Improving quality of life The State Policy Road Map: Solutions for the Journey Ahead

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​Innovative thinking by state leaders can improve citizens’ quality of life. Improving the business environment and closing the wide infrastructure gap could be good places to start. State leaders should also think about the changing mobility landscape. But paramount is their commitment to safeguard citizens.

Economic development: Cultivating prosperity

By William D. Eggers, Kurt Dassel, and Scott Malm

Explore: Infrastructure | Future of mobility | Law and justice

Economic development

What is the issue?

What can state governments do to create jobs and boost economic competitiveness?

Most state economic development strategies fall into two broad categories:

States looking to revitalize their economies need to think creatively about the steps they can take, and address the one question that really matters: Which policies accelerate talent development, boost economic growth, and catalyze productive employment—and which may impede it?

Issue by the numbers: Economic development

  • Jobs create jobs: Some jobs create more jobs than others. A study of 11 million workers in 320 metropolitan areas found that every new high-tech job in a metropolitan area creates five additional local jobs. Every new manufacturing job creates 1.6 additional local jobs.1 
  • The “middle skills” gap: Middle-skill jobs (which require education beyond high school, but not a four-year degree) account for 53 percent of the United States’ labor market, but only 43 percent of the country’s workers are trained to the middle-skill level. Nearly half of all job openings between 2014 and 2024 are expected to require middle skills.2
  • Automation: Depending on whom you believe, job-killing robots could be coming to take your job3—or, conversely, automation and artificial intelligence (AI) will likely drive the next great economic boom. According to an analysis by Gartner, in 2020, AI will become a positive net job motivator, creating 2.3 million jobs while eliminating only 1.8 million jobs.4 Most economists, however, believe the new jobs created through advanced technology will require higher level skills.
  • Licensing requirements have increased: The share of the workforce that falls under some sort of licensing requirement has increased from 5 percent in the 1950s to almost 30 percent in 2015.5 Excessive licensing requirements can stifle innovation.

How can state leadership tackle the issue?

For state policy makers aiming to boost economic growth, a two-pronged strategy of strengthening the state’s talent pool and improving the business environment can be a good starting point. But first, it is important to understand some of the factors that drive economic growth in the information age.

In survey after survey, talent often tops the list of the most important factors determining competitiveness. As the World Economic Forum notes: “A strong innovation capacity will be very difficult to achieve without a healthy, well-educated, and trained workforce.”6

The notion of what constitutes a “job-ready workforce” has shifted. Today, there is a widening earnings gap between those with and without a college education—what economists are calling the great economic divergence.7 Middle- and low-skill workers from working-class regions may suffer as automation rises and manufacturing jobs wane.8 Automation has the potential to boost economic growth by creating new types of jobs and improving efficiency in many businesses, but its current negative effects can’t be ignored—the loss of some middle-class jobs.9

Meanwhile, overly onerous regulatory compliance burdens can cost businesses and citizens, stifle innovation, and have an adverse effect on economic growth and employment. As the innovation economy accelerates, states should focus on fostering a great workforce and an attractive environment for entrepreneurs.

Build a work-ready population for employers to tap into

Talent development by its very nature creates a positive-sum game—everyone benefits when states develop talent more broadly and rapidly.

Become a magnet for top talent. To remain competitive in the twenty-first century, policy agendas should focus aggressively on growing and attracting talent. Studies show that when it comes to high-paying knowledge, professional, and creative jobs—the ones that drive the economy and innovation—jobs follow people.10 Increasingly, businesses want to be based where talent wants to be, and for those people, factors such as housing, cost of living, and quality of life influence that decision. In fact, several cities in the United States have seen an influx of skilled talent and businesses due to favorable housing costs, better public transit, and improved quality of life, while traditional tech hotbeds may see an outflux due to these very factors.11

Increase educational attainment. Many of the jobs being created today—and those created tomorrow—can’t be filled by lower-skilled workers. Yet a significant portion of the US population doesn’t receive formal education after high school. Postsecondary enrollment has declined for the fifth straight year.12 A key to state competitiveness is to get a much higher percentage of the workforce on the path to a college degree, in a skilled training program for a trade, enrolled in community colleges, or deeply engaged in alternative education options or alternative paths to a degree.

Make skills, training, and retraining the focus of workforce development. Allocating funds for workforce training instead of just employment services can lead to more effective use of public dollars.13 Although employment services, such as job search and placement, can facilitate employment in the short term, evidence shows that they do not typically result in an increase in income or better economic opportunities.14 Participants who receive such services often end up in low-skill jobs. In contrast, those who receive longer-term training services ultimately see greater gains in both employment and earnings.15

Flip the customer: Shift the customer of workforce programs from job seekers to employers. To address the skills gaps, the solution is not simply more education, but ongoing and more specifically tailored professional development that aligns more closely to employer needs. Two ways to close the skills gap between employers and workers are just-in-time learning and a modernized accreditation system that objectively evaluates skills gained. State education authorities could identify ways to work with alternative education and training providers—for example, providers of bootcamps, massive open online courses (MOOCs), apprenticeships, and community college education—as well as with employers and businesses to carve out space and support experimentation with new learning and training models that promote job-to-skill alignment.

