Budget for the keeps, not the cuts

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In Washington, Republicans, with a trifecta controlling the presidency and both houses of Congress, want to cut back on spending using the Elon Musk/Vivek Ramaswamy advisory Department of Government Efficiency (DOGE) as their ramrod in order to pay for reducing taxes and controlling the national debt. In Minnesota, where the Democrats had a trifecta last year, now nobody has a governing majority in either house of the legislature, creating a TRY-fecta that must try and find a way to cut back spending to avoid a looming $5 billion shortfall.

These attempts to cut spending won’t work. The reason is simple. Every time someone proposes to cut a particular program, the beneficiaries, contractors and professional advocates rise up in opposition. And they usually win.

Here’s an example. In 2003, Gov. Tim Pawlenty had just been elected as a Minnesota Republican pledging no new taxes. He faced a $4 billion shortfall — he called it the “Mount Everest of budget deficits.” He swore he would cut back spending by 14%. When asked where he would start, he singled out the Highway Helper program (now called FIRST). If you ever have a flat tire on the freeways of Minneapolis or St. Paul, the Highway Helpers will soon arrive to provide assistance. Pawlenty reasoned that cutting this program would be easy — people could change their own tires. And it would save $1 million. The Speaker of the House confirmed the logic. But …

People were outraged. The proposed cut became a front-page story for days on end. The papers were filled with heartwarming stories of real help to people in need. Ultimately, Pawlenty relented and announced that the Highway Helpers would be spared any cuts. Cutting the program would have saved $1 million. Pawlenty would have needed 4,000 more cuts of that size to cut his way to a balanced budget. He was off to a lousy start.

Here’s how the Seattle Times once described the business-as-usual approach to dealing with budget problems:

“The usual, political way to handle a projected deficit is to take last year’s budget and cut it. It is like taking last year’s family car and reducing its weight with a blowtorch and shears. But cutting $2 billion from this vehicle does not make it a compact; it makes it a wreck. What is wanted is a budget designed from the ground up.”

When that was written, Gov. Gary Locke of Washington had had enough of the business-as-usual approach to closing his state’s budget gap. “Closing the $2 billion gap we face in the next biennium would require an across-the-board cut of 15 percent — if that’s all we did,” he announced. “And that is not what we are going to do. I don’t want to thin the soup. I want state government to do a great job in fulfilling its highest priorities.” He challenged his administration to answer four crucial questions, and I was lucky enough to be part of the team that helped find the answers to these questions (a detailed description of the approach can be found in “The Price of Government,” which I co-authored with David Osborne):

The answer to the first question was simple, but challenging — the state would spend only its current revenues — there would be no tax or other revenue increases. He called this the price of government.

For the second, Locke set out 10 outcomes or results to be delivered and specific performance measures to track their achievement. He called these the priorities of government. They included delivering better results in:

For the third question he put a price tag on each of the 10 results by allocating the state’s total budget resources among them based on his assessment of the relative value of each to the people of Washington.

Finally, every one of the state’s 1,300 programs was assigned to one and only one of the results. This was probably the most radical change. For the first time he and other decisionmakers could see the dozens and dozens of programs run by multiple agencies that had grown up over the years all intended to lead to the same result.

Every one of those programs was then reviewed and ranked based on the quantity and quality of the results it delivered for the money. Locke then invited the agencies that owned each program to consider making changes to improve their ranking — to deliver more results for the money. Once the ranking was final, the budget was created by using the resources assigned to each result to “purchase” the programs on the list starting from the top. A line was drawn when the budget had purchased all the programs it could afford. Those above the line were kept in, those below were not.

In the image accompanying this article is the example for health. It illustrates the choices Gov. Locke made to get the best health outcomes for the money available.

The budget then became, in effect, a set of performance contracts linking outcomes to resources with accountability for results. It was clear, easy to understand, and it explained in simple terms why some activities were kept in, and others were not. By focusing on the keeps rather than the cuts, Locke transformed the budget into a tool for delivering more and better results for the money that people are willing to pay for their government.

If the trifecta in Washington, D.C., or the TRY-fecta in Minnesota (or any other government) really wants to reduce spending, deliver better results, foster accountability and encourage innovation, they should do the same.

The Tacoma News Tribune praised Locke’s budget process as forcing “hard choices about the core priorities of state government.” It was focusing on the keeps, not the cuts, that made it possible.

Peter Hutchinson is a former superintendent of the Minneapolis Public Schools, former Minnesota finance commissioner and former Independence Party candidate for governor. His Substack newsletter “Notes from the Independent Center” is at theindependentcenter.substack.com, where this article first appeared.