Why government can't be run more like a business

Last week I attended the Stand Up for Seniors advocacy forum which focused on the impact the state’s worsening economic and fiscal situation is having on programs serving seniors. State Treasurer Scott Meacham was among the elected officials who addressed the gathering. In laying out the budget challenges we are facing and the limited tools at our disposal for mitigating the severity of budget cuts, Treasurer Meacham shared a conversation he had a couple of months back with a friend who expressed frustration at the inability of state government to operate more like a business. Businesses in the downturn are responding by cutting back, reducing expenses and payroll, and simply doing whatever it takes to get through until the economy recovers. Why, asked his friend, can’t state government just do the same?

The Treasurer’s response, which he echoed in this Oklahoman article,  is worth sharing and elaborating upon, because it gets to the very heart of why the state fiscal crisis is so difficult and why this matters so much. Businesses are driven by supply and demand, and by the obligation to maximize profit for shareholders. To use the proverbial private sector example, if demand for widgets declines in a downturn, then Acme Widget company will produce fewer widgets. This may mean laying people off or even going out of business, which will have an unfortunate impact on employees, their families, and communities.  But there is no obligation on any widget maker to  produce more widgets than can be profitably sold.

The situation for government is fundamentally different. Government’s mission is to promote the security and well-being of the population as a whole.  And what Scott Meacham eloquently reminded us is that just because there is a downturn, that doesn’t mean there is any less need for those things we expect government to do.   Children don’t have less need to receive a quality education just because we’re in a recession. Corrections facilities don’t have fewer inmates to supervise and police departments don’t have fewer crimes to investigate because the economy is bad. The Health Department can’t wait until the economy recovers to treat contagious diseases.  We don’t have less need for public libraries or workplace safety inspections or drivers license examiners or court clerks.

In fact, in many cases, just the opposite is true – economic downturns create more demands for public services. With more people unable to find work, enrollment has risen in colleges and universities by 5.8 percent in 2009-10 compared to last year. If you look at our latest Numbers You Need bulletin, you’ll see the extent to which participation in public safety net programs like food stamps, Medicaid, and unemployment insurance have spiked as families struggle to make ends meet. And the financial and psychological stresses associated with unemployment and falling incomes tend to exacerbate an array of social, health, and public safety problems, such as domestic violence and homelessness, creating more demand for public services. It is these critical social services, along with the regulatory and administrative functions of state and local government, that are now being reduced, eliminated, and stretched to breaking.

Obviously, there are some things government agencies can do and are doing to get by with less. And certainly there are some public services that can be viewed as non-essential that can be scaled back or eliminated when revenues are scarce. But it is worth remembering and being very clear about the fact that when the public institutions of government are deprived of the resources needed to fulfill their mission, the people of Oklahoma bear the toll.