Changemaker: Mike Hartman, Colorado Department of Revenue

At Start Within, we want to learn from the changemakers that are innovating in their company, nonprofit, government agency, or organization.

This week we talked to Mike Hartman, Executive Director at the Colorado Department of Revenue. Mike is the classic finance guy with a twist – taking his many years in finance and banking in the private sector and applying it to the work at a state agency.

Learn more from Mike about how he approaches innovation in a complicated world of enforcement, rule-making, and regulatory activities.

Check out the audio for the full conversation, or read below for the highlights.

What divisions do you oversee with the Colorado Department of Revenue?

Marijuana Regulation

I oversee four businesses for the state, the Tax Division, which I don’t think anybody loves paying taxes, but we all recognize that it’s necessary in order to fund the operations of the state and all the wonderful programs that we do.

The Division of Motor Vehicles (DMV) tends to have a relatively bad reputation in most states in terms of wait times and customer experience when they’re in the office, etc.

The Enforcement Division is a business that has six operating divisions: marijuana, because it’s newly legalized here in Colorado, is one we spend a lot of time on. But we’ve also got alcohol and tobacco, auto dealerships, casinos, and horse racing.  

These are the five divisions that make up the enforcement division. So we touch on a lot of different things. As part of that organization, I have about a 150 to 200 police officers, POST certified police officers that report up and help us with our enforcement actions.

The last business in the Department of Revenue is the Colorado lottery.  Most states are familiar with lottery systems at this point. I’ve got about a 120 employees there, about $600,000,000 in revenue that returns about $150,000,000 of proceeds to our beneficiaries every year that go towards improving state parks and access to outdoor, lifestyle-type activities.

 

How do you bring private-sector leadership into public-sector roles?

Public Sector LeadershipOur Governor and our Lieutenant Governor in particular, are very, very focused on bringing business, traditional private-sector practices to the public sector.

When Governor Hickenlooper started the governor’s fellowship program two years ago now, the intent was to go out and identify business leaders within the community who may have a desire at some point to serve in government services, whether it’s as an elected official, as an appointed official, volunteering, etc. hopefully to bring some of those business practices to government work.  

And that’s definitely what we’re focused on.

How do you disrupt and innovate in the DMV?

DMV License Plates

So with the DMV… obviously, a function that’s been around in state government for quite some time. I’ve had many, many predecessors that came before me that have focused on tweaking the right regulations and making sure that we’re doing things as we best can to, most importantly, focus on the security of the credentials that were issuing.  

These are documents that have national and international implications because we’re part of the federal program. Our licenses qualify and allow people into airports and onto airplanes. As a result of that, we have certain standards that we have to comply with at the federal level.

Additionally, there’s a lot of different stakeholders that are involved to make sure that we get the security side of it right.  For example, as it relates to the LGBTQ community, we have active, ongoing conversations to relate on things.

Like what is the process that a transgendered individual goes through in order to change the sex identified on their driver’s license?

And what does that do in terms of security implications both at the state and federal level.

For instance, what if someone were to get pulled over and they present an ID that shows them as John Doe but if they’re transgender, and truly reflect as their gender Jane Doe? And that’s how they dress and present themselves in society – how does that factor into the way that law enforcement handles the situation?


Those types of questions, candidly, are difficult and there aren’t any easy answers.

We have to think through security implications. How are stakeholders impacted? What are the true policy missions that the administration wants to achieve? And I mentioned that specifically because I may have specific personal feelings on an issue, but I serve to uphold the constitution of the state, as well as the constitution of the United States. And I serve at the pleasure of the Governor. So really his policy objectives are what drive the day and yet, they don’t exist in a vacuum. So we have to recognize what those policy implications would mean towards the legislature and how that may impact how competing agendas and the legislature approach other bills that may or may not be directed towards the DMV and its operation.

So it gets pretty sticky, pretty quick.  And the key to all of it is making sure that we engage stakeholders as aggressively as we possibly can.

The DMV has been around forever, but there are ways that we can have transformational change there.

For example, the state of Oregon, through rule-making and the state of California, through their legislative process, just allowed for a third gender option on IDs.

You can be either male, female, or a neutral designation if somebody is not comfortable choosing male or female as their designation.