Employers can also play a bigger role in training workers through apprenticeships (see sidebar, “Direct state investment in apprenticeship to encourage employment participation”), as well as by reskilling existing talent as technologies automate work (as AT&T is doing through the retraining program described later in this article).16 Anything that states can do to put employers at the center of workforce development and incentivize investing in skill-building is helpful. Several states, including Connecticut, Georgia, Kentucky, Mississippi, Rhode Island, and Virginia, provide training tax incentives between 5 and 50 percent of training expenses.17

Direct state investment in apprenticeship to encourage employer participation

Public investments can influence employer willingness to participate in apprenticeship programs. South Carolina’s apprenticeship program encourages and incentivizes employers to sponsor apprenticeships. Often seen as a model for states, the program offers comprehensive support to employers through a host of options:

  • A tax credit of $1,000 per apprentice for employers who sponsor apprenticeships
  • Access to apprenticeship consultants at no cost to facilitate the process of registering apprenticeships, connecting companies to high school tech centers, and evaluating apprenticeship performance
  • Access to the state’s technical colleges through Apprenticeship Carolina, an affiliate of the Division of Economic Development embedded within the technical college system

Similarly, Iowa enacted the Apprenticeship and Training Act in 2014, which established an apprenticeship program training fund with annual appropriations at $3 million. The apprenticeship training program funds are used to support grants to Registered Apprenticeship program sponsors—which are typically employers, labor-management partnerships, or industry associations—to subsidize the cost of apprenticeship programs.18

Address information mismatches in workforce development. Information gaps between various players in the workforce development system can make workforce development programs less effective.19 Programs could see better results if information mismatches among all stakeholders—including workforce boards and employers, employers and participants, participants and training providers, and workforce boards and training providers—were corrected. Greater coordination between Chambers of Commerce, youth training programs, and community schools could help further address barriers to education and training, as well as spur innovative partnerships and policy changes.

Tailor transition programs to individual needs. Public policies can help in reducing the stresses that workers face when shaping their own careers, learning new skills, and participating in global talent networks. For those caught in challenging and unexpected transitions, the question that should be asked is: How can public policies help to shorten the time spent on the unemployment rolls, support necessary retraining, and ensure the provision of basic necessities such as health insurance? 20 Digital technology infrastructures and greater accessibility to data about individuals can make it more feasible to tailor transition programs to people’s evolving needs. Exploring unemployment policy adjustments such as providing one-time/lump-sum unemployment benefits, linking unemployment benefits to professional development, or subsidizing work rather than unemployment during downturns could incentivize and motivate unemployed workers to get back on their feet faster.21

Michigan’s Promise Zones

To lower the financial barriers to a college education, Michigan created 10 Promise Zone designations through public-private partnerships to provide every high-school graduate in selected low-income communities a tuition-free path to college. Districts identified as Promise Zones are allowed to keep a portion of state revenue to issue scholarships. Many of Michigan’s Promise Zone awards are last-dollar scholarships to supplement other aid students receive from Pell Grants, other need-based aid sources, and private contributions.

In Baldwin, the first district to start giving out scholarships, 14 students out of the 23-student graduating class enrolled in college when scholarships were awarded—a 26 percent increase from before the program started. In addition to improving college enrollment rates, the Promise Zone program has improved how these communities think about college and higher education and made students more aware of the opportunities available to them.22

Make your state a great place to do business

Human and economic activity clusters in areas that are highly attuned to the needs of businesses and employees, where people expect to find jobs and opportunity, and where innovation, ideas, and freedom are welcomed, incubated, and encouraged.

Understand your state’s competitive advantage. Not every city or state in America can become Silicon Valley, but all states can build their competitive advantage by playing to their unique strengths. Identify and invest in your state’s assets—the factors that differentiate the state in terms of improved competitiveness and economic outcomes (for example, world-class talent and institutions, geographic location, quality of life, and so on). At the same time, supporting geographic clusters of the specialized industries and sectors that have traditionally driven the region’s growth and employment can help boost and sustain economic gains from these areas. Firms located in dense clusters of industry along with related or supporting companies tend to be more innovative than isolated enterprises.23

Make it easy for businesses to transact with government. Businesses interact with government in numerous ways—from registering businesses, getting licenses and credentials, and obtaining permits for thousands of activities to reporting on compliance and paying taxes and fees. Making it easier for businesses to transact with government can both reduce compliance costs and boost voluntary compliance. Steps to consider include:

