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topic index A DC Program Analysis Office

COUNTING AND SPINNING THE BEANS WITHOUT ASSESSING THEIR VALUE
Managing by Quantity Rather than Quality

summary

According to a recent local issue of the EXAMINER (2/13/07): "At a public hearing earlier this month, DC CFO Natwar Gandhi was asked why he didn't do more to fight corruption and waste in the city agencies he monitors. As he has done so often, Gandhi said his job is to balance the budget, not run the city agencies. 'I'm just a bean counter', he said." While the self-styled "golden hammer" may have been trying to display humility, some members of the DC Council find his holier-than-thou false modesty both aggravating and disingenuous.

The facts are mixed, however. The city books have been over-balanced for almost a decade now; Wall Street has raised DC's bond ratings to all-time highs; investment is pouring into the city; and income and property taxes have been somewhat reduced. On the other hand, the CFO does not hesitate to use unsubstantiated assertions in the political quest for additional federal and regional subsidies; and the ever-lengthening budget documents provide virtually no clues as to whether our capital city is really addressing, let alone resolving, its real and imaginary fiscal issues. Six years later, "program-based budgeting" is essentially a hoax.

DC's budget documents simply do not assess such basic matters as: desired and achievable population growth, land use, the impact and benefits of the federal presence and commuters, its real and imagined "structural imbalance"; its persistent and exorbitant poverty; the growing size of the DC government and its consultants; and its real-world infrastructure needs to provide first- rate municipal services, to educate its overly disadvantaged kids, or to assure transportation capacity for its continued growth.

NARPAC strongly believes that the new administration needs to create an independent program analysis and evaluation function, probably as an adjunct to the DC Council. It is high time to address and objectively quantify DC's very real and persistent fiscal needs, and assess whether, and how better the CFO's beans might be used to satisfy them.

introduction

In truth, counting beans accurately, if not conservatively, is a necessary management attribute in re-establishing DC's once-sullied financial reputation. On the other hand, it is certainly not sufficient to assure that our national capital is a world-class city capable of governing itself over the long run. Just as the city needs an annual independent audit of its books, it also needs a continuing independent assessment of the merits of the programs on which it spends exactly the right amount of money. It is an accounting success to spend precisely what was budgeted for widgets. It is a procurement/acquisition success to avoid buying faulty widgets or paying more than a reasonable price for them. But it is only a program success if those widgets not only do the job for which they were intended, but do an important job well, when and where it is needed.

Just as the city's bookkeeping and contracting are monitored by independent auditors, so the city's planned and ongoing programs should also be assessed by independent analysts. The quaint notion that program enthusiasts should justify their own biases by analyses conducted by their own staff and/or captive contractors is an invitation to the well-known "waste, fraud and abuse". This applies as well to any advocates' analyses done by, or directly for, the mayor's agency heads, the sainted CFO, or the several members of the DC Council with their own constituent-driven agendas. Members of NARPAC are familiar with the importance of this function in both federal and international organizations. We are disappointed that it was not applied to DC's past municipal government, nor is it planned for the newly emerging administration. We have tried (unsuccessfully) to fill the void on occasion, but without the necessary imprimatur. Late in 2004, we also prepared a formal suggestion to increase quantitative analysis capability in DC, but it brought no reaction.

Undeterred, however, we still marvel at the bureaucracy's unwillingness to come to grips with the following major issues which falsely taint the current programs and future plans of the nation's capital.

return to the top of the pagepopulation trends:

While our national capital metro area has been growing more populous by leaps and bounds over the past several decades, the District's resident population has been declining, leaving it with an uncertain tax base for the future. A significant portion of the decline, however, has been in kids, primarily black kids, resulting in a rapid decline in public school enrollment (but not in school facilities). On the other hand, "at-place employment" (the sum of residential and commuter workers) has been rising slowly, with commuters holding over 60% of DC's total jobs. The Office of Planning challenged the Census Bureau's trends in DC's population since 2000 and got them changed from slow-decline, to steady-increase for its 20-year Comprehensive Plan projections. 'OP' also hoped to (very) slowly improve the share of employment held by DC residents.

