10 rules for deficit reduction with fewer fears
By Bill Schweke on 01/18/2011 @ 03:00 PM
North Carolina, like most American states, faces a tough funding future. The state has a large budget shortfall, which it is legally required to close. Hard choices are on the horizon -- significant cuts in services and programs and possibly tax and fee hikes. Fortunately, state leaders can and ought to take steps to make a difference.
Gov. Beverly Perdue has made a start in identifying potential cuts. Her plan is to "remake" state government by consolidating 14 state agencies into eight and privatizing functions such as information technologies.
No figures for possible cost savings have been suggested, which is to be expected. The effort to enact a new balanced budget will take time.
However, these actions do not guarantee significant cost savings. Moreover, there exists no "natural law" that programs are made more cost-efficient and effective by being housed somewhere else.
Privatization is not even a sure strategy. Sometimes it has worked and sometimes, not. And there are many perils along the way. Big spending cuts could harm North Carolina's most economically vulnerable citizens. Disinvestment in education and infrastructure could undermine or market position in the global economy. Moreover, the administration and the General Assembly could miss an "opportunity" for transforming governance and services.
A few years ago, the state of Washington's governor and its Office of Financial Management used a process that sought to "buy" the best results for their budget dollar and closed a $2 billion budget gap.
These reforms are not easy. Liberals and conservatives will both raise objections. Here, however, are 10 steps that deserve consideration:
- Start by separating the governance ("steering") function from the service delivery ("rowing") function. Do not contract out the former but find the best public, private or nonprofit service provider for a particular job.
- Do not eschew any tool for change -- the budget process, personnel system and procurement system all are needed to make things happen.
- Be ready to abandon programs that don't work.
- Stop worrying about agencies and think about strategic opportunities. The key questions are not -- "Where do we put this agency or division?" but "How do we best tackle this policy area?" and "Given that public money is set aside for this strategy, how much funding is needed to not just do the right thing, but to make a difference?" and "What types of alliances are required?"
- Emphasize prevention, not treatment.
- North Carolina's tax system is outdated. Three commissions during the last 20-plus years have analyzed the issue and largely offered the same set of recommendations -- broader tax base with lower rates aiming to advance tax equity, neutrality and stability.
- Emphasize long-term returns on public investments.
- Change employee incentives in order to begin shifting the governmental culture from a focus on rules, red tape and inputs to one on innovation, initiative and results.
- In an effort to accomplish more with less, do not be seduced by the notion that one need only slash payrolls and then seek to raise efficiency by "flogging" the remaining public employees.
- Focus, instead, like a laser beam on meeting the customers' needs, not the organization's desire for immortality. Much innovation has to be bottom-up, led by the employees.
This is an admittedly ambitious agenda and there is not much time to act. Worse still, the standard budget process is already underway.
Fortunately, we do not need to start from scratch. North Carolina has experience with these activities and tools. With hard work, open minds and realistic expectations we can make a real difference in meeting the quality and cost concerns of our citizens.
1200 G Street, NW
Comments
Leave a Comment