2010 Utah Legislative Session
The 2010 session of the Utah State Legislature has begun. The top priority is the need to shave as much as $700 million off of last year’s budget in order to meet the projected shortfall in government revenue from taxes, fees and other sources. (As quoted in Monday’s Deseret News, the House Speaker has stated, “The budget dominates. It is the 800-pound gorilla in the room. Less spending trickles down to all other policy issues”).
Most elected officials tend to think in terms of “raise the bridge” or “lower the water.” Some (like the Democrat majority in Washington) want to raise taxes and fees to guarantee the revenue needed to keep funding all existing government programs and give regular “cost of living” increases to all government employees. (The self employed and most business owners have no such guarantee from year to year). Others want to cut and reduce spending to stay beneath the reduced income ceiling. The hard part is prioritizing and knowing where to focus and best apply the citizens’ combined resources. (When it comes to budget cuts – there are no volunteers).
George Will has called the process that produces our annual government budgets an “endless auction.” The many government departments and interest groups will again advocate why they must receive more than is available or why they should be spared the cuts that are needed because of the down economy and high rate of unemployment.
The Flawed Premise of “Base Budgets”
Conventional state budget analysis always begin with last year’s base budget and then moves to a review and consideration of the many competing requests for new and additional increases. This creates a sort of “use it or lose it” philosophy within government. It discourages departments from trying to achieve savings from year to year and conducting their own “waste watch.” There is little incentive for consolidation or elimination. As Ronald Reagan noted, “Government doesn’t tax to get the money it needs, it always needs the money it gets.”
I recall one very disappointing experience involving our state’s public education budget. It was a similar time of needed budget cuts due to limited revenue. A school for the physically challenged pleaded for roughly $600,000 more than was budgeted. I remember working diligently with others on the Appropriations Sub-Committee to meet those needs in reliance on the representations that were made in the school’s budget presentation. However, an audit later revealed that a comparable surplus from the previous year had been kept back and misused by the school in ways that directly contradicted what we worked so hard to provide at their request.
One of the best Bills I ever sponsored (and which I would like to see revived) would establish recurring annual audits of all departments’ base budgets and then track and reward savings and efficiencies within each department from year to year.
When specific individual budget decisions are replaced by blanket across the board cuts by all departments, individual accountability and prioritizations are diminished. Those who are the most conscientious and transparent and frugal are effectively penalized by being lumped together with all other departments under such an over-generalized approach.
Departments are reluctant to come forward and volunteer savings because they fear they will not receive any future increases if they do. They are afraid that any immediate savings or voluntary reductions may suggest that they are over staffed or over funded.
When a new task or direction is proposed or required by a new piece of legislation, there is a tendency for the budget analysts and the affected areas of government to generate and add a “fiscal note” to the proposed Bill. This notation indicates that more funding is needed to do what is asked because everyone and everything in our state government are always thought to be working at maximum level. Reallocation of current resources and reprioritizations within existing budgets are not an option it seems and are seldom considered. Thus, fiscal notes can be fatal for any new proposed legislation.
Principles to Consider in Setting the Price of Government
Here are some guiding principles that could help with this year’s state budget crisis:
Every Citizen is a Stakeholder
Ronald Reagan said, “Government is the people’s business, and every man, woman and child becomes a stakeholder with the first penny paid in taxes.” (See prior posting on this site on December 3, 2007: “Keeping a Lid on It—Controlling the Size and Cost of Government.”).
As citizens, we pay for our government and we want a government that is worth the price we pay for it. Hopefully, our representatives will not merely accept “business as usual.” The focus should be on the results we expect from government and the price we are willing to pay rather than just maintaining current programs and the costs they incur. The state budget should be based on the programs, institutions and undertakings, which will deliver the results we seek as citizens. There must be careful and strategic reviews, consolidation where possible, alternatives, accountability and right sizing to achieve maximum efficiency.
Calculating and Paying The “Price of Government”
The Price of Government by David Osborne and Peter Hutchinson explains how government can refocus its approach to budgeting on behalf of the people, who pay the bills. They refer to an old saying, which teaches, “When you’re riding a dead horse, the best strategy is to dismount.” You don’t change riders. You don’t reorganize the herd. You don’t put together a blue-ribbon commission of veterinarians. And you don’t spend more money on feed. You get off and find yourself a new horse. (p. 19).
The “price of government” means the amount of purchasing power we are willing to give and commit to our government (City, County, State and Federal) (p. 41). The Budget process is a mad scramble to determine how much of what we want, we can actually afford. Budgeting for desired outcomes would turn the status quo on its head. It begins not with last year’s budget or competing demands from special interests. Instead, elected representatives determine what the people want and how much they are willing to pay for it. (We must also be leery of those who are always willing to raise taxes on the assumption that it will surely be someone else and not them who must pick up the tab).
