VALUE FOR MONEY BUDGETING

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1 VALUE FOR MONEY BUDGETING One Reform In A Series From Rick Snyder s Top 10 Guiding Principles For Reinventing Michigan: #3 - Fix Michigan s Broken Government Paid for by the Rick Snyder for Michigan Committee PO Box 7371, Ann Arbor, MI 48107

2 REINVENTING MICHIGAN: RICK S TOP TEN Rick s Top 10 principles to reinventing Michigan serve as the foundation for his vision and long-term plan in leading Michigan beyond today s challenges, and into an era of innovation. 1. Create More and Better Jobs Rick believes that Michigan needs to cultivate a thriving and globally competitive economy with a diverse business base, enabling job growth and prosperity. His entrepreneurial experience, management over the growth of Gateway and leadership in economic development programs, such as Ann Arbor SPARK and the MEDC, make him uniquely qualified and positioned to lead this state in creating more and better jobs. 2. Reform Michigan s Tax System Rick believes that we need to reduce the tax burden on families and businesses in Michigan. Rather than advocate for short-term solutions Rick wants to reform Michigan s tax system so that it is competitive, simple, fair, transparent, efficient and facilitates economic growth. 3. Fix Michigan s Broken Government It s time we reinvent state government so that it runs efficiently and serves its citizens as customers. Rick wants to restore ethics, accountability and transparency to state and local government. Rick believes we need a new approach to governing that is not politically motivated, but solution oriented. 4. Create An Environment That Will Keep Our Youth Our Future In Michigan Rick believes that we need to create networks, programs, and environments across Michigan that will cause our young people to want to stay in this state. His experience has given him an understanding of how Michigan can retain and attract young talent. 5. Restore Cities and Control Urban Sprawl In order for Michigan to truly reinvent itself, its cities and communities must become more vibrant. Rick will work to improve the state s city centers and create attractive living and working environments for its citizens. Rick supports the establishment of a proper mass transit backbone in the state. 6. Enhance Michigan s National and International Image Rick believes that to reinvent Michigan, we must focus our marketing strategy to encourage tourism, attract innovative businesses, invest in the arts, and rebuild our roads and infrastructure in order to enhance Michigan s image. 7. Protect Michigan s Environment As a native Michigander, Rick knows that Michigan s awe inspiring lakes, landscapes and natural resources are some of its most valuable assets. Rick has served on the Nature Conservancy and believes that protecting the environment and growing the economy can be done simultaneously. Michigan needs to be a leader in the innovative movement towards alternative and cleaner energy. 8. Reform Michigan s Educational System Rick believes that a child s progress from pre-kindergarten through college and advanced degrees is the cycle on which the state s efforts should be focused and coordinated. Rick believes that schools, teachers and parents must renew their commitment to ensuring that each child is given the best possible preparation and education for life so that future generations can be competitive and innovative. 9. Reform Michigan s Health Care System Every citizen should have access to affordable and quality healthcare. Rick believes that comprehensive, successful health care reform must include prevention, wellness and personal responsibility. 10. Bring Winning Back To Michigan Rick believes that it is time for this state to create a hopeful, positive culture and attitude where personal responsibility and collective determination introduce us to a new era. Rick also believes in the importance of embracing our rich diversity to reach common goals for the state. 2

3 VALUE FOR MONEY BUDGETING It s time for the citizens to take back control of Michigan s broken budget process and Lansing to show us real value for money. As Governor, I will fix our broken budget system and bring fiscal responsibility, stability, transparency, and the citizens priorities to state government. - Rick Snyder Introduction Value for Money Budgeting Is An Innovative Budget Approach That Engages Citizens In Determining How Their Tax Dollars Should Be Spent And Tracks Progress Against These Goals Transparently. It s a simple concept, but one that requires leadership and a strong commitment to the people to implement. Value for Money is an approach to budgeting that puts citizens first, asking their priorities for tax dollars as a first step to assembling a public budget. It takes budget-writing out of political backrooms and puts it right into communities into the people s hands. A Value for Money approach includes specific outcomes measurements to ensure progress is being made toward the goals set by the citizens and requires government report back on whether taxpayer actually got their money s worth. There are a number of ways to design such a system, but when we put the people first and focus on results, the outcome is always the same: a common-sense budget based on measurable goals. We will know, month-by-month, with specific data whether or not government is being effective. Lansing Politicians Are Out Of Touch With Michigan s Needs Imagine this scenario: you need to invest in a new car for your family. You work out a payment plan and purchase a vehicle that is affordable, reliable, safe, and comfortable for your family s frequent trips around town and yearly vacations that s Value for Money budgeting where you are in control and can see that you get what you pay for. Imagine instead that a car dealer doesn t ask you what you are looking for, takes money out of your pocket, hands you the keys to a clunker and sends you on your way that s our current situation in Lansing. Background On Budget Fixes, Michigan Has Heard Talk, But Seen No Action A few times in recent decades, politicians have attempted to introduce the concept of outcome-based budgeting in Michigan 1. What they neglected to realize is that is also takes leadership. Michiganders have heard the talk, but have never seen the action, because a lack of leadership has always meant that professional politicians ultimately joined with special interests to fight against innovation on behalf of the status quo. 3 1 Public Strategies Group Report, 3/28/06

