ANALYSIS OF FY01 DC BUDGET

Many people find budget books dry compendiums of numbers and statements defying comprehension. Others, however, see them as a compilation of all the decisions made during the prior year about the next year's program objectives that will require either new money or personnel. As one case in point, the decision to put a fifth firefighter on fire trucks was reached early this year (2000) after a particularly deadly fire, but the authority and funding to do so will have to wait until approval of the FY2001 budget, probably not before October, 2000. As a second case in point, activists are already whining that the Mayor has forgotten his promises in December 1999 to do more city planning at the neighborhood level, but the authority for the additional personnel for the Office of Planning is requested in the FY2001 budget and must await approval by year's end. Those who don't understand the length and importance of the budget cycle are ill- equipped to judge government performance and responsiveness.

Gross Budget Changes

The preamble to the 2001 budget promises great new initiatives in response to citizen demands, and in the main, these are reflected in the budget. However, these new items are a very small fraction of the total budget. To the typical budget analyst, the changes from FY00 to FY01 would appear routine at best, and discouraging at worst. In terms of monies to be spent, and personnel to spend them, the trends would appear to be in the wrong direction.

In terms of expenditures, the FY01 budget is 3.6% higher than FY00, and the share paid by DC from its own revenues increases twice as fast as the growth in federal grants and other sources.

Similarly, the number of people on the payroll increases over 5%, although here the costs borne by DC are about equal to those borne by other funding sources. However, the rate of grow in people exceeds that of expenditures, meaning a more bureaucrat-intensive program.

The combination of these two gross factors confirms that any efforts made to offset the minor costs of new initiative programs have been unsuccessful, implying a mindset that says better performance demands greater resources. No one even vaguely familiar with the evident "dysfunction" of the DC governmental agencies would accept that on face value. The other alternative is that the mayor is trying to make good on his promises of greater neighborhood involvement despite the fact that he has not yet attained control of his inherited bureaucracy.

This disappointing shift in direction is accompanied by a retreat on applying benchmarking (to determine if DC agency performance is competitive with that of other jurisdictions). Moreover, the presentation of agency performance objectives is very modest and very incomplete. On the other hand, the need to present data comparisons that are beyond reproach requires far more justification than if the manager has full authority over his workers--as would be the case in the private business sector.

To cap it off, this year's goals are compared to last year's goals, but nowhere are goals compared to accomplishments. Again, the response is not as sinister as some might imagine. The mayor's first goals were set in the FY2000 budget--a fiscal year that will not be over until October 2000. Results cannot be digested and reported until, say, March of the following year.

The following sections goes into these areas in greater detail.

Two Year Changes in Government Personnel Levels

It is now clear that the Williams administration has not to put a cap on government employees. In fact, total "full time equivalent" (FTE) workers will increase by 4,085 from 30,295 in FY99 to 34,380 budgeted for FY01. The majority of the increases (3,495) will be funded by non-local revenues, but some 590 will come out of local revenues. The break-out of the increases is as follows (key: total (local/federal or 'other):

• 231 (74/157) for Government Direction and Support;
• 445 (96/349) for Economic Development and Regulation;
• 591 (-671/+1262) for Public Safety and Justice;
• 1239 (694/545) for Public Education (including UDC);
• 978 ((88/890) for Human Support Systems (Including health);
• 558 (493/65) for Public Works; and
• 212 (-155/+367) for 'Receiverships' (CFSA and CMHS)
  
  

Other increases include greater staffing for the Inspector General's Office; proper funding of the Firemen's Retirement Fund; continuing the functional swaps associated with Federal assumption of most prison costs (which require DC increases in some functions as well); increases in DC's funding share for opening Metro's Green Line, South, and operating the entire system for longer hours. Most important of all (to NARPAC, at least) is the initial funding of $10M for urban 'brownfields remediation'.