We’ve had interested parties in the state come to us and say, why can’t Colorado do that? And so we’ve done a deep dive on the legislative history as well as what the statutory language is.

And specifically in this instance, Colorado’s statutory language uses the word ‘sex’. If you look at the case law going all the way up to the federal courts, ‘sex’ means male or female, it’s binary.

If instead, our legislators had used the word ‘gender’ instead of ‘sex’ that now becomes a much more flexible term where we then could, by rule, choose to make available a third designation.

With the way that our state legislature has set up, we actually believe that that would require a statutory change, that the legislature would actually have to go about doing that. So there are opportunities there.

Disruption through Respectfully Engaging Stakeholders

listen and learnWe get together with all of the relevant people that are involved in the conversation. It’s my desire to make sure that we have all of the relevant voices around the table so that we’re hearing from people that are supportive of LGBTQ community.

We hear from law enforcement what requirements they have in regards to utilizing the documents and how it goes into their everyday practices.

We hear from legislators who may not support the LGBTQ agenda.  And so we just make sure that we factor all of those discussions into the decision making process.  

And then at the end of the day, it does ultimately fall on me, with guidance from the stakeholders and from the Governor’s office, to make a decision as to what the policy should be.  

A lot of times that can’t be as fast as we want from a process standpoint, but it’s more important that we get it right than we get it done fast. And so it’s important that we take our time.


Improving Customer Support at the DMV

DMVHow else do we improve and innovate within the DMV?

We have a hundred drivers license offices and title and registration offices where the 5.5 million residents of Colorado go into those offices to get their driver’s license, to get IDs, to get their license plates, to get their titling work.

With the number of employees that we have, serving that large population of individuals can be very cumbersome. And so we actually have in many of our offices wait times before the initial service starts, up to 15 minutes.

And for the full customer experience, it can be as long, on average, 45 to 50 minutes.

Well, how do we shrink that? How do we make that better?

One of the ways that we do that is by analyzing throughput in our Front Range offices. In Colorado, 80% of the population lives in the Front Range regional communities. And so we serve most of those 5.5 million customers in the Front Range offices.

How do we get more people out of the offices?

Well, let’s move services online. License plate renewals, driver’s license renewals – let’s make those available online.

Let’s put the proper guardrails around them such that we can still maintain security, but if we can make it so that somebody only has to come into the office once every 10 years instead of once every three years, that makes a pretty significant difference in terms of how we can then treat every single customer that is in the office.

Hopefully, it reduces the amount of wait time that people have when they come to the office.

How do you disrupt and innovate in the marijuana industry?

innovate and disruptThe marijuana industry is the exact opposite of the DMV. It was legalized here on a constitutional ballot initiative in 2012.   Medical marijuana was legalized far earlier than that and there was some policy in place associated with medical marijuana, but adult use marijuana became legal as of January 1st, 2014.  

And since that time, we’ve been really developing the regulatory infrastructure to make sure that we’re making the industry and society as safe as we possibly can in the state of Colorado.

There’s a complicated wrinkle there that I think everybody’s aware of, that it’s legal in Colorado, and illegal at the federal level.


So we contemplate, how do our federal partners want us to act as we look at building out this industry? What are the things that we can do to make it as safe as possible such that the federal government doesn’t feel it raises to the level that they have to come in and take action?

And then we have constant communication with our partners at the federal level as well as all of the industry providers, industry participants, healthcare professionals, etc. So again, the common thread there is the stakeholder process that we go through.

It’s been an interesting developing industry.  Under the Obama Administration, under the Department of Justice, we had the Cole Memorandum. For those who aren’t familiar with the Cole Memo and don’t live it every day, it outlined the eight or nine responsibilities states had to follow in order to make the federal government not focused on coming in and cracking down on the industry.

And those eight or nine things from the Cole Memo really boil into what we have utilized to establish our regulatory infrastructure.  That’s kind of an overarching umbrella that I like to say is entirely focused on public health and public safety. That’s our number one key objective.

Underneath that umbrella, there are three key tenets that we look to which are:

  1. Keep it out of the hands of minors,
  2. Keep it out of the hands of criminals,
  3. And keep it out of other states.

We focus on those things: public health and public safety being the overriding one; and then those three other tenets as kind of the heart of our objectives.  

When we’re looking at the regulatory infrastructure, it allows us to look at each individual policy through a lens to make sure that we’re remaining compliant with that.

