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.
Locally Funded = paid for by DC-raised revenues
Otherwise Funded = paid for by federal grants, other sources
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):
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:
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:
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:
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
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:
Typical Performance Measures:
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.
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:
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 ControlOptimists can glean from this that the Williams Administration is not backing away from the need for major bureaucratic reforms, based on non-controversial and irrefutable evidence of non-competitive administrative performance. Pessimists can claim that this essential restructuring effort is being strung out beyond and reasonable span of political attention or energies. Realists might bridge the gap by acknowledging that changes of this magnitude in such ingrained--but nonetheless democratic--institutions requires both the patience and the fortitude to persevere. While NARPAC would aspire to such realism and familiarity with governmental processes, it cannot help but hear inner voices crying "OK, but HURRY UP!".
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.