4 Our Current Budget System Is Too Broken To Fix On A Piecemeal Basis As families and businesses across the state are cutting back in this economic recession, Michigan s government must decrease spending and reign in long-term spending pressures from existing programs. As professional politicians have struggled with growing deficits, they have done so without clear objectives. Without performance measurements. Without positive results. Over the past three years, professional politicians have overseen two government shutdowns as they failed to pass a budget before the deadline. This lack of leadership has consistently threatened local governments, schools, hospitals, roads, and damaged the quality of services and programs citizens deserve. The challenges facing Michigan s budget situation are severe and will require strong leadership and fiscal responsibility. Unfortunately, Michigan s current budget system is driven by special interests and lobbyists who use money and political favors to influence Lansing. Those Figure 1: Source: Michigan s Fiscal Future, May 2008, Citizens Research Council, Pg 123 influences dictate which programs are funded and which services are put on the chopping block. On top of that, unclear priorities and poor fiscal management are responsible for the failure to address growing spending pressures from existing programs and growing liabilities that outpace projected revenues (see Figure 1). Glossing Over Structural Budget Problems The current administration has glossed over structural budget problems 2 and growing deficits with harmful tax increases and a misuse of federal stimulus dollars. Accounting gimmicks and short-term fixes have been used to put off necessary long-term solutions. Since 2001, over $8 billion in one-time resources and stimulus funds have been used to mask outof-control government spending 3. These reckless decisions will result in even greater challenges when federal stimulus funding ends in 2011, creating a virtual revenue cliff that will further threaten Michigan programs. This failure to make structural reforms is quite simply a failure of leadership. Michigan s government has continued to operate without regard to the economic problems facing our citizens. The Remedy Michigan needs responsible leadership. It needs long-range planning. When it comes to the state s budget, Michigan needs an innovative approach that puts the peoples priorities first and ensures measurable outcomes from the state s budget policy decisions. 4 2 Mackinac Policy Center, Michigan s Budget Deficit Calls for Structural Reforms, Citizens Research Council, State Budget Notes, Jan 2009, p.7

5 How Value for Money Budgeting Works A Cycle That Begins With Citizen Input and Ends With Measureable Success Step #1: ASK CITIZENS FOR THEIR BUDGET PRIORITIES AND OUTCOMES Ask Citizens For Their Budget Priorities Value for Money budgeting begins by engaging citizens in a variety of ways focused discussion groups, town halls, journalism, polling, Web-based tools, and other means of outreach to determine the priorities that matter most to the people of the state. They are asked to rank the top issues on which government should concentrate its resources. These priorities are used to align spending, manage limited resources, and focus government on a clearly defined list that citizens value most. The process, from Day One, takes the budget-writing process out of the backrooms in Lansing and puts it into Michigan communities. Measure Performance, Report To The People Enact Multi-Year Budget Review Best Ways To Deliver Government Services Identify What Success Would Look Like Select Best Strategies To Reach Goals Examples of What Might Be Citizens Top Priorities for Government: 1. Create more and better jobs 2. Reform Michigan s educational system Step #2: IDENTIFY WHAT SUCCESS WOULD LOOK LIKE Citizens help government leaders determine Indicators of Success that best illustrate whether state programs and services are successfully achieving the desired outcomes. Metrics are identified that measure progress and are meaningful to consumers. Results are assessed and made available to the public through regular reporting. Below are potential measurements for each of the citizen s priorities from the previous example: Examples of Indicators of Success for Each Citizen Priority: 1. Create more and better jobs Increased employment between the ages of Increased new business creation Increased per capita income 2. Reform Michigan s educational system Improved quality of students education Improved scores in science, technology, engineering and mathematics Increased percentage of participation in university/college programs 5

