March 6, 2011: "Time for a results-oriented city budget," Philadelphia Inquirer (link)
"Time for a results-oriented city budget"
is a Philadelphia councilman at large
Mayor Nutter's fiscal 2012 budget address focused on the (thankfully) stabilized city revenues, various new initiatives the administration proposes to fund, and the uncertainty surrounding the level of state and federal aid the city will receive.
These are all inputs - what money is coming in and how the city plans to spend it.
Not discussed much were outputs. What results can residents expect for their tax money?
Why should we care?
In the private sector, new investment and spending reductions are driven by cost-benefit analysis: how much the function under consideration costs compared with the benefit it delivers.
In the public sector, we should be focused on expanding what works and shutting down what doesn't - not only in times of limited resources, like now, but also as part of our basic fiduciary duty to deliver value to residents.
We should set a measure of expected productivity enhancements year after year, even for programs that work. For example, further reducing the prison population and driving down criminal-justice system costs.
Last week, City Council held a hearing on the cost and effectiveness of outsourcing various functions, such as snowplowing and pharmacy services at city health centers. The administration testified that departments were not required to perform cost-benefit analyses before contracting for services - and those services account for $1.14 billion of the annual budget. A city that spends more than $3.5 billion a year doesn't have a rigorous, systematic way to determine whether the spending is necessary or cost-effective.
Today the budget is framed as, "What is the increase or decrease compared with last year?" not "What results do we want? What is the best and most cost-effective way to achieve them? How are we tracking the results of our investment?"
Until we know the cost and effectiveness of what we do, we'll continue making incremental changes to department budgets year over year - upward, more often than not - without sufficiently understanding the value received for the money.
We must reform the budget process so that it focuses on outputs, not just inputs. I have proposed legislation that would require the city to detail the true cost of each function funded with tax dollars, to set performance goals, and to report annually on how well goals are met. The legislation would require cost-benefit analysis for all capital projects. It would compel the city to annually submit a five-year strategic plan outlining how it would use technology to improve performance goals and reduce the cost of government.
Departments would be required to state clearly what they would deliver for the money appropriated for each program, not for their agencies as a whole. The bill also would require a clear statement of costs (personnel, fringe, utilities, etc.) by program - that is, by output - not department.
For capital spending on technology, measuring outputs means measuring outcomes. Investment in technology should be measured in terms of productivity enhancements, rather than what hardware and software we bought.
I appreciate that Philadelphia's budget problems did not start during Nutter's tenure. I am hopeful, however, that he will work with Council to address them on his watch.
Governments across the United States - local, state, and federal - already use program-based budgeting, cost allocation, cost-benefit analysis, and strategic planning. Washington state moved to a program-based budgeting system in less than a year. Other jurisdictions that have used budgeting for outcomes include Iowa, Michigan, Dallas, and Baltimore.
Philadelphia should start the data-gathering and analysis now so that next year's budget and five-year plan set forth concrete outcomes for programs against which we can measure progress. This effort should piggyback on related analysis that is needed for the city's planned $120 million investment in technology. We need to understand what we are doing so we can deploy technology to improve our operations, not just replicate existing processes.
City government must set concrete performance goals and hold itself accountable for meeting them. That includes defunding programs that are not delivering results. Otherwise, we are not holding up our end of our bargain with citizens. Philadelphians are right to expect more of us.