Innovate: Policy For The Future

F E B R U A RY 2015
Dear ALEC Members, February 5, 2015

Solutions to todays problems come from creative thinking and a genuine plan of action. Government
should operate in the 21st Century instead of the 1950s, yet long lines, unclear objectives and poor
performance are persistently associated with government programs. A government that meets the
needs of its people is innovative and held to a high standard.
Innovate: Policy for the Future offers solutions that cut red tape and promote economic growth and
competition. Government should facilitate the development of new ideas and innovations, and the
policies offered in this book inform and educate the debate on best government practices.
Hard work is needed to break out of the cycle of stagnant ideas and old ways of legislating. ALEC
provides a platform for legislators looking to share and find new understanding of the challenges
facing their states. Using this book, legislators can start the discussions in their states of how to best
streamline government services and create a system that is efficient, effective and accountable.
Hardworking taxpayers deserve a government that respects and protects their time and money.
As legislatures set their 2015 priorities, commitment to measureable success and investment in
a healthy economy should be the top goals. Good ideasand the courage to see them through
produce real results, and ALEC supports all legislators looking to lead with break out ideas in the
21st Century.
Sincerely,
Representative Phil King

Texas
2015 ALEC National Chair
I N N OVAT E : P O L I CY F O R T H E F U T U R E F E B R U A RY 2015
ACKNOWLEDGEMENTS
A special thanks to ALEC member legislators, who create model policy and work tirelessly in their states to
advance the principles of limited government, free markets and federalism.
AUTHOR
Michael Hough, Director of Special Projects
MANAGING EDITOR
Michael Bowman, Senior Director of Policy and Strategic Initiatives
Molly Fuhs, Manager of Communications and Media Relations
SPECIAL THANKS
Lisa B. Nelson, Chief Executive Officer
Bartlett Cleland, Director of the Task Force on Communications and Technology
John Eick, Director of the Task Force on Energy, Environment and Agriculture
Karla Jones, Director of the Task Force on International Relations and Federalism
Amy Kjose Anderson, Director of the Task Force on Civil Justice
Sean Riley, Director of the Task Force on Health and Human Services
Lindsay Russell Dexter, Director of the Task Force on Education
Cara Sullivan, Director of the Task Force on Commerce, Insurance and Economic Development and the
Justice Performance Project
Jonathan Williams, Senior Task Force Director and Director of the Task Force on Tax and Fiscal Policy
Kati Siconolfi, Manager, Task Force on Tax and Fiscal Policy
William Freeland, Research Analyst, Task Force on Tax and Fiscal Policy
Ben Wilterdink, Research Analyst, Task Force on Tax and Fiscal Policy
ALEC offers appreciation to supporters, members and the entire ALEC staff. We also thank Speaker Newt
Gingrich and his staff at Gingrich Productions for their feedback and encouragement.
ABOUT THE AMERICAN LEGISLATIVE EXCHANGE COUNCIL
Innovate: Policy for the Future was published by the American Legislative Exchange Council (ALEC) as part
of its mission to discuss, develop and disseminate model public policies that expand free markets, promote
economic growth, limit the size of government, and preserve individual liberty. ALEC is the nations largest
non-partisan, voluntary membership organization of state legislators, with members representing every
state legislature in America. ALEC is governed by a Board of Directors of state lawmakers.
ALEC is classified by the Internal Revenue Service as a 501(c)(3) nonprofit, public policy and educational organization. Individuals,
philanthropic foundations, businesses and associations are eligible to support the ALEC mission through tax-deductible gifts.
AMERICAN LEGISLATIVE EXCHANGE COUNCIL 3
CONTENTS
INTRODUCTION...................................................................................................................... 5
n INNOVATION IN HEALTH CARE.......................................................................................... 7

Expanding Access and Lowering Costs with Telemedicine....................................................... 7
Case Study: The Private Sector Leads the Way......................................................................... 7
Direct Primary Care and Transparency...................................................................................... 9
Case Study: Oklahoma Provides Consumer Choice.................................................................. 9
n INNOVATION IN EDUCATION........................................................................................... 11

Digital Education and High-Quality Digital Learning............................................................... 11
Case Study: Mooresville, North Carolina Leading the Digital Revolution............................ 11
n INNOVATION IN ENERGY.................................................................................................. 13

Hydraulic Fracturing................................................................................................................. 13
Case Study: North Dakota Takes the Lead on Energy and Jobs.............................................. 13
n INNOVATION IN TRADE ................................................................................................... 15

Expanding Exports................................................................................................................... 15
Case Study: Expanding Energy Exports................................................................................... 15
Case Study: An Innovative Agreement to Spur Exports (Trans-Pacific Partnership)............... 16
n INNOVATION IN JUSTICE.................................................................................................. 18

Breaking the Cycle of Crime.................................................................................................... 18
Case Study: ALEC Member Brings Smart Justice Reforms to Texas........................................ 18
Case Study: Swift and Certain Sanctions in Hawaii................................................................. 19
n INNOVATION IN ECONOMIC DEVELOPMENT.................................................................. 21

Public Private Partnerships...................................................................................................... 21
Case Study: Virginia: Investing in the Future........................................................................... 21
The Personalization of Financing: Crowdfunding.................................................................... 23
Case Study: Crowdfunding in Action....................................................................................... 23
n INNOVATION IN PENSION REFORM................................................................................. 25