  • Treat businesses as customers: Treat businesses as customers who want to obey the law but might need some guidance navigating the maze of government rules and regulations. Tools developed in the private sector, such as human-centered design, personalization, data analytics, and the use of feedback loops, can make a powerful difference for governments trying to engage these “customers”—the businesses that operate within their boundaries.
  • Go digital: Develop user-friendly online systems that make license and permit applications simple, transparent, and predictable for businesses. Digitizing regulatory transactions as much as possible can increase satisfaction and reduce costs for those affected (as well as reduce costs for regulators).
  • Reduce duplication and delays: Starting a business shouldn’t involve spending multiple days completing half a dozen different procedures with five different agencies. For example, in New Zealand, a business owner can register a business in less than a day by interacting with a single government department online.24
  • Engage businesses while formulating rules and regulations: Seek input and create ways to listen to businesses, staff, and the enforcement community—whether through direct contact (“get out of the building” field visits), crowdsourcing, or more traditional outreach activities such as surveys—to understand pain points and successes.

Reassess legal and regulatory policies. Business formation rules could be updated to make it easier for entrepreneurs to launch a business. The future of work will likely involve a higher percentage of start-ups and small businesses, and policy makers will likely find themselves under pressure to update regulations to make starting small ventures easier.

Moreover, reviewing occupational licensing requirements for undue burdens can help policy makers make fixes and chip away at regulatory barriers. State-level licensing requirements can make it hard for licensed professionals such as doctors and lawyers to move from place to place to areas where wages are higher or where their services are in demand. Where licenses are necessary, states can evaluate whether their prices can be reduced.25

Reduce and streamline regulatory requirements. Some actions to consider here include:

  • Assess where the challenges lie: Flag complex or costly regulations, and consider whether a proposed regulation would have a net positive or negative impact on the economy.
  • Eliminate redundant regulations: Start with those that may have once provided value, but have remained fixed while the world evolved to a point where they now add little value and could be changed without affecting protection.
  • Consider the TSA Precheck model: Similar to TSA Precheck, a risk-based system could be applied to regulatory enforcement, allowing for alternative modes and/or frequencies of inspection for pre-certified businesses. A similar practice has been put in place in some assembly plants in the United States, where parts vendors that demonstrate a highly reliable level of process control are pre-certified to ship their components directly to the shop floor without an incoming inspection.
  • Implement an ongoing review process to surface out-of-date regulations: It is tempting to treat regulatory reform as a one-off project that can be done and forgotten. Unfortunately, our analyses have shown that a large percentage of regulations are never updated after publication.26 Establishing a clear process to continuously evaluate existing regulations can prevent such buildups from continuing into the future.

Make public data more accessible to business. States can share their data to help business owners make decisions such as the most appropriate locations for their business. For example, Utah has launched an interactive online economic development map. The site provides information on the state’s broadband services, utilities, transportation, workforce, and lifestyle features. It allows businesses to compare and evaluate the features of multiple locations and print personalized reports with summaries of available infrastructure.

States such as Virginia have also embedded interactive DataUSA charts into their economic development portals to make their regions more competitive.27

You don’t have to look too far for inspiration

NCWorks: Bridging the gap between employers and job seekers

North Carolina, the ninth-largest US state, has more than 80,000 students attending colleges for degrees who will soon be on the job market. In 2013, the state consolidated its job-training efforts and created an online portal called “NCWorks” to serve as a bridge between employers and job seekers. The portal has enabled employers to partner with universities, such as North Carolina State University, UNC-Chapel Hill, and Duke University, to customize workforce training programs based on their requirements. Through the NCWorks Incumbent Worker Training Grant program, the government not only reimburses the employers’ training costs, but also helps employees build skills that employers require.28

AT&T’s ambitious retraining program

Under its Workforce 2020 initiative, AT&T is investing over $1 billion to retrain 100,000 employees by 2020. In the face of rapidly changing technology, the company found that its employees didn’t have the necessary skills to run and maintain its changing software and technological infrastructure. Instead of looking outside to address this skills gap, AT&T decided to look within its own workforce and build the skills it would need in the future.

AT&T set out to help employees quantify their skills in terms of competencies and credentials, and launched internal tools that connected them to skills-training options. These include individual online courses and certifications as well as “nanodegrees”—course bundles that deliver specialized training that can, for example, prepare a programmer to upskill to a software engineer. AT&T also partnered with Georgia Tech and Udacity to deliver an online master’s degree through a MOOC. The company partly covers the cost of several of these options.29

In addition to building a steady stream of talent, AT&T is beginning to see other benefits, including an increase in speed and efficiency. It has reduced its product-development cycle time by 40 percent and accelerated time to revenue by 32 percent.30

Infrastructure: Closing the gap

By Avi Schwartz, Mark Blumkin, and William D. Eggers

Explore: Economic development | Future of mobility | Law and justice

Infrastructure: Closing the gap

What is the issue?

Everywhere you look, there are visible signs of America’s deteriorating infrastructure—congested roads, unsafe bridges, aging schools, water and wastewater treatment facilities in need of repair. The list goes on. These problems, in turn, can impose huge costs on society, from lower productivity to reduced competitiveness to an increased number of accidents.

