GUEST COLUMN.

As pressure grows on states and localities to operate within their budgets and still keep the voters happy with the services they provide, a number of steps are being taken. Sometimes they’re referred to as cost savings. In other instances, they’re labeled as efficiencies.

But these can be two very different creatures, and there are perils in thinking they are interchangeable. Conversations about efficiency in public programs are replete with stories that conflate cost savings with efficiency. Commonly, one can easily reduce costs by doing less, disregarding the issue of whether outcomes were maintained, and falsely claiming an efficiency improvement.

I previously served as the non-partisan Legislative Auditor for Washington State. Like many well-intended auditors (and many executive branch leaders), I constantly chased the silver chalice of improving the efficiency of government.

The initial question to ask is what does a program actually cost to achieve a given outcome? One way this can be easily expressed is in terms of efficiency ratios.

Decreasing an efficiency ratio is typically seen as an uncontroversially good thing. For example, if a government previously spent $10 million per mile of highway construction, and they find a way to reduce that ratio to $9 million per mile, this is an obvious win for society. Most public officials, regardless of political affiliation, would consider this as an improvement.

That said, measuring efficiency and recommending ways to improve it is complicated in the real world. This is because efficiency is not usually uniform and measuring it often involves addressing multiple complex outcomes.

For example, the cost to construct a mile of highway is higher in urban than in rural areas. So, a new rural highway project might appear more efficient, but instead merely reflect differences in construction locale. Further, if efforts to reduce costs have the effect of decreasing a highway’s lifespan or safety, then it is disingenuous to claim this lower cost as an efficiency. Instead, you are really trading off cost savings for reduced performance.

I’ve seen many examples of this kind of thing.  One audit in Washington State examined ridership in the marine ferry system. The audit claimed eliminating some lower ridership ferry routes would improve efficiency. However, the complexity that wasn’t addressed in the audit was how to properly measure outcomes when eliminating routes.

Reducing low ridership routes would definitely cut the cost per remaining passenger. However, certain ferry dependent communities would have more limited options for commuting to jobs or accessing critical services like health care. I would argue the auditors had a simplistic measure of outcomes and conflated cost savings with efficiency. A policy change like the auditors’ recommendation might improve one measure of efficiency (cost per passenger), but “break” another important outcome (transportation access).

There’s a lot that states and local governments can learn from observations of recent developments at the federal level. Many recent publicized efforts by the  administration to reduce the cost of the federal government have been touted as efficiency improvements. This includes wide scale federal employment reductions and the halting of certain payment programs to eliminate fraud. The executive branch has the authority to manage its workforce and payment review processes (assuming, of course, its actions comply with legal requirements on personnel management and program eligibility). But from an efficiency perspective, what appears to be missing from these efforts is a discussion of the impacts on outcomes.

Targeted staffing reductions, strategically focused on employee performance and reorganization to maintain service delivery, could improve efficiency. However, according to publicly reported information, the current efforts do not appear to have addressed employee performance or reorganized job functions around outcomes.

Similarly, broad payment pauses could theoretically result in preventing some fraudulent expenses. But the outcomes of withholding other legitimate payments does not appear to have been analyzed. Or if it has been analyzed, it has not been publicized.

These federal initiatives will indeed reduce costs. But many proponents are equating those cost reductions to efficiencies. Without solid evidence about how outcomes are impacted, this may be a false equivalence.

This matters because a true efficiency is that rare “free lunch” in government. It occurs when an innovation in delivering a program provides the same or improved performance at lower cost. It implies we got the same thing for less money, or possibly something better without paying more. It should be roundly supported by all parties.

But cost reductions incorrectly cast as efficiencies are dangerous, as they may really be changes to outcomes disguised with language that makes them appear less consequential. Referring back to the ferry example: who does not want a more efficient ferry system? But if the scenario really involves reducing costs by decreasing service, then this is a more complex proposal to debate.

Efforts to improve government efficiency generally receive wide support. But they require clear documentation about outcomes. Without this, many legitimate questions remain about whether downsizing efforts are breaking other important outcomes. These questions should be asked by all officials, regardless of political affiliation.

There are objective professionals well suited to help determine whether government actions are improving efficiency. Nearly all state governments have non-partisan Legislative Auditors who adroitly analyze these very issues. Public officials would be wise to use these resources to identify whether proposed spending reductions are indeed true efficiencies, and to ensure there is an objective focus on analyzing outcomes.

The contents of this Guest Column are those of the author, and not necessarily Barrett and Greene, Inc. 

#StateandLocalGovernmentManagement #StateandLocalGovernmentEfficiency #StateandLocalGovernmentPerformanceAudit #ServiceCutsMaskedAsEfficiency #OutcomeReductionAndEfficiencyMeasures #DefiningEfficiency  #StateandLocalGovernmentPerformanceManagement #AnalyzingStateEfficiency #WashingtonLegislativeAudit #CityGovernmentEfficiency #StateAuditorPerspectiveOnEfficiency #StateandLocalCostReductions #ConflatingCostSavingsWithEfficiency #StateandLocalEfficiencyRhetoric #AssessingStateandLocalEfficiencyEfforts #AnalyzingFederalEfficiency #StateandLocalEfficiencyImpact #NonpartisanLegislativeAudit #GovernmentConflationOfCostSavingsAndEfficiency #StateandLocalServiceCutsMislabeledAsEfficiency #ComplexOutcomesAndFederalStateLocalEfficiency #BandGGuestColumn #KeenanKonopaski #BarrettandGreeneInc