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David OsborneThe Public Strategies
Group
www.psg.us
978 768 3244
David OsborneThe Public Strategies
Group
www.psg.us
978 768 3244
A New Budget Process for Louisiana
A New Budget Process for Louisiana
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5-Year Budget Outlook5-Year Budget Outlook5-Year Budget Outlook5-Year Budget Outlook
2
9.4 8.1 8.2 8.5 8.8
9.4
8.19.1
10.5 10.7
.91.9 1.9
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0
5
10
15
20
25
30
35
1970 1975 1980 1985 1990 1995 2000 2005
Percent of Total Spending
K-12
Health
Safety
Human ServicesTransportation
Source: Bureau of Economic Analysis, National Income and Product Accounts (NIPA) Table 3.16
Distribution of State and Local Spending, 1972-2005
Distribution of State and Local Spending, 1972-2005
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Distribution of State Spending 1987-2005Distribution of State
Spending 1987-2005
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Distribution of State Spending 1987-2015Distribution of State
Spending 1987-2015
0
5
10
15
20
25
30
35
40
45
50
1987 1991 1995 1999 2003 2007 2011 2015
% of State Spending (All Funds)
Education
Health
Medicaid
Transportation
Corrections
Public Assistance
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State and Local Government Surplus and Deficit 1980-2050
As a Percentage of GDP
State and Local Government Surplus and Deficit 1980-2050
As a Percentage of GDP
-5.00
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: U.S. Government Accountability Office (GAO)
Percentage of GDP
Operating Budgets
Operating and Capital Budgets
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The Fiscal Crisis is Permanent
The Fiscal Crisis is Permanent
• A “perfect storm” – the convergence of inexorable cost drivers:
• 10% annual increase in health care costs.
• Pension (and Social Security) obligations as population ages.
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The Current Path is Simply Not Sustainable
The Current Path is Simply Not Sustainable
• We need better results for less money, every year.
• Bureaucratic government cannot deliver that.
• We need post-bureaucratic government, capable of continuous improvement.
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Duct TapeDuct Tape
• Across-the-board cuts
• Consolidation
• Performance audits and studies
• Creating oversight groups
• Reorganization
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Who Said It?Who Said It?
“We trained hard, but every time we were beginning to form up into teams, we would be reorganized. I was to learn later in life that we tend to meet any new situation by reorganizing ... and a wonderful method it can be for creating the illusion of progress while producing inefficiency and demoralization.”
-- Petronius, A.D. 66
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The DNA of Public Systems and Organizations
The DNA of Public Systems and Organizations
• Purpose
• Incentives
• Accountability
• Power
• Culture
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The Budget System…The Budget System…
… is the most powerful driver within government.
Traditional budget instructions ask managers to explain how much it will cost to do:
• what they did last year,
• in the same way they did it last year,
• with the same results they got last year.
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The Current Budget GameThe Current Budget Game
Cost- Based Budgeting
Starting Point Last Year = BASE costs
Addition Autopilot increases = new BASE
Plus “needs”
Submission Justification for needs/costs
Incentives Build up costs - make cuts hard
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The Current Game (cont’d)The Current Game (cont’d)
Analyst’s job Find hidden/ unnecessary costs
State Officials’ job
Choose to cut services, OR
Raise taxes to cover costs
GET BLAMED!
Focus of debate What to cut
What to tax
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Wouldn’t It Be Nice If…Wouldn’t It Be Nice If…
Your budget process aligned your money to deliver the results citizens valued? If it:
• Got rid of low-value spending
• Moved money into higher-value, more cost-effective strategies and programs
• Motivated all managers to find better, cheaper ways to deliver results
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Inputs Activities Outputs OutcomesResults
Move Focus From Here…
…to Here!
Let’s Fund Results, Not Activities
Let’s Fund Results, Not Activities
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We Need to Answer Four Basic Questions
We Need to Answer Four Basic Questions
• How much revenue will we have: What price of government will we charge our citizens?
• What outcomes matter most to our citizens?
• How much should we spend to achieve each outcome?
• How can we BEST deliver each outcome that citizens expect?
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Louisiana’s Outcome GoalsLouisiana’s Outcome Goals
Education: I want increased academic achievement for all students, fewer children dropping out of school, and an educated workforce
Economic Development: I want Louisiana to retain, grow, and attract good jobs in a diversified, growing economy, while wisely utilizing cultural and natural resources.
Transportation: I want better, cleaner, safer and less congested modes of transportation, and I want to get where I need to go efficiently and reliably.
Hurricane Protection and Emergency Preparedness: I want Louisiana to better prepare for, respond to and recover from the next emergency (hurricanes and all other hazards).
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Louisiana’s Outcome Goals (2)Louisiana’s Outcome Goals (2)
Public Safety: I want less crime and for people of all ages to be safe at home, school, work and while traveling.