But the CFO, whose fiscal projections are intricately linked every year to past and current financial trends, continues to use 'old numbers' in its FY07 budget, and was apparently disinclined to use its own data on DC income tax returns to influence the debate. The peculiar-looking summary chart below smears together all the recent Census projections (in shades of green) and the "official" population estimates of the Comprehensive Annual Financial Reports (CAFRs) in purple. The higher dark blue extension line represents the long-range projection set by the Comprehensive Plan, while the lower light blue line is the CFO's much shorter range projection on which he bases the future financial outlook. Of possibly more interest, however, are the lower, shorter lines: Federal income tax returns from DC are indicated by the lower brown line, the companion yellow line of DC's taxpayers, and the top dark red line indicating the number of exemptions' claimed on federal taxes. There in nothing in these tax data to encourage such optimistic future trends.

population wanted

Despite the ready availability of data, there is no agreement within the DC government as to the best future use of scarce DC real estate. In particular, planners have proven unwilling to identify the real costs of the poor or the staggering burden they place on DC taxpayers relative to the rest of the metro area. The city's urges to: a) compete with the suburbs for young families; b) satisfy the needs of a vastly disproportionate share of the region's poor; and c) provide more affordable housing for less affordable residents all appear peculiarly unrealistic. The chart pair below shows the extent to which CFO budget projections have underestimated the revenues that DC would collect in the out-years of each five-year projection (left chart), while the rate of increase in budget spending for its three largest spending categories appear to have been equally, and disproportionately underestimated (right chart).

Few jurisdictions pay three-quarters as much on "safety and justice" as they spend on educating their young, and virtually no others spend 25% more on "human support services" than on education. The lack of any official city program analysis function allows these adverse trend to worsen yearly without challenge. This chart (left side) shows that DC may have as many as 50% more than police per capita than other typical US cities, not even counting the huge number of federal police employed by The Capitol, the Park Service, and other federal agencies. The lower chart also shows DC's unusual allocation of government manpower to education, safety, and welfare. The DC budget gives no inkling of these greater expenditures of manpower, nor of the alternate uses for the resources available to other jurisdictions.

 


Land Use

The failure to develop agreed land-use 'productivity' figures (i.e., revenues generated less city service costs incurred) clouds an otherwise obvious fact that high density commercial uses are almost certainly more revenue-productive than high density residential uses, unless those residents are high-earners with no demands on the public school and health systems.

The chart below tries yet again to demonstrate the vast difference in the "productivity" of DC's strictly limited acreage. Horizontally, left to right, are DC's 30,000-odd acres of available land for use of any kind, excluding public rights of way. The vertical axis indicates the thousands of dollars generated (or foregone, if negative) per acre by property taxes. Less than 13,000 acres generate revenues, and only some 550 of those (dark green) produce over $1 Million per acre (high- density, high-rise commercial structures, generally downtown, and including, of course, the K Street Corridor). Three times as much commercially-zoned acreage (light green) yields only $85K per acre. Obviously, DC could wipe out its (phony) structural imbalance by converting more of its underutilized commercial acreage to high-density use, and without even relaxing its antiquated building height limits near the federal core.

The remaining 10,000-odd acres are used for single or multi-family residences (blue) producing only about $60K per acre. In fairness, of course, residential acres produce almost twice as much on average per acre from individual income taxes, though the vast majority of these income taxes (gray) come from a very small share of residentially-zoned property. All DC's remaining acres are untaxed.

DC foregoes some $100K per acre on 1000 acres of tax-exempt residential properties (orange, center): almost 300 acres occupied by foreign embassies, but twice as many acres for DC's 1230 churches (!) (i.e., 200 households per church). Another 500 acres are at least "partially exempt" for low income residents. The DC government occupies over 1800 acres (red), and provides 2400 acres more (yellow) for non-profit hospitals, schools, colleges, cemeteries, etc.).

