title>Texas Parks

Texas' Entrepreneurial Budgeting

by Ron Holliday


Prior to 1990, Texas State Parks, like most state park systems, depended heavily on state general funds for operations and capital improvements. Fully 60 percent of park operations were funded by the state general fund.

Public use of and demand for state park services has grown rapidly, and the legislature added 22 parks between 1984 and 1992. But appropriations failed to keep pace with this growth. This led to serious problems with deferred maintenance, and state budget problems in the early 1990s threatened the closure of several state parks.

Instead, the parks division adopted a new program called "entrepreneurial budgeting." Under this program, state parks managers were rewarded for saving money as well as for increasing revenues. As a result of this and other initiatives, by 1994 the parks system was able to operate without any undedicated general funds. Thanks in part to donations and volunteer assistance from local communities, all of the parks remain open and park management remains on sound footing.


The Genesis

Texas State Parks are managed by the Public Lands Division of the Texas Parks and Wildlife Department. The entrepreneurial budget system traces its beginnings to the summer of 1990, when Andrew Sansom was appointed director of this department. Sansom refocused on day-to-day operations by: In the midst of Sansom's efforts came a new administration and legislature committed to streamlining Texas government. The legislature asked the state comptroller, John Sharp, to "challenge the basic assumptions" behind state government. Under his leadership the most thorough and wide ranging review of state government operations ever undertaken produced a 1991 report titled Breaking the Mold, detailing hundreds of concrete proposals to increase government efficiency. In 1993 a second major review, Against the Grain, contained 460 recommendations that would increase Texas general revenue. Together, these documents are known as the "Texas Performance Review."

In the spirit of these reviews, in 1991 the legislature directed Texas Parks and Wildlife to move toward self sufficiency. Prior to 1991, state general funds made up 60 percent of state park operations. All undedicated general fund support was to be eliminated after 1993.

The summer of 1992 contained dark days for the Public Lands Division. Declining funding forced the division to propose closures of several parks and reductions in force (RIFs) throughout the state. This announcement drove home the fact that the Texas park system must develop a program of fiscal responsibility just to survive.

The first step was the development and implementation of a "partners in parks" program. Communities throughout the state responded with funding, "friends of parks" support groups, and park volunteer programs. Under special arrangements, management of seven parks was transferred to other entities. These efforts generated over $1 million of cash and in-kind commitments, which kept all of the parks open. These actions saved the Texas Parks system for that 1992-93 state fiscal year.

Yet the forecast for the 1994- 95 state biennium still appeared bleak. Faced again with the possibility of closing parks, reducing staffs, and cutting operations to the point of mediocrity, I asked Public Lands Division staff to develop the rudiments of the what would become the "entrepreneurial budget system" or EBS. Focus groups moved quickly and the initial planning began for a system that would encourage sound financial operating procedures and reward responsible fiscal management at state parks.

Before the letters EBS became a part of our daily vocabulary and before the term "entrepreneurial" became a spelling nightmare, parks were experiencing the frustration of a decentralization process that, although underway, had failed in many cases to reach the park level. Park employees--the same people who were responsible for delivering products and services and maintaining the overall image of state parks--felt less than empowered to steer the course for their park sites.

Increased revenues, cost savings, improved visitor services and customer experiences, staff dedication, and creative park operations were acknowledged but not significantly rewarded by the agency. Park managers had little or no incentive to expand products, services, or visitation. At Austin headquarters the budget crunch was once again rearing its ugly head as rumors of RIF's and park closures ran rampant.

Reinventing Government, by Osborne and Gaebler, had recently become popular reading as many governmental entities began to embrace its concepts. The Texas Performance Review, Reinventing Government, departmental needs, and new opportunities met head on and the EBS program was born.


The Pilot Program

The heart of the entrepreneurial budgeting system is a performance agreement or contract signed by the director of Texas Parks and Wildlife and park managers. The agreement listed the annual park budget and revenue targets, and specified that: For example, revenue rewards returned to a park 35 cents of every dollar exceeding the revenue target contracted by that individual park. The park superintendent could spend this money on that park's operational needs, facility expansion, or enhanced programming. The decision on how to spend the 35 percent was left to the superintendent.

