Government efficiency is an elusive ideal.
When a business or a household consistently spends more than it earns, it will go bankrupt. This provides an incentive to review costs.
Total government spending in the U.S. will come to about $7.1 trillion this year, of which a little more than half will be federal spending with state and local governments spending the rest.
The spending process at the federal and state level lends itself to review, even if the process is frequently abused or short-circuited. Generally, executive branch agencies draw up draft budgets that are then reviewed by an executive finance agency. These budgets are then presented to elected representatives in operating in their respective oversight committees and debated openly, drawing careful scrutiny from committee staff as well. The appropriations must be then approved by both houses of the legislative branch (Nebraska being unicameral) after which they are presented to the president or governor who has the power to veto the spending bills. All the while the media and interest groups pay careful attention to the process and the spending, often advocating for more spending and occasionally calling out waste, fraud and abuse.
Nationally, about 39 percent of state spending is on healthcare, most of which is under the federal Medicaid program which contributes a portion of the program’s cost in exchange for thousands of pages of rules that must be followed to get the federal matching funds.
As an example, Texas is set to spend about $31 billion on Medicaid this year, about 57 percent of which comes from the federal government. A comprehensive state audit examined 28 health services provider contracts worth $4.6 billion and found errors in all of them. This doesn’t mean that all of that money was wasted or that the government was defrauded—some providers may have gotten more than they were entitled to by law, some less. But, it does show a government accountability process struggling to make the system work. The governor and elected representatives are asking tough questions and trying to reform a complex system—all out in the open as it should be.
The City of Austin, Texas’ capital, spends about $4 billion annually. Its budget process is far different than that used at the federal or state levels. Where legislative members of a budget committee can meet several times a week for months, taking testimony from agency representatives and looking at budgets line item by line item, Austin City Council members are presented with the recommended budget by city staff and then spend up to 10 work days to review the numbers, including two days of public hearing and three days of deliberations.
Ellen Troxclair, a businesswoman and a member of the Austin City Council, serves as chairman of the Audit and Finance Committee. She also served as a chief of staff for a Texas state representative, giving her a unique insight into the differences in how Texas develops its budgets compared to how budgets are created in the City of Austin. Of the city budgeting process, Troxclair notes, “The budget presented to the council takes prior years’ spending for granted. The entire focus is on the increase from the last budget. Further, each city agency is viewed as a budgetary silo. For instance, spending to address homelessness is spread among a few departments, including the police department. This makes it difficult to see if taxpayer dollars are effectively used, if programs should be ended, or if higher priority needs should be funded.”
Troxclair also observed how the city’s bureaucracy games the system. “The City Manager presents the budget to the council. The budget is built up on budget requests from the city departments and it’s rather long. Department heads are encouraged to ask for anything they think they need, knowing that the city finance staff will pare this back. As a result, departments will put an essential requirement as 27th on the list, often leading to that key requirement not being funded or being seriously underfunded. This ends up on the unmet needs list. After a few years of being on the unmet needs list, the department then makes the case that it needs a major boost in funding. Of course, the right thing to do at the start would have been to prioritize spending within the budget.”
As evidence for the City of Austin’s tendency to fund wasteful programs Troxclair cited a city-administered federal program that gave up to $4,000 in tax money to anyone who asked so long as the stated purpose was to buy a house or open a business in the city. About $600,000 had been awarded by the program, half of which was city taxpayer money and half federal. The program lacked meaningful oversight and, as federal support was ending, the question was whether to continue the program with 100 percent city tax money. Had federal support continued, the program would likely not have been questioned.
Troxclair’s experience on the Austin City Council convinced her to support a comprehensive third party audit to examine spending. A bipartisan group of local Austin taxpayer activists who are leading the effort have successfully gathered enough petition signatures, more than 30,000, to put the question before voters this November.
The concept, known as a Government Accountability Inspection (GAI) or efficiency audit would look for program efficiencies and cost savings, review outsourcing opportunities, and recommend city assets that might be sold to the public. The overall goal would be to provide improved services for less money and potentially even reduce taxes. Importantly, an efficiency audit can only be done by an independent auditor.
Bill Bunch, Executive Director of Save Our Springs Alliance, a Central Texas conservationist group, supports an audit. He notes, “Transparency and efficiency in City spending is about as basic as it gets. The audit and spending review called for by petition should be unanimously approved by the Mayor and City Council.”
Speaking about an independent audit, former Assistant Director at Public Works for the City of Austin, Keri Burchard-Juarez, said, “It makes sense to identify redundancies and areas of overlapping responsibilities to potentially free up resources that could be used for other priorities. The information that results from a process like this can help everyone make more informed decisions.”
Independent audits conducted for local government have identified savings to local taxpayers of up to 10 percent.
Of note, the City of Austin is looking for voter approval on a bond package approaching $1 billion in the November 2018 election, more than a quarter of which would be allocated for affordable housing. The city council has until August to approve the package. If the voters approve the bond, taxes on the median-priced Austin home will go up about $87 per year. Behind that bond push awaits more than $3 billion in additional desired city spending to be financed by debt secured by local property owners.
The key question for city voters is whether they’ll approve more spending and higher taxes knowing that most of Austin’s elected representatives oppose an independent audit of the city’s $4 billion annual budget.
This commentary was originally featured in Forbes on July 24, 2018.