Politicians Count Their Pennies Too Soon
Elected officials have a tendency to promise big savings and painless cuts that often don’t turn out how they hoped.
When cities, counties and states discover that they need more cash to spend, there are two obvious solutions: raise taxes or cut back on programs. Neither of those is very appealing, particularly to the portions of the citizenry who pay those higher taxes and utilize those diminished programs.
As a result, elected and appointed officials frequently come up with hosts of ideas -- sometimes developed by commissions, sometimes by leaders who are engaged in a hairy budgeting process -- to make more out of less. You know all the clichés: We’ll run “leaner and meaner,” or we’ll “walk the walk.”
This kind of thing is “ubiquitous around the country,” says John Cape, former budget director of New York state and a managing director of the consulting firm PFM. “Four years ago, we got a new crop of governors and they started to say that they were going to run this government like a business. A lot of that [rhetoric] ultimately got focused on state operations.”
This all makes a great deal of sense, so it’s a pity how frequently efforts to save money without sacrificing quality fail to work.
Minnesota, for example, decided that there were some nice savings to be had by privatizing school buses. Not only did the state feel that the private sector could provide the service for less cash, they were convinced that they could do so more safely.
A recent report from the think tank Minnesota 2020 shows just how that effort worked: 86 percent of the largest outsourced transportation companies passed the Minnesota Highway Patrol Safety inspections. That might not look too bad except for the fact that school district-owned buses earned 93 percent. More startlingly, in-house districts were paying about $3.97 per pupil per square mile. The outsourcing deal ran the state a pretty steep $7.37 for each pupil per square mile.
Then there’s Pennsylvania’s Justice Reinvestment Initiative. The idea was to save money by removing inefficiencies in the state’s criminal justice system. Five-year savings projections were a hefty $254 million. But theory ran smack into reality in the 2012-2013 fiscal year, when the state re-estimated the total five-year savings down to a potentially more realistic $58 million.
And finally, there was Virginia’s Commission on Commissions. The idea was to spend around $50,000 doing a thorough inventory and analysis of all the commissions running in the state in an effort to cut back or eliminate those that weren’t sufficiently productive. Once again, this sounded like a great idea on the face of it. But according to Kirk Jonas, director of research compliance and integrity at the University of Richmond, “I’d be surprised if they saved anything like the $50,000 [they spent].”
So how does this kind of thing happen? On occasion, it’s a matter of purposefully closing one’s eyes and being over-optimistic in an effort to balance a budget. Or officials figure that something will come along to save the day. In years past, there have been accusations of various states assuming large unrealistic savings in Medicaid, with the sure knowledge that the legislature would cough up supplemental dollars for entitlement programs like Medicaid when the bills actually came due.
Sometimes the real purpose of efficiency programs is to make it appear to citizens that the programs are in the midst of positive change -- that won’t cost the taxpayer a nickel -- whether or not leaders have real faith in its validity or are willing to put in the hard work to make it happen. As one long-time public official told us, “In my experience a lot of elected officials aren’t willing to work with the implementation to overcome the barriers to actually make big things happen. For most elected officials it’s news release to news release. There’s sustained effort that’s required to make change happen.”
But, says Neil Bergsman, assistant director of Maryland’s Office of Capital Budgeting, “it’s usually disappointed aspirations, rather than premeditated fraud.” In many cases, it’s newcomers’ hopes and prayers. “They’re sure they’re going to find enough savings to fund an initiative,” says Bergsman. “But the results come in and the biggest hopes and dreams turn out to be unworkable, or they save amounts of money that turn out to be immaterial or too far in the future.”
Why do so many seemingly worthwhile ideas fail? William Leighty, former chief of staff to several governors in Virginia, ticks off five causes: “Unrealistic expectations, fuzzy roles, poor communication, undefined savings and lack of attention to project management.”
In all fairness, it’s important not to be overly pessimistic about cost-control efforts. There are ample instances in which they can work -- at least in large part. Some cities and states have been capable of finding savings in the couch cushions of government and putting them to work.
Our point here is not that cities and states shouldn’t be on the lookout for every dollar they can save through greater efficiency or smarter management. The key is not to count -- or boldly predict -- any dollars as saved until they’re actually in the bank.