Skip to comments.Reinventing the Budget
Posted on 06/28/2003 2:48:43 PM PDT by Anthem
In solving his revenue crunch, Washington Gov. Gary Locke focuses on results, not costs. Table of Contents
At a time when the states face a collective revenue shortfall of $80 billion
That public confidence has been a byproduct of an effort by Locke to invert the standard way of budgeting, in which costs are the driving concern, by focusing instead on the intended results of government spending.
In the traditional approach to addressing a shortfall, you start with your previous year's budget and you tweak it, cutting costs until the old list of expenditures comes in line with your new revenue projections. The focus is on how much from the old list has to go. You can pick through the budget looking for obvious waste, or you can cut everything across the board. Either way, it's the cuts that matter
Locke's results-based method flips the cost-based approach on its head. The focus is no longer on what government can't afford to do; it's on the things government can
Thus, the brand name Locke gave the process that he and his budget team followed in writing their biennial budget for 2003-05: "Priorities of Government." It has become widely known in the state as "PoG," pronounced like "frog."
"It has allowed the governor to dramatically redefine himself as a visionary and a leader willing to make tough decisions and back them up," said Richard Davis, president of the fiscally conservative Washington Research Council, a policy group that has been critical of Locke in the past.
How Locke and his team decided to embark on the PoG process is a classic tale of necessity being the mother of invention. They knew they needed a dramatically new approach when they saw they were facing not just a short-term revenue shortfall, but a long-term structural budget problem. Addressing it by increasing revenues was not a viable option; Washington voters, like voters across the country, had shown no appetite for tax hikes. And yet it was clear that the traditional cost-cutting methods would leave no one satisfied; beyond the political fights, cost-based budgeting is also a recipe for inefficient and ineffective government. "It is like taking last year's family car and reducing its weight with a blowtorch and shears," The Seattle Times wrote in an editorial. "But cutting $2 billion from this vehicle does not make it a compact; it makes it a wreck."
That's an image one understands when one sees the budget broken down into discrete bits. As in other states, Washington's budget includes big-ticket expenditures, such as special education and the prison system, along with scores of more obscure programs and activities, like the superintendent of schools' anti-bullying and harassment training program and the attorney general's homicide investigation tracking system. Keep adding to and subtracting from that list in a piecemeal fashion, and, over time, both logic and direction are lost.
Four questions. To help Locke's budget team chart a new course, the governor's chief of staff, Fred Kiga, brought in consultants Peter Hutchinson and Connie Nelson from the Public Strategies Group in St. Paul, Minn. Over 10 weeks, they helped Locke's team plot out their PoG strategy.
The process revolved around four questions: How much money does the state have to spend? What results form the core of what must be done
The answer to the first question was approximately $23 billion.
In answering the second question
To answer the third and fourth questions
Shopping for results. In their results-oriented process, that list, in effect, became a selection of goods on the shelves of a grocery store. The budget team browsed the aisles, viewing the offerings with the skepticism of discriminating, fixed-income shoppers. They saw each line item as a service option that was available to them as a potential means of advancing their core set of goals. They took an enterprise-wide approach, ignoring the established order of which agencies had traditionally been responsible for which activities. With their core list of priorities in mind, they simply took their $23 billion, looked down the master list of 1,400 service options, and
For example, to improve student achievement, they proposed buying $1.2 billion worth of special education, $426 million worth of pupil transportation, $144 million worth of bilingual education, and $4 million worth of information technology, among other things. But they decided that anti-bullying and harassment training, summer vocational training, and "readiness to learn" activities were not good values for their education dollar.
Down the list of top state priorities they went, shopping for the programs and activities they felt were most likely to produce the results the citizens of Washington wanted, until they had finished spending their $23 billion.
The process was a creative one that encouraged substantial reforms. For each of the budget team's core goals, a "results team" was charged with identifying the five or six key expenditures that would most likely achieve the intended result. In cases where the options on the existing master list seemed inadequate, they were encouraged to propose new options. For example, the team handling K-12 education proposed moving to a "pay-for-performance" compensation system for teachers, instead of the traditional fixed pay scale. That team also proposed moving away from across-the-board education funding and toward more targeted funding for the schools and students with the greatest needs. Such creative reforms are generally absent from the traditional cost-based budgeting process.
The budget Locke submitted to the legislature cut spending by a brutal $2.4 billion
"People here feel good about the process," said Lynne McGuire, budget operations manager in Locke's Office of Financial Management. "They can explain it. It's more understandable than before."
The governor and his budget team are by no means out of the woods, though. Everyone agrees the PoG process has been a breath of fresh air. But with spring comes the legislature's chance to make edits. And then there's the really hard part
Are they advancing that list of top priorities? It will be a while before anyone knows, and the wait may test voters' confidence. "The time it takes to demonstrate results is often longer than the anti-tax populace may be willing to give you," said Davis, of the Washington Research Council. "So there has to be a strong communications strategy
But the long-term benefits of pulling that off may be huge. "This is a value-for-money question," said Hutchinson, the consultant. "The anti-tax crowd says there's no value for money. Locke is saying, 'There is value for money, but we have to prove it.' Over time, if he does prove it, history shows citizens will want to pay for the value they get, which can translate to more revenues."
Randolph Court is a senior editor of Blueprint.
Indeed, it is the way most businesses approach their own budget process. Every line item is questioned every budget cycle -- or, at least, should be.
Nonetheless, I'm immediately skeptical -- as the two of the most disastrous budgeting "tricks" in our history came from the liberals.
1. Zero baseline budgeting -- courtesy of Jimmy Carter, thereby assuring that any reduction in the percentage of growth of any program would be falsely labelled a "cut".
2. The consolidated budget -- LBJ merged the federal government's operating budget with the Social Security Trust Fund in order achieve "guns & butter" and a "balanced budget" during the Viet Nam war. Out of control government spending traces to exactly this development (just as LBJ wanted).
So, on the face of it, I've no problem with Locke's "results-based" budget. But I have a host of problems with any liberal Democrat being responsible for any public budget...
Credit should be given where credit is due.
Fact is, no new taxes and spending cuts is astounding for any government budget, at any level, irrespective of party.