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State and local government budgets have been severely affected by several events over the first nine years of the 21st century. The terrorist attacks of September 11, 2001, bankruptcy by several major U.S. corporations and the worst economic recession since the Great Depression have all contributed dramatically to shrinking tax revenues. A report from the Center on Budget and Policy Priorities notes that fiscal 2009 saw the steepest decline in state and local tax receipts on record. 1 The National Conference of State Legislatures' July 2009 report on state budgets indicates that the budget gap for all states since the recession began has reached $268.6 billion, and could top $348 billion in fiscal 2011 and 2012. 2
More than any other time in modern history, government officials are confronted with the need to manage resources as efficiently and effectively as possible. A variety of techniques have been used to address resource management issues. They include activity-based costing, total quality management, just-in-time inventory and Lean thinking, just to name a few. However, a weakness of these techniques has been the lack of focus on managing resource constraints. The Theory of Constraints (TOC) is a method that focuses on the single factor that limits an organization's production processes.
Traditionally, TOC has been applied in the manufacturing sector. However, this technique is also applicable to public sector entities in the delivery of social goods and services. This article reviews TOC and discusses how its principles can be applied in the public sector. Specifically, the article demonstrates how the technique can be used to improve the service delivery process in a medium-sized county. A Registration and Licensing Department is used for illustrative purposes. By optimizing process throughput relative to the constrained resource, the department can move closer to meeting constituents' service needs and contribute to the program's continued financial sustainability.
The Development of TOC
TOC is a process improvement philosophy introduced by Eliyahu M. Goldratt, Ph.D., in his 1984 book titled The Goal: A Process of Ongoing Improvement. 3 The philosophy emphasizes constraint identification and management as the keys to focusing limited time and resources on areas where potential returns are the greatest. The core idea of TOC is that every organization has at least one resource constraint...