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David Osborne
Co-author,Reinventing Government and The Price of Government; Senior Partner, Public Strategies Group
Answers to Questions from the Audience
Q: After implementing his new budget process, Governor Locke was so unpopular that he decided not to run for re-election. We have Governor Schwarzenegger - now at an all-time high, according to The Field Poll, in terms of California governors - having proposed a budget based on five of the deadly seven sins outlined in Professor Osborne's book: full of accounting gimmicks, robbing Peter to pay Paul, more borrowing. Finally, there is the governor of Virginia, who has gone the other way from Locke and built a coalition with a Republican Legislature to increase taxes. How would you evaluate these three governors?
A: Locke had been in office six years when he did this. He chose not to run for a third term. This budget process had a very healthy impact on his popularity. There was a poll done a month after he released his budget, which asked, basically, Do you agree with the following statement? Whether I agree or not with all of the governor's budget decisions and cuts, I think he has demonstrated real leadership in leading Washington through this crisis. About 67 percent agreed.
Locke had a reputation as a technocrat, not a leader. His Republican opponent's main theme, when he ran for re-election, was The governor is not a leader. This process helped his image enormously. When you are cutting $2.5 billion, throwing people off of health care, denying teachers salary increases, denying parents lower class sizes, you're not going to get