Out of Control Policy Blog

Make California's Programs Compete for Money

David Osborne, who helped lead the Clinton administration's "reinventing government task force," is author of the book Reinventing Government and a new Reason Foundation study on how to fix the California budget. Osborne pulls from that study in this Sacramento Bee column on how to rebuild California's deficit-riddled budget from scratch:

Californians are sick of watching their leaders kick the state's fiscal problems into the future. They are also tired of sterile debates about how much to spend on X vs. Y, with no attention to the results these expenditures produce or the long-term liabilities they create for the state.

One big factor contributing to fiscal paralysis has been the two-thirds requirement, in both houses of the Legislature, to approve a budget. Yet without some other form of fiscal discipline, citizens are not likely to consider repeal. To create that discipline, California's elected leaders might consider a new approach, called "Budgeting for Outcomes." It helps leaders rank programs according to how cost-effective they are at achieving the results citizens want, then eliminate the low-ranked activities.

The Public Strategies Group developed this approach to help Washington Gov. Gary Locke close a nearly 15 percent budget gap in 2003. Since then, it has spread to more than 20 other states, cities, counties and school districts.

As with other reforms, its success depends on leaders' courage to make hard choices. But it can help them make those decisions in a more rational and transparent way.

It starts where most budget processes end: Elected leaders decide how much they want to spend next year. They make a policy decision, up front, whether to raise or cut taxes and fees. (They can revisit this decision at the end of the process, of course.) Then they work with citizens to define the eight to 10 results most important to them – a better economy, better schools, better health, better safety, better mobility, a cleaner environment, and so on. They decide how much each of these outcomes is worth and divide the money among them.

This creates eight to 10 finite pots of money, for which programs must compete based on their value, the results they produce per dollar. This is the real magic: Competition for scarce resources forces creativity.

For each pot of money, leaders assign a team of experts with no ax to grind or budget to protect. These "results teams" act as buyers for the citizens. Their task is to produce the outcome, not to fund programs.

Read the rest here.


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