The American Society of Civil Engineers estimates that to meet future demands and to restore the country’s competitive advantage, governments at all levels and the private sector need to increase infrastructure investment from the current 2.5 percent of GDP to 3.5 percent by 2025.31 Failure to adequately invest in infrastructure could cost the economy $4 trillion over the coming decade.32

While there is broad consensus that the nation’s infrastructure needs attention, state leaders lack the resources needed to upgrade their state’s infrastructure. Dwindling federal support and declining gas tax revenues—which are largely earmarked for surface infrastructure—have only exacerbated the resource crunch.33 This situation is particularly critical because in the future, infrastructure may require more built-in technology, such as IoT sensors and so forth. This embedded technology could not only help facilitate these assets’ maintenance, but also enhance the ability to manage their utilization: Think connected vehicles communicating with their surroundings, or variable road pricing to manage congestion.

Many governments are also struggling to use their infrastructure allocations wisely, sometimes choosing low-return projects, and often failing to deliver projects on time and on budget. Nine out of ten major projects have budget overruns, with costs commonly reaching 50–100 percent above initial estimates.34 This not only degrades the value of each dollar spent, but can also diminish public confidence in the government’s ability to be a good steward of tax dollars earmarked for infrastructure. This, consequently, may lead taxpayers to become less inclined to support increased funding measures.

Bridging the current infrastructure gap will likely require states to raise additional revenue and find innovative ways to finance and deliver projects.

Issue by the numbers: Infrastructure

  • According to the American Society of Civil Engineers, it will take approximately $4 trillion to repair the current state of the US infrastructure by 2025.35
  • According to the Congressional Budget Office, “Almost all spending on transportation, drinking water, and wastewater infrastructure is done by the public sector. Federal, state, and local governments spent $416 billion on it in 2014. That amount equaled about 2.4 percent of gross domestic product, a percentage that has been fairly stable for roughly 30 years.”36 About three-quarters of that amount came from state and local governments.37
  • The sources of state funding for infrastructure (as of 2015) include:38
    • Dedicated fees, surpluses, and other state funds: 35 percent
    • Federal funds: 28 percent
    • State bond proceeds: 32 percent
    • State general funds: 5 percent
  • According to the American Society of Civil Engineers, households will lose $3,400 in disposable income each year from 2016 to 2025 due to infrastructure deficiencies, in part due to increased congestion, greater vehicle repair costs, and other costs attributable to poorly maintained infrastructure.39

How can state leadership tackle the issue?

Articulate the importance of infrastructure investment to voters

Politically speaking, infrastructure, unlike schools or human services programs, lacks a concentrated constituency—which can make public investment in this area a difficult sell. Yet there are compelling reasons to invest in infrastructure that should be articulated to constituents because of what is at stake for both the local and national economy. Investment in infrastructure can act as a direct economic stimulus. Such investments could boost the economy in other ways as well—by attracting and retaining business and talent. At the national level, broad infrastructure investment would modernize the foundation of the US economy and could help the country keep pace with foreign competitors.

Select the right portfolio of projects

Agencies should implement better decision analytics that can accurately assemble project costs and benefits so that the best decisions can be made about new construction and maintenance programs. Old methods of allocating resources equally or formulaically can result in inefficient deployment.

Developing life cycle cost estimates that take account of all the costs involved over the life of an asset, which is now only a Government Accountability Office (GAO) requirement for federal investments, should become a routine part of all capital projects. Agencies should only build what they can maintain, and they need to design projects with full life cycle costs in mind.

A capital investment framework is becoming more common at the state government level as a tool for scoring projects by value and risk. This process allows an infrastructure investment committee to assess, rank, and prioritize projects across different infrastructure types. With limited funding available, it can be critical to consider the economic returns when selecting infrastructure investments and to prioritize high-return investments.

A capital investment framework can be a powerful and transparent approach to overcome political interests, focus on critical priorities, and balance the overall portfolio of projects—particularly when there are competing priorities between rehabilitating existing infrastructure and investing for economic growth.

Use analytics to improve on-time and on-budget performance

Large capital projects can be a project management headache. Repetitive reporting, multiple data systems, unprioritized and unorganized data, largely paper-based reporting, and lack of system connectivity all can make it difficult for construction owners to gauge risks to on-time and on-budget performance across their portfolio of projects.

Agencies should turn all this data into insights so they can better manage their construction portfolio. A predictive analytics platform that aggregates relevant data across systems, processes key performance metrics, and senses project risk and performance could allow government agencies to identify and mitigate potential issues, and quickly report anomalies to leadership.

Build an action plan for leveraging public-private partnerships (PPPs)

If state governments want to pursue their infrastructure goals, the central question they may want to answer is not whether or not to partner with the private sector in infrastructure projects, but perhaps how to optimally leverage such partnerships to attain their goals and maximize public value.

