At a time when the states face a collective revenue shortfall of $80
billion -- the worst fiscal crisis since World War II, according to
the National Governors Association -- Washington Gov. Gary Locke has
achieved the improbable. In addressing his state's $2 billion budget gap,
he has managed to garner widespread confidence in his budgetary leadership
among voters and political counterparts alike.
That public confidence has been a byproduct of an effort by Locke to
invert the standard way of budgeting, in which costs are the driving concern,
by focusing instead on the intended results of government spending.
In the traditional approach to addressing a shortfall, you start with
your previous year's budget and you tweak it, cutting costs until the
old list of expenditures comes in line with your new revenue projections.
The focus is on how much from the old list has to go. You can pick through
the budget looking for obvious waste, or you can cut everything across
the board. Either way, it's the cuts that matter -- eliminating things
government can no longer afford to do. Political turf battles inevitably
ensue, as competing interest groups rally to protect their pet programs.
Those fights can leave governors battle-scarred and politically weakened.
Locke's results-based method flips the cost-based approach on its head.
The focus is no longer on what government can't afford to do; it's on
the things government can -- and should -- do with the money that's available. Instead of taking the previous year's budget for granted as
the starting point, the results-based process allows you to start from
scratch. You calculate how much money you have available for all state
spending; you step back and ask basic questions about what services are
most important for government to provide citizens; and then you spend
your money on programs that are most likely to achieve the results you
want. That process forces interest groups and political opponents to argue
that their priorities are more important than yours. The debate is no
longer about money and cuts; it's about the priorities of government.
Thus, the brand name Locke gave the process that he and his budget team
followed in writing their biennial budget for 2003-05: "Priorities
of Government." It has become widely known in the state as "PoG,"
pronounced like "frog."
"It has allowed the governor to dramatically redefine himself as
a visionary and a leader willing to make tough decisions and back them
up," said Richard Davis, president of the fiscally conservative Washington
Research Council, a policy group that has been critical of Locke in the
past.
How Locke and his team decided to embark on the PoG process is a classic
tale of necessity being the mother of invention. They knew they needed
a dramatically new approach when they saw they were facing not just a
short-term revenue shortfall, but a long-term structural budget problem.
Addressing it by increasing revenues was not a viable option; Washington
voters, like voters across the country, had shown no appetite for tax
hikes. And yet it was clear that the traditional cost-cutting methods
would leave no one satisfied; beyond the political fights, cost-based
budgeting is also a recipe for inefficient and ineffective government.
"It is like taking last year's family car and reducing its weight
with a blowtorch and shears," The Seattle Times wrote in an
editorial. "But cutting $2 billion from this vehicle does not make
it a compact; it makes it a wreck."
That's an image one understands when one sees the budget broken down
into discrete bits. As in other states, Washington's budget includes big-ticket
expenditures, such as special education and the prison system, along with
scores of more obscure programs and activities, like the superintendent
of schools' anti-bullying and harassment training program and the attorney
general's homicide investigation tracking system. Keep adding to and subtracting
from that list in a piecemeal fashion, and, over time, both logic and
direction are lost.
Four questions. To help Locke's budget team chart a new course,
the governor's chief of staff, Fred Kiga, brought in consultants Peter
Hutchinson and Connie Nelson from the Public Strategies Group in St. Paul,
Minn. Over 10 weeks, they helped Locke's team plot out their PoG strategy.
The process revolved around four questions: How much money does the state
have to spend? What results form the core of what must be done -- and
done well -- to serve the citizens of the state? How much will the state
spend to produce each of those outcomes? And how best can that money be
spent to achieve each of those core results?
The answer to the first question was approximately $23 billion.
In answering the second question -- about the core responsibilities
of government -- the budget team whittled down its priorities list to
10 things they thought the citizens of Washington most wanted to see improved:
student achievement in elementary, middle, and high schools; the quality
and productivity of the state's work force; the value of a state college
or university education; the health of the state's citizens; the security
of vulnerable children and adults; the economic vitality of businesses
and individuals; statewide mobility of people, goods, information, and
energy; the safety of people and property; the quality of the state's
natural resources; and cultural and recreational opportunities.
