Govt. financing needs to abandon rigid top-down bureaucratic control, "steer rather than row," and delegate major authority to their operating divisions, then focus on results.

WASHINGTON — I’m stuck with a David Osborne habit I don’t quite know how to shake.

It began in 1988 when Osborne wrote "Laboratories of Democracy," portraying a generation of ambitious governors making states into powerful policy innovators across the nation.

Neal Peirce

http://www.postwritersgroup.com/archives/peir0517.htm

(Thanks to Al Jones for passing this along.- Russ)

States are my beat, so how could I not review "Laboratories"?

In 1992, it was Osborne’s "Reinventing Government," co-authored with Ted Gaebler. This time he argued that American government leaders — federal, state and local — had to abandon rigid top-down bureaucratic control, "steer rather than row," and delegate major authority to their operating divisions, then focus on results.

"Reinventing Government" was embraced by hundreds of leaders, Bill Clinton and Rudolph Giuliani among them. It was the important government book of the 1990s. Ironically, its impact was only dulled during the economic boom of the late Clinton years when governments were awash in funds and a lot less attentive to reform.

So now Osborne is back with yet another landmark book, called "The Price of Government" (Basic Books), co-authored with his Public Strategies Group founding partner Peter Hutchinson, a public service hero himself after tackling such jobs as Minnesota finance commissioner and Minneapolis school superintendent. These are two impatient guys: believers in governments’ public missions, but constantly critiquing their performance.

Their prescription is familiar to readers of this column: America’s governments are convulsed by a fiscal crisis so deep it may have no end. A "colossally irresponsible president and Congress," as they put it, have blown a hole in national fiscal policy that may leave us with $4.1 trillion added debt in the next decade. But even without that, they note, the rapid graying of America is propelling us toward deep crises in Social Security and Medicare funding that political leaders — neither a George Bush nor a John Kerry, for example — won’t confront.

As for the states, 38 cut their budgets by a combined $13.7 billion in fiscal 2002 and 40 by $11.8 billion in fiscal 2003, throwing poor people off Medicaid rolls, closing schools, cutting university budgets and slashing assistance funds critical to their own local governments.

The first solution for governments facing red ink, the authors say, is to stop deceiving: no more resorting to accounting tricks, delaying important maintenance, projecting fictional income, or borrowing as California is now doing.

Policy-makers must also dismiss, they say, both the right-wing argument to "starve the beast" because government is intrinsically bad and the liberal habit of creating programs then hoping the revenue to finance them will somehow appear.

Instead, policy-makers need "to get a grip on the problem." The top solution they suggest is a new practice called "budgeting for outcomes" which Hutchinson helped Washington Gov. Gary Locke try out when he faced a $1.5 billion deficit in 2003.

Instead of starting with the last year’s budget and figuring how to cut 10 percent to 15 percent from agencies’ requests, Locke’s team identified the 10 key results it thought citizens most wanted from state government (improved student achievement, improved food sanitation, better health results, for example).

"Results teams" were set up for each outcome to produce a "purchasing plan" to procure the best possible results. Then the state’s 1,400 existing activities were checked against a priority wish list until the available budget figure was hit. The budget received editorial praise and passed the Legislature largely intact.

Any government can do this, Osborne and Hutchinson argue, once it calculates a key figure: the amount citizens are willing to pay in taxes and fees to support it. This so-called "price of government" — it’s actually the sum of all taxes and fees divided by the area’s aggregate personal income — functions much like a thermometer.

If the price of government goes too high, incumbents get ousted or anti-tax initiatives get passed. If it gets too low and the services people really want (police, roads, health, schools, etc.) start to slip seriously, citizens start pushing the price of government back up by electing more free-spending officeholders or passing referendums for added services.

There’s some variation in the accepted cost of government — it’s higher in a New York or Minnesota, lower in a Texas or Tennessee, for example. But generally, we learn, people are willing to pay 20 cents to 23 cents on each dollar of their income for federal government services, 7.3 cents to 8.3 cents for state services, and 6 cents to 6.6 cents for local services. The overall figures have changed little since World War II, though the mix of what governments choose to spend on has shifted, in some cases dramatically.

Osborne and Hutchinson suggest the smart governor, mayor — maybe even president — will calculate his or her permissible "cost of government" this way, and go from there.

It’s another ingenious reinvention idea. Again, let’s watch.

Neal Peirce’s e-mail address is [email protected].

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