Defined-Contribution Pension Reform Act.............................................................................. 25
Case Study: Oklahoma Reforms Retirement Plans.................................................................. 25
CONCLUSION........................................................................................................................ 2 7
FOOTNOTES.......................................................................................................................... 28
INTRODUCTION
What comes to mind when asked to describe government?
A November 2014 Rasmussen survey found that 8 percent of people think Congress is doing a good job, and
only 11 percent think Congress has passed any legislation that will significantly improve life in America.
Americans are frustrated, and they do not trust the government to meet their needs.1
Government for the people and by the people should encourage innovation and technological advancements
and work with the private sector to invest in growing the economy. And yet, why in the 21st Century does
the federal government still process Internal Revenue Service (IRS) forms by hand and rely on technology
developed 30 years ago? Why does it take more than 15 years for a new drug to be approved by the Food
and Drug Administration (FDA)? Why are new technologiessuch as Uber, Lyft and Airbnbmore likely to
be outlawed than given permission to operate? Why is government more inclined to say no than yes to
innovation and change? Government too often stands in the way of technological advancements.
This is not the government our country deserves. The land of the free and the home of the brave deserves a
government that is efficient, effective and accountable. The people who work hard to earn a living deserve
a government that respects their time and money. The families who are raising the next generation of
entrepreneurs, teachers and leaders deserve an education system that supports their childrens endeavors
and prepares them for the future that lies ahead. Imagine a government that works for the people and with
innovatorsthat meets the needs of those it servesand ask yourself, what could be achieved with a more
efficient government?
It is time to break out of the old ways of thinking. It is up to state and local leaders who are closer to the
people they serve to lead the way, to dig up the framework of the old government and replace it with a
newer, stronger, more innovative one.
Innovation does not come from old ways of thinking. Innovation comes from those who have a vision and
show leadership to make it a reality.
INTRODUCTION
This publication offers challenges to the current models of government and suggests innovative solutions for
those looking to reform the thinking and processes holding back a more efficient and responsive government.
Regulatory uncertainty and bureaucracy should not be tolerated, and serious efforts should be undertaken
to streamline government services to effectively balance the needs of the people with the limits set by
responsible budgeting.
Innovate: Policy for the Future provides answers for lawmakers looking to improve how government operates
and how it interacts with the people it serves. A government representative of its people is current with the
times, encourages innovation and fosters economic growth. With this publication, lawmakers and others will
find ways to help government better meet the needs of the people they serve.
n INNOVATION IN HEALTH CARE

EXPANDING ACCESS AND LOWERING COSTS WITH TELEMEDICINE
Telemedicine continues to hold tremendous promise
as technological breakthroughs are providing nurses,
doctors and other health care providers with new and
more efficient ways to connect with patients, including
those in rural and underserved areas. Nonetheless,
telemedicine faces hurdles in many states.
Despite the efficiencies telemedicine offers, just 11 states
provide some form of telemedicine coverage under their
state employee health plans. Similarly, at a time when
Medicaid enrollment is surging, just five states have
Medicaid programs that offer comprehensive coverage,
with few barriers for telemedicine-provided services.2
Meanwhile, though telemedicine can technically operate
without borders, the ability for physicians to practice
across state lines is limited in many cases.
CASE STUDY
CASE STUDY: THE PRIVATE SECTOR LEADS THE WAY
The doctor-patient relationship is rapidly changing. Recently, Rite Aid announced a pilot program to offer
private, high-definition videoconferencing kiosks at select retail locations for patients to interact with
doctors, complete with digital stethoscopes. Services like Doctor on Demand and MDLive now allow
any patient with a smartphone to connect with a doctor from the comfort of their home, 24/7, for less than
the cost of an urgent care visit. While these services are currently limited to common health issuesflu,
stomach pain, sore throat, earaches and skin conditionsthese issues are responsible for nearly 10 percent
of patient visits to physician offices, emergency departments and hospitals.3
Beyond interactions between patients and doctors, advances are also expanding the market for smartphoneconnected medical devices. In 2014, at least 23 digital health apps received FDA clearance, including
smartphone linked thermometers, inhalers, glucose meters and even a peel-and-stick, Band-Aid-like vital

signs monitor that captures ECG, heart rate, HRV, respiratory rate, skin temperature, body posture, steps,
stress, and sleep staging.4
With more than 6,100 Primary Care Health Professional Shortage Areas across the U.S.,5 and just 10 percent
of doctors living in rural areas where 25 percent of Americans live,6 telemedicine also has significant potential
to serve rural and underserved populations. For example, in rural South Dakota, even though a clinic was just
10 minutes from Tom Soukops ranch, the physician on duty didnt have the expertise to treat his back injury.
Fortunately, the physician at the clinic was able to connect with a doctor in Sioux Falls via videoconference
who walked him through the steps to treat Toms injuries.7
And while further investigation is needed, a cautiously optimistic RAND study released last year found
that patients with coverage for telemedicine experienced increased access and required fewer follow-ups
compared to patients who visited a traditional doctors office or emergency department.8 According to the
lead author of the study, [t]elemedicine services such as the one we studied that directly links physicians
and patients via telephone or Internet have the potential to expand access to care and lower costs.9
ALEC supports the use of telemedicine to improve access and reduce costs for patients, and to that end,
supports the creation of an interstate compact to improve access to telemedicine by facilitating reciprocity
for physicians and reforming the existing reimbursement system.
ALEC MODEL POLICY

Resolution Supporting Efforts of Telehealth Working Group

DIRECT PRIMARY CARE AND TRANSPARENCY
Anecdotes of confusion surrounding health care charges and disparities in pricing are widespread. One
hospital charges $117,000 to undergo a procedure for which another charges $26,500; hospitals across
the street from each other charge wildly different prices for the same treatments, etc.10 One of the reasons
offered is that the lack of transparency creates a disincentive for consumers to seek competitive pricing.11
Meanwhile, the spread of concierge medicine and direct primary care are offering consumers new choices
and transparency not typically seen in health care. While not a solution to all of the challenges facing health
care, direct primary care has benefits that extend beyond those participating, including increased, voluntary
transparency by competitors, and potential savings for taxpayers.
CASE STUDY
CASE STUDY: OKLAHOMA PROVIDES CONSUMER CHOICE
In 2009, the Surgery Center of Oklahoma decided to do something considered disruptive in the health care
market: post its surgery prices online for anyone to see. Patients, doctors and even competitors can go
online, choose from the menu of procedures offered, and instantly get prices for a host of available services,
ranging from biopsies to knee replacements. Other medical facilities quickly followed.
Local news in Oklahoma City investigated the prices in 2013 and found the following comparisons to the
three largest medical centers in the surrounding area:12
Mercy Hospital charged $16,244 for a breast biopsy; the procedure costs $3,500 at Surgery Center
of Oklahoma.

