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Riding Across the Desert in the Public Sector
For those of us old enough to remember the administration of South Carolina Governor James Burrows Edwards in the late 1970s the notion of massive layoffs of public employees is not new. Thousands of jobs were RIFed (reduction in force) during Edwards’ administration. The reductions were due to the simultaneous fall in projected tax and other revenues and the flattening of federal money coming into the state.
The difference between the employee layoffs then and those projected for the coming years is those job losses were primarily due to cyclical economic events and these to come are due primarily to structural economic events. The layoffs of the seventies were due to a series of recessions, the layoffs of the teens will be due to fundamental shifts in the economic structure of the nation and the world.
There is evidence that the steep recession we are experiencing is nearing an end, may, technically, already be over. While there are many, myself among them, who do not believe we have seen the worst, it is entirely possible, as a society, we have. Even so, there are three reasons why no one should expect a massive influx of new, real dollars into the coffers of state government once the economy rebounds.
First, it is unlikely any new foundational tax source will be available at either the state or local government level. There are such tax sources available, local income tax for instance, but the political possibility of the state giving local government the right to levy such a tax is near zero. In the absence of such a new foundational tax source, revenue increases, if they come at all, will only be incremental increases such as may result from an increase in the tax on cigarettes. Whether these incremental increases are targeted to a specific use or thrown into the General Fund is less material than the fact that none of them, individually or collectively, will make a significant difference to an attempt to restore across the board historic funding levels of state agencies.
It is conceivable that the state could affect a significant increase in revenue from elimination of billions of dollars of sales and use tax exemptions. However, these exemptions are in place because powerful special interest groups want them. This ongoing support for the status quo would indicate any really significant elimination of these exemptions is politically unlikely.
The second reason it is unlikely any massive restoration of funding will occur is demands made by higher priority needs. It is a very real possibility that the federal government will enact some sort of national sales tax, probably a value added tax. However, if this is done, it will be done out of sheer necessity brought on by the enormous debt we have taken on.
The current “War on Terror” will not end soon. Our allies in Europe and the Far East have begun to drop out, indicating their willingness for us to carry on with our Mideast and Central Asian allies. This, of course, means much of the blood and all of the treasure expended will be ours, for our Asia allies and Israel cannot continue unless we pay for it.
Between the cost of this “Long War” and the debt service on the national debt, there will be little new money for social programs or to send to the states for infrastructure, education and other traditional causes of contributions from the federal government to the states and municipalities. These pressing, survival issues will absorb the vast revenues received from any new foundational tax levied at the federal level.
Make no mistake, these two issues are critical to the survival of the nation and of all the nation states of the west and the “modern” world. If we fail to win the Long War, the consequences are the drastic modification of culture and the death of civil liberties.
The Long War will be a war of attrition, not a clearly marked point of demarcation where one side formally surrenders to another. It is nothing less than a global civil war being waged between people who have a modern mentality and those who have a medieval mentality. Both the armed resources and the core belief system have to dissipate before one side loses. As such, it is a war that cannot be lost. To win it, it must be paid for.
There is no point in arguing whether it is a war that should have been fought. It is too late for that. It now has to be fought and it has to be won. Winning means exhausting the other side’s ability and willingness to fight. This will be dehumanizing and it will be expensive.
The third reason there will be no extra money for a while is the national debt. Paying for the national debt will also be a necessity. Failure to meet our national obligations or to attempt to meet them by inflating the currency, artificially reducing the principal and trying to pay it before the interest rates overwhelm us, is folly. The predictable result of either course will be the perversion of the financial system of the world. The terrible century the Argentines lived through in the 1900s will be the fate of the world if the United States does not meet its obligations and do so in real money. Failure simply cannot be an option unless we are willing to destabilize ourselves and everybody else.
I believe this abiding crisis offers public sector managers and employees an unprecedented opportunity, if they want to seize it. While it is nonsense to spout platitudes such as, ‘government ought to be run like a business,’ running a business is at least an order of magnitude less complicated than running a government, there are things public sector managers can learn from their private sector counterparts.
As I see it, there are three areas where government could adjust itself and reap significant coat efficiencies. These are: intelligent use of quantifiable analysis, structural adjustments and centralization of certain core administrative functions.
The late Robert McNamara is infamous for his idiotic decision to determine the appropriate number of bullets soldiers in the field should be allowed for any single fire fight. Consequently, since McNamara based his numbers on averages, soldiers either ran out or finished with too many. I think any soldier would tell you it is never an embarrassment to end a fire fight with too many bullets left over. On the other hand, it is frequently, remarkably so, deadly to run out of bullets before the party is over.
Partially as a consequence of this lesson from Vietnam, quantifying government processes fell into disfavor. That is too bad. There are many functions of government that are no different from similar functions in the private sector. Quantifiable analysis of such functions is possible and desirable.
Without getting into massive governmental restructuring, it would be possible to devise incentives for public sector managers and employees to identify functions that can be analyzed by quantitative means and outputs evaluated using those means. Further, incentives can be put into place that will lead managers and employees to reduce the personnel and other costs associated with delivering the services, lending themselves to quantifiable analysis.
Of course, reduction in costs is not the only, or even the primary, criteria; delivery of quality services to the citizenry is. So, any cost reductions resulting from quantitative analysis and incentives must also be evaluated to demonstrate that no service quality reductions occur.
These kinds of management incentives and analytical tools have to be utilized or severe and unacceptable service level deterioration will be inevitable. Fair or not, public sector managers and employees are going to have to elevate their game if service levels are going to be maintained in the coming years of financial deprivation.
Another thing that will be a must is to restructure the institutional form of service delivery. Governmental restructuring has never lived up to its promises. However, some streamlining of service delivery that is institutional not managerial is going to be necessary. Such streamlining could include everything from imposing incarceration responsibilities on families of certain criminals to lessen the cost to the taxpayers. Other potential structural changes could involve limiting penalties for non-violent crimes, including wholesale elimination of criminal penalties for drug possession, licensing, taxing and regulation of the sale of controlled substances. Another potential cost saving mechanism would be to extend the public school education responsibility to two years of post secondary education. By adding two years, the first two years of college, to high school, tens of millions of dollars of higher education annual costs could be eliminated. College campuses would then become the lair of upperclassmen and graduate students. There are many such cost saving structural modifications that are available.
Most such structural changes are politically prohibited by strong cultural and emotional biases to the contrary. However, failure to identify these required changes and take them on will mean more and more service level compromises and the accelerated destruction of governmental efficiency.
A final source of governmental management that could save significant funds is centralization of certain support functions. It is popular to speak of consolidating information services into one giant IT service center. I do not think that is practical or workable. On the other hand, while various government agencies need independent data and communications centers and the staff to run them, certain functions can be centralized, even in information sensitive areas. There is no reason there cannot be a central hardware and software maintenance service. Third party maintenance service is pretty much standard fare, even in government agencies. Consolidating and centralizing maintenance functions would bring the massive purchasing power of the state to bear on providers of such services. Whether the service was privatized or handled in house, the saving could result in tens of millions of dollars every year with no diminution in service levels. In fact, in this instance, service levels at smaller agencies and political subdivisions could be markedly improved.
There are many other potential cost benefits of centralization of certain core administrative functions. Again, for the most part emotional and territorial concerns prevent these from happening and, again, this may prove a luxury government can no longer afford.
The coming decade will be a trying and exciting time for public servants. The limited resources available can be an opportunity for meaningful change designed to insure the public is served or it can be a long period of deterioration and lost morale. Either way, it will not be easy. However, if the public sector chooses the former rather than the latter it will be rewarding.
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