Self Sufficiency: I want self-sufficient families and healthy and safe Louisianans.
Health: I want better health for Louisianans, more affordable care, and the creation of a culture of personal responsibility for health.
Natural Resources: I want a better environment and abundant natural resources, and I want to preserve Louisiana as a sportsman’s paradise.
Transparent, Accountable, and Efficient Government: I want a smaller, more cost-effective state government I can trust and be proud of.
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Tracking Progress on Outcome Goals
Tracking Progress on Outcome Goals
We will define 3 key indicators for each one.
E.g., for health care, one state chose:
• Infant mortality rate
• Self-perception of health on survey
• Percentage with health insurance
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Pricing the PrioritiesPricing the Priorities
• How much are they each worth? Not how much do they cost?
• It’s judgment about relative priorities, not science
• Leaders can revisit these decisions later in the process
• The purpose is to create 9 finite pots of money, for which programs must compete
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Delivering the Results Delivering the Results
• Teams of policy experts analyze the basic factors that have the most influence on the outcome.
• They use those factors to create a Cause-and-Effect Map, showing the relationships between those factors.
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H E ALT H
R is kFa cto rs
E nv ironme ntB eh avio r
O ccupa tion
R ace /e thn ic ity
Age andge nder
S oc io -
econo mics ta tus
C ongen ita l
& G ene tic
fac tor s
A dequ atew ate r
S af ew ate r
Saf efood
A dequ atefood
E xp osu re to
ha zar dou sm ater ia ls
Exp osu re to
com m un ica bled iseas es
E xp osu re to
ha zar dou scond it ions
S ee k
ap prop riat ecare
S e lf- p ro tec t
fro m ac ciden tan d in ju ry
H ea lth y
sexu albe hav io r
H ea lth yE xe rc is e
R educ e
subs tan ceab use
R educ eob esity
H ealth yd ie t
C are S pe cial tycar e
Em er ge ncycar e
C hron ic /longte rm c are
P rima ry careP reventivecar e
A ccess to
cover ag e
Q ua lity
p rov id ers an dfacilit ies
G eog ra ph ic
d is tribu tio n o f
p ro v iders an dfacilit ies
R educ e
toba cco
use
ENVIRONMENT
HEALTHHEALTH
RISKFACTORS
CARE
BEHAVIOR
Sample Cause-and-Effect Map for Health
Sample Cause-and-Effect Map for Health
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ImpactNational Health Expenditures
$1.2 trillion
Source: Centers for Disease Control and Prevention, University of California at San Francisco, Institute for the Future
Health Impact vs. SpendingHealth Impact vs. Spending
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Turning Cause-and-Effect Maps Into Purchasing Strategies
Turning Cause-and-Effect Maps Into Purchasing Strategies
• Focus on changing lifestyle choices (smoking, drinking, diet, exercise, etc.).
• Focus on prevention: pre-natal care, immunizations, educating new parents, etc.
• Stop high-cost, repetitive cycles of care in emergency rooms.
• Electronic health records, to eliminate duplicate tests, increase quality and cut costs.
Potential Health Care Examples:
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Turning Purchasing Strategies Into “Requests for
Results”
Turning Purchasing Strategies Into “Requests for
Results”
• Budget Office issues new budget instructions, called “Requests for Results”
• For each outcome goal, the RFR explains the purchasing strategies, the funds available, & the desired results.
• They include other criteria as well, such as: “We will look favorably on offers than involve collaboration between agencies, or partnerships with NGOs.”
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“Sellers” Make Offers“Sellers” Make Offers
• Offers promise a specific level of performance at a specific price.
• They include proposed measures of performance.
• Offers assume no guarantee of funding based on historic levels.
• Offers are opportunities for departments to propose new, innovative practices.
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Buyers Seek the Most Results for the MoneyBuyers Seek the Most Results for the Money
Budget office:
• Evaluates offers
• Engages in dialogue with sellers
• Gives feedback
• Ask sellers for better offers
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Innovative Offers: ExamplesInnovative Offers: Examples
• Washington State: shifted $45 million in Medicaid money from emergency room care to drug & alcohol treatment
• Iowa: Reinventing the Corrections Dept.
• Los Angeles: New method to repave streets, using cold slurry seal
• Ft. Collins, Co.: Dial-a-Ride Solution
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Budget Office Prioritizes Final Offers
Budget Office Prioritizes Final Offers
• Sellers submit new, improved offers
• Budget office engages in further dialogue with sellers
• Budget office prioritizes offers within each outcome goal; recommends activities to fund and activities to eliminate
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The Bottom LineThe Bottom Line
• Balanced budget without gimmicks
• Focus on the ‘keeps,’ not the cuts
• Buy results, not costs
• Important new investments go to the front of the queue
• Performance accountability
• Continuous reform/ improvement