An Outsider in Regulatory Infrastructure

As I came into leadership, the woman who preceded me, Barbara Brohl and then also the Senior Director of Enforcement, Ron Kammerzell, they did an incredible job in the state of Colorado.  

The state of Colorado is the first jurisdiction that legalized marijuana. They used to say, “Look, we built the plane as we’re flying it. We had to put the regulatory infrastructure in place as the industry was developing and it made it really, really challenging.”

As somebody who comes in as an outsider, had no ties to the regulatory infrastructure whatsoever, I’m happy to report that as I look at it, I think they did an incredible job.

It’s served our industry well. It served our state well, and what we’ve seen is a great number of other states have come to us to learn from us and what we’re doing.  

A great number of other countries have come to us as well. I was up in Canada testifying to their Parliament as they’re looking at going through legalization. We share how Colorado looks at putting the safety mechanisms and guardrails in place to make sure that the public health and public safety as the emphasis.

And again, it comes back to that stakeholder process. It’s discussing with industry, what do we need to do to relax some of the ownership regulations that we had in place such that they can get the capital that they need.  But at the same time, how do we put regulations in place to make sure that that capital isn’t coming from nefarious sources e.g. cartels in other countries or organized crime here in our country.

So it’s having conversations with those who are affected by the decisions that we make, allowing them to inform our decision-making process. And in many cases, there’s a natural tension between what industry wants and what we, as the regulators feel needs to happen.

But so long as we continue to have dialogue and we are able to identify the unintended consequences that pop up.  And then have the flexibility in our system to address those when they pop up. It’s served us well, the process that we’ve undertaken.

How is innovating in the public sector like a startup?

Government StartupYou’re right, it’s not a startup environment. Having said that, I think that there is a natural comparison. 

The startup world is one where there’s typically an existing industry and/or technologies in place. And the startup community is identifying new technologies, or new systems, or new distribution channels. Startups use these as places to disrupt the existing operations of the industry.

And while that’s not necessarily the core focus of what we do at state government, what I would say is, when I stepped into the role, there are all kinds of rules and regulations that are in place that may be specifically in my control or more frequently than not outside of my control.

For me it’s about identifying what is the policy objective that we’re trying to achieve? What’s the pathway to get there? What are the hurdles that are in the way in terms of the existing thought processes – the “this is how we’ve always done it” thinking?

And then where are the opportunities and where are the key decision makers that do have the flexibility to change some of the hurdles that are in the way? Then working closely with others, either in my organization or outside of my organization, to try and align the assets such that we’re effectively creating new pathways or new distribution channels that didn’t exist previously.

In some instances, things are fantastic and we don’t want to touch it.  

Colorado Lottery has been operating fantastically for a long time. So outside of focusing on culture, outside of focusing on making sure that our customers are served with a high level of customer service, and that our employees are engaged in that we keep them at the forefront of every decision that we make, there isn’t a ton to focus on there.

Sure, there’s some innovative work that we could do with online sales and some other things along those lines but in terms of truly disrupting the model, probably doesn’t happen that much.

On the flip side, with marijuana, it’s developing so rapidly that we have plenty of opportunities to be really disruptive to the way that things have been done.

For instance, one of the things that is going on in the legislature right now is trying to give access to operating companies in the marijuana space to publicly traded investors, in a publicly traded company status.

Traditionally, we viewed that as a potential risk of not being able to identify who every single investor is, which means that we might not be able to certify to the federal government that criminal enterprises weren’t there. But as we’ve gotten smarter about what different roles the federal government entities like the SEC and FINRA play in those types of public investing activities – we’re figuring out ways where we might be able to get comfortable with that.

So that is going to be a transformational change to the industry, both for the players that are here in our state as well as nationwide.

So taking some of those private-sector thinking processes like lean process improvement and how do we focus on improving not just our operational processes but also our customer experience are things that we think about every single day and there are a lot of tricks and tools that we utilize from the startup community in how we go about doing that.

I think it’s incredibly important as you go through these processes where regardless of whether you’re in the private sector or the public sector, is to,

Recognize that you’re probably not the smartest person in the room, particularly when it comes to specific topics that other people have expertise in.


I frankly have no background in marijuana, the driver’s license bureau, in the Colorado lottery, any of that stuff.