OU Medical Center billed $20,456 for the open repair of a fracture; the procedure costs $4,855 at
Surgery Center of Oklahoma.
OU Medical Center billed $21,556 for a gall bladder removal surgery; the procedure costs $5,865
at Surgery Center of Oklahoma.
OU Medical Center billed $23,934 for an ankle arthroscopy; the procedure costs $3,740 at Surgery
Center of Oklahoma.
Integris Baptist billed $37,174 for a hysterectomy; the surgery costs $8,000 at Surgery Center
of Oklahoma.
The Reason Foundation shared the following example of how the Surgery Center is helping working Americans:
June Wietzikoski is a typical patient benefiting from this alternative health care market. She works as
a loan officer for a community bank in Groesbeck, Texas... She had carpal tunnel release procedure
done at the Surgery Center for the all-inclusive price of $2,775, which was covered by her employer.
Had she gone to a traditional hospital the discounted bill would have come to about $7,452 and she
would have been personally responsible for the first $5,299, since she hadnt met her deductible.13
And the impacts of direct pay transparency dont just benefit individuals and surgeons in Oklahoma. Dr.
Keith Smith, co-founder of the Surgery Center, shares the anecdote of a patient in Georgia who used online
prices to negotiate a surgery from $40,000 down to $4,000 at his local hospital.14 There is the potential for
government to save money as welllast year Oklahoma County allowed employees to use the Surgery
Center, and since making the change, the clerks offices recorded savings of more than $573,000 in just the
first five months.15
The Surgery Center of Oklahoma is just one success story of direct pay facilities offering lower prices and
greater transparency to consumers. ALEC supports allowing consumers to directly pay for health care, and
opposes classifying such arrangements as insurance. Four states, Maryland, Oregon, Utah and Washington,
have laws or regulations specifically permitting direct primary care, providing doctors relative certainty that
such arrangements will not come under regulatory scrutiny.16
ALEC MODEL POLICY

Freedom to Purchase Medical Services Act
n INNOVATION IN EDUCATION
DIGITAL EDUCATION AND HIGH-QUALITY DIGITAL LEARNING
For more than a century, the American education
system has looked nearly the same with students
crammed into a classroom with a teacher and
a black board at the front of the room. Despite
advances in technology, this method has basically
remained unchanged.
Children are no longer learning the way they have
in the past. Brick and mortar schools are no longer
effective and seat time is no longer a variable in
student achievement. The National Assessment
of Educational Progress (NAEP) scores strongly
suggest that parental choice in education leads to
higher test scores. Digital learning is also a major
component of school choice and helps students
who traditionally struggle in subjects such as math
and reading to learn at their own pace. Additionally,
digital learning is a crucial step in the transitioning
workforce that puts emphasis on skills and mastery
rather than the status quo of a traditional school
schedule. Digital learning is inevitable and necessary
for the continued growth of Americas economy.
CASE STUDY
CASE STUDY: MOORESVILLE, NORTH CAROLINA LEADING THE DIGITAL REVOLUTION
Defenders of the status quo insist on investing more and more money into the same system, expecting
different results. However, educators in Mooresville, North Carolina decided to try a different approach
and instead adopted a fully digital education model and equipped each student, grades 3-12, with a
laptop computer.
Children in Mooresville still attend school and have a teacher to help them with their work, but many of
the similarities stop there. Imagine a math classroom where one student is learning basic algebra and the
student next to them is learning advanced calculus. The children are free to learn at their own pace, and
advanced students can progress more rapidly while students who need more help can learn at a slower pace
and not face the humiliation of failing at a blackboard in front of the whole class.
n INNOVATION IN EDUCATION
Here is how one child described their digital education experience: Im not a very social person, but I have
no problem typing on a keyboard. It connected me with other studentsopened me up and helped me with
talking in public.17
The results are not just anecdotal. The New York Times reported the following about academic progress
in Mooresville:
The districts graduation rate was 91 percent in 2011, up from 80 percent in 2008. On state tests
in reading, math and science, an average of 88 percent of students across grades and subjects met
proficiency standards, compared with 73 percent three years ago. Attendance is up, dropouts are
down. Mooresville ranks 100th out of 115 districts in North Carolina in terms of dollars spent per
student$7,415.89 a yearbut it is now third in test scores and second in graduation rates.18
Not only was Mooresville able to increase academic achievement, but they did it with larger class sizes and
with fewer staff. In fact, sixty-five jobs were eliminated due to the conversion to digital learning, including
37 teachers.19
The principal of Mooresville High School, Todd Wirt, said, To be honest, this school was staffed incredibly
well when I first came, so much so that I wasnt exactly sure what some people did.20
Digital learning allowed Mooresville to maximize the use of their staff and allowed them to unlock the
potential of their students. Academic success in the 21st Century is contingent upon students access to highquality K-12 education. Todays students have access to the Internet, technology and devices unavailable to
previous generations. Excellent educational resources are becoming abundant in digital form, such as online
and blended learning.
ALEC supports allowing students in public and charter schools to enroll in online, blended and face-to-face
courses not offered by the students school. ALEC model policy allows a portion of that students funding to
go to the course provider.
ALEC MODEL POLICY