The Federal Government, from the White House and Capitol, to the State and Agriculture Departments, occupy some 4200 acres (dark purple) while public parks occupy 7400 more. Given the relatively sprawling nature of these high profile government buildings, they are appraised by DC's officials at an average of $90K per acre. The actual drain on DC's coffers for these federal entities is very low, and trivial in comparison to the drawing cards they provide for visitors, tourists, residents, commuters, and businesses.

return to the top of the page commuters vs. residents

There are no accepted estimates of the costs of city services (to local government) of the huge daily flow of commuters (or tourists and visitors as well) in and out of DC. This results in baseless qualitative assertions about the un-reimbursed costs for road wear, police, and emergency services. It also results in agencies like DDoT pushing local intra-city public transportation over regional inter-city arteries for misplaced social reasons.

net costs of the Federal presence

Almost a decade ago, DC's CFO took it upon himself to brand the presence of the federal government as the primary reason why DC has an inescapable built-in "structural imbalance" and cannot pay its bills without prohibitively high taxes. There are two obvious fallacies in this self- serving scapegoat approach. The federal government is almost certainly the primary reason most current high-rent residents and higher-rent office dwellers live and work here. The unspoken assumption that, absent our national capital, this city could find enough high revenue occupants to offset its disproportionate share of the poor and the illiterate seems highly unlikely and inconsistent with American urban trends elsewhere. For all the effort the CFO puts into estimating the real estate and income taxes foregone on federal properties, there are no equivalent estimates of the federal funds spent to maintain, improve, and protect those properties. For instance, there are roughly 4000 federal police protecting the Capitol, federal parks, and foreign embassies, and over 100 miles of major city roads largely maintained by federal funds. Furthermore, the 900-odd acres of federal parks, and dozens of museums and other attractions (such as the Smithsonian and Kennedy Center) are available to DC residents completely free.

return to the top of the page embracing a voodoo structural imbalance

For strictly self-serving reasons, the CFO continues to endorse a hurriedly and amateurishly prepared GAO study purporting to show that the city cannot be expected to pay its own bills without substantial (as much as $1.1B annually) outside federal help. NARPAC has shown that half the estimated unavoidable shortfall comes from an obvious arithmetic error. Much of the remaining shortfall comes from: a) using the wrong basis for comparing wage scales; and b) an unsupportable correlation of police levels with murder rates, and firefighters with apartment house fires. Totally lost in the spin is that GAO also showed that almost half of US states would, by this methodology, have much larger structural imbalances!

Nevertheless, the introduction to the CFO's FY07 budget justification starts out with the following truly fatuous bureaucratic promise that:

"the agency plans to fulfill its mission* by achieving the following strategic result goal (seventh out of nine):

  • Develop and implement a plan by program area and provide analysis to support the District's efforts to redress the structural imbalance:
    • Measure 1: Plans developed in each program area;
    • Measure 2: Actions from plans implemented;
    • Measure 3: Dollars received as a result of implemented action items."
(* the CFO's mission is "to provide financial management services to the government and people of DC to sustain long-term fiscal and economic viability")

the real "structural imbalance": excessive poverty

The CFO has never stopped promoting the mythical "structural imbalance". The letter of transmittal of the FY07 budget from Mayor Williams to President Bush continues to harp on this now-dated (and fully discreditable) effort to rationalize large federal payments:

"Even more impressively, DC has accumulated this (annual surplus and very high credit rating) despite a long-term structural imbalance, which is estimated by the GAO to be between $470M* and $1.1B per year. The GAO cites multiple factors causing this imbalance: the high cost of providing services in the DC metro area; the relative poverty of our population; and federal restrictions on our revenue collection authority......The explanation (of this apparent paradox) is twofold: our residents are among the most heavily taxed in the nation, and two, DC is deferring massive investments in critical services and infrastructure....."
(* FY07 will complete a 3-year phased reduction in DC's supposedly unbearable property/income tax burden by "over $350M")