But what I bring to the table is a very deep interest in learning about those things. And so asking questions of the people who have made it their life’s work, who have dedicated themselves to building the expertise, and then just being interested, “well, why do we do it this way?”  Why is the line system set up this way? Why do we only sell through this channel?”

Asking those questions of being interested, rather than being interesting, is kind of the contrast that I put is important because that allows the other people who do have the expertise to share their information with you. Then it becomes a problem-sharing and problem-solving exercise, rather than coming in with a dictatorial approach and saying, “I know how to solve every single situation.” It takes a village, if you will, to use the old cliché.

 

How might someone get into this type of work?

MapI don’t know the right answer. There’s no silver bullet. There’s no kind of clear path that somebody from the private sector would bring directly to get into the public sector.

What I can tell you, based on every interaction I’ve had, with very few exceptions, the public sector just craves to interact with people from the private sector and something that they very, very much so desire to have involved, at least in the state of Colorado.

I’ve had the benefit and pleasure of living in a lot of great states: California, North Carolina, Illinois and Colorado. Some really wonderful places. Colorado Is really unique in that we love to collaborate with people as much as we possibly can, whether they’re direct employees, whether they’re key stakeholders, whether it’s somebody who just has a passion around an idea – we reach out to those types of people and interact with them as much as we possibly can.

And I would say that that’s how I got on this path as well.  When my wife and I moved back to Colorado about five years ago, I made it a point to build out my professional network.

I did undergrad and high school here so I had a very strong social network but not necessarily a professional network. I very aggressively started networking with people and as I did that, I started to ask questions that served me in the private sector with my banking career, but also was just being open with people about, “I also have a passion for government and I’m open to those kinds of ideas. Do you have exposure to that? Do you have experience with that? Tell me about it, what do I need to think about? Who should I be talking to?”  

Those are the types of questions that as you’re meeting with people, if you show your passion and if you show your desire to be involved and to be helpful in solving problems, generally people are going to be receptive to meeting with you and connecting you with other people where you could have an impact. And I think that’s true across public and private sector both.

 

Day in the Life as Executive Director

Co Dept of Revenue

A normal day is totally different than what I had in the private sector.

In the private sector I was in banking and most specifically, I was effectively in sales. I was out building relationships with C-level individuals at companies, trying to find companies that needed to borrow money and then understanding why the company would continue to exist in the next 5 to 10 years, and why they were a good company to lend money to.  

Fortunately, I had quite a bit of flexibility in terms of schedule, so long as I was delivering on my results in that role. So I had quite a bit of time flexibility.

This role is completely and totally different. I’m in the office most days between 8:30-9:00am and usually I have meetings from nine until call it 5:00 or 6:00pm at night, back to back.

Occasionally we’ll have pockets of one or two hours in there were I’m able to catch up on email and do all that normal, administrative stuff that everybody deals with. But usually my meetings are a half an hour to an hour long and they’re almost all associated with stakeholders and/or the leadership of the different businesses that I’m responsible for.

It’s coming in and briefing me on, “hey, we’ve got this situation coming up. We just wanted to give you a heads up so that you could be in front of it.” And then we’ll talk about what do we think the potential outcomes are and where do we think we want to line up. If an issue is sensitive enough, politically and/or important enough to the state, then we’ll usually tee up a briefing for the Governor and make sure that his office is involved.

For example, with tax reform that just happened at the federal level.  Most people didn’t appreciate that while their federal taxes were going down, because of the way that state taxes are calculated, their state taxes we’re actually going to go up.

And so we had to do an analysis, how was Colorado going to be impacted by the potential legislation? And then take that information to the Governor so the Governor could then communicate out to all of the residents, but most specifically the federal delegation in congress.

How do we want to support it? Or are we against it even though the state revenues were going up as a result of it?  Were there enough negatives associated with the policy that we didn’t want to support it even though maybe more revenue would be good for us because we could support programs at the state level?

So it’s lots of meetings, lots of exploring possible ideas, lots of identifying potential problems and trying to avoid them.

It’s really about connecting with others, having them trust in you that they can share their information with you and that you’re going to be a partner in trying to find the right solution, but also that you’re going to treat them and their information fairly so that they know they can do their job and you’re not necessarily going to get in there.