Between the Lines

Between the Lines By David Lias If in the near future, if your hear shrieking, the rending of garments and the gnashing of teeth as you stroll by city hall, the courthouse or the school administration building, don't become too alarmed.

Budget time once again is upon us � the annual, deliberate, sometimes painful, sometimes numbing � process that local governments must face each year.

School boards, city councils and county commissions are at work figuring out the amount and method of future revenue spending needs in time to collect the necessary funds from their primary source � you and me, Mr. and Mrs. Taxpayer USA.

Some local governments value simplicity over creativity when it comes to budget planning. It's not unusual, particularly in smaller communities, for school boards, city councils and county commissions to simply look at the line items in last year's budget, tweak up the totals to account for inflation, and close the books until budget times rolls around again.

No doubt the process used by local governments here is a bit more sophisticated than that. But David Osborne, who in the the 1990s authored two books, Re-inventing Government and Laboratories of Democracy, gives all who listen to him much to think about.

A line item budget, at one time, worked well for public agencies. But times have changed, and he argues that the way governments plan their budgets must keep up with those changes.

In fact, he believes traditional line item budgets encourage managers to waste money.

And while he hasn't specifically studied the way local governments work in Vermillion or Clay County, his statements do make one wonder.

If line item budgets are inefficient elsewhere in the country, could they be driving that same sort of waste and inefficiency here?

"Think about what it's like for a manager who gets a line item budget," he told an audience during a 1992 speech in Minnesota. "It's cut up into all of these little pots. They made sense when they were first created, but things change and needs change."

Theoretically, the manager can move money from one line item to another, he added, but usually he or she has to ask for permission.

"They come to the board, and they say, 'I don't need so much in line item A, but I need it in line item D.' What happens? Whoever is in charge says 'We're glad you don't need it over there because money is tight. We'll take it back, but we can't afford to give you more.'

This approach, which is very typical in the way government works these days, means managers take a risk every time they ask to change their budget.

"The worst of it is what happens if a manager doesn't spend every penny of every line item?" Osborne asked. "They have to give it back, right? And then they get less of it next year, and the budget director yells at them because they asked for too much last year. So unless they are a complete fool, they spend every penny of every line item every fiscal year. It's a built in incentive to waste money."

Osborne suggests that government, its managers and its employees, should be driven not by line item budgets, but by missions.

This isn't just a pie-in-the-sky theory he's dreamed up, either. He's found places where it has been implemented, and been very effective.

Places like Fairfield, CA. In that community, he said, there is "one budget number for every government agency that has its own mission. City leaders agreed to let agencies keep what they didn't spend in a fiscal year and roll it over, and they adopted a formula which protected the agencies from retroactive funding raids in the next year from the city council. Sunnydale, CA's city government also has found a way to achieve accountability under this system. The city government in Sunnydale has established a budget based on service levels rather than line items. For example, Osborne said, Sunnydale city government leaders may say to its department of public works that it would like to get half of the roads that are in poor condition into good condition in the next 10 years.

The department responds by giving them a cost estimate. The city council would then decide if it wanted to buy into that outcome or not, or how much of that outcome to buy.

If the department exceeds its performance target, the managers are eligible for up to a 10 percent bonus on their salaries, but the new performance level becomes their expected base for next year, so they constantly ratchet up their performance. Osborne said.

"Using this system, Sunnydale has increased its productivity 4 percent year after year after year," he said. "In other words, in 10 years they can cut the costs of delivering the same basket of services almost in half."

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