Spending Limits Don’t Inhibit Effective Government: Report

Published February 1, 2007

For many, the management of government boils downs to two options: either higher taxes and spending, or fewer services. A new report from a state-based think tank lays out examples of strategies that move the debate over government management beyond those suppositions.

“How Local Government Can Thrive with Spending Limits,” from The Maine Heritage Policy Center, examines ways in which local governments in other states have managed their operations in order to achieve the same or better service outcomes at a lower cost to the taxpayer. Such management tools allow local governments to maintain services under an environment with spending limits.

The analysis was written by Geoffrey F. Segal, director of government reform at Reason Foundation and an adjunct scholar at The Maine Heritage Policy Center.

Increased Efficiency, Quality

“Policymakers must get beyond the mindset that, while managing a budget, the only options available are to either raise taxes and increase spending, or to cut back on services,” said Segal in an interview for this article.

“There are great examples of local governments employing effective management tools that have achieved an increase in government efficiency and the quality of services while spending the same or fewer tax dollars,” Segal noted.

Four Policy Tools

Segal surveyed management strategies employed across the country that allow governments to operate successfully within budget constraints.

The research revealed four policy tools with which government officials increased efficiency in the delivery of government services, resulting in greater service quality and reduced costs. While these are not the only such tools available to policymakers, the four tools repeatedly achieved measurable results, according to Segal’s study.

Reorganization, Competition

One tool was identifying and using shared services. That requires looking for common function areas to share the expense of providing services across a larger group.

Segal’s study identified many benefits of shared services. They save money and achieve economies of scale, but equally important is that they help in retaining local control, standardizing processes, and flattening unexpected peaks and troughs.

The study also observed that successful governments introduce competition into public services. Competition typically can lower costs 15 to 30 percent while maintaining or improving service levels.

The goal, Segal notes in the study, should not be to reduce service delivery but instead to increase the value of services to taxpayers by providing more and better services for less money.

Competition, Segal notes in the study, is a powerful tool for policymakers to find the most effective and efficient means of delivering services to taxpayers. It shines light on how governments operate and helps change antiquated practices.

Efficiency, Performance Requirements

The study also observed that successful governments fully use the value of public assets (through, for example, enhanced use of leasing, concessions, and divestiture).

An often-overlooked policy management tool, the study notes, is extracting value from assets. Increasingly, governments are tapping their portfolios of real property assets to raise revenue, reduce expenditures on maintenance, and increase the tax base.

Finally, successful governments tie budget appropriations to performance, the report observes. This involves nothing more than measuring for outcomes and budgeting based on achieving goals. All “investments” by government are routinely assessed for their actual effectiveness. Only activities that provide the greatest benefit should be funded, and at a level relative to the goals and priorities set by the people, the report concludes.

“Local governments should take the management approach used by families: When resources are limited, maximize every dollar and live within its means,” Segal said. “By maximizing efficiency and effectiveness, local and state government can thrive under spending limits or lean budget years.”

Jason Fortin ([email protected]) is director of communications/projects manager at The Maine Heritage Policy Center.

For more information …

“How Local Government Can Thrive with Spending Limits,” by Geoffrey F. Segal, http://www.mainepolicy.org