GOP con­gress­man pushes zero-based bud­get­ing

Agen­cies would have to jus­tify all ex­penses

The Washington Times Weekly - - Politics - BY KELLY RID­DELL

Kraft Foods is the lat­est in a long line of ac­qui­si­tions by a pri­vate eq­uity firm whose bud­get-cut­ting ini­tia­tives are so ag­gres­sive that em­ploy­ees com­plain they are asked to jus­tify the cost of a pho­to­copy.

Now some politi­cians and po­ten­tial Repub­li­can pres­i­den­tial con­tenders are imag­in­ing a world where the U.S. fed­eral gov­ern­ment is asked to do the same.

The stream­lin­ing tac­tic, known as zero-based bud­get­ing, re­quires each agency or busi­ness unit to jus­tify its bud­get re­quests from scratch for all ex­ist­ing and newly re­quested pro­grams. It’s some­thing the fed­eral gov­ern­ment hasn’t at­tempted since Pres­i­dent Carter ad­vo­cated for it in the 1970s. It re­lies in­stead on past bud­gets as a base­line of money that is guar­an­teed, and then re­quests ad­di­tional sums year over year.

“We have to jus­tify our ex­is­tence ev­ery day in the pri­vate sec­tor — change to at­ti­tudes, trends. You have to adapt. Gov­ern­ment doesn’t adapt. In­stead it just in­cre­men­tally adds on,” said Rep. Den­nis A. Ross, who in­tro­duced last week — for the third time — his Zero Based Bud­get Act in the House of Rep­re­sen­ta­tives in the hope that the public sec­tor can take a les­son from pri­vate en­ter­prise’s play­book.

“We should be painfully hon­est with the Amer­i­can peo­ple, be­cause it’s their money,” said Mr. Ross, Florida Repub­li­can and a mem­ber of the House Com­mit­tee on Fi­nan­cial Ser­vices. “When we do the bud­get process, we want to have some jus­ti­fi­ca­tion for ev­ery ap­pro­pri­a­tion that is sought — a legal ba­sis for it, an amount that is less than last year’s and a sum­mary to ex­press the out­come of it,” he said.

The thought be­hind zero-based bud­get­ing is that it shifts the bur­den of proof to each agency head, con­gres­sional mem­ber or manager to give jus­ti­fi­ca­tion for why they should be spend­ing any money at all. It re­quires them to an­a­lyze all ac­tiv­i­ties and rank them in or­der of their costs and benefits.

The tac­tic has be­come so suc­cess­ful for 3G Cap­i­tal Part­ners, the Brazil­ian group that pur­chased Kraft and other food chains like Burger King and Tim Hor­tons, that other in­dus­try lead­ers are tak­ing note, with Co­caCola adopt­ing the mea­sure to strip $3 bil­lion in costs out of its bud­get by 2019.

But there’s doubts the public sec­tor has enough dis­ci­pline to make zero-based bud­get­ing suc­cess­ful.

“It just doesn’t work with Congress, be­cause they all be­lieve in the spend­ing. If you’re on the Agri­cul­ture Com­mit­tee, you be­lieve in farm spend­ing, [and if you’re on the] Trans­porta­tion Com­mit­tee [you be­lieve in] trans­porta­tion,” said Chris Ed­wards, the direc­tor of tax pol­icy stud­ies at the Cato In­sti­tute, a lib­er­tar­ian think tank. “There’s no cost-ben­e­fit trade-off for mem­bers in Congress — they just fight for much more ev­ery year.

“Pri­vate com­pa­nies — and why the gov­ern­ment fails — is that pri­vate com­pa­nies are in search [of] prof­its, and it’s ruth­less. They cut costs, in­no­vate and im­prove qual­ity,” he said. “Profit mo­ti­va­tion is the fun­da­men­tal in­gre­di­ent that the gov­ern­ment doesn’t have. There’s no pres­sure to cut costs in Congress be­cause there’s no in­cen­tive to.”

Still, some state leg­is­la­tures have taken on the ini­tia­tive.

In 2000, dur­ing Jeb Bush’s ten­ure as gover­nor, Florida was one of the first states to en­act an eight-year cy­cle of agency re­views to help it bet­ter eval­u­ate bud­getary re­quests. The ef­fort was aban­doned a few years later af­ter state leg­is­la­tures found the process ex­pen­sive and time-con­sum­ing, ac­cord­ing to a re­port by the Na­tional Con­fer­ence of State Leg­is­la­tures.

The same thing hap­pened in Ok­la­homa, where law­mak­ers passed leg­is­la­tion re­quir­ing a four-year cy­cle of zero-based leg­isla­tive re­views in 2003, but the process be­came so la­bo­ri­ous, law­mak­ers didn’t have time to con­sider the bud­get, so in­stead they re­vised the law to get out of the zero-based process, the re­port said.

Zero-based bud­get­ing gets messy in gov­ern­ment be­cause there isn’t one pre­dom­i­nant goal, mul­ti­ple agen­cies have dif­fer­ent mis­sions, and their lead­ers eval­u­ate them by their own stan­dards, said W. Clif Wilkin­son, a po­lit­i­cal science pro­fes­sor at Ge­or­gia Col­lege & State Uni­ver­sity.

How­ever, in busi­ness there is an agreedupon bot­tom line that ev­ery­one — no mat­ter the job or unit — ral­lies around and to­ward which ev­ery­one is held accountable.

“The dif­fer­ence in gov­ern­ment is the ac­count­abil­ity, the way the hi­er­ar­chy is dif­fused and what is your mission. There are mul­ti­ple mis­sions in gov­ern­ment, and prof­itabil­ity isn’t one of them,” said Mr. Wilkin­son. “The mission and goals in pri­vate in­dus­try are so much more sim­ple and clear than they are in gov­ern­ment.”


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