Citing business lessons, Deloitte publishes government handb

by Vault Consulting Editors | January 06, 2011

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Yesterday, Deloitte released its latest publication, entitled Letting Go of the Status Quo: A Playbook for Transforming State Government. The Playbook suggests a four-pronged approach to improving state governments: make government smaller and more cost-efficient, make states more business-friendly, overhaul health and human services systems, and reorganize critical government structures.

Deloitte's approach is a private-sector brew of good, bad, and obvious ideas. It starts like this: November's midterm elections delivered a new wave of freshman politicians and with them, a broad mandate to enact change. Voters, the authors say, want jobs, smaller government, and reduced spending, all without tax increases. So, what to do? Let's examine the four prongs.

Prong 1: "Reduce the cost, size, and scope of government"

Pretty straightforward stuff here. This section cites examples of cost-cutting measures in New Jersey, Indiana, and Michigan, praising the kind of "take-no-prisoners" governance that has seen these and other states make considerable deficit reductions. The authors touch on lots of non-controversial material here; while they note savings earned by changes in pension schemes and the decommissioning of unused state vehicles, they fail to note that the "take-no-prisoners" style they suggest has also resulted in hundreds of thousands of public sector layoffs (despite their acknowledgement that jobs are the only real indicators of prosperity). So while the language is tame, the suggestion is clear—tough cost-cutting measures are necessary to achieve financial responsibility. That's something that most can agree on.

Prong 2: "Improve state competitiveness"

Here's where we start to run into some problems. The authors write, "For states determined to move beyond their hard times and recharge their vitality, they'll need to focus on competitiveness boosters like revitalizing infrastructure, pursuing radical education reform, and reinventing economic development." To their credit, the authors recognize that it's difficult to justify slashing social welfare and education expenditures to provide for corporate tax decreases and incentive packages. Their alternative solutions, however, are also problematic.

A first suggestion is for state governments to invest heavily in new infrastructure ("roads, bridges, rail lines, sewer lines, electrical grids," and more), which will in turn attract the modern businesses that require it. While that solution would indeed provide jobs and attract businesses (though many still prefer the corporate tax "race to the bottom" option), it would also require massive state expenditure—exactly what the publication asserts that voters do not want. You can't have it both ways.

Next, the Playbook suggests that businesses will only be attracted to states with highly educated workforces, clearly problematic in light of the "take-no-prisoners"-style cutbacks in public education that have devastated school systems in Detroit, in California and elsewhere. Deloitte suggests a different way forward, through radical reform (and lots of streamlining/efficiency speak).

They cite California's move to "online textbooks" as an example of a brave new digital world of education, even going so far as to recommend that AP (advanced placement) courses be offered strictly online, nationwide. As an ex-high school student with a few AP credits under my belt, I take personal issue with that suggestion. How could shifting our nation's most rigorous classes to online formats possibly better prepare our students for future careers? How can the authors wax poetic about the US's growing education deficiencies and also suggest that our students enter the workforce with cookie-cutter, online educations? I'm all for cutting redundant education costs, but at the cost of a decent education? No thanks.

Prong 3: "Transforming health and human services"

No surprises here. The authors touch on the obvious: states need to make health care systems more efficient. Likewise for human services. Both need to modernize IT infrastructure (a service that, unsurprisingly, Deloitte is big in). Both need to "streamline bureaucracy", "eliminate duplication", and "deploy resources" more efficiently. Common sense 2.0.

Prong 4: "Overhaul state operations"

The fourth and final prong addresses some classic deficiencies that have plagued governments for years: bureaucracies must be streamlined and made more efficient; government needs to be more responsive to people's needs; government must be more transparent; public sector jobs need to attract private sector candidates.

The ideas here are unquestionably good—the problem is implementation. "Century-old systems need to be replaced with new models that better address the needs of the 21st century," the authors assert. Great! But how? In this age of bipartisan gridlock, how likely is it that, say, New York's freshman governor Andrew Cuomo (and others like him) can toss out the rulebook and replace it with a wholly new system? "Incremental change won't be enough," the authors say—only radical change will do. Unfortunately, that is rarely how it works these days, especially at the state level. Almost certainly, incremental change and compromise will have to be the way forward, much as it has been throughout the country's history. States need practical ideas that reflect that trend.

The good, the bad, and the obvious

All in all, the Playbook for Transforming State Government is an interesting, but unsurprising private-sector take on how to improve its public counterpart. Are there lessons to be learned here? Certainly. For one, there is no question that governments need to cut spending and become more efficient in light of our recessionary troubles. If we can streamline bureaucracies and achieve more responsive governance, great.

But the Playbook ignores many of the key differences that set business and government apart. The way our democratic process is structured makes for tough implementation of many of the "radical" ideas posited here—however beneficial or necessary—whereas a corporation might enact change upon the click of a CEO's mouse.

Further, some of the authors' suggestions just don't have a place in government; ultimately, government is about providing for the people, not the bottom line. Governments don't exist to turn a profit. Of course, that isn't to say the bottom line can be ignored; a massive deficit only hurts the people. But most of Deloitte's suggestions are unapologetically business-like, focused solely on profit. Many of these ideas might be good for the short-term turnaround, but in the long run, the most valuable wisdoms included in the Playbook are those that employ common sense and fiscal responsibility.

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Filed Under: Consulting

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