Creating an action plan for leveraging PPPs can foster a successful relationship between state governments and the private sector. Some of the strategies to consider that could be foundational for creating a balanced program to incorporate PPPs include:

  • Establish the necessary legislative and regulatory framework to support a successful PPP program (with clear processes, decision-making criteria, and authority to execute transactions)
  • Choose an appropriate partnership model for delivery and funding
  • Use a life cycle approach to project delivery that confers attention to all stages of the project

To dive deeper into these strategies, see our related publication Closing state infrastructure gaps.

Choosing the right financing model

Several criteria should be considered when determining how to finance new infrastructure projects. Two key factors are the level of urgency and current availability of funds. For example, if the infrastructure needs are not immediate and funds are available over time to make a new capital investment, then the pay-as-you-go model may be a good option. Key questions policymakers should consider include:40

  • Is there an immediate need for the asset?
  • What is the expected useful life of the asset?
  • What is the current availability of funds relative to the size of the project?
  • Are there multiple projects that need to be completed simultaneously?
  • Is inflation expected to increase?
  • Is the borrowing rate expected to increase?

Consider asset recycling for financing non-revenue-producing infrastructure

With most PPP project investors interested in funding user-fee revenue-based projects, asset recycling is gaining traction for funding non-revenue-producing infrastructure projects. Asset recycling involves the sale or long-term lease of existing revenue-generating infrastructure such as airports, seaports, and bridges. The proceeds from the sale or lease are then used to fund non-revenue-generating infrastructure projects (such as schools and municipal buildings). For years, Australia has successfully used asset recycling as a revenue source for funding new infrastructure assets; Brazil recently jumped on the bandwagon, and Canada is actively considering it.41

You don’t need to look too far for inspiration

Using innovative financing and delivery for school modernization in the District of Columbia

Built in the 1920s, the James F. Oyster Bilingual Elementary School was on its last legs by the early 1990s. The school’s strong academic record stood in contrast to a structural crisis—leaking roofs, building code violations and accompanying shutdowns, lack of computer hookups, and limited space. The District of Columbia had neither the $11 million required to build a new school, nor the borrowing power to raise funds from other sources. The district had to make a hard decision—either shut down the decrepit building and relocate students, or find another way to bring the school up to code.

What the district lacked in financial assets, it made up for in physical assets. The school sat on 1.67 acres of prime real estate within walking distance of the Smithsonian National Zoo. The district converted its underused physical assets into a financial asset by dividing the property, half for a new school and half for a new apartment building—both designed and built by the private sector. The private sector entity that partnered the development was given the operation and maintenance rights for the new apartment building, and in exchange, the district got its first new school in 20 years—a state-of-the-art facility with double the space. The bond issue that financed construction is backed by the incremental revenue generated by the project, which consists of the taxes and other payments that the private partner generated from the operation of the apartment building.42

Cost-effective infrastructure development through PPPs

The city of Phoenix, Arizona, saved an estimated $30 million by partnering with the private sector to design, build, and operate a new water treatment plant.43 Similarly, the Commonwealth of Pennsylvania used an innovative approach for clearing backlogs in bridge repairs. By bundling 558 small bridges into a single procurement to achieve economies of scale, the commonwealth expects to be able to get the private sector to repair and maintain the bridges for 25 years at 20 percent cost savings.44

Performance-based project selection in California

With limited budgets, selecting the right portfolio of infrastructure projects—one that yields the highest return on investment (ROI)—can be critical. To streamline the selection process for its transit projects, the Metropolitan Transit Commission (MTC) in California’s Bay Area created a performance-based planning process to provide data-driven insights on which projects to fund. The evaluation was based on whether the proposed project’s benefits outweighed its costs and on how it performed on what the MTC calls the “Three Es” of economy, environment, and equity.45 The MTC performed a detailed assessment of around 700 projects and was able to narrow the list down to 500 that yielded the highest ROI and scored highest on other priority parameters.46

The future of mobility: Accelerate ahead

By Vinn White and Tiffany Fishman

Explore: Economic development | Infrastructure | Law and justice

The future of mobility: Accelerate ahead

What is the issue?

The way people and goods travel from point A to point B is going through a sea change driven by a series of converging technological and social trends: the rapid growth of carsharing and ridesharing; the increasing viability of electric and alternative powertrains; new, lightweight materials; and the development of connected and autonomous vehicles. The result is the emergence of a new ecosystem of mobility that could offer faster, cheaper, cleaner, safer, more efficient, and more customized travel.

The stakes are high, and the implications of these shifts look to be wide-ranging. The extended auto industry alone touches nearly every facet of the American economy. It represents nearly $2 trillion in revenue—more than 10 percent of US GDP.47 The commercial trucking industry adds another $700 billion to that figure.48 Almost 7 million people worked in the US auto industry in 2016, with another 3.5 million employed as motor vehicle operators.49 And those figures, significant in themselves, don’t include the many additional jobs that rely on the provisioning of transportation, such as warehouse workers, public works employees, and those in delivery services. At the same time, traffic congestion wastes 7 billion hours a year for commuters.50 The world should find better ways to move people and goods.