Resolution Adopting the 10 Elements of High Quality Digital Learning for K-12
Course Choice Program Act
n INNOVATION IN ENERGY
HYDRAULIC FRACTURING
As a result of the hydraulic fracturing (or fracking)
and horizontal drilling revolution of the past decade,
the U.S. has seen domestic production of oil and
natural gas skyrocket. The technology has existed
since the 1940s and since the first well was
fracked roughly 70 years ago, fracking has been
regulated almost exclusively by individual states.
In 2010, Congress directed the U.S. Environmental
Protection Agency (EPA) to study fracking to
determine if the practice poses any threat to
drinking water.
To date, there has not been a single proven case
of aquifer contamination as a result of fracking.
The EPAs study will also likely determine whether
the agency is afforded wider latitude in regulating
the drilling process, so a great deal rests on its
results. There are growing concerns that if the EPA
starts playing a major role in regulating fracking,
then energy development in the states might be
negatively affected.
It is important states maintain their existing regulatory authority over energy production and that fracking
continues to be employed in an environmentally safe manner.
CASE STUDY
CASE STUDY: NORTH DAKOTA TAKES THE LEAD ON ENERGY AND JOBS
Americans for decades were told they were going to have to learn to live with less. Peak Oil Theory stated
the U.S. would reach its peak energy production in the early 1970s and decline from there. Most famously,
President Jimmy Carter told Americans the energy shortage is permanent, and to live thriftily by turning
your thermostat down to 55 degrees at night.21
Despite pessimism by some lawmakers, the private sector continued to look for solutions to Americas energy
needs. A national fracking boom began in the mid-2000s. In fact, U.S. crude oil production has increased
from five million barrels a day in 2008 to more than eight million barrels a day in 2014.22 Additionally, the
amount of petroleum the nation imports has fallen from 65 percent in 2005 to 35 percent today.23
n INNOVATION IN ENERGY
Nowhere is the positive impact from fracking more evident than in the state of North Dakota. Oil was first
discovered in the Bakken formation in 1951, but was mostly unreachable until the recent technological
advancements in fracking, which uses pressurized water to break through shale to allow the extraction of
hydrocarbons. Fracking, combined with advances in horizontal drilling technologies, have created an oil
boom in North Dakota.
North Dakota now produces more than one million barrels of oil a day and is second behind only Texas in
oil production.24
Due to revenues from the oil boom, North Dakota has cut income and property taxes, while building new
roads and schools. Despite all the spending and tax-cutting, the state still has a surplus of more than $500
million.25 In fact, North Dakota is projected to receive almost $10 billion in tax revenue from oil and gas
production in the next two years.26 The oil and gas boom has also created jobs, with one in seven jobs now
tied to the energy industry.27 North Dakota currently has an unemployment rate of less than three percent.
North Dakotas oil boom has also created jobs and higher wages in other industries within the state. Notably,
employees working at McDonalds restaurants in the state often make as much as $15 per hour in addition
to generous signing bonuses. But, not all states have realized the economic benefits of fracking. After a sixyear-long moratorium, the state of New York recently banned fracking within the states borders.
It is difficultperhaps even impossibleto overstate the importance of readily available access to safe,
affordable energy for economic wellbeing and individual prosperity. Energy is an input to virtually everything
produced, consumed and enjoyed in society. Since energy is so fundamental to life, government policies
and regulations pertaining to the energy industry can have far-reaching effects, both positive and negative,
on everyday life. As the North Dakota model reveals, by enacting policies creating an environment in which
states can safely and responsibly develop their natural resources, state policymakers can ensure continued
job creation, economic growth and plentiful, cost efficient energy for all.
ALEC MODEL POLICY

