Why Do We Let Governments Fail Us?

When I joined Cook County’s transition team in November 2010, the County had a $3 billion budget, and faced a $487 million deficit – a 16% gap between revenues and expenditures. It was an astounding figure that jeopardized the future of the region’s public health system serving hundreds of thousands of residents, among other critical services. It caused so many ask “how did we get here in the first place?”

The answer was seemingly simple – a history of waste, patronage, and corruption at the County led us there. But the real question is not how, but why? Why did anyone – employees, media, residents – let this happen? We read stories about how governments waste millions or billions of taxpayer dollars. The federal government has spent more than $1 billion over a decade trying to digitize U.S. immigration forms, with only a single form out of 95 now available online (a .011 batting average for baseball fans out there). How does anyone let this go on for a decade?

You’ll find your answer when trying to answer this question: what would happen if a technology CEO kept making multi-year investments that didn’t pan out? The answer is easy: the CEO gets fired. Would that happen in the public sector? Of course not – because it keeps happening!

It’s easy for shareholders and analysts to feel the impact of a bad investment – a swift decrease in company and shareholder value. In fact, the impact is felt even before the investment turns sour – if the market perceives that the investment has limited ROI, the stock price drops. What happens when government wastes billions of dollars on projects? In the short-term, nothing. Over the long-term, government will have to raise revenue, most likely from taxes, or cut costs (by eliminating services).

So why does no one care about the operations of government? Because the impacts are hard to see in the short-term. Elected officials are incentivized to care about the next election; the media reports on items that their readership cares about now; and residents react most strongly to what impacts them now. Its easier for all three of those stakeholders to talk about “policy” – social, economic, fiscal, whatever – and its impact on those groups – rather than operations. But its not necessarily because its more important – right now, it’s only because its easier to see the link between policy and impact.

Residents care about services they receive, they care about their taxes – but its hard to judge on a day-to-day basis. But when they can see how failed operations impact them? They’re furious. Chicago’s Mayor Bilandic was famously voted out of office for his poor snow removal response to Chicago’s Blizzard of 1979. And to a lesser degree, President Obama faced criticism after healthcare.gov failed to properly launch.

So is the issue misaligned incentives? I don’t think so – I believe its a lack of timely public reporting. Governments – particularly local governments – aren’t scrutinized as closely as publicly-traded corporations are. It’s probably because there’s a limited business around investing in governments. There are no 10-Ks, no quarterly reports – most governments don’t even set goals with service levels they aim to achieve. The only widespread analysis we see around government is what’s done by the Big 3 rating agencies, who supply credit ratings for municipal bonds. Missing are the equity analysts and investors who dive deep into company operations and strategies that we see in the private sector. Missing is the data and its translation that residents can easily understand.

With quicker, easier-to-understand public reporting, governments will focus on operations again. At Cook County, the situation had become so dire that residents deeply cared about operations over all else – they wanted a fiscally responsible steward. We were able to close a structural budget deficit, and we implemented performance management programs that mandated quarterly reviews and reports. Some other units of government, such as the Chicago City Treasurer, have gone even further with quarterly earnings call. But that’s all just a start – a drop in the bucket. Companies such as OpenGov are making it easier for governments to analyze share their metrics. There’s a whole ecosystem of third-party analysis and reporting that is missing – and that both governments and residents desire – that would transform government operations.

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