In fact, neither the "What GAO found" summary of this May 2003 report, based on FY00 national comparative financial data, nor the 16-page GAO Executive Summary, mentions the word "poverty". To the contrary, that GAO report suggests DC has been spending too much on schools, and too little on police/FEMS! And the largest single 'massive deferred infrastructure investment' is DC's failure to modernize twice as many school buildings as it needs. DC's "independently chartered" CFO appears to spend more time spinning his beans than spilling them. NARPAC's detailed analysis of this startlingly bad GAO report has been essentially ignored.

But DC's most obvious basic budgetary issue certainly is excessive poverty (not sugar-coated as "relative poverty"). If Maryland, Virginia, and DC shared their "poverty burden" equally, DC would have 12,000 (60%) fewer families below the poverty line. Barring, that, DC should have strong incentives to pull its less fortunate families out of poverty. And that is the domain of DC's Human Support Services budget. It is the fastest growing, already disproportionately large, segment of DC's locally supported and Federally-augmented budget. It is therefore instructive (if analytically tedious) to lay out the budget justifications for the "Department of Human Services" from FY02 thru FY07. How is DC progressing in alleviating its chronic poverty problems? In these most recent six years:

o the department has been reorganized 5 times, with three of its major programs spun off into separate agencies (Child & Family Support; Mental Health; and Youth Rehabilitation);

o the "mission statement" has been changed somewhat each year. "Providing quality of life support" has stayed pretty much constant, but the goal of "fostering rehabilitation and self- sufficiency" has (in NARPAC's view) shifted to somewhat less ambitious goals of "promoting maximum independence and secure futures";

o Federal budget contributions have increased from (nominally) $200M to $300M, but local spending has grown from $200M to $660M. Full-time employment has grown from 1850 to almost 5000, of which 3300+ are supported by local, not federal, funding; o FY02 was the last year that the number of beneficiaries was enumerated (TANF families, disabled persons, teen-births, childcare recipients, etc). There is now absolutely no way to tell from these budget documents what 3200 more employees (a 166% increase!) are doing, or to how many more dependents (if any) they are doing it;

o the earlier concept of measuring success by how many deserving people were helped (e.g., "number of TANF heads of households participating in approved work-related activities") has been replaced by fuzzy bureaucratic measurements of the efficiency with which services are provided to whomever needs them (e.g., "percent of Medicaid eligibility determinations finalized within 30 days");

o The grand claim that each major subprogram now "has 'Key Results Measures' that show programs' outcome-based performance measures with prior years' actuals, current year targets and future year targets" is simply not demonstrated. Less than 25% of the minimum needed data entries are made in the 20-odd key measures (the rest are all "N/A"), and there are no cases where the FY08 target achievements are higher than those on FY07.

The opening statements of the FY07 DC Budget proclaim the adoption of "Performance Based Budgeting":

"The District is transforming the way it articulates what the government does as well as how it reports results. Performance-based budgeting (PBB) links spending to programs and activities allowing results to be measured. This linkage enables public officials, program managers, and the public to evaluate whether money is being spent wisely on a program that is meeting its goals or if the money could be better spent elsewhere. "
o The above statement is, in NARPAC's view, somewhere between disingenuous and fraudulent. Six years after the DC Council passed legislation (DC 47-308.01) requiring the mayor to adopt PBB, the bean-counters have produced significantly more obfuscation. There is absolutely no way to tell what is to be accomplished in the FY07 Human Services budget, or, for that matter, what has been accomplished since FY02 to lower DC's poverty-based "structural imbalance". Nor is there any hint of how else these rapidly increasing beans might have be spent. There may be a perfect count of the dollar beans and the FTE beans, but there is no visibility whatsoever as to what will be gained by expending them.

ignoring excessive government personnel, contract services

Despite the bogus claims for the need of more police/FEMS personnel offered by the GAO, there is no analytical basis for such claims. There are several areas where the number of government personnel per capita exceed national and urban norms.