6 Step #3: SELECT BEST STRATEGIES TO REACH GOALS Citizens input on priorities and indicators of success are used to develop best strategies for achieving each goal. Solutions that demonstrate true improvement to Michigan are identified. Develop a Strategy for Achieving Each Citizen Priority: 1. Create more and better jobs Make Michigan more competitive to attract businesses, new investment to the state and foster homegrown industries Reform the Michigan Economic Development Corporation to work better with regional economic development organizations to create and recruit jobs Utilize our research universities as catalysts for new job creation, especially in the areas of high tech, alternative energy and life sciences Assist employers to grow and expand existing businesses and enter new markets 2. Reform Michigan s educational system Promote a P-20 Model, where education programming is readily accessible and measured Focus improvement on Science, Technology, Engineering and Mathematics (STEM) programs Implement teachers and principal competency standards and reward performance Mixed use of public and charter schools to improve quality through competition Step #4: REVIEW THE BEST WAY TO DELIVER GOVERNMENT SERVICES All options both public and private are examined for the best way to deliver the services that the citizens want. These options are compared with best practices and benchmarks from other government and private entities and ranked based upon their probability for success in Michigan. Government agencies providing overlapping or redundant services are directed to find the most efficient service delivery option by combining or eliminating inefficient programs. The options selected give taxpayers the most value for their money. Review public and private service delivery options: What agencies are currently responsible for this function? Is there overlap or redundancy that could save money? Is there a private sector alternative? What can we learn from other states? Is there a better solution? Assess options using quantitative and qualitative tools like cost-benefit analysis and cost-effectiveness analysis. The most promising programs and services are selected. 6

7 Step #5: ENACT A MULTI-YEAR BUDGET CYCLE, LONGER-RANGE PLANNING A sane multi-year budget cycle must be enacted for Michigan. It is the only way to adequately address the people s priorities. The current haphazard, crisis-to-crisis planning cycle leads to a poor allocation of scarce state resources. EXAMPLE: School districts throughout the state begin their fiscal years on July 1st, long before the current budgeting process concludes, which means they begin the school year forced to guess how much they ll be allocated. This system leads to budget shortfalls in classrooms throughout the state. With a two-year budget cycle, school districts will be in a much better position to anticipate the level of funding they are likely to receive. The state government budget problems should not add stress to school districts and cities budgets. Additionally, longer-range planning would allow state government to allocate resources based upon the funds that are actually available, not the funds available after accounting gimmicks, tax increases, and fee hikes. Step #6: MEASURE PERFORMANCE AND REPORT TO THE PEOPLE The state must measure its progress toward the citizens goals and report back to the people. With Value for Money budgeting, program and service performance is measured regularly and the results are made publicly available through a variety of channels, including the state s Web site. Citizens will have the information necessary to understand how tax dollars are spent and how programs and services are performing relative to their expectations. Further, through increased access, citizens will be able to make their voices heard throughout the process. This access and idea-sharing is currently non-existent in Michigan. Transparency initiatives implemented on the state s website: Program progress regularly reported using the Indicators of Success determined by citizens The state will produce an annual report that reflects the State of the State for Michigan taxpayers. The report will provide insight on how state programs are achieving desired outcomes and where Michigan ranks relative to other states. The state s checkbook is posted to illustrate how state spending reflects citizens priorities This ongoing process allows the cycle to continually improve so that state government can better provide the results and services that its citizens want and deserve. 7