Performance Based Permitting Act
Resolution to Retain State Authority over Hydraulic Fracturing
The Disclosure of Hydraulic Fracturing Fluid Composition Act
n INNOVATION IN TRADE
EXPANDING EXPORTS
For years free market policymakers have been working with the private sector to create plans to fix Americas
trade imbalance and increase exports, and thanks to the efforts of both, the world is witnessing a global
explosion of American goods. The iPhone is available around the world, the most recent version enjoying
particular popularity in Asia according to Business Insider, and U.S. movies and music are exceedingly
popular overseas. However, numerous American goods and products that have potentially lucrative export
markets are unable to access them fully because of misguided and often outdated export control restrictions.
Liquefied natural gas (LNG), defense and aerospace products with commercial applications and crude oil are
among those goods that could gain greater market share with Americas trading partners with the removal
of excessive restrictions.
CASE STUDY
CASE STUDY: EXPANDING ENERGY EXPORTS
While the laws governing energy exports seemed a prudent step to conserve domestic energy reserves
when the nation was reeling from the energy crises of the 1970s, the laws have outlived their usefulness
and are desperately in need of reform. Now that the U.S. has become the largest oil producer in the world,
these antiquated policies prevent America from capitalizing fully on Americas energy boon. In addition to
the significant economic opportunities that Americas increased energy production presents, the U.S. could
leverage it to support important alliances and partnerships.
Recently, some positive developments have emerged in energy export policy. Last year, the Obama
administration approved a $10 billion natural gas export station in Texas, which will help make America a
leading exporter in natural gas. These multi-billion dollar facilities condense natural gas into a liquid, which
can be put into containers and shipped around the globe. Since May 2011, the U.S. Department of Energy
has approved six natural gas export facilities three in Louisiana, one in Texas, one in Maryland and one in
Oregon. These export facilities will create thousands of jobs and millions in new tax revenue for the states.
Crude oil exports have the same potential to create jobs and spur investment in the energy sector. While
the United States can export refined oil products (gasoline, diesel, etc.), crude oil exports have been banned
except in very limited circumstances since 1974. However, in June 2014, the U.S. Department of Commerce
allowed two Texas oil companies to export condensate, a type of ultra-light oil, and recently the Department
released new export guidelines suggesting the White House might favor lifting the ban. The ban can be lifted
ad hoc by the Administration or, preferably, by Congressional action, which would result in more lasting
policy reform.
CASE STUDY
CASE STUDY: AN INNOVATIVE AGREEMENT TO SPUR EXPORTS (TRANS-PACIFIC PARTNERSHIP)
As a complement to addressing specific export restrictions to boost energy exports, negotiating and finalizing
trade frameworks with U.S. trading partners will help grow Americas economy. The most innovative of these
frameworks is the Trans-Pacific Partnership (TPP). While innovative may not be the first adjective that
comes to mind to describe a free trade agreement (FTA), TPP is unique and, if negotiated wisely, has the
potential to be the trade agreement gold standard for decades to come.
TPP is a trade agreement being negotiated between the United States and 11 other countries (Australia,
Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam) which have
a combined population of 482 million people and are responsible for 15 percent of global trade. TPP will
remove trade barriers for goods and services, improve intellectual property rights protections and create
21st Century trade rules. Unlike most trade agreements, TPP is built on an expansion model and has added
new partner countries since negotiations began. TPP negotiating partners represent nations on both
sides of the Pacific and negotiating partners range from the worlds largest economy (United States) to
smaller, less developed economies like Brunei and Vietnam. All member countries will be held to the same
high standards on everything from definitions of what constitutes a state-owned enterprise to enhanced
intellectual property rights protections. The latter is crucial to the U.S. innovation economy, as it needs
strong intellectual property rights protections to thrive.
TPP opens new markets in countries that are not currently free-trade partners where the U.S. can remove
trade barriers that will facilitate exports. For example, Vietnams tariff rate on passenger vehicles is up to
83 percent. Imagine how many more American cars will be bought by Vietnamese citizens when this tariff
is lifted. Japans tariff rate on beef is 38.5 percent. Eliminating this tariff could have a major impact on beef
exports. Every state in the union will benefit from a TPP that is wisely negotiated.
Ninety-five percent of the worlds consumers and 80 percent of the worlds purchasing power are beyond
U.S. borders, so increasing exports is one of the surest ways to grow the economyboth nationally and in
each state. Much work remains to expand American exports, starting with removing outdated export control
restrictionsespecially those on energy exportsand finalizing the Trans-Pacific Partnership Agreement (TPP).
ALEC model policies, including those listed below, support free market initiatives as they are proven to spur
economic growth nationally and in the states. Exports, because of their scope, carry with them an even
greater potential for economic growth than most domestic policies. According to the U.S. Department of
Commerce, nearly one-third of Americas economic growth since mid-2009 has been driven by exports,
and since then almost 30,000 businesses have begun exporting for the first time. These are astounding
figures, and lifting misguided restrictions on exports and negotiating high standard agreements with trading
partners are a sure way to grow Americas economy.
ALEC MODEL POLICY