These norms are further exceeded by the extensive use of relative "hidden" 'consultant' services. Monies spent on "other contract services" would raise the locally-funded FTE's in the FY07 DC government budget from 27,000 to 32,200. The CFO's office itself could be increased by over 600 people beyond the 1060 budgeted directly. Even more startling, DC's self-motivated DDoT staff of 104 FTE's for FY07 could be augmented by 200 more full-time personnel!

The layer chart below shows the increase in DC's operating budget by "Object Class", a little- exploited federal budget classification. It separates all spending as personal services (pay, overtime, fringe benefits, etc.) or non-personal services covering everything from supplies and utilities to security and equipment rental. The largest single category is "subsidies and transfers" which includes such payments as Medicaid and housing subsidies. But it also includes "other services and charges" (such as travel) and "contractual services other" which includes the ubiquitous "consulting" category that offers such a convenient alternative to permanent hiring. As indicated below, the fastest growing category of DC spending is for "subsidies and transfers", including items such as those listed to the left (from the FY06 budget) gleaned but not clearly delineated in CFO budget documents. The small band between personal and 'net' non-personal services is the slowly growing band of consultants that keep full-time personnel costs from growing any faster.

return to the top of the page municipal services infrastructure

According to DC's new 'Comprehensive Plan', the Office of Property Management "is responsible for the management, care and operation of all DC government facilities, including over 100 government-owned buildings with nearly 5.9 million square feet of floor space, 13 warehouses totaling almost 700,000 square feet, and 35 leased buildings with 4.3 million square feet of floor space. Assets include 10 parking lots and seven communications towers." DC Public School System facilities are excluded from this list, but all police, FEMS, libraries, health, human services, public works and even UDC fixed assets are included..These are the facilities most visited by DC residents for city services and leave a lasting impression of municipal indifference if not competence. Many are in disgraceful condition (like the schools, below) and there has been no systematic effort or planning to assure their maintenance, upgrading, and possible consolidation. They are way overdue for critical analysis.

public school infrastructure

Regardless of whether DC's kids are getting a sufficient education to assure that they become self-sustaining members of the community, their school facilities are a national disgrace. The utter disregard for preventative maintenance and essential capital investment is generally associated more with Third World countries than the leading capital cities of the Western World. DC's problems are exacerbated by a dwindling school enrollment (down to perhaps half its current capacity); a large number of buildings way beyond their useful life span, and a group of strident activist groups who think these properties are, and should remain, outside the city government's control. A recent analysis of twelve "urban" (inner city) school systems shows that DC has 43% fewer kids per school than the average, 20% more school staff per student, and the lowest test scores of them all. Another area where objective analysis beyond the influence of misguided advocates is sorely needed. NARPAC's school facilities analysis has been ignored.

transportation infrastructure

DC's new 'Comprehensive Plan' projects a 20-year increase in employment of 125,000 (lower than the regional growth trend); an increase in population of 121,000 (much higher than recent local or national urban trends); and no need whatsoever for additional Metrorail infrastructure or a single lane-mile of arterial roadway. Instead, the city will focus on adding on-street bicycle lanes and trolley tracks to facilitate intra-city mobility, while lowering the capacity of urban arterials through an extensive effort in beautification, "boulevardization", traffic-calming, and urban entertainment. No projections are provided for tourism and visitors, even though they currently match daily commuters in annual "outsider man-days". No projections are made of increasing truck traffic demands or vehicular parking needs either to generate or sustain the growth. To cap it off, near-term planning projections differ from those of the CFO in both starting points and five- year growth. Current city transportation modes are already near saturation points, but there have been no objective assessments of future requirements, the lead times and costs of providing them, or the consequences of not providing them. NARPAC has challenged Metro's inadequate planning to no avail.