There is a limit to how much the people can afford and are willing to pay. The price of government is not something elected leaders can set anywhere they choose. Citizen acceptance and support of the level of taxation and the services provided by their government act as restraints and are limited by the health of the economy. The price of government is subject to the will of the people and must reflect their values and priorities. A higher price does not necessarily mean better government and a lower price does not mean a worse government. People in different jurisdictions make different choices about the public services they want (p. 55). Leaders should begin by reaching agreement on the total incoming revenues from all sources (and make sure those sources are based on sound principle as well) and then determine how to use those funds to purchase the best results for the people they serve. It’s all about setting priorities and buying and achieving results that the citizens value at a price they are willing to pay.
Balancing the Government Checkbook
Sometimes elected officials and special interests seem to concern themselves with only a particular piece of the revenue pie without giving full consideration to the condition of the pie itself. (p. 63). Everyone needs to be concerned with the “big picture” and the final total budget decision. Anyone can be a sympathetic hero to this or that group and tell them you supported their every wish if you never have to balance the checkbook and account for the total tax burden and overall size, productivity and efficiency of government. The majority in the Utah State Legislature are the ones who consistently take the lead in balancing the state’s checkbook. They are the ones who must make the hard individual choices that hard times demand.
Conscientious legislators will read the individual bills and take ownership of the combined results of the session as a whole. They are not spectators who merely focus on a handful of Bills that interest them and leave the final budget for “leadership” to work out with the Chairs of the Appropriation Sub-committees and then with the Governor.
Focus On “Keeps” Rather Than “Cuts”
An improved way to reach the final budget is to focus on “keeps” rather than “cuts”. It shifts the debate and focus from how to best trim 5-10 % to how to best spend the 95-90% that remains. It changes the approach from defense to offense. (Id.). It changes the focus and outcome from appeasing advocacy groups to actually delivering the results that citizens value.
The traditional state budgeting process typically focuses on cuts and how to survive them. Again, a better method is to focus on what we keep and what we are striving to accomplish for the good of the State. The problem is that the budget process starts every year with each department proposing to spend what they did last year. (That is their “base”).
Base budgeting is at the heart of the current system. It is presented as the minimum necessary for all agencies and departments to keep doing what they are currently doing. Each year, every department tries to increase their base and receive more than what they received the previous year. (In hard times, they try to avoid going backwards but because everyone wants to go forward, government grows and budgets steadily increase over time).
Government departments typically present three justifications to increase their base budget: (1) Inflation makes everything cost more; (2) An expanding workload means they have to cover new students, patients, prisoners, etc. as the case may be or (3) A new law has created a new mandate.
When budget cuts are in the air (such as this year), department heads often ask to be spared the budget ax (or is it a scalpel?). They hope to be “held harmless”. Knowing that there is always the possibility of a future budget cut down the road, departments try to get as much money as possible into their base where it can be protected from year to year. This is the difference between “one time money” and “ongoing” allocations. Utah has been recognized nationally as the Best Managed State, in part, because of our recognition of this important principle and resistance to unsustainable long term budget commitments.
The Budget Process Is Not a Game of “Hide and Seek”
Consider this disturbing admission and budget strategy expressed by a Minnesota Department Head:
One trick in the Legislative budget hearing was to make sure that you had one or two items that cost about $25,000 that would attract the Legislators’ attention — maybe even get them a little angry. They could understand the value of $25,000. It was small enough for them to relate to. I really like bringing one of these up right before the $60 million for technology operations.
My favorite item was uniforms for the state band, for $30,000. I used it for a number of years. I would insert it right in front of something large and controversial I was concerned about. I could always get them to spend at least a half hour haggling over the state band uniforms; then they would only spend two or three minutes on my $60 million item. (p. 64).
As you can see, this Minnesota state budget official compensated for the likelihood of coming budget cuts by building enough excess into his proposal to ensure that even after the inevitable trimming, he could still end up with what he felt he needed for his department. Such manipulation of the budget process is not principled government. Another budget reduction avoidance tactic that department heads sometimes use is to threaten to shut down the most popular programs or elements of their administration. At the Federal level, this is known as “Closing the Washington Monument.” (p. 64).
Sometimes budget officials are unable or simply fail to discern the difference between “fat” and fundamentals. Therefore, they may simply resort to blanket “across-the-board” cuts that affect every area of government. This approach may seem fair but, as mentioned, it effectively penalizes those administrators who filed the most prudent, efficient, and well-conceived budgets. (p. 65). When the trimming starts, officials are often criticized for what they cut and rarely thanked for what they manage to keep. It can be a very intense and difficult process to justify every dollar that is cut while what is kept is too often taken for granted.