Resolution for Reform of Counterproductive Export Control Policies
Resolution in Support of Expanded Liquefied Natural Gas (LNG) Exports
Resolution in Support of Lifting Federal Restrictions on Crude Oil Exports
Resolution Urging Congress to Pass the Trans-Pacific Partnership (TPP) Agreement
n INNOVATION IN JUSTICE
BREAKING THE CYCLE OF CRIME
Currently, nearly one in every 100 American adults is behind bars, and once released from prison more
than four in ten return within three years. This failing system costs federal, state and local governments
approximately $85 billion, yet does not deliver adequate public safety results for taxpayers and victims. In
addition to the enormous budgetary costs, Americas current criminal justice system places tremendous
human costs on society. ALEC has worked with state legislators from across the nation to reform the broken
criminal justice system by implementing evidence-based reforms that are proven to reduce recidivism,
lower the crime rate, decrease prison populations and save taxpayer dollars. Limited government-minded
state legislators have been at the forefront of this criminal justice reform movement. Policies along these
lines have been passed in more than 20 states during the past four years. Some key states include Georgia,
Mississippi, North Carolina, South Dakota and Texas.
ALEC criminal justice reform efforts operate on a couple of simple premises:
Crime at its core is harm to a victim, and the primary purpose of the system should be to repair the
harm done by the crime. To this end, victims should be involved in the system as early as possible.
Policies should be enacted to decrease the number of nonviolent offenders in prison.
Community correction programs should be held accountable for successes and failures through
clear performance measures. Local entities should be incentivized through funding mechanisms to
use evidence-based programs proven to work.
In order to reduce recidivism, it is important to get to and treat the root cause of criminality, which
is often addiction or mental illness.
CASE STUDY
CASE STUDY: ALEC MEMBER BRINGS SMART JUSTICE REFORMS TO TEXAS
During the course of 14 years, the Texas inmate population rose from 64,000 to 154,000.28 In 2005,
Representative Jerry Madden was named the chair of the Texas Corrections Committee. When he took
over the chairmanship, the Speaker gave him one order dont build any more costly prisons. Madden, an
engineer and not a criminal justice expert, began looking for data-driven solutions. One of the first places
he looked was across the aisle to his Democrat counterpart in the Senate, Senator John Whitmire. Together,
this bipartisan pair convinced the legislature and governor to invest $241 million in mental health treatment
and drug and alcohol rehabilitation instead of building a new prison.
Since their reforms took effect, Texas has saved more than $2 billion and has its lowest crime rate since
1973.29 Representative Madden then began chairing the ALEC Task Force that dealt with criminal justice
reform and Texas-style criminal justice reforms have spread across the nation. These policies focus on
evidence-based solutions and treatments, and are saving taxpayer money, reducing crime and giving
individuals a second chance.
CASE STUDY
CASE STUDY: SWIFT AND CERTAIN SANCTIONS IN HAWAII
In Hawaii, Judge Steven Alm faced many of the same problems that other judges face: a large number of
the people serving probation under his watch were being poorly supervised and getting rearrested at high
rates. The prevailing philosophy was that it was cheaper to allow someone on probation to get away with an
infraction or two, rather than locking them up in prison at a cost of anywhere between $20,000 and $50,000
per year. Unfortunately by doing nothing, the message sent to the criminal offender is that the rules do
not apply to them. Judges and probation officers are often left with an all-or-nothing choiceleaving the
offender to roam the streets or lock them up in expensive prison cells for years on end.
Judge Alm watched the revolving door of probationers coming in with failed drug tests and missed
appointments. Only after offenders had committed a new crime or had multiple infractions were they
brought back in front of the judge. Frustrated with the system, Judge Alm created the Hawaii Opportunity
Probation with Enforcement (HOPE) program. The simple idea was that if someone on probation committed
an infraction, like a failed drug test or missed appointment, they would have to come and see the judge right
away and receive a moderate punishment like a weekend in jail or home confinement with GPS tracking. The
immediacy and consistency of the punishment is more effective in changing offenders behavior than the
possibility of going to prison for an undetermined sentence at some point in the future.
The HOPE program produced fantastic results. Participants were:
55 percent less likely to be arrested for a new crime,
72 percent less likely to use drugs,
61 percent less likely to skip appointments with their supervisory officer, and
53 percent less likely to have their probation revoked.30
As a result of Judge Alms work, similar programs have
been enacted in several states and President Obama has
proposed $115 million in grants for states to establish
similar smart probation programs. ALEC members have
developed a set of model policies that refocus criminal
justice spending away from the incarceration of lowlevel, nonviolent offenders and instead direct funds to
more cost-effective community corrections programs like
intensive parole and probation, electronic monitoring
and drug and alcohol treatment. Technological advances,
such as advancements in GPS monitoring and nonnarcotic drug treatment options, now allow more
offenders to be safely supervised outside the prison
walls. The supervision of low-level offenders in the
community reserves prison space and resources for the
most violent criminals and works to provide a second
chance for nonviolent offenders through rehabilitation
and personal accountability.
ALEC MODEL POLICY

Swift Certain Sanctions Act
Earned Compliance Credit Act
Recidivism Reduction Act
Resolution in Support of Evidence-based Medical Treatment for Substance Use Disorders
Justice Safety Valve Act
n INNOVATION IN ECONOMIC DEVELOPMENT

PUBLIC PRIVATE PARTNERSHIPS
Public Private Partnerships (P3s) have been growing in popularity as a tool for states to address their major
infrastructure challenges. P3s rely on bringing in private capital to fund public infrastructure. P3s transfer
risk away from the government and into the private sector, bring in new sources of capital and get projects
moving again.
As of February 2014, 22 states have broad P3-enabling legislation and an additional 11 states have limited
or project-specific legislation.
CASE STUDY
CASE STUDY: VIRGINIA: INVESTING IN THE FUTURE
Not only can government change the way it delivers services to citizens, it can also change the way it finances
those services. For example, since the 1950s, roads have been primarily funded through gas taxes.
Now, however, the advent of electronic tolls and public-private financing brings a new way for states to build
roads and infrastructure. Thanks to technology, drivers no longer have to stop at a toll booth and rates can
be changed quickly to help control traffic flow. For example, discounts can be applied to those who commute
during off-peak hours to help reduce congestion.
The Washington, D.C. area has some of the worst traffic congestion in the nation. The Beltway that circles
D.C. through Maryland and Virginia was completed in 1964, and despite the increase of millions of new
citizens, the Beltway has remained essentially the same since its construction. When Virginia lawmakers

lacked the $1.9 billion funding to add lanes to a 14-mile stretch of the Beltway, they secured a deal with a
private financier, Transurban, who agreed to pay $1.4 billion to build the additional two lanes. In return for
building the tolled lanes, Virginia leased Transurban the lanes for 75 years to collect the toll revenue.
The lanes were recently finished and Virginia was able to complete the $1.9 billion project with only $400
million in state investments. Virginia has also begun looking at building more public private partnerships as a
result of this project, and their neighbors to the north in Maryland recently passed legislation to expand the
use of public private partnerships. A safe and updated infrastructure system is vital to a thriving economy,
and as federal highway funds look decreasingly likely, states need innovative tools to help them address their
increasing infrastructure needs.
ALEC supports P3s as a financing tool for states looking to expand and maintain their infrastructure. P3s
benefit governments by leveraging tax dollars, transferring risk away from the government and to the private
sector, accelerating delivery schedules and providing an opportunity to innovate.
ALEC MODEL POLICY

Establishing a Public-Private Partnership (P3) Authority Act

THE PERSONALIZATION OF FINANCING:
CROWDFUNDING
Technology is changing the way we receive
loans and invest. Beginning in the mid-2000s,
websites were launched that offered people
the ability to fundraise for their own personal
projects and ventures. This came to be known as
crowdfunding. The crowdfunding site Kickstarter
claims to have had more than $1 billion pledged,
from 7.4 million people, to support thousands
of different projects on the site. Kickstarter
investors back everything from films, music,
art and gadgets. In return for investing in these
projects, investors do not receive shares in the
company but, for example, receive signed albums
and t-shirts. Kickstarter has averted Securities
and Exchange Commission (SEC) regulation by
operating on a donation basis and only offering
trinkets in return for investment.
CASE STUDY
CASE STUDY: CROWDFUNDING IN ACTION
Recently, a group of fans of the music group Foo Fighters raised more than $60,000 to have the band play at
a show in Richmond, Virginia. Fans invested $50 a piece, and local businesses contributed more. Fans were
only charged once the band agreed to play.
Imagine, however, instead of funding music concerts, you could go online and fund the next iPhone or
Facebook. There are crowdfunding sites that offer monetary returns on investments. Crowdfunding sites like
EquityNet offer accredited investors the ability to fund startup companies.
Crowdfunding is also spreading to personal lending with sites like Lending Club, which offers investors the
ability to directly make personal loans to other individuals. Their website claims their members have made
more than $6 billion in loans to individuals and paid almost $600 million in interest to investors.

