I Loved Being an Economic Development Consultant

City spends $585,000 on study of how to save money.

Consultant's report on Baltimore finances painted grim picture

Why did Baltimore need to pay outside consultants half a million dollars for a report that says the city's financial future is grim?

Some city residents wondered as much after Mayor Stephanie Rawlings-Blake called for a new trash collection fee, a smaller city workforce and cuts to employee benefits as a way to deal with the projected $750 million, 10-year budget shortfall the consultants projected. For a city as financially strapped as Baltimore, couldn't that work have been done in house?
 

First off, yes most elected rulers of municipalities do need someone to explain to them how organizational funding and expenditures work.  Local governments do actually function under a different set of laws, customs and expectations than other businesses. 

It seems that Baltimore got a halfway decent price for the scope of work they hired out.  In other words, I don't think they got taken to the cleaners.  Baltimore politicians are elected the same way most other politicians are elected.  They promise to use their position to advance the wants and desires of those who fund their way into office.   What do you do when your going broke and need to find away to do the right but politically awkward thing? 

The answer is, "hire a consultant".  The city of Baltimore needed (among other things I'm sure), to charge for trash pick up, reduce employee benefits and cut the city pay role. They knew this in house, but they needed a way to do it. That's where the consultants came in.  The consultant can write a report that tells you that you have to do the thing you knew you needed to do in the first place.  You then fix the problem and blame the whole idea on the consultant.   In this way the problem is addressed and the elected official gets to blame someone else for fixing it if the solution proves unpopular.  If the solution proves popular the politician gets to take all the credit.  In politics this is known as a "win, win" solution.

Aren't there any other ways to solve our public problems?  Yes of course there are.  Two come to mind.  The first is public officials and professional bureaucrats could act with a high amount of ethics and personal integrity in their decision making and put the public interest first.  I'm sorry.  I hope you didn't spew your coffee all over your keyboard.  It could  happen.  The second method requires us to change budgeting methods.

The way public entity budgeting works in most jurisdictions in the US is cost plus.  Each year the bureaucrats get together and take a look at all of their programs add up the cost as well as any new spending they want to do and ADD a factor to it for inflation.  The equation looks like this: COST OF CURRENT PROGRAMS + COST OF NEW SPENDING + % for inflation.  For example, this year the department of useless twats spent $100 on programs, they want another $100 for more programs, plus they assume a 3% inflation factor. $100+$100+($200*.03 or $6)=$206.  This is the way dot.gov budget planning has been handled for decades. 

We need to use a different method.  A revenue minus budget looks like this: EXPECTED REVENUE - PERCENTAGE = PROGRAM SPENDING.  For Example: $100 in tax revenue - 15%= $85 for spending.  The obvious question is what to do with the $15 in excess tax revenue.  Ideally it would be saved for a rainy day.  That way the government could avoid borrowing money.  In a situation where the dot.gov is in debt you split the money.  Half of the $$ would be used to make an extra principal payment on the debt, while the other half would be savings.

A transitional budget might look like this:

$100 revenue

$15   percent

$40   debt service

$45   programs

In this example an additional $7.50 would be paid each year on the principal debt balance and $7.50 would go into savings.  This would reduce the debt faster but still allow the funding of an operational reserve account.

 

If implemented what would happen in real life?  First revenue, not spending would determine the budget.  The tax wasters at the department of useless twats would look for ways to cut waste instead of inventing more of it.  They have to, there won't be as much money to spend, and most of them will want to keep getting paid.  Second, politicians will have to look at what things they REALLY REALLY need to have the dot.gov function.  Every Useless Twat sucking off the government tit believes that they are NEEDED I mean really NEEDED and NECESSARY for the good of the whole wide world.  They aren't, we all know that.  Forcing the politicians to put the useless twats in the unemployment line would be a good thing.  Third, eventually the public debt will be paid off and there will be an operational reserve account equal to 1, 3 or maybe even 5 years worth of revenue.  At that point it will be time to look at cutting taxes even further.  Less spending, equals more money in the private economy equals more economic growth which equals more freedom.