Office/Agency Rankings by Personnel Levels

The table below shows the relative size of DC's various offices and agencies ranked by their total numbers of 'FTE's', and shows how many of those FTE's are funded by DC's own revenues. Some of the placements may provide "gee whiz" statistics. For instance, for whatever it's worth:

• there are many more people in mental health care than in regular health care;
• the Office of the Chief Financial Officer is much larger than the Recreation and Parks Dept;
• there are more people in Corrections than in Public Works;
• there are more people in the Corporation Counsel's office than in all DC libraries; and so on
  

DC's FIVE-YEAR BUDGET TRENDS Outyear projections of DC revenues and expenditure requirements are in the main component projections without regard to content or major changes in direction or governmental efficiency. Unfortunately, these projections do not include estimates of government personnel requirements. They seem to NARPAC to be little more than a projection of "business as usual"--devoid of any departures from historical trends based on new initiatives. To be realistic, about all these projections demonstrate is that it should be marginally possible to continue barely balanced DC budgets for the foreseeable future. The gross trends are summarized below:

General Fund Revenues are projected to rise 14% from $3214M in '00 to $3493M in '04, with property taxes rising 6%, sales taxes 27% and income taxes 16%. By 2004, the make- up of DC's local revenues would be:

• 20.6% from real property taxes;
• 21.7% from sales taxes;
• 38.9% from individual and corporate income taxes;
• 9.6% from gross receipts and other taxes; and
• 7.1% from 'non-tax' sources;
  
  

Non-Local Revenues are projected to rise 12% from $1573M in FY00 to $1767 in FY04, with $1444M coming from federal grants, and $323M coming from private or other revenues. These non-local revenues will continue to comprise some 34% of total DC revenues--a very substantial fraction compared to other jurisdictions receiving both state and federal assistance.

These non-local revenues--mostly federal grants--are spent primarily on welfare programs, but impact significantly on several other areas. In the five years from FY00 through FY04, the $8312M in non-local revenues (81% from the Federal Government) will be dispersed as follows:

• $4684M to Human Support Systems;
• $928M to Public Safety/Justice;
• $873M to Public Education;
• $773M to Economic Development and Regulation;
• $770M to Receivers in the Human Support area; and
• $192M to Gov't Direction and Support.
  
  

• Gov't Direction and Support will rise from 3.9% to 4.1%;
• Ec Development, Regs, and Financing will drop from 12.2% to 11.3%**;
• Public Safety and Justice will drop from 16.7% to 15.7%;
• Public Works will hold at 5.8%;
• Public Education will grow from 18.4% to 20.0%; and
• Human Support Systems (incl. receivers) will grow from 39.7% to 40%

Welfare: DC's 300 lb. Gorilla

Spending for DC's poor, sick, old, hungry, mentally disabled or physically abused, consumes directly 40% of DC's total annual expenditures. But if one makes a reasonable assumption that 25% of public education costs, and 25% of public safety and justice costs also flow from endemic poverty, and if one further assumes that the "overhead" costs of government direction and regulation are proportional to all other operational functions, then reductions in welfare demands would provide additional economies in other functions as well. Hence if it was possible to cut the welfare roles in half, NARPAC estimates that the city would save 18% of its total personnel (6145) and 27% of its total gross spending $1180M).

Taming and slimming this gorilla is made the more difficult by two mutually reinforcing factors that will remain intractable for the foreseeable future:

o The first is that the current DC bureaucracy is the evolutionary product of an almost wholly patronage-based hiring policy over 25 years, still protected by an antiquated civil service regime fashioned on the federal government's "fire-proof" system of thirty years ago (DC still uses some old OPM forms discarded by the federal bureaucracy well over 25 years ago). And many of the jobs are sustained by relatively remote, disengaged federal resources.

o The second is that the majority of welfare recipients are the tragic product of a "reverse evolutionary process". To overstate for emphasis, the "fittest" have survived--and prospered--by escaping the bounds of blighted neighborhoods, leaving behind a concentration of the "less fit" who, far from dying out (or being consumed!) as a species, have proliferated under marginal (mostly federal government) sustenance. This, in turn, has generated a significant sector of DC's electorate gullible to local demagoguery, but relatively unable to help themselves. It has also generated large numbers of government workers (and contractor support) dependent on the city's poor for their jobs.

There are no objective solutions to this dilemma other than modernizing DC's government personnel policies on the one hand, and gradually "deconcentrating" the metro area's disadvantaged on the other--so that they no longer perpetuate and reinforce each other's condition. There is no evidence of these unavoidable long-range programs in the pages of DC's FY2001 budget books.

