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
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
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
Distribution of State Spending 1987-2005Distribution of State
Spending 1987-2005
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
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
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.
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.
Duct TapeDuct Tape
• Across-the-board cuts
• Consolidation
• Performance audits and studies
• Creating oversight groups
• Reorganization
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
The DNA of Public Systems and Organizations
The DNA of Public Systems and Organizations
• Purpose
• Incentives
• Accountability
• Power
• Culture
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.
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
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
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
Inputs Activities Outputs OutcomesResults
Move Focus From Here…
…to Here!
Let’s Fund Results, Not Activities
Let’s Fund Results, Not Activities
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?
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).
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.
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
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
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.
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
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
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:
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.”
“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.
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
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
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
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