 1980s and later the FDIC. In those capacities, he was called upon to deal with large challenges, some of national significance. When President Nixon decided to end the gold-dollar link and suddenly impose an import surcharge, it was Michael Bradfield who was called on short notice to Camp David during the weekend of August 15, 1971, to assure the necessary legal framework was in place. A decade later, in the midst of the 1980s Latin American debt crisis, it was Michael Bradfield who worked with the Federal Reserve Board, the Treasury, and the IMF to provide the framework for the needed assistance. Later, in the early 1990s, the savings and loan and banking crises led to important legislative negotiations. In yet another decade, the “Great Financial Crisis” called him out of retirement to lead the FDIC legal team. I knew Michael Bradfield. I leaned on Michael Bradfield when I was in office both as Treasury under secretary for monetary affairs and as Fed chair. He crafted the legal defense of the Federal Reserve’s independence in a critical court case. I later called upon him to take much of the responsibility for adjudicating the Swiss Bankers Association-Jewish financial settlement for victims of the Holocaust. He subsequently joined a small group establishing a new nonprofit organization—now known as the Volcker Alliance—“working

The volcker alliance

2017 Annual report

for effective government.” Think of that these days as a challenge worth doing—a challenge that for decades was a big part of Mike Bradfield’s life. I visited with him and his family as he was failing. One of his sons asked a simple question: “Which of the positions over your long life has given you the most satisfaction?” Mike thought a bit, and then responded: “I guess it was at the Federal Reserve. But the fact is I found a lot of satisfaction in all my public service. I would have been willing to pay to take those jobs.” How much of that spirit, that respect for service in government in all its forms and settings is alive today? The doubts, the questioning, the erosion of trust is all too evident. But I also know there are dedicated civil servants working today to maintain effective government under difficult circumstances. Every day I am reminded that there are young Mike Bradfields, willing and able to serve. But, as a nation, are we doing enough to support those efforts? Are our universities providing those with the urge to serve with relevant education? Do our governments at all levels do enough to recruit and train the best? Are the President and the Congress willing to respect the importance of well-qualified nonpartisan professionals to carry out day after day the essential work of government? Mike Bradfield was not alone—a skilled professional, facing changing circumstances, working with different agencies to maintain and advance the public interest in effective government. But the fact is we need to attract and keep more men and women of that caliber in civil service. Quite specifically, a small group of senators and House representatives have begun working across their respective aisles to review the existing civil service system. Clearly reforms are needed while maintaining the strong non-partisan traditions. Those efforts urgently need support. It’s not a question of “big government” or “small government.” Alexander Hamilton made the point at the very beginning of our constitutional system: “The true test of good government is its aptitude and tendency to produce a good administration.” Michael Bradfield did his part in meeting that test. As a nation, we have work to do. (Originally published in August 2017)

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2017 Annual report

Financials Statements of Activities

Statements of Financial Position

Years ended December 31, 2017 and 2016 2017

Years ended December 31, 2017 and 2016 2016

REVENUES

2017

2016

$105,779

$1,353,968

15,342,824

16,849,718

325,000

341,191

Prepaid expenses

29,194

28,466

Security deposits

70,327

Premises and equipment, net

33,615

45,001

$15,906,739

$18,688,671

$161,564

$119,275

325,000

161,564

444,275

15,445,175

17,500,826

300,000

743,570

15,745,175

18,244,396

$15,906,739

$18,688,671

ASSETS

Grants and contributions

$1,044,491

$3,072,796

436

18,517

Investment return, net

1,874,604

550,542

Total revenues

2,919,531

3,641,855

Other income

Cash and cash equivalents Investments Grants and contributions receivable

OPERATING EXPENSES Program services Public Service Excellence Program

1,254,648

970,071

415,969

540,189

State and Local Program

1,982,492

921,963

Other program activities

432,823

376,339

4,085,932

2,808,562

Management and general

1,170,612

887,331

Fundraising

162,208

328,500

Total supporting services

1,332,820

1,215,831

Total expenses

5,418,752

4,024,393

Unrestricted net assets

Change in net assets

(2,499,221)

(382,538)

Temporarily restricted net assets

Net assets, beginning of year

18,244,396

18,626,934

Net assets, end of year

$15,745,175

$18,244,396

Financial Regulation Program

Total program services

2017 Program Expenses Financial Regulation Program $415,969

Total assets LIABILITIES Accounts payable and accrued expenses Deferred revenue Total liabilities NET ASSETS

Total net assets Total liabilities and net assets

Public Service Excellence Program $1,254,648

State and Local Program $1,982,492

Other program activities $432,823

The volcker alliance

2017 Annual report

Our Supporters We gratefully acknowledge the following foundations and individuals, whose generosity and commitment to our mission made it possible to launch the Volcker Alliance in 2013 and to begin to advance effective management of government to achieve results that matter to citizens.* FOUNDER

Paul A. Volcker SUPPORTERS AND CONTRIBUTORS

Laura and John Arnold Foundation

Thomas Lyon

Sheila C. Bair and Scott P. Cooper

The Mallinckrodt Foundation

Cadena Bedney

Lewis A. Miller

Mr. and Mrs. Robert R. Bench

The New York Community Trust â&#x20AC;&#x201C; Lise Strickler and Mark Gallogly Charitable Fund

William Bradley

Norman Ornstein

Carnegie Corporation of New York

Tan Soo Pang

The Challenger Foundation

Peter G. Peterson Foundation

Ray and Barbara Dalio

Richard Ravitch Foundation

Mark Dalzell

George T. Reichman

William H. Donaldson

William Rhodes

Anthony J. Dowd

Robertson Foundation for Government

R. Anthony Elson

Thomas W. Ross

The Lee and Juliet Folger Fund

The Sedoric Family

Francis Fukuyama and Laura Holmgren

Thomas Seidenstein

Gisela R. Gall

Richard Syron

Healey Family Foundation

Mr. and Mrs. Edwin M. Truman

Henry and Elaine Kaufman Foundation

Marshall W. Whigham

Thomas G. Labrecque Jr.

Lawrence and Carol Zicklin

Cheryl and Glen Lewy

*This report reflects support received through December 31, 2017.

The volcker alliance

2017 Annual report

Staff Thomas W. Ross PRESIDENT Melissa Austin Emily S. Bolton William Glasgall Naomi Major Melanie Martha Maureen C. McCarthy Maggie Mello Peter Morrissey Henry Owens Amy M. Smitherman Neilia Stephens Gaurav Vasisht Noah A. Winn-Ritzenberg Elizabeth Donnelly and Kaeleigh Forsyth were also key members of the Allianceâ&#x20AC;&#x2122;s team in 2017; they left the organization in 2018, prior to the publication of this annual report.

Don Besom, art director; Michele Arboit, copy editor. Photos: page 3 (ÂŠ Mariana Cook 2016); page 5 (Albert Cheung); pages 9-33 (Ralph Alswang), with the exception of pages 17 and 24 (International Monetary Fund), page 30 (Samuel Hurd), page 34 (Lindsay King), and 35 (Penn Program on Regulation). Cover illustration: Robert Neubecker.

The volcker alliance

2017 Annual report

The Volcker Alliance

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