Of the remainder, 40 percent was retained by the agency for general funding and 25 percent was reserved in a special account to supply future start up funding as additional parks come on line with the EBS program. This division was termed the "EBS split."

The contracted target revenue amount was based on the revenues collected by the park in fiscal year 1993 plus the addition of a growth factor, projected by the agency to be 1.4 percent per year. For example, a park that collected $50,000 in receipts in 1993 would contract for a 1994 target of $50,700.00. Every dollar earned over this target was divided up according to the EBS split.

This entire program--the contract, the EBS split, and leaving the decision on how to spend the parks' 35 percent to the superintendents--was a radical departure from past agency practices. Although many parks had provided innovative programs in the past, they were essentially penalized for saving budgeted dollars. Often, in the following fiscal year, their budgets were reduced by the amount saved. This only added to the incentive to "blow the budgets" prior to fiscal years endings.

Meanwhile, attempts to increase revenue were rarely acknowledged much less rewarded. Parks that collected increased revenues often saw those revenues transferred to other parks that made no effort to increase their receipts.

As an additional incentive, EBS pilot parks were granted special start-up funds to assist with getting business operations underway. The agency ultimately invested $235,000 in the pilot projects, for which it projected a return of $1,000,000 in additional revenue.

Not all parks initially participated in EBS, and many worried that these start-up funds would come out of the budgets of non-participating parks. But the financial impact to non-participants was small because the requests for start-up funds were very modest.

Out of the 95 park operational units invited to be a part of the entrepreneurial budgeting system, 72 applied to be EBS pilots. Applicants were required to prepare business plans and go through a training program.

Preparation of the business plan was a formidable obstacle for many parks. Traditionally, park managers worried about maintaining their facilities, insuring visitor safety, and providing basic customer services. More recently, more emphasis on cultural and natural resource conservation was added to a manager's duties. The business plans suddenly added a wide range of brand new issues and problems, such as finances, total quality management, product review, marketing, customer targeting, and analyses of the competition. As Wayne Haley, the manager at South Llano River State Park, put it, "It's like rocket science to a cowboy."

Park managers had to learn and understand these concepts in a new environment of competition with their fellow parks. Moreover, they had to get ready to almost immediately implement their plans and ideas. To their credit, park staff not only expanded their business and financial skills but began to think more like entrepreneurs. Challenged to invest in programs that would either make money or save money and provide services that would increase visitors and revenues, park staffers were prepared to take risks and reap the benefits of their efforts.

After six months of hard work, including training, developing business plans, and going through a rigorous application process, the department accepted 42 parks as pilots. Park staffs signed performance contracts with directors of Texas Parks and Wildlife and the Public Lands Division in late October, 1993. The contracts guarantee that the department would give managers flexibility in budgets and pricing policies, maintain the incentives, and--perhaps most important--not raid park budgets to fund shortfalls in other parks or programs as the fiscal year progressed.

"I put my signature on those contracts," promised department director Andrew Sansom. "We'll keep our end of the bargain and those budgets won't be touched." And they weren't.

As in the business world, park managers, by signing the performance agreement, commit both themselves and the park staffs to achieve revenue and expenditure targets, meet operational guidelines of maintenance, safety, customer service, quality management, and the agency conservation stewardship mission. Failure to meet projected revenue and budget goals would mean that the future budget would be decreased in an amount equal to the shortcoming, introducing the element of risk at the park level.

Ultimately the EBS program shifts more of the burden of responsibility for a park's operational and financial decision making from a centralized control at Texas Parks and Wildlife Austin Headquarters to the field staff at the park sites. It simultaneously holds park managers' staffs accountable for their decisions and actions. As the need for operational self-sufficiency grows stronger with each passing year, the EBS program places the responsibility at the park level where it can be most successful.