State governments will play a role in shaping this new mobility landscape, regulating new technologies, and sharing critical data to enable a more integrated transportation ecosystem—which is as much an information challenge as it is a transport challenge. States that can help accelerate the future of mobility will likely see economic benefits as well as enhancements to their residents’ quality of life.

Issue by the numbers: Mobility

  • The use of shared autonomous vehicles could cut the cost of single-person trips to as little as 31 cents per mile—about a third of the current cost.51
  • The average car spends 95 percent of its time parked.52
  • Car-sharing services are expected to encompass 23 million members globally by 2024.53
  • Uber currently operates in more than 633 cities worldwide.54
  • Traffic jams cost the US economy about $160 billion annually. 55
  • On average, US drivers spend 17 hours per year searching for parking, at a cost of $345 per driver in wasted time, fuel, and emissions.56

How can state leadership tackle the issue?

Treat existing mobility options as one big ecosystem

The future of mobility
Read more about the future of mobility in Deloitte’s report The future of mobility.

Public policy should focus on getting travelers from point A to point B efficiently, using any and all resources available—private cars, shared cars, ridesharing, bike sharing, and various modes of public transportation. Through public-private partnerships, governments can foster development of multimodal trip planning services, along with payment systems that let a traveler cover all the costs of a trip—bus and subway fare, parking, tolls, bike rentals, or whatever applies—through a single transaction.

Also, and fundamentally, states should explore creating a digital backbone for the mobility ecosystem: a comprehensive, interoperable system that transcends existing infrastructure, drives standardization and interoperability, enables value creation by key parties, and cultivates technological advancements. Such an integrated mobility platform could bring together physical infrastructure (roads, rails), modes of transport (cars, public transit, ridesharing, bike sharing), and transportation service providers (aggregators, public transport systems) and create greater throughput and optimization system-wide through market-clearing mechanisms. Such a system could not only enable “mobility as a service” (MaaS), but it could also allow visibility into and dynamic balancing of mobility supply and demand.

There should also be a thoughtful integration of physical infrastructure that facilitates transfer between transportation services. Examples include bus and subway interchanges, or bike and carsharing spaces at stations. Transportation planners should think through how the various modes link up, and states should particularly consider their role as a convener of various participants to promote greater integration.

Create conditions for smart mobility innovation

The rise of mobility as a service
Read more about enabling seamless multimodal mobility at The rise of mobility as a service.

State governments can help set the stage for autonomous vehicles and MaaS by considering collaboration and public-private partnerships, as well as by encouraging open architecture technology standards. Governments can help define the vision and set the metrics by which success in mobility is measured.

Governments also can encourage investment in new programs. The US Department of Transportation (DOT) launched the Smart Cities Challenge, in which 78 cities submitted plans for intermodal innovations.57 The goal of the challenge was to encourage cities to think creatively about the future and to experiment with new mobility alternatives, with the $40 million federal contribution ultimately awarded to the city of Columbus, Ohio.58 Off the back of the challenge, states such as Nevada, Michigan, Pennsylvania, and Florida are now developing their own pilot programs.59

Protect the public interest

Governments should play an important role in ensuring that the new transportation environment doesn’t compromise safety or security. Autonomous vehicles may be a hot topic, but in creating integrated mobility platforms, governments should also address more prosaic issues around vehicle driving, service provision, consumer protection, data protection, liability, and equal access. Finding the regulatory sweet spot could be key. Too much regulation and the private sector may find it difficult to innovate or participate; too little regulation and the public interest might not be served.

Revisit and refine often

Because of the speed with which the technologies are advancing, a once-and-done approach to rulemaking may be ill-suited to the future of mobility. Instead, governments should review and refresh regulations frequently, with an emphasis on outcomes rather than only process or product. This can become especially important as policies evolve from high-level guidance to increasingly detailed—and binding—rules.

Explore creative financing options

Could MaaS, cost sharing, or other approaches allow state agencies to introduce new technologies without requiring a huge upfront investment? In some cases, private sector players eager to create viable in-market proof points might be willing to provide technology or services at reduced cost. Are there ways to make better use of purchased assets? For example, could a ridesharing service for state employees be created rather than assigning cars to individuals? What about setting up charging stations for state-owned electric vehicles and then letting members of the public pay to use them?

