| October 29, 2012

‘Which programs do you suggest we cut?’

I’m glad you asked.

Last week in The Washington Examiner, former state finance director Tom Daxon pointed out that Mitt Romney is someone who knows how to balance a budget. “You can’t be successful turning around failing companies, not to mention the Olympics, without knowing how to ferret out waste and then eliminate it. But can the same techniques Romney used so successfully in the private sector work in government?”

Mr. Daxon, who himself rehabilitated Orange County, California’s finances while serving as acting treasurer following the county’s 1994 bankruptcy, says the answer is yes.

In fact, it is already being done in Kansas. Gov. Sam Brownback, R-Kan., has introduced a dramatic new approach to report the costs and benefits of state programs. The effort’s early success helped give Kansas legislators the resolve to enact the biggest tax cut in state history, while balancing the budget. Kansas reduced 4,000 bureaucratic positions—mostly by attrition—and turned a half-billion-dollar deficit into a half-billion-dollar surplus.

Romney has used a similar approach countless times in business; but it is unlike the way most government spending is assessed today. Interest groups jealously guard their “share” of federal spending. Current accounting reviews tell us little about the actual cost of services and even less about whether those services actually accomplished their goals.

If Romney would insist that actual goals be established for each program, and then measure progress toward those goals, both in terms of cost and effectiveness, he would have a tool to pinpoint waste and inefficiencies. Then when opponents ask, “Which programs do you suggest we cut?” the answer would be, “Those that aren’t meeting their goals.” Or, “Those whose benefits don’t justify the cost.”

Regardless of who wins the presidential election, Oklahoma’s political leaders should follow Gov. Brownback’s lead and implement this “Cost Management System” in our state. Brownback’s budget director, OCPA research fellow Steve Anderson, has made this system available for download. Policymakers can also draw on the wisdom of Mr. Daxon, who now teaches accounting at Oklahoma City University and who outlined some of these ideas three years ago in OCPA policy papers entitled “Enhanced Financial Reporting for State Government” and “Enhanced Financial Reporting for State Government: Comparing Cost to Performance.” Doing so would be consistent with Gov. Mary Fallin’s vision of lower taxes and right-sized, effective government.

At an OCPA speech in Tulsa and in other public forums, Indiana Gov. Mitch Daniels said:

Never take a dollar from a free citizen through the coercion of taxation without a very legitimate purpose. We have a solemn duty to spend that dollar as carefully as possible because, when we took it, we diminished that person’s freedom.

It is inappropriate for our political leaders to continue spending money on government programs that aren’t meeting their goals or whose benefits don’t justify the cost.

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