State and local government performance: It's time to measure up!

Headnote

STATE AND LOCAL GOVERNMENT PERFORMANCE IT'S TIME TO MEASURE UP!

State and local governments must do more with less. This has been the task for nearly three decades. Resources have decreased due to slowed population growth, recessions in the 1970s and 1980s, reduced federal funding and reluctance of citizens to pass new taxes. Furthermore, unfunded mandates, inflation, worn out infrastructure and increasing wage and benefit costs have caused expenditures to skyrocket. Figure 1 shows how percentage increases in expenditures of state and local governments have outpaced inflation by nearly three to one. In addition, in the 1980s, state and local governments lost nearly one of every four federal dollars they received in the 1970s.1

The effect of these reductions has led to numerous fiscal problems in state and local governments and greater demand for accountability by citizens. Keehley et. al. state that, "taxpayers increasingly are demanding greater results for their tax dollars. The search for better ways of producing results has never before been more critical." They go on to list the following reasons to incorporate performance measurement and benchmarking in the government sector: it works;

recognition is likely to follow; other organizations have already started; building on the work of others makes sense;

organizations cannot afford not to; it leads to cooperation; and taxpayers are viewed as customers?

Performance has long been a major emphasis in private sector business and industry. Managerial and cost accounting, long-range planning, ratio and financial analysis, and benchmarking are mainstays in private sector accounting. Businesses can compare performance to competition and industry norms through Standard Industrial Classification (SIC) codes and other methods. To remain competitive, it is essential for these companies to be meticulous in maintaining performance. Osborne and Gaebler state, "American corporations have spent the last decade making revolutionary changes: decentralizing authority, flattening hierarchies, focusing on quality, getting close to their customers-all in an effort to remain competitive."3 Keehley et. al. support this and cite numerous success stories of benchmarking and performance measurement in private sector companies, including General Electric, Ford Motor Company, General Motors, Xerox, Texas Instruments and Ritz Carlton. Performance measurement has become standard practice throughout the private sector.4

Despite advances in private sector practice, few state or local governments possess a comprehensive program...