Alternative Futures Budget Displays

That the 5-yr DC budget projections are essentially hokey is suggested by the fact that the cumulative expenditures are estimated to be $24,970M and the revenues are estimated to be $24,998--the kind of coincidence made simpler by modern computers. It would appear to be more useful to demonstrate the extent to which this balance can be upset by relatively small--but continuing--changes in various basic parameters during the 5-year time frame.

For purely illustrative purposes, NARPAC has taken a rough pass at making small changes in each of four major areas and estimating the 5-yr cumulative impact of each:

o Adding 500 top-end (rich) households per year could add revenues of $348M over the five years;

o Adding 2% annually to revenues derived from business enterprises could bring in $183M over five years;

o Reducing the number of welfare households by 500 annually could decrease expenditures by $594M over the five years;

o Decreasing the DC government workforce by 500 FTE's annually could reduce expenditures by $450M over five years.

Doing all four of these things could produce well over $1.5 billion by the end of FY2005. That is enough money to begin to address real initiatives for the long-range improvement of our nation's capital.

DC's Best Kept Secret: A Respectable Capital Investments Budget

As reported in the analysis of last year's DC budget, one of the most encouraging aspects is the doubling of spending for capital improvements. Although the large increase for FY00 was not realized, the new six-year plan is 17% higher than that proposed last year--as indicated by the table below. The distribution between various functions remains much the same--with 50% going for transportation needs, 20% for public education, 11% for Human Support Services; 7% for Public Safety and Justice, and almost 5% for the Office of Technology.

DC 6-YR CAPITAL BUDGET SPENDING PLANS
in $(M)

Reducing the Burden of Debt Servicing

Last year's proposal to restructure the debt was adopted, with a very substantial reduction in financing costs for the next three years (a trick that cannot easily be repeated). Nonetheless, by somewhat mortgaging the city's longer range spending, significant near-term savings have been achieved--allowing some $185M more to be spent on hopefully useful near-term programs, as shown below:

The items listed below are representative of, but by no means a complete report of, the various performance measures offered by different offices and agencies. Hopefully, NARPAC has picked out the more interesting ones--as well as some of the noteworthy omissions. It might be noted that none of the agency heads, per se, have any performance measures. Moreover, there is no evident correlation between these performance measures and the newly instituted management scorecards.

The 105 members of the Inspector General's Office plan to close 220 investigations in '01 vs. 200 in '00; issue 100 investigative reports vs 200 in '00; and save $35M through audits--as last year.

The 52 people in the CFO's Office of Budget and Planning hope to get 100% of their FRP reports on time, vs. 75% in '00; and to produce 80 fiscal impact statements on time instead of 70 in '00.

The key initiatives for the Office of Planning's 58 staffers include assessing the development opportunities and negotiating the disposition options for St. Elizabeth's between GSA, CMHS Receiver, and DC government; and developing plans for targeted commercial districts such as Georgia Ave, Columbia Heights, and East of the River.

The 144 members of the Dept of Housing and Community Development intend to repeat '00's performance of providing downpayment assistance for 473 first-time homeowners; executing rehab loans for 428 housing units in multi-family apartment buildings; and executing 250 loans for development of new housing units.

The 309 people in the Dept of Employment Services plan to complete 175 OSHA inspections, register 215 district residents as new apprentices; and place 1600 youths in unsubsidized summer employment--marginally more than in '00.

The 403 staffers in the Dept of Consumer and Regulatory Affairs hope to improve their non-complex building permit processing time from 90% to 95% within 24 hours; occupational and professional license renewal processing time from 75% to 80% in four days; and to clean and abate 1,000 nuisance properties vs 500 in '00.

The 89-person Dept of Insurance and Securities Regulation hope to establish an electronic document tracking and retrieval system; develop an interactive web site; improve staff capabilities; and conduct community outreach and education by engaging in a wide range of promotional activities with insurance and securities industry representatives--in the hopes of making DC a focal point for worldwide financial services.

The goals of the 3599 members of DC's Police Dept are virtually unchanged from last year in crime reduction, resident satisfaction and average 911 response time (5 min) to emergency calls for service.

The 1948 members of the Fire and EMS Dept have not yet determined their performance measures.

The 516 FTE's in the Corporation Counsel have no stated goals or performance measures.

The 1815 employees of the Dept of Corrections intend to achieve a 10% reduction in inmate-on-inmate assaults, a 3% reduction in inmate-on-staff assaults, and a 10% reduction in rate of absconders. They also plan to transfer 4600 prisoners to federal facilities in '01 vs. 1800 in '00.

