Tag: TABOR

Unserious Cost Cutters Only

In a new Governing column entitled “Serious Cost Cutters Only, Please,” William Eggers and John O’Leary offer advice “for those public leaders who are looking to make structural changes that will bend the cost curve of government down.”

The target audiences are state officials who presently find themselves in the politically unrewarding position of not being able to spend as much as they’d like to because the recession has constrained revenues. Eggers and O’Leary correctly warn that policymakers shouldn’t “kick the can” down the road by pursuing short-term strategies that could prove costly in the long-run.

Unfortunately, their recommendations are of the pie-in-the-sky “good government” variety.

The piece caught my eye because I have first-hand state government experience with some of their suggestions:

The first lesson is that it is virtually impossible for the secretaries and department heads charged with running operations to come up with sufficient savings themselves to deliver the necessary cost savings. The best approach by far is to establish a dedicated team, located physically and philosophically close to the chief executive, and charge them with developing a set of recommendations that the mayor or governor can then direct her lieutenants to execute.

I spent two years working for such a dedicated team within Indiana Gov. Mitch Daniels’ Office of Management and Budget. The group, “Government Efficiency and Financial Planning,” was originally tasked with conducting a “long-overdue inventory of the state’s operations.” We produced two reports with hundreds of recommendations for making state government more “efficient” and “effective.”

The governor never directed his “lieutenants to execute” very many – if any – of the recommendations. In fact, the lieutenants were so worried about the potential political fallout from the issue of the second report that it was intentionally released when nobody was looking. They needn’t have worried because those interests who might have had cause for concern already saw that the first report was basically inconsequential.

Eggers and O’Leary continue:

There is likely to be some internal friction between the cost reduction team and the various department leaders. That is by design. The cost reduction team is supposed to be disruptive.

GEFP was somewhat disruptive, but not very effective. The governor’s lieutenants typically either sided with the department leaders or did little to support GEFP. The reason was simple. The perceived political costs of GEFP’s efforts usually exceeded the perceived political benefits. Department heads, on the other hand, can create favorable (and unfavorable headlines) and thus possess greater pull.

The sorry story of the Indiana Economic Development Corporation is instructive. A recent series of investigations by an Indianapolis reporter found that the IEDC had long been taking undeserved credit for job creation. When the reporter tried to visit some of the companies celebrated in IEDC news releases, he found empty fields, vacant lots and deserted factories. When he asked the head IEDC official to provide the public with evidence to support the agency’s claims, the IEDC head refused.

The IEDC, which was created by Gov. Daniels, was portrayed quite differently in the first GEFP report released in late 2006:

The previous Department of Commerce was responsible for a wide range of programs that included economic development, energy, community development and revitalization, agriculture, and tourism. The priorities of these programs were difficult to discern while mired within the former structure. The dismantling of the previous department into the Indiana Economic Development Corporation, Office of Energy and Defense Development, Office of Community and Rural Affairs, Office of Tourism Development, and Department of Agriculture has enhanced the profile of their respective programs and allowed for greater focus and accountability. Each of these areas now has a strategic plan that identifies its mission and long-term goals.

Adding insult to taxpayer injury is this gem of a quote that’s contained in the report’s introductory section on transparency:

Information on government performance mainly comes from agency heads and program managers. Human nature will incline agency heads and program managers to report results that show their programs in the best possible light. Naturally, agencies have little incentive to report information that would demonstrate inefficient or ineffective performance.

The last I heard, GEFP is now in charge of overseeing how Indiana spends its share of Obama’s stimulus money. The 2006 report, now a distant memory, stated in bold font that “outcomes and results matter.” Unfortunately for Indiana taxpayers, the outcome certainly hasn’t been a smaller state government or lower state taxes.

Eggers and O’Leary rightly acknowledge that politics make government cost cutting efforts difficult. But at the end of the day, politics almost always trumps policy. Government is not a business, and attempts to make it operate like one are a fool’s errand.

More importantly, when Eggers and O’Leary talk about cutting government costs, they’re not really talking about net cuts. Taxpayers bear the cost of government. Therefore, a net cut in government costs would mean a reduced burden on taxpayers. Making government “more efficient” is all well and good, but if the “savings” just get plowed into other programs – as has been the case in Indiana – then taxpayers aren’t any better off.

What structural changes can be made to avoid the long-term fiscal problems that concern Eggers and O’Leary?

I’ve concluded that a strong statutory limit on state spending and/or revenues is the best option. That such limits, like Colorado’s TABOR, are effective is proven by the vociferous opposition they generate from interests that depend on state largess.

Another sign is that it’s rare for an authoritative state policymaker to pursue such a measure for the obvious reason that it would inhibit the  ability to spend other people’s money. Once again, my time in state government was instructive.

When I suggested to Gov. Daniels that he consider pushing a measure like Colorado’s TABOR, he replied that he “guess he didn’t see the need for that.” A Daniels lieutenant would later instruct me, at the governor’s behest, to create a taxpayer rebate mechanism (a component of TABOR). However, I was told that the mechanism couldn’t “cost” much because the governor didn’t want his second-term spending “priorities” to be jeopardized. I was also told it had to “look good” to voters for purposes of boosting Daniels’ reelection prospects.

The bottom line is that policymakers of all stripes say they want taxpayer money spent more efficiently and effectively. If I had a dime for every time I heard a politician promise to root out “waste, fraud, and abuse” I’d be snorkeling in the Caribbean instead of writing this blog post. Therefore, if taxpayers want structural changes that will limit the burden of government, they’re going to have to demand that policymakers offer more than just platitudes.