7. Enterprising Government: Earning Rather Than Spending

Government is under constant pressure to keep local taxes down. In this chapter, Osborne and Gaebler describe how some state and local governments have used innovative methods to actually earn money that would otherwise need to be raised from taxes. These enterprising governments have learned to recognize their assets and generate revenue from them. They have done so in four main ways:

• Making use of the profit motive. Government rarely thinks in terms of raising money. But government often owns land and provides other services that can be turned into profit-making ventures. Sale of land for development or of public services that only benefit some individuals, such as golf courses or marinas, are examples of ways government can raise money.

• Charging user fees. User fees are already fairly common, for services such as garbage collection and parking. However, in some cases public services that benefit affluent individuals, such as golf courses and tennis courts, are subsidized by all taxpayers. A simple and fair alternative is to charge user fees to those who benefit from a service. User fees are appropriate as long as the services provided are private goods, not collective goods, which benefit society at large, such as police services. In addition, special arrangements may be necessary to ensure lower-income people have access to services.

• Making investments based on expected returns. Government traditionally focuses on minimizing costs, but enterprising governments pay attention not only to cost but also to potential returns on expenditures. This requires thinking over a longer term, which can be politically difficult. But several examples illustrate how initial spending by governmentsuch as to protect land under intense development pressure that will later require massive government investmentcan pay off with savings later.

• Turning managers into entrepreneurs. There are several techniques for allowing managers to operate in a more entrepreneurial fashion. By reforming traditional budget systems to allow departments to keep the funds they save or earn, government provides managers with incentives to save and make money. Introducing a loan pool against which managers could borrow automatically, up to a certain limit, would give managers access to capital that they could use for innovational purposes.

Governments can, and often do, create enterprise funds to operate certain services. In contrast to agencies funded from general revenues, enterprise funds are self-supporting. While they are not appropriate for all services, they can be effective for those services that are expected to support themselves either fully or partially, such as water and sewer services. Because any funds they earn or save are returned to the fund, enterprise fund managers are encouraged to spend less money and make more money than other managers.

8. Anticipatory Government: Prevention Rather Than Cure

Osborne and Gaebler detail several examples where city, state and federal governments have incorporated mechanisms into their decision-making processes to plan for the future. Many of these cases simply projected out budget considerations into the future. By doing this, governments are better able to integrate costs that will arise in the future with those short-term decisions that politicians make to maintain the approval of their constituencies. The central idea that is driving this trend is the realization that prevention costs less and is much easier than suppression.

These are just some of the many ways governments are building preventative methods into their decision-making processes.

Prevention vs. Crisis Management

At the present, public institutions are geared towards crisis management. Fire departments, for example, spend significantly more time putting out fires than they do preventing them. Slowly, these institutions are recognizing the superiority of preventative, rather than reactive, solutions to society's problems. By creating and enforcing building codes, installing sprinkler systems, and working closely with developers on building plans and construction, fire departments are beginning to enjoy tremendous savings. Changing the orientation from suppression to prevention is being accomplished in many ways.

Futures Commissions

Governments have turned to the community for input by creating organizations called "Futures Commissions." A Futures Commission can take on a variety of forms but ideally they are comprised of citizens from within the community who are charged with the task of identifying and developing goals. Once the goals have been established, subcommittees are organized to prod the relevant public and private agencies into achieving them.

Strategic Planning

Strategic planning is another method being used to incorporate foresight into the decision-making process. A practice used in the private sector for years, strategic planning is a process of "examining an organization's or community's current situation and future trajectory, setting goals, developing a strategy to achieve those goals, and measuring the results."

Long-Term Budgeting

Perhaps the most important realization is the impact of short-term budgets on community and organizational planning. Many governments budget on an annual or bi-annual basis, causing most decisions to be made with little regard for the long-term financial impact. Governments are beginning to recognize the benefits of predicting costs and revenues as many as ten years in the future.

Accrual vs. Cash Accounting

Another way to incorporate a long-term focus into the budget is to include the costs of future obligations as expenses. Most governments rely on the practice of cash accounting, in which expenses are not recorded until they have actually been paid. By incorporating accrual accounting techniques, which counts the future financial commitments of an organization as expenses, governments will be better positioned to assess their abilities to meet those commitments given the projected revenue flows.

Cross-Departmental Budgeting

Governments are also beginning to view the impact of a budget decision in one area on other departmental and institutional funding streams. Cross-departmental budgeting, as this practice is commonly called, is one way to identify when spending cuts in child care, for example, drive up costs in welfare transfers.

Regional Concerns

Long-term planning has been incorporated into the decision-making process in ways beyond budgeting. Recognizing the impact of decisions made in neighboring jurisdictions and anticipating regional problems have proven to be beneficial for some governments. In addition to this orientation toward the intergovernmental system, governments have realized that constituencies can be created to monitor plans and react as any other special interest group might. Organizations such as BUILD Baltimore and the Greater Indianapolis Progress Committee have become, in essence, stakeholders of the future in the system of public affairs. They assess government policy for its long-term practicality and lobby decision makers.