Cost Accounting in Local Government

The Costa Mesa Experiment

As you probably know, the City of Costa Mesa has pink-slipped nearly half of its employees. Considering that as of yet none of those pink-slipped employees have included firefighters and only eight out of the existing 139 police positions were involved, you understand that the cuts primarily came from the ranks of the General Employees and the services they provide.

Regardless of what you may think, it is hard to know for sure if the changes are more politically or fiscally motivated. Given that all of the current council members consider themselves fiscal conservatives, politics would be hard to ignore. But given that the City has also had a significant downturn in General Fund tax receipts, combined with escalating retirement costs, the fiscal prudence needs cannot be eliminated either.

Municipal service delivery changes that are being considered include sharing service delivery with other nearby local agencies, as well as fully contracting out to other levels of government or private sector contractors. Also, numerous services that are deemed as not being worth the cost are being eliminated. These changes are not unheard of in municipal government. Many newly incorporated cities employ them with great success. And hey, we all get it; the public elects a City Council, the City Council makes policy, and staff, at least the remaining ones, carry out that policy to the best of their ability. If you don’t understand this, you are probably in the wrong business.

So what are a few ways that make any actions more fiscally prudent and less politically motivated? Here are some suggestions:

Recognize the twin principles of efficiency and effectiveness.  Sure, they differ. The former relates to cost, the latter relates to how well the service is provided. Savings can always be made, but at what cost to the level of service (or LOS)? The City could easily hire a bunch of monkeys (officially called a “troop”) and give them a hundred typewriters to write the City’s press releases. No doubt it will be efficient, but the monkeys would probably fail on effectiveness. On the other hand, hiring ten fully tenured literature professors to carry out the same task would probably be effective, but not efficient. You need to strike a balance between the two.

Measure the delivery of municipal services.  You know the process by many names, including Management by Objectives, Quality Circles, and Zero-Based Budgeting. But whatever the name, they all require the measurement of the provided service, identifying the resources it takes to provide the service, and then measuring the quality of the actual service. I know that it seems counter-productive to spend more time on record-keeping (or as I like to call it, management) when resources are limited, but to make changes just for the sake of saving money, is (as my dad used to call it) just whistling past the cemetery. Everyone in the room is just pretending the decision was for the better.

Distribute Resources and Responsibility.  Rather than micro-manage how a service is provided, the City Council could simply allocate the available resources (or the revenue pie) to the departments and then let the professionals responsible for that service determine how to best use those limited services. The Police Chief should be the professional the Council chooses to look for law enforcement delivery decisions. If they don’t, then its time they choose one that they do. If the Council makes the staffing decisions, how can you hold the Chief responsible for the outcome? You simply can’t.

Discuss these major changes above board.  No one should fault any city council for reviewing service delivery options. But sweeping statements like, “the private sector can do it better” do not make better decisions. “Better” needs to be defined, as does the task and the follow-up review of the results. For instance, did it actually complete the needs of the public and was it cheaper (again the effectiveness/efficiency thing). If the service is to be outsourced to a private sector firm that has to consider a profit, be sure to include the costs of monitoring the contract work to insure that the terms of the contract are met.

What is most helpful to all of us is that Costa Mesa has placed themselves in the Petri dish for all of us to observe. They have become the biggest experiment going, and frankly, we should all take advantage of that.

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