8 Comparing Value for Money To Lansing s Current Broken Budget System A Value for Money approach to budgeting in Michigan will alter the role of the governor in a significant way. Instead of trying to appease special interests and lobbyists, the governor will be required to find the most value for tax dollars to invest in programs and services that Michiganders value most. The governor s focus will shift to improving the quality of state government by implementing long-range planning and creating measurements to gauge success. Rather than make decisions in closed-door negotiations, the governor will lead a transparent process that engages the public so that everyone can work together to build a better Michigan. A Comparison of Lansing s Current Budget Process to a Value for Money approach Budgeting Steps Current Lansing Value for Money Budgeting Starting Point Last Year s Budget Engage citizens to set priorities and identify tangible outcomes Create strategies for each priority Assess available funds projected Produce standards to measure success Budget Crafting Add/subtract from last year Special interests and lobbyists influence lawmakers Budget talks are delayed until government is forced into crisis management Midnight tax and fee increases are sought to balance and pass the budget Budget Enactment and Management Public Transparency Substantive reform is left unaddressed Government is not held accountable to measurable results Deficits grow while Lansing fails to act Status quo is maintained Closed-door sessions Severely limited information available online Implement a two-year budget and longer-term forecasting to enable planning and performance management of government programs /services Identify and propose funding for programs/services that target achieving the outcomes prioritized by citizens Evaluate public and private bids for service delivery options and select providers Assess and eliminate costly and inefficient redundancies in state government Establish clear performance metrics for each program/service Government spending is based on funds available Each outcome is measured and evaluated transparently and government is held accountable Planning, forecasting and program performance are managed Structural reform is integrated into the process Constant cycle of improvement Community meetings and outreach Timely and accurate information published on the state website including: o Budget process o Citizen s priorities o Program performance o Benchmarking against other states o The state s checkbook 8

9 Value for Money Has Worked Elsewhere Nationwide, governments are learning how to do more with less. Shrinking revenues and the rising costs of government programs are requiring leaders to become better financial managers and focus limited resources on outcomes prioritized by citizens. The following list of success stories illustrates how this type of bold and innovative fiscal management can increase government efficiency, improve customer service, and produce outcomes that citizens value most. Washington State reduced a $2.4 billion deficit without raising taxes. In 2002, Washington State engaged citizens to identify and prioritize outcomes that government leaders should focus on for the upcoming budget. This approach resulted in over $2 billion in savings and a balanced budget that did not require tax increases. More importantly, it changed how the state did business by fostering long range planning, and creating a system called Priorities of Government. These changes created savings from consolidated service delivery, improved efficiency at the state and local level, and targeted spending in areas prioritized by citizens. Priorities of Government is still practiced today and has been recognized as a finalist for the Innovation in Government Award by Harvard s Kennedy School of Government. 4 Iowa s Department of Transportation (IDOT) saved an estimated $35 million annually by restructuring. Like Michigan, Iowa s transportation infrastructure suffers from harsh winters and limited money for badly needed maintenance. Iowa risked losing federal transportation funding unless they could identify additional revenue to finance construction and maintenance projects. In 2001, IDOT ordered a comprehensive review of all services, delivery mechanisms, and management. Citizens were engaged to determine the priorities and changes were implemented to right size IDOT for their mission requirements. Redundant layers of leadership were eliminated, office and maintenance garages were consolidated to better support operations, and the workforce was crosstrained for new technologies, maintenance and construction. These changes have saved an estimated $35 million annually and federal matching dollars were preserved for Iowa. 5 Charlotte, NC has improved customer service, efficiently managed government growth, and invested in mass transit despite doubling in population. Charlotte s city government adopted a customer based and results oriented rightsizing initiative in the 1990s to identify competitive and innovative solutions to meet the increased demand on government services. City council worked with city staff and a 44 member citizen advisory council to determine priority outcomes for government services and to adopt a long range plan to manage the city s rapid growth. The city implemented cross-training strategies and improved technology to restructure city government; 26 departments were consolidated into 9 business units, and the municipal workforce was reduced by 8% while the public safety workforce actually grew by over 40%. Customer service surveys indicated greater than 80% approval on nearly all citizen services with public safety near 90%. Moreover, the city managed a AAA bond rating throughout the restructure, reduced the budget by 1%, and avoided any property tax increases Harvard Kennedy School of Government Innovation Awards 5 The Price of Government, David Osborne & Peter Hutchinson 6 The Price of Government, David Osborne & Peter Hutchinson

10 Conclusion Value for Money budgeting is exactly what Michigan needs to put its state budget back on solid ground and protect the programs that Michiganders deserve and expect. The process begins with citizen input and is followed through with measurable outcomes, enabling committed and effective leadership to relentlessly improve how government serves the needs of its citizens. A Value for Money approach would stave off the kind of partisan and political bickering that has vexed Lansing. Michigan residents needs and desires, and their priorities, we can marginalize pettiness and ideological power struggles by clearly describing the problems. Value for Money rallies people of different backgrounds and beliefs together in the interest of common state goals and strategies. It is a simple concept, but one which requires a leader to put it into place a leader who is not beholden to the special interests that plague Lansing. Rick Snyder is that leader. He is the candidate with the experience and commitment to ensure that Value for Money budgeting is finally put in place for Michigan providing citizens real, measurable value for their tax dollars. 10