Politics

Deficit Discipline

Elected Leaders Refocus on Results
by | January 2006

The daunting deficits of recent years have focused the attention of elected leaders on results, the demonstrable outcomes of government spending.

As legislators, mayors and governors confront difficult choices about what programs get cut and who loses a job, they are increasingly demanding data to guide or support those decisions. Whether gathered through performance measurement or town hall meetings, data make the hard decisions about what government can't afford to do easier to explain. State and local government officials heard that message loud and clear when they gathered in Brooklyn this past fall for Managing Performance 2005, Governing's annual flagship conference.

THE DATA-DRIVEN MAYOR

Mayor Michael R. Bloomberg, who made billions by building a company based on real-time data, came into office a few months after the 9/11 terrorist attacks in a city facing a hulking $6.4 billion budget deficit. As his chief of staff Peter Madonia recounted, Bloomberg literally looked around the world to find the best people to fill the city's top jobs. He found some of them in retirement, such as Sanitation Commissioner John J. Doherty; some of them in the private sector, such as Gino Menchini, now commissioner of information technology and telecommunications; some of them already working for the city, such as Homeless Services Commissioner Linda Gibbs; and some of them as far away as India, such as Health Commissioner Thomas Frieden.

Once he hired them, he made clear he wasn't a micro-manager. One appointee recounted the brief mandate he was given: "It's your agency. Don't screw it up." When one prospective commissioner asked if he was going to have to hire political friends of the mayor, the immediate answer was further evidence of Bloomberg's results-based management approach: "No, we're not going to give you any excuses. If you fail, it's your fault."

  • Bloomberg gave new commissioners two pieces of advice:
  • Only hire people smarter than you. Make changes early.

The first big change in each case was cutting the budget to close the deficit. Each new commissioner had to decide what to spend money on-- and what to stop doing. Among the most controversial decisions: replacing the health department's ineffective smoking-cessation program with a huge cigarette-tax hike and a smoking ban in bars and restaurants, and suspending glass and plastic recycling. There were good reasons for both: Frieden had hard data showing the most effective anti-smoking strategies, and it was costing the city more to recycle than to take out the trash.

Despite their initial unpopularity, these initiatives were successfully implemented, largely because of a cast of strong, creative managers who mustered data to support those moves and a mayor who backed them up. "The mayor showed that if it is a legitimate cause, he is willing to take the battle on," said Homeless Services Commissioner Gibbs. "He takes the risks and sticks with his decisions."

Sanitation Commissioner John J. Doherty looked at the numbers and recommended cutting the recycling program just four months into the job. His proposal met intense opposition from residents and the city council. But the facts were hard to argue with. It was costing the city $100 a ton to recycle metals, glass and plastic, while it cost only $64 a ton to have its garbage hauled away. By eliminating the recycling effort, Doherty estimated the city would save $50 million to $60 million a year.

The numbers were persuasive: Bloomberg backed the plan and kept the pressure on until an agreement was reached: Recycling metal would continue; recycling plastic would be suspended for one year, and recycling glass for two. Even the City Council could not rationalize retaining a flawed environmental program while cutting human services.

Bloomberg believes in accountability, in getting and giving credit where it is due, and it bothered him that many citizens found it difficult to access services that New York spends more than $46 billion a year to provide.

To address that problem, he set out to set up a one-stop shop, a 311 hot line for citizen complaints and concerns. He gave IT Commissioner Menchini one year to set it up. It went live in March 2003. Currently, the system handles an average of 40,000 calls a day and is on track to handle more than 15 million calls a year. Service representatives can assist citizens in 170 languages.

Menchini, however, believes the success of 311 is measured by far more than raw statistics. It's about transforming how city government works. The 311 system churns out statistical snapshots of city services, which Bloomberg watches to see how city departments respond to public needs. Commissioners are held accountable for the results.

Acknowledging the mayor's deep knowledge of the uses of technology, Menchini calls Bloomberg his co-CIO: "IT under Bloomberg is a different animal than it was under any other mayor," Menchini said. "People talk about administrators that get it, but Mayor Bloomberg gives it," regularly proposing initiatives to be implemented by Menchini and his department.

Bloomberg's data-driven approach to managing the city produced results--both fiscal and political. The $6 billion budget deficit was replaced by a $1.9 billion surplus in 2004. And Bloomberg was easily reelected to a second term last November.

LISTENING AND LEADERSHIP

A $4 billion budget deficit greeted Michigan Governor Jennifer Granholm when she took office in 2003. Already an advocate of performance management in her state, Granholm took the advice of Virginia Governor Mark Warner and went to the people of Michigan for guidance on how to close this budget gap and revive the state's ailing economy. In 2004, Warner had traveled around the commonwealth, talking to local residents and building public support for a major overhaul of the state's tax code by the legislature.

Granholm held 15 town hall meetings, seven of which were televised, throughout the state. She told the citizens: "You are my employer. Your [tax] dollars buy you something. You should have input on what those dollars should pay for." Urging them to help her decide how to deal with the deficit, she asked them where they would spend the first state dollar and where they would make the first cut. Using electronic voting devices, the citizens told her what services to keep and what to cut. The priorities were clear: Protect K-12 education and health care for seniors, pregnant women, children and the disabled. Those priorities were reflected in the budget Granholm sent to the legislature and eventually signed into law.

Knowing what was important to citizens helped her formulate her first economic development proposal, a package that gives a $4,000 scholarship to every student in Michigan who pursues college or technical training. "We need to figure out how to raise parents' expectation of their children," Granholm said, noting that only about 23 percent of Michigan's adults have a four-year college degree, below the national average of 27 percent. The economic impact of a better education is clear: There is a $1 million difference between the lifetime earnings of a college graduate and a high school graduate, she explained.

"We are what we repeatedly do," said Granholm, quoting Aristotle. "Excellence, then, is not an act but a habit."

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