To answer the third and fourth questions -- how much to allot to each
desired outcome, and how best to spend the money to achieve the intended
results -- the governor's staff was able to draw upon a complete inventory
of programs and other activities that they had ordered state agencies
to produce. The master list included 1,400 line items.
Shopping for results. In their results-oriented process, that
list, in effect, became a selection of goods on the shelves of a grocery
store. The budget team browsed the aisles, viewing the offerings with
the skepticism of discriminating, fixed-income shoppers. They saw each
line item as a service option that was available to them as a potential
means of advancing their core set of goals. They took an enterprise-wide
approach, ignoring the established order of which agencies had traditionally
been responsible for which activities. With their core list of priorities
in mind, they simply took their $23 billion, looked down the master list
of 1,400 service options, and -- using every piece of data they could
find to measure each program's performance -- they went shopping for
the best results they could afford.
For example, to improve student achievement, they proposed buying $1.2
billion worth of special education, $426 million worth of pupil transportation,
$144 million worth of bilingual education, and $4 million worth of information
technology, among other things. But they decided that anti-bullying and
harassment training, summer vocational training, and "readiness to
learn" activities were not good values for their education dollar.
Down the list of top state priorities they went, shopping for the programs
and activities they felt were most likely to produce the results the citizens
of Washington wanted, until they had finished spending their $23 billion.
The process was a creative one that encouraged substantial reforms. For
each of the budget team's core goals, a "results team" was charged
with identifying the five or six key expenditures that would most likely
achieve the intended result. In cases where the options on the existing
master list seemed inadequate, they were encouraged to propose new options.
For example, the team handling K-12 education proposed moving to a "pay-for-performance"
compensation system for teachers, instead of the traditional fixed pay
scale. That team also proposed moving away from across-the-board education
funding and toward more targeted funding for the schools and students
with the greatest needs. Such creative reforms are generally absent from
the traditional cost-based budgeting process.
The budget Locke submitted to the legislature cut spending by a brutal
$2.4 billion -- nearly 10 percent of the projected cost of continuing
all state services at existing levels -- without imposing ineffectual
across-the-board cuts or calling for substantial general tax increases.
Instead of producing a chorus of gripes, it was greeted by widespread
praise. A January poll conducted by Moore Information for the Washington
Roundtable, a business-oriented policy group, found that 64 percent of
voters, regardless of whether or not they agreed with Locke's specific
budget recommendations, respected his leadership and vision in working
to solve the state's desperate fiscal situation. Support for Locke's approach
was strong among Democrats (72 percent), Independents (62 percent), and
Republicans (56 percent).
"People here feel good about the process," said Lynne McGuire,
budget operations manager in Locke's Office of Financial Management. "They
can explain it. It's more understandable than before."
The governor and his budget team are by no means out of the woods, though.
Everyone agrees the PoG process has been a breath of fresh air. But with
spring comes the legislature's chance to make edits. And then there's
the really hard part -- showing the results of the spending plan they've
chosen.
Are they advancing that list of top priorities? It will be a while before
anyone knows, and the wait may test voters' confidence. "The time
it takes to demonstrate results is often longer than the anti-tax populace
may be willing to give you," said Davis, of the Washington Research
Council. "So there has to be a strong communications strategy -- an
evangelical, ambassadorial component that lets people know what to expect,
when to expect it, and what's being done to ensure effective and efficient
delivery."
But the long-term benefits of pulling that off may be huge. "This
is a value-for-money question," said Hutchinson, the consultant.
"The anti-tax crowd says there's no value for money. Locke is saying,
'There is value for money, but we have to prove it.' Over time, if he
does prove it, history shows citizens will want to pay for the value they
get, which can translate to more revenues."
Blueprint Keywords: Extra Outcomes