You don’t need to look too far for inspiration

Japan’s seamless transportation payments system

JR-East, one of Japan’s largest railway companies, introduced a rechargeable, contactless farecard in 2001. In 2004, NTT DOCOMO, a Japanese mobile phone provider, created the “wallet mobile,” which served as electronic money, member card, credit card, and a ticketing mechanism for air travel and events. In 2006, the two companies joined together to launch Mobile Suica, moving payments from smart cards to cellphones.60 Since then, they have built an extensive ecosystem of transportation operators, retailers, and service providers, and attained interoperability across most of the country’s transportation systems. Japan aims to extend the interoperability of the Suica card across all train lines nationwide in time for the Tokyo Olympics in 2020.61

Contra Costa County’s carpooling app

In Contra Costa County, California, the Contra Costa Transportation Authority (CCTA) has partnered with Scoop Technologies to develop an app that encourages carpooling. The app allows users to find rides, generate driving directions, and make payments. CCTA will pay commuters $2 each way each time they find a ride through the system instead of using their own cars.62

Law and justice: New options for public security

By Angel Quinones and Stephen Lee

Explore: Economic development | Infrastructure | Future of mobility

Law and justice: New options for public security

What is the issue?

Perhaps a governor’s most sacred responsibility is his or her commitment to safeguard citizens’ lives and properties. In today’s times—with terrorism and civil unrest often joining crime and disaster response as key citizen concerns—security is typically a top-of-mind priority with voters.

Justice and security can encompass a broad range of public safety issues, including law enforcement, emergency management, the courts, and homeland security. Constituents want the state to uphold its obligation to protect them and ensure the administration of justice in each of these areas—no easy task.

The costs associated with justice and security are not small. Over the last 30 years, spending on the criminal justice system has increased at triple the rate of public school funding.63

How can governors meet this challenge without breaking the bank? One way is to consider using new technology and new approaches to break traditional trade-offs. Government can look for innovative solutions by expanding the “ideas space” for addressing these thorny challenges.64 Instead of more of the same, approaches such as adopting good ideas from other states or partnering with cutting-edge private sector firms have the potential to save money and enhance public safety.

The possibilities are endless. But there are three areas that seem ripe for new thinking: embracing virtual incarceration, streamlining court proceedings, and digitizing emergency management.

Issue by the numbers: Law and justice

  • In the last 40 years, inmates in federal and state correctional facilities have increased by nearly 600 percent, as reported by the Bureau of Justice Statistics (figure 1).

Prisoners under the jurisdiction of federal and state correctional authorities, 1975–2015

  • A study on recidivism found that about two-thirds of released prisoners are rearrested within three years, and three-fourths are rearrested within five years.65
  • As of 2015, an inmate in California costs the state an average of $64,642 per year; in New York, the cost per inmate is $69,355 per year.66
  • Close to 50 percent of inmates are nonviolent offenders (figure 2).67

Percentage of sentenced prisoners under the jurisdiction of state correctional authority, by most serious offense, 2014

How can state leaders tackle the issue?

Virtual incarceration

Many state governments around the country face the problem of a prison system that is too crowded, too expensive, and often doesn’t succeed in reducing recidivism. Over the past 40 years, state and federal prison populations have increased nearly 600 percent,68 and a National Institute of Justice study finds that over 50 percent of inmates are rearrested within one year of their release and 75 percent are rearrested within five years.69

Women constitute one of the fastest-growing prison populations, increasing from 8,000 in 1970 to 110,000 in 2014.70 This is an incredible 1,300 percent increase, four times the increase rate of male prisoners. As one can imagine, this isn’t the sort of growth that states want to see, and it certainly doesn’t come cheap. The impact isn’t just budgetary; incarceration can have an immense impact on children, families, and communities.

One potential solution is virtual incarceration, which could use an Internet of Things (IoT) device for certain low-risk, nonviolent offenders. Instead of going to a physical jail or prison, convicted persons could remain in their communities or in some sort of low-cost shared housing—either of which would permit them to maintain family connections, jobs, and support systems while serving time—while their location is monitored with GPS-enabled devices that alert authorities if the wearer moves out of a specific geographic area. This technique would limit inmates’ freedom of movement by confining them to specific geographic locations; in essence, it would be a form of house or community arrest, which could be expanded from its primary present-day use as a pretrial confinement tool to one that supplants physical incarceration. This system—elements of which are already being used in a number of states—can be expanded to include advanced risk modeling, geospatial analytics, smartphone technology, and principles from the study of human behavior to achieve superior outcomes at a lower cost.71

Beyond the barse
Learn more about virtual incarceration in Beyond the bars: A new model of virtual incarceration for low-risk offenders.

Evidence suggests that this sort of program could save states significant amounts of money—and could be even more effective than traditional imprisonment. A 2012 study of electronic monitoring devices in Washington, DC, found a drop in recidivism by 24 percent and an overall net benefit to society of $4,800 per person across the criminal justice system.72 And in Florida, virtual incarceration reduced the failure rate of offender compliance with probation terms by 31 percent.73

Unresolved questions surrounding the ethics of virtual incarceration remain, including when it is appropriate and whether those being monitored should be charged for the use of the devices. But state government can explore this technology as a potential way to reduce prison overcrowding and recidivism, decrease the budgetary burden, and improve the chances of rehabilitation. That said, technology alone likely won’t be enough. Coupling these programs with counseling, skills training, and work transition programs can help head off issues early and assist in getting offenders the right help to keep them on track.