Neither the 10,931 FTE's in DC's Public School System nor the 931 employees of UDC offer and performance goals or measures.

The 432 employees of the DC Public Library on the other hand, offer detailed and steadily improving performance measures for each of their three divisions from FY98 thru FY02 and is easily the most concise and informative budget presentation in the FY2001 DC Operating Budget document.

The 690 newly reorganized employees of the Dept of Parks and Recreation hope to raise user-survey satisfaction from 50% to 75% for DPR programs and cleanliness, while reducing work hours due to job injuries by 70% and raising the proportion of day-care centers nationally accredited from 50% to 85%.

Most of the performance goals for the 1780 workers in the Dept of Public Works remain unchanged: 100% on-time trash collection including alleys; 100% abandoned vehicles removed from public property within 10 days and from private properties within 31 days; 90% of utility cuts completed within 60 days, and permanently repaired within 45 days.

The 334 employees of the Dept of Motor Vehicles have set new goals for average auto inspection time (not including wait time!) from 30 minutes to 20 minutes, and to process 50 cars per hour instead of 45. They hope to complete 80% of first-time car registrations and driver's license renewal within 30 minutes (including wait time), and to get 80% of registration renewals below 20 minutes.

The 2030 employees of the Human Services Dept seem to have very few quantifiable objectives: the Income Maintenance Administration plans to increase the medical coverage for poor families by 8,700 vs. 8600 in '00; the 201 members of the Rehabilitation Services Administration hopes to find at least 90-days of successful employment for 890 disabled "customers" vice 829 in '00; the goal of the Youth Services Administration is to have no more than 188 inmates at Oak Hill; and the 69 people in the Office of Early Child Development hope to increase the number of early care and education caregivers in educational activities from 3168 in '00 to 3485 in '01.

The 577 workers of the Child and Family Services Agency (under receivership) has a substantial increase in funding for pay raises, personnel increases, and higher payments for foster parents and other "placement resources". They hope to: increase their investigations of child mistreatment above 450/month; protect some 4000 kids within their families; increase the number of kids reunified with their families from 144 to 180; have 455 kids successfully adopted vs 350 in '01; decrease adoption time from 24 to 20 months; reduce time in foster care homes from 38 to 34 months; and to raise the number of licensed foster care homes from 481 in '01 to 553. The CFSA does not provide data on the total numbers of kids being assisted by this program.

Many of the goals for the 1241 employees of the Dept of Health remain unchanged from last year, but include enrolling 2000 uninsured residents in Medicaid vs 5100 in '00; getting a school nurse in 100% of DC schools (vice 90% in '00); creating another 1000 drug treatment slots in '01; increasing the number of "premises abated for rodents" from 10,000 to 12,000; and screening 21,900 kids under 6 for lead poisoning, vs 19,000 in '01. The 136- person State Health Affairs will devote 70 people to licensing and regulation and 47 people to collecting "state health statistics".

It should be noted that this year's goals are compared to last years goals, but nowhere are there yet any comparisons with achievements relative to goals in past years. In its current form, this exercise is of little use as a management tool, except as a precursor for accepting the principle of performance accountability. This can change radically when sufficient time has passed so that performance attainment can also be reported--possibly as early as the FY2002 budget.

Benchmarking: Retreating Behind Promises--and Reality?

In reviewing DC's FY2000 budget, NARPAC waxed euphoric about the CFO's stated intent to embrace benchmarking. In part we noted at that time:

Perhaps most intriguing to NARPAC's analysts was the test run of a new budget format which obliged each of some 70-odd budget elements to begin to compare their operational parameters with those of other cities--primarily the ones visited by Mayor Williams shortly after his inauguration. Unfortunately, the final budget proposal eliminates these comparisons, probably because most of these comparisons are yet to be developed, and all of them will be controversial. Nevertheless, as NARPAC asserted here in May, 1999, if pursued, these benchmarks would offer a substantial challenge if DC is indeed to transform itself into an urban role model. In fact, the final management report submitted with the budget includes the following statement:

Benchmarking

The District conducted benchmarking research studies in preparing the FY 1999 and FY 2000 budgets. The January-March 1999 study compared selected operating and financial measures for a dozen District agencies with five "best practice" cities: Detroit, Indianapolis, Philadelphia, Phoenix, and Portland, Oregon. This summer, the District will mount a more extensive benchmarking effort of services in these five cities and additional jurisdictions. The selection criteria for benchmarking are:

1. Neighboring jurisdictions in the region regardless of differences or similarities 2. Comparable urban jurisdictions around the nation similar in population size, demographic mix, geographical features and other dimensions 3. Best-practice jurisdictions regardless of differences or similarities

Benchmarking will help us understand how the District compares to our neighbors, identify strategies used in similar urban settings, and set our goals as high as the best performing jurisdictions in the nation.