Individual states have passed regulations allowing intrastate crowdfunding for non-accredited investors.31
In Texas, companies can now raise up to $1 million a year, in increments of $5,000 per person. To avoid SEC
regulation, only Texas companies and residents are allowed to take part. Similar laws are on the books in
Alabama, Colorado, Georgia, Idaho, Indiana, Kansas, Maine, Maryland, Michigan, Tennessee, Washington
and Wisconsin.32 Twelve states are currently working to legalize crowdfunding.
It should be noted there are hesitations to adopt the crowdfunding platform. Federal regulators fear the
potential for fraud and as a result are refusing to eliminate many Depression-era regulatory requirements.
The JOBS Act, signed by President Obama in 2012, was crafted to open up investment crowdfunding to small
startup businesses, but due to the SECs delay to promulgate regulations for equity crowdfunding, that has
yet to happen. To this date, crowdfunding investing is not open nationally to the general public.
Crowdfunding is an innovative way for start-ups to gain funding and individuals to invest in companies in
their community. While crowdfunding must have regulatory oversight, this is a promising technology that
can open up funding for entrepreneurs. ALEC supports intrastate equity crowdfunding.33
ALEC MODEL POLICY

Local Investment Made Easy (LIME) Act
n INNOVATION IN PENSION REFORM

DEFINED-CONTRIBUTION PENSION REFORM ACT
While a large percentage of employees are enrolled in defined-contribution plans in the private sector, the
public sector offers unsustainable defined-benefit plans for many of its employees. When the public sector
makes pension promises that they cannot afford, state employees, retirees and taxpayers are put at risk. As
former Utah State Senator Dan Liljenquist wrote in Keeping the Promise: State Solutions for Government
Pension Reform, pension reform is not a partisan issue, but a math issue.
The Defined-Contribution Pension Reform Act promotes security and accountability in state retirement
plans. This policy creates a 401(k) style defined-contribution pension plan for new public employees. Unlike
the older defined-benefit model, the modern defined-contribution pension plan provides greater choice,
mobility and stability for public servants and their families.
CASE STUDY
CASE STUDY: OKLAHOMA REFORMS RETIREMENT PLANS
In the most significant pension reform of the decade, Oklahoma became the third state in the nation to
transition new hires into a 401(k) style defined-contribution pension plan. Oklahoma joins Michigan and
Alaska in making the switch.
The pension overhaul exempts teachers and public safety employees from the defined-benefit to definedcontribution transition, but all other new state employees, beginning in November of 2015, will be enrolled
in the states defined-contribution plan. The pension reform will not impact current retirees or current
employees; the changes will only benefit new workers.
n INNOVATION IN PENSION REFORM

This ambitious reform will be an essential part of Oklahomas fiscal health for years to come. Although the
state still faces significant unfunded liabilities from its current defined-benefit pension system, it is one of
only three states that will no longer accrue these massive liabilities every year. Oklahoma can now work over
time to pay off unfunded liabilities, keep its promises to current workers and retirees, and also make sure
that future employees will have a stable and sustainable retirement plan.
Oklahoma is the most recent state to recognize traditional defined-benefit plans no longer serve a 21st
Century workforce. Hopefully this major reform will not go unnoticed in other states looking for ways to
make sure their public servants are taken care of in retirement.
ALEC supports states adopting defined-contribution plans for all new hires. By giving state employees a
private retirement account, just like the vast majority of private sector companies, employees will have a
legal right to make sure their pensions are adequately funded and protected.
ALEC MODEL POLICY