Desired Outcomes and The Price of Government
If the budgeting process is changed to focus more on desired outcomes and the overall price of government (which our Representatives sensibly determine to be the limit of what the people can afford and are willing to pay), the entire concept of a “base” budget goes away. Last year’s numbers are not entitlements. There is no argument about adding to or subtracting from it. Instead, the starting point is an agreed upon price of government. The objective is to buy those results and outcomes and accomplish what the citizens value most at a price they can afford and are willing to pay. Instead of trying to pad their base budgets from year to year, the departments are asked to show why this or that program will produce the desired outcomes for the best possible price. (p. 65). The people’s representatives can then compare competing strategies to determine which options offer the best “bang for the buck.”
By trying to always steer all government organizations towards desired results, everyone works as a team. Everyone is working on delivering the results citizens’ value at a price they are willing to pay. This is not simply a change in semantics. It is a fundamental shift towards a more principled approach to state budgeting. The “price of government” calls for a “purchasing strategy” and the budget becomes the final purchasing decision. It requires the purchaser (our Legislature) to set specific goals (something more than simply a balanced budget).
The Legislature as “Buyers” and “Purchasing Agents”
Those who are charged with creating the budget should see themselves as buyers or purchasing agents for the citizens. They should be impartial and not tied to any of the suppliers. They help determine what matters most and how the various decisions and activities contribute to the desired outcome. Each suggestion of what matters most is challenged by competing proposals. The Representatives seek out those who can deliver the best results for the best price. Instead of asking agencies or departments to simply add to or subtract from last year’s numbers, representatives incorporate the results, price and purchase strategy they have settled on. Rather than simply a “request for proposal” (RFP), we can think of it as a “request for results” (RFR). (p. 79).
As the Representatives gather and study the many offers that come before them, they ultimately choose what they want to buy for the people who have entrusted them with such purchasing power. They evaluate and rank the proposals based on the results that can be delivered on a per dollar basis. They make their decisions according to the priorities they set until the available funds (which should be a principled ceiling) have been exhausted. This overall buying plan becomes the final budget. It is a list of keeps, not simply cuts. It represents the combined positive choices they have made concerning how to best spend and apply the citizens’ resources. The Legislature’s responsibility is to purchase the results the citizens value most at a price they can afford and are willing to pay.
Performance Budgeting
Performance budgeting from year to year is a significant improvement over traditional “base” budgeting. By calling attention to outcomes and results, it can drive serious rethinking of strategies (p. 85). In the Legislature, committees are typically linked to the structure of the state government. There is usually a committee for every department (Education, Law Enforcement and Criminal Justice, Health and Human Services, Transportation, Judiciary, etc.). Performance and desired outcomes should be determined and gathered and goals and objectives and priorities set for each year. Base budgets are not always reliable nor should they be controlling. “The biggest room in the world is the room for improvement.” Where are the incentives to make such improvement when all base budgets become “sacred cows”?
The Results of Charter School Innovations in Public Education
In the area of public education, Charter Schools are a positive example of what happens when government takes the outcome approach. Charter Schools are public schools created by an individual or group including teachers and parents or guardians of students who will attend the school or a not-for-profit legal entity organized under the laws of the state. They are schools made up of students who have chosen to be there and who are actively engaged in creating an education environment and opportunity of their own making. To stay open, Charter Schools must attract and keep enough students to finance their operations.
Charter Schools are viewed as innovative and affordable “laboratories of learning”. The Utah Charter Schools Act (Utah Code 53A-1a-501 et seq.) has caused these schools to flourish. There is a lot of flexibility built into the Charter School system and that seems to be one of its best elements.
The purposes of Charter Schools are to improve student learning; encourage the use of different and innovative teaching methods; create new professional opportunities for educators that allow them to actively participate in designing and implementing the learning program at the school; increase choice of learning opportunities for students; establish new models of public schools and a new form of accountability that emphasizes the measurement of learning outcomes and the creation of innovative measurement tools; provide opportunities for greater parental involvement in management decisions at the school level and expand choice of public schools. (See Utah Code 53A-1a-503).
Utah Education — “The Full Keyboard”
In my passion for promoting Civic and Character Education among the rising generation (who George Washington described as “the future guardians of the liberties of the country”), I have many opportunities to meet and speak to Utah students and educators. I am impressed by the enthusiasm for learning and the high morale and level of education in our schools.
You don’t have to play the exact same note to be in perfect harmony. I think of education in Utah as “playing the whole piano”. This includes both traditional and charter public schools and private and home schools. The common desired outcome is the education, progress, health and happiness of every student. This also contributes to the strength and happiness of homes and families and the future well being of our society. The core element in all successful education settings is a loving, skilled and dedicated teacher working closely and connecting with individual students.
What Will the Price of Government Be in 2010 in Utah?
In the current tough economy, the 2010 Utah State Budget will hopefully include no new taxes or tax increases and will be results driven and not merely an across the board extension of the status quo. The process that ultimately produces that final budget amount and its individual cost breakdowns is tedious and far reaching. It is well to remember that the “price of government” is what the citizens can afford and are willing to pay for the outcomes and results they value and reasonably expect from their government.
Posted by: LaVar Christensen