Speedy trials

Courts are where the laws of the state and the rights of the citizenry meet. The Sixth Amendment to the US Constitution grants citizens the right to a speedy trial, and if courts become an inefficient vehicle for the delivery of justice, the resulting problems can extend far beyond the justice system. Research has shown that one of the most effective means of deterring criminal behavior, or recidivism in the case of probationers, is to implement “swift and certain” punishment.74

An example of this approach’s success is found in Hawaii’s Opportunity Probation with Enforcement (HOPE). This program provides convicted persons and probationers a set of guidelines that govern their daily reporting requirements to state officials. If the agreed-upon rules are broken, punishment is swift, certain, and “sends a consistent message about personal responsibility and accountability.” This concept revolves around the idea that citizens respond better to certainty than severity. The results seem promising: 61 percent are less likely to miss supervisory appointments, 72 percent are less likely to use drugs, 55 percent are less likely to be arrested for a new crime, and 53 percent are less likely to have their probation revoked. 75

Another approach is the use of new technologies and innovation competitions that crowdsource solutions from outside the courts. For example, in 2014, the city of Philadelphia launched a $100,000 challenge called FastFWD that invited entrepreneurs, businesses, and academics to develop innovative solutions to crime and justice. “We wanted to open up the solution space,” explains Story Bellows, who led the initiative for the city.76

And in North Carolina, an electronic filing system at local assistance centers allows victims of domestic abuse to file a complaint, provide sworn testimony via webcam, issue a summons, automatically index the case, and transmit protective orders to all parties. A process that used to require time and travel to several locations can now be accomplished in one trip and 90 percent faster.77

Opening systems to external ideas has the potential added bonus of an engaged citizenry that feels some sense of ownership of its institutions, and the use of performance data to identify procedural flaws can help spur efforts to resolve those issues. Ultimately, more efficient administration of the court system can improve outcomes, reduce state prison and tax costs, and perhaps strengthen the constituency’s faith in the state’s ability to protect and serve.

A solution economy for justice reform
Read more about collaborative approaches to law and justice in A solution economy for justice reform.

Digitizing emergency management

Some of the toughest security challenges a governor can face are emergency situations that occur with little or no warning. While certain natural disasters, such as hurricanes, are foreseeable, others, such as tornadoes, provide little warning. A peaceful protest can quickly escalate into a riot, and an act of terror can occur in the unlikeliest of places at any time. State government must be ready to respond quickly and coordinate all the resources of the emergency response.

Between 2005 and 2015, the Federal Emergency Management Agency spent $67.7 billion to assist communities devastated by natural disasters, including winter storms, tornadoes, and wildfires.78 And this cost doesn’t account for lost productivity and revenue streams, emergency state expenditures such as overtime and National Guard activation, or the immeasurable loss some communities suffer. While few governors campaign on a platform of better disaster response, failure in this area can define an administration.

While this task can become overwhelming, having the right tools ahead of time can better prepare state governments to be more resilient and recover more quickly. Here again, leveraging IoT devices and the power of data collection can prove invaluable.

Some states are already using advanced analytics to more efficiently respond to severe weather—techniques that could be extended to disaster response. Saginaw County, Michigan, for example, now uses data analytics to improve the efficiency of salt trucks preparing roadways for snowstorms, and has saved over $500,000 by reducing salt use. Keeping the public informed during a disaster is important, and in 2016, locals of Howard County, Maryland, could see exactly which streets had been plowed on a website that could be viewed through their mobile devices. Additionally, the website displayed relevant data, such as “highway traffic camera views, weather alerts, and real-time traffic information”—providing residents with a one-stop shop for storm recovery information.79

From these early applications to address inclement weather, it is not a huge leap to consider how advanced analytics could be used to improve other aspects of emergency response services. The same technology that efficiently stations snowplows can be used to position police (as is already being done in Santa Cruz, California),80 firefighters, or ambulances. In this way, advanced data analytics can transform the way governors are able to manage emergency responses to better keep their citizens safe. In fact, in a more distant future, augmented reality (AR) could allow agencies to enhance search and rescue efforts. From using virtual compasses to trace the direction of a target location to three-dimensional mapping of the surrounding environment, AR capabilities could improve and aid emergency management in a big way. 81

You don’t have to look too far for inspiration

Using geospatial mapping to micro-target reentry programs and services in New York City

For more than a decade, New York City’s Justice Mapping Center has tracked the residential addresses of inmates in various prison systems—the address they gave when they went into prison. The center found that offenders often are concentrated in particular census blocks, some of them costing state and local governments more than $1 million a year in incarceration costs alone.82 Such findings are spurring some cities around the nation to design reentry initiatives for specific neighborhoods, with services such as transitional housing and job training for ex-offenders.