Defined-Contribution Pension Reform Act
Retirement System Board of Trustees and Employees Prudent Investor Act
CONCLUSION
State lawmakers have the power to transform government and offer innovative ideas to break out of the old
way of thinking. Americans deserve a government that encourages economic success and entrepreneurship,
and by embracing new and creative ways to govern, state legislators can lead the way to a more efficient,
effective and accountable system of state governments.
As true laboratories of democracy, states have the unique opportunity to experiment and decide for
themselves what system of government best meets the needs of their constituents. In the face of federal
inaction and discord, state lawmakers can set the example of how a successful government operates. From
improving our system of education to reforming our criminal justice system, states are creating solutions
from which others can draw and learn.
As Speaker Newt Gingrich discusses in his book Breakout, a new axiom is developing for lawmakers that will
be different than the simple right vs. left debate. The new debate will be about future vs. past. Future leaders
will embrace technology and reforms that bring government in line with the new world, while leaders who
stand for the past will continue to argue for the status quo and push back against reformers.
ALEC is proud to stand with leaders of the future and those who want to bring innovative solutions to
their state.
FOOTNOTES
1.
http://www.rasmussenreports.com/public_content/politics/mood_of_america/congressional_performance
2.
http://www.americantelemed.org/docs/default-source/policy/50-state-telemedicine-gaps-analysis---coverage-and-reimbursement.
pdf?sfvrsn=6
3.
http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Technology-Media-Telecommunications/gx-tmt-2014prediction-evisits.pdf
4.
http://mobihealthnews.com/36795/23-notable-fda-clearances-for-digital-health-apps-devices-so-far-this-year/
5.
http://www.hrsa.gov/shortage/
6.
http://sph.tamhsc.edu/centers/rhp2010/Volume1.pdf
7.
http://www.argusleader.com/story/news/2014/06/08/telemedicine-gains-increasing-relevance-sd/10193077/
8.
http://www.rand.org/pubs/external_publications/EP50457.html
9.
http://insurancenewsnet.com/oarticle/2014/02/04/first-assessment-of-national-telemedicine-service-finds-efforts-appear-toexpand-a-455307.html#.VLkbsWd0z4g
10. http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/08/one-hospital-charges-8000-another-38000/
11. http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/08/one-hospital-charges-8000-another-38000/
12. http://kfor.com/2013/07/08/okc-hospital-posting-surgery-prices-online/
13. http://reason.com/reasontv/2012/11/15/the-obamacare-revolt-oklahoma-doctors-fi
14. http://www.forbes.com/sites/davechase/2013/03/24/diy-health-reform-reduces-surgery-costs-50-90/
15. http://www.news9.com/story/26117496/health-care-switch-saving-oklahoma-county-thousands
16. http://www.heritage.org/research/reports/2014/08/direct-primary-care-an-innovative-alternative-to-conventional-health-insurance#_ftn29
17. http://www.nytimes.com/2012/02/13/education/mooresville-school-district-a-laptop-success-story.html?pagewanted=all&_r=0
18. Ibid
19. Ibid
20. http://www.edweek.org/dd/articles/2011/10/19/01conversion.h05.html
21. http://millercenter.org/president/speeches/speech-3396
22. http://online.wsj.com/articles/why-peak-oil-predictions-haven-t-come-true-1411937788
23. http://www.politico.com/magazine/story/2013/11/congratulations-america-youre-almost-energy-independent-now-what-98985.html#.
VGTPrDTF8Yc
24. http://dailycaller.com/2014/08/04/north-dakota-oil-production-surpassed-1-million-barrels-per-day/
25. http://bismarcktribune.com/news/local/govt-and-politics/north-dakota-surplus-continues-to-grow/article_fbbb0d94-2fbe-11e4-8b41001a4bcf887a.html
26. http://www.governing.com/topics/elections/gov-north-dakota-ballot-oil-taxes.html
27. http://www.wday.com/content/report-almost-1-7-north-dakota-private-sector-jobs-tied-oil-and-gas
28. http://www.governing.com/poy/jerry-madden-john-whitmire.html
29. http://www.rightoncrime.com/wp-content/uploads/2011/09/Texas-Model-Adult.pdf
30. http://www.heritage.org/research/reports/2014/02/the-hawaii-opportunity-probation-with-enforcement-project-a-potentially-worthwhilecorrectional-reform
31. http://www.siliconhillsnews.com/2014/10/23/texas-approves-equity-based-crowdfunding-rules/
32. http://www.crowdfundinsider.com/2014/07/45170-definitive-guide-proposed-intrastate-crowdfunding-exemptions/
33. Ibid

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F E B R U A RY 2015

Dear ALEC Members, February 5, 2015

Representative Phil King

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 3

Expanding Access and Lowering Costs with Telemedicine....................................................... 7

Case Study: The Private Sector Leads the Way......................................................................... 7

Direct Primary Care and Transparency...................................................................................... 9

Case Study: Oklahoma Provides Consumer Choice.................................................................. 9

Digital Education and High-Quality Digital Learning............................................................... 11

Case Study: Mooresville, North Carolina Leading the Digital Revolution............................ 11

n INNOVATION IN TRADE ................................................................................................... 15

Case Study: Expanding Energy Exports................................................................................... 15

Case Study: An Innovative Agreement to Spur Exports (Trans-Pacific Partnership)............... 16

Breaking the Cycle of Crime.................................................................................................... 18

Case Study: ALEC Member Brings Smart Justice Reforms to Texas........................................ 18

Case Study: Swift and Certain Sanctions in Hawaii................................................................. 19

n INNOVATION IN ECONOMIC DEVELOPMENT.................................................................. 21

Public Private Partnerships...................................................................................................... 21

Case Study: Virginia: Investing in the Future........................................................................... 21

The Personalization of Financing: Crowdfunding.................................................................... 23

Case Study: Crowdfunding in Action....................................................................................... 23

n INNOVATION IN PENSION REFORM................................................................................. 25

Defined-Contribution Pension Reform Act.............................................................................. 25

Case Study: Oklahoma Reforms Retirement Plans.................................................................. 25

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 4

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 5

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 6

n INNOVATION IN HEALTH CARE

n INNOVATION IN HEALTH CARE

ALEC MODEL POLICY

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 8

n INNOVATION IN HEALTH CARE

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 9

n INNOVATION IN HEALTH CARE

ALEC MODEL POLICY

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 10

ALEC MODEL POLICY

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 12

ALEC MODEL POLICY

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 14

ALEC MODEL POLICY

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 17

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 19

ALEC MODEL POLICY

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 20

n INNOVATION IN ECONOMIC DEVELOPMENT

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 21

n INNOVATION IN ECONOMIC DEVELOPMENT

ALEC MODEL POLICY

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 22

n INNOVATION IN ECONOMIC DEVELOPMENT

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 23

n INNOVATION IN ECONOMIC DEVELOPMENT

ALEC MODEL POLICY

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 24

n INNOVATION IN PENSION REFORM

AMERICAN LEGISLATIVE EXCHANGE COUNCIL 25

n INNOVATION IN PENSION REFORM