The Discovery Phase

Looking from the outside, an observer might conclude little of a true business nature has occurred in the initial pilot program. However, what has really changed is the presence of unleashed talent hard at work developing special programs for revenue enhancement, and an explosion of ideas on how park sites can become self-sufficient.

For many, this meant establishing a line of site specific resale items under the new Texas State Park Store. Others planned new educational and interpretive programs, special promotions, recreational equipment rentals, setting differential fees at the park level and developing special park tours. The enhanced products, services, and programs not only have been universally well received by park visitors but have exceeded revenue projections.

Some of the ways we have cut costs and increased revenues include:

During the fiscal year '94 program, the parks' saved more than they expected due largely to careful purchasing, renegotiating contracts for services, cost efficiencies, and an active volunteer program that generated payroll savings, and staff commitment to saving every possible dollar. Of course, we still have to fine tune objectives, iron out details, monitor, evaluate, and nurture new ventures as a joint effort between the park staffs and the Austin-based support staff.

As with any new venture, the pilot program brought with it some new problems:

Despite these initial problems, EBS has proven to be an unqualified success and therefore has gone forward. Even the "Doubting Thomases" were won over when oversize checks were presented to forty of the pilot EBS parks totaling $378,000 at the Public Lands Division annual meeting in the fall of 1994. These funds were added to their base budgets to be spent at the discretion of the park superintendents.

Four years ago, four of our parks were self-sufficient in terms of revenues. Today, with the help of EBS, 26 parks are self-sufficient and are helping to fund other parks.


The Next Generation

The Entrepreneurial Budget System program will be a dynamic and fluid process over the next several years. During the initial pilot phase, the program structure was designed to support a small number of parks. The second phase was implemented in fiscal year 1995 and underwent some major changes.

As a total of 95 parks became a part of the second generation, the available base funding remained at essentially the same dollar amount. Start up funding, which was plentiful during the pilot program, is now extremely limited. Where start up funding came in the form of grants in the '94 program, it came in the form of a repayable loan during the '95 program. Expenditure budget funding which was previously enhanced during the pilot program remained flat during the second generation.

During this fiscal year's program, the setting of revenue targets will change as well. Last year's revenue targets were based on a 1.4 percent increase over the previous year's income. Under a new and improved system, parks had a choice of revenue targets between 1/2 to 3 percent over their previous year's revenue. The incentive return is scaled to the growth factor: Parks that choose higher targets get a greater percentage return.

In the pilot year, all parks committed to a standard revenue increase and received 35 percent of the return. This year, parks must increase revenue by the full 3 percent to receive that 35 percent return. The lower the risk, the lower the return. Some parks have chosen to go for the big return while others value the lesser risk of a lower target.

Although the EBS program will change and evolve as the years progress, one sustainable fact exists: Texas State Parks can expect the incentive factors to remain constant. The success of the future for EBS and state parks lies in meeting and exceeding park goals. Inherent in the EBS process is the value that proper stewardship of the park's natural and cultural resources is the first priority. Subject to that priority, all park assets will be managed in the manner that will provide for the maximum possible net return.

Park staffs plan, monitor, evaluate, and correct both old and new aspects of a park's operation to allow for this maximum return. The success of this program lies in a covenant of a shared entrepreneurial vision that will both sustain and allow for future park and system growth. Ideally this vision goes beyond keeping the gates open, maintaining the grounds, and raising fees to increase revenues for sustaining the system.

As the EBS programs grow, managers will focus and refocus on changing customer demographics, delivering value to the customer, sustaining competitive advantage, maintaining safe, clean, wholesome park environments, and establishing an on-going quest for variety in park activities. The park's future business operations lie in the expansion of the customer base, constituency building, and quality product delivery.

Parks must provide a quality outdoor experience in a conserved and preserved natural or cultural setting. Combining this stewardship mission with EBS ventures strengthens the parks system for present day users as well as for future generations.

Ron Holliday is the former director of the Public Lands Division of the Texas Parks and Wildlife Department. This article orginally appeared in the summer, 1995, issue of Different Drummer magazine.


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