Shining the light on Budget Prioritization

In normal times, in normal cities, budget prioritization isn’t really a big deal.  Political factions will scream and yell for their interests to be accommodated.  In a complicated dance of political give and take eventually budgets get done.  

For the most part, even if budget items don’t yield their promised results no one really cares because the basics were covered.  The trash still got picked up, schools didn’t close, the police responded to calls and property taxes are still a fraction of the cost of home ownership.

Most cities, and Trenton in particular, aren’t sophisticated about their budget process.  We give scant attention to meaningful citizen input.  When citizens are asked what they want, they’ll roll off a litany of “demands” with no concept of the cost or implicit tradeoffs or even whether the “demand” is within city’s span of control.  For instance, a citizen isn’t asked to choose between an additional $1000 in taxes and 300 fewer crimes solved.  Or, between a $400,000 museum budget and the capacity to treat 30 additional free patients at a clinic.  We don’t chose between better fire protection and better schools.  We aren’t forced to make hard choices and that’s good because most voters don’t really understand what their government does.  For the most part, budgets are contemplated in the darkness of ignorance.

Comparatively these “either/or” choices are easy but some budget decisions really are hard especially when they affect the future.  Future decisions have affects that are uncertain or are second order in nature.  For instance: investment in technical inspection affects the rate of development which builds the tax base and lessens the future tax burden; many investments in police, public works and economic development also affect the future tax base;  some argue that investment in schools affects future crime rates and have a second order effect on future development; a new street paver may reduce future operating expense, and so on.

Who among us is smart enough to keep all of these first order effects (action A affects B) and second order effects (action A affects B and B affects C) in our head?

We can’t, so cities bungle their spending from year to year.  Trenton’s budget is never well thought out and any impact on the quality of life is usually accidental, good or bad.

However, in most cities people don’t die or go bankrupt if the budget isn’t perfect.  In Trenton the consequences of a less than brilliant budget are about to become life altering.

Trenton has been bungling its budget for many years and has missed every opportunity for revitalization (e.g. the economic boom in the 90s).  Our tax base has shrunk relative to national growth and our costs have gone up.  We’ve entered an economic death spiral so that conditions have become unfavorable for new investment which leads to further revenue shrinkage.  So now, we’ve became overly dependent on State funding, so much so, that when the State gets an economic cold, we get pneumonia.

We’re now faced with cuts in police and fire that may put our lives in increased danger and will certainly impact our personal wealth.   As citizens, we’ve allowed a situation to fester that will harm all of us.

The good news is that many revitalization-oriented policies require little money to implement.  For instance, eliminating rent control will stimulate investment and actually save a little money on enforcement.  Reorganizing our inspections process could be cost neutral and also more responsive to developers. These things don’t need to be considered in a budget, and only require smart management.  However, most city services require money and for the first time in a quite a long time, that money will be supplied by the citizens of Trenton.  Perhaps we never made hard choices before because it was never our money.  Now it is.

How can we improve our budget process to build public understanding and support for the hard choices our government will have to make to escape this spiraling decline?

We can build a budget prioritization process based on economic insights into our city’s operation by conducting a citizen budget poll.

Haven’t you ever looked at a federal budget and thought, “Boy I’d like to just axe this program or that and reduce my taxes?”   What you really want to do is to create your own optimal budget.  Of course, every other citizen wants to do the same thing.  In a federal budget this would be a massive and dubious effort. 

However, in a small municipal budget like Trenton’s, we can do it.  We can simply vote for our priorities given a certain level of information about budget trade-offs.

The citizen budget poll will ask as many Trentonians as possible to vote on where their money should be spent.  It will force them to choose between more services and higher taxes and between one service and another.  The poll can be conducted through a web site specially designed to collect voter input..  Citizens will be notified about the poll via the papers, mailings and social media.  It will educate voters about trade-offs and the proposed benefits for a budget dollar, collect their input on priorities and perform analysis on the future impact of their decisions.  After the poll is closed, the web site can be constructed to present the results.  Those results will constitute a recommended city budget that will be reflective of the direct opinions of a large sampling of voters.

The strength of this approach is in how the web site presents options to voters.  It will break down the budget into costs and benefits and will specifically disaggregate large budget items like police and fire into “t-shirt” size option (Small, Medium, Large, X-Large) each with incremental increases in benefits.  Voters can make the budget buckets add up to the currently proposed $7 per $100 in assessed value, if they chose, or maybe more or less.

There are several non-discretionary costs such as debt obligations, pension funds and payments to the schools and County that we must pay.  In addition, if we lay off employees we’re obligated to pay severance costs.   There are other costs that we’re obligated to pay by the State.  We also have to pay damages awarded in lawsuits although we can make the risky choice of not paying for insurance against those claims.  It’s possible that of the $7 per $100 proposed as much as $4 is non-discretionary.

The remaining budget is discretionary.  This is the part on which voters will decide.  A voter might decide to spend $1.1 on police, $.8 on fire, and $.1 on recreation and so on.  These are the discretionary items that we can eliminate if we want.  A voter could decide to lay-off the entire police force and save that $1.1.  Of course, most wouldn’t but they might cut back a portion of the police budget?  What if that meant he got to keep museums and recreation programs?  He could choose to increase police spending and increase our taxes past $7 per $100.  It’s up to the voter and his or her personal ability to accept risk or desire to enjoy a particular service.

Some voters may feel that an increase in taxes to $7 per $100 is more harmful to them than almost any reduced level of service.  If the extra $2 per $100 in taxes over the 2010 budget will force you into bankruptcy then you’re likely to forego nicely paved streets and good fire protection.  Of course, the impact of those reduced levels of service need to be reflected in future budget needs and property values. 

All of these costs need to be weighed against each other and the impact they have on our current and future tax burden.  Reducing services and thereby reducing tax is a very attractive to some people.  But even our tax rate is a trade-off. The higher it is, the less likely new investment is to come to Trenton and the more likely it is that current residents will leave.  A picture of the future, based on relative investment or disinvestment in Trenton will allow the voter to see into the future.

The choices that are presented have to be somewhat limited in scope.  There’s no reason to offer choices that are impractical for a city like Trenton.  For instance, we could offer the choice to spend $8 per $100 in recreation.  However, as nice as that sounds, no rational voter would accept the extreme tax hike it entails.  Likewise the choice of eliminating police protection is impractical (to anyone other than a criminal). The choices will be an a la carte menu and we’ll be guided by our wallet and our taste for the services our city might offer.

The only practical way to conduct a budget poll is to do it online.  The city or a any of our civic group don’t have the money to do “house to house” surveys, focus groups or mail in ballots.  This is a reality.  Some might complain that this leaves out those without Internet access.  They would be right.  But how is not doing it at all better?  Currently we don’t hear anybody’s opinions on the budget.  At least by conducting an online poll we can reasonably reach a majority of voters in Trenton. 

Having the path forward to revitalization half-way lit is better than it being completely in the dark.

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