Even DDoT's "mission" seems to vary depending on which document one reads. According to its official DC government web site:

"(DDoT's)...mission is to enhance the quality of life for DC residents and visitors by ensuring that people, goods, and information move efficiently and safely, with minimal impact on residents and the environment."

On the other hand, in the FY07 DC Budget Documents, DDoT puts greater emphasis on commuters and economic competitiveness by stating that:

"(DDoT's mission)...is to provide reliable transportation facilities and services for residents, visitors, commuters, and businesses so that they can move safely and efficiently, while enhancing quality of life and economic competitiveness."
Neither statement refers to the necessity for, or desirability of, enhancing future transportation capabilities. Furthermore, presumably with CFO approval, DDoT uses its budget documentation to toot its own horn rather lavishly, and without substantiation:

"Since achieving cabinet-level status in 2002, DDoT has positioned itself as one of the District government's most innovative and visionary agencies, and has become an emerging national leader in the provision of state and local transportation services."
And it goes on to assert that: "Each weekday, nearly 40,000 DC residents walk to work, and 25,000 residents commute by bicycle." A quick check of Census Bureau data suggests that in 2005, out of some 620,000 persons traveling to work in DC, there may have been closer to 25,000 walkers and 6000 bikers. "Working to increase these numbers" should probably not be a major pre-occupation, as currently promised. Biking, in particular, seems to be a hobby for a few well-off, full-grown white men, along with owning multiple cars.

return to the top of the page conclusion: a DCPAO

It seems abundantly clear that the independent office of the CFO, created while DC was under the thumb of a Congressionally-imposed Financial Control Board, has developed a fiscal accounting capacity sufficient unto its limited bean-counting task. There is not the slightest indication, however, that the CFO has any handle on program content, or program purpose, for that matter. The CFO exhibits a propensity to add very questionable "spin" to his own quest for funding, and little control for other idiosyncratic "spin" added by the city's agencies and departments. Improprieties in contracting persist, and the initial attempts by the Williams administration to add clear program goals and accountability have clearly faded (except for the rhetoric) through successive budget/program documents after FY02.

DC's FY07 budget will include almost 34,500 full-time equivalent (FTE) employees, of which some 26,950 will be paid from local revenues. The CFO's office will have 1060 FTE's, and another 200 will populate the Office of Contracts and Procurement, and the Office of Finance and Resource Management. The Inspector General's Office, under the Mayor, will employ almost 120 people, and the DC Auditor's Office, under the DC Council, will have only18. Within the CFO's office, some 25 people are assigned to analyzing revenue sources. There is no identifiable program analysis function anywhere in the DC government, certainly not on the staff of the CFO, the Mayor, or his City Administrator. Hundreds of consultants do parochial analyses for their agency proponents, many of which are insultingly poor, and narrowly constrained. Some Federal agencies do support very influential independent "program analysis and evaluation" offices. For instance, at the Defense Department, the program content of each 5-year rolling budget is "scrubbed" before the beans are assembled. in accountants' detail.

NARPAC strongly believes that a completely independent program analysis capability is long overdue, and that it could well afford to employ between 50 and 100 professionals, hopefully drawn largely from other departments, agencies, and "think tanks".

These city employees should have access to carefully monitored contractor support, as does DC's CFO. The office should have talents and skills at least equivalent to those of Congress's Government Accounting Office (GAO), the Congressional Budget Office (CBO), and the White House's Office of Management and Budget (OMB). Ideally, such an impartial DC Program Analysis Office (DCPAO) should be jointly supported (and staffed?) By the DC Council and the Mayor's office. If such cooperation cannot be assured, then it should be under the auspices of the DC Council.

The proposed DCPAO should be thoroughly distinct from the CFO, but have access to his data and projections. Its work should be a combination of self- and externally-generated studies, and heavily protected from outside political pressures (a major failing of the GAO) . Its data bases should be drawn from, and/or consistent with, those of federal, regional, state, and local government and private sector agencies. It could well become a model for other local, state, and regional organizations.


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This page was updated on Mar 18, 2007


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