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Reason Foundation

Fixing the California Budget

"Reinventing Government" author and Clinton administration expert David Osborne on how California can build a better budget

April 1, 2010

Each year, the governor and state agencies create wish lists for next year’s budget based on how much they are spending this year. Unfortunately, despite a $20 billion deficit, results - whether or not programs are actually working - rarely factor into this equation.  A new Reason Foundation study, written by David Osborne, who led Vice President Al Gore’s “reinventing government task force” and was the lead author of the Clinton administration’s “National Performance Review,” offers a better path, showing how California can use “Budgeting for Outcomes” to balance the books.

The Reason Foundation report, The Next California Budget, urges the governor and legislature to start from scratch. Rank education versus transportation versus state prisons and evaluate specific programs within these areas. Not everything can be funded, so what are the state’s specific goals and top priorities?  What are citizens demanding and what are they willing to live without? Do taxpayers want to reduce spending or raise taxes to achieve the goals they set?
 
“If California uses ‘Budgeting for Outcomes’ every citizen will easily understand the resulting budget, because it will reflect common sense, kitchen table economics and taxpayers’ priorities,” says David Osborne, author of the book Reinventing Government and the new Reason Foundation report.  “The budget can be summarized in one page per outcome. Reducing traffic congestion, for example, will come with a simple list of programs to be funded to achieve that outcome and a list of programs the state can no longer afford because they don’t reduce congestion or produce enough value.”

Osborne's firm, Public Strategies Group, has previously worked with the states of Iowa, Washington, and Michigan on similar outcome-based budgets.  The new Reason study details exactly how California's leaders would build the budget from the ground up:

  1. Set the price of government upfront. Precisely how much will the state spend this year?
  2. Clearly establish the top priorities of government. Determine which outcomes (for example, improving public safety, improving the mobility of people and goods, and improving student achievement) matter the most. Then create a scorecard, to see whether the state improves these outcomes year-to-year.
  3. Decide how much to spend on each outcome goal.
  4. Develop a purchasing plan to determine which programs and strategies produce the best results.
  5. Require agencies to submit their best budget offers - in competition with each other. These offers must define what their program will do, how it will contribute to the desired outcome, data to support that contention, performance indicators that will be used to measure its impact, and how much it will cost.
  6. Rank those offers from cost-effective to least cost-effective and "buy" from the top, until the money runs out. 
  7. Leaders make the final decisions and submit the budget to the legislature. It should clearly list what is to be funded, and what is not, to make the tradeoffs in the budget crystal clear.

“California’s spending and borrowing has created a budget mess of epic proportions,” says Adrian Moore, the report’s project director and vice president at Reason Foundation. “Every year our political leaders create a patchwork budget that makes the deficit look smaller while actually kicking the can, and tough decisions, down the road. This study offers the folks in Sacramento a legitimate way to give taxpayers the services they deem most important while getting rid of ineffective and unnecessary spending.”

Full Report Online


The Next California Budget is online here.

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