NARPAC, Inc. will do whatever it can to make sure that this promise is fulfilled. We are particularly pleased to see that some of the peer comparisons will be made with neighboring jurisdictions. One prime objective for DC is certainly to be as good--if not better--than other American cities where people like to live. But the primary means to achieve this is to level the socioeconomic playing field within its own metro area. Hence regional parameters that directly influence demographic/migration decisions need to be included, quite possibly developed jointly with the COG or the Greater Washington Research Center.)

In fact, the FY2001 budget moves in the opposite direction and removes any hint of comparative performance measures--for the time being. In its place, DC's new CFO promises the following on pages 3 and 4 of his letter of budget transmittal to the Chair of the DC Control Board:

Span of Control

".......Evaluating the ratio of staff to managers and the number of management layers can play a significant role in an organization's effort to re-invent and re-engineer itself to help District executives and policy makers evaluate and determine the appropriate structure for agencies. We will analyze the agency organizational structures that were submitted in April. More specifically, we will:

o identify and document existing rations of staffs to managers and the number of layers of management in the District;

o compar(ing) the District's management structure to those of other public organizations that are similar to ours in size and complexity; and

identify changes the District can make to become a more organizationally efficient government.

This will require a team effort and partnership with the Mayor's Office, the Council, the Office of Personnel, the Office of Budget and Planning, and agency management.

Benchmarking

We have joined the International Cities/Counties Management Association (ICMA) Performance Consortium. The ICMA Center for Performance Measurement (CPM) will assist the District in the data-collection of 1000 measures of service. These areas of service include Police Services, Fire/EMS Services, Neighborhood Services, and Support Services. It is my intent to work collaboratively with the Mayor's Office to coordinate the collection of these measures, to work with the Council and agencies in analyzing and interpreting the results. The results will be benchmarked with other jurisdictions that participate in the ICMA Performance Consortium--which currently includes 31 local jurisdictions with populations greater than 50,000. These measures will provide an indication of how the District compares with similar jurisdictions which are "best-in-class" and thus facilitate analyses to determine what "best practices" those jurisdictions are using."

NARPAC has been in contact with the ICMA, and obtained the latest annual CPM report (December, 1999). Most encouraging are indications that the "membership" in the ICMA is growing rapidly to include a more diverse cross section of cities (not just the healthy ones!), and more suburban counties including the key ones in the Washington metro area. It should eventually be possible to compare metro areas as well as cities, and cities in relation to their immediate suburbs--a longstanding NARPAC objective.

The latest CPM contains a significant amount of useful data, but on less than half of the governmental functions critical to DC's overall budget. There is no information on public education, welfare and medical programs, or government administrative staffs. It is clear that either CPM will have to greatly expand the breadth of its efforts, or it will have to adopt means of "certifying" data from other sources such as the Census and the Dept of Education.

Furthermore, although it is a noble objective to seek accurate and representative data, the magnitude of DC's apparent personnel inefficiencies does not need another one or two years of analytical stroking--for reasons other than purely political acceptability. For instance::

o None of the 16 listed cities and counties with populations between 400K and 1,500K have as many as half as many police FTE's as DC;

o No listed city or county has as many library staff per1000 residents as DC, except Minneapolis;

o Only cities with over twice DC's population hire more Fire/EMS FTE personnel;

There are some useful data comparisons on the maintenance of roads and city- owned vehicles, solid waste removal, facilities and housing maintenance, and personnel issues. Many of these other areas, however, appear to lack direct ties to manpower levels. Clearly, the art and science of benchmarking remains in its early, formulative stages.

NARPAC is seriously concerned that benchmarking across all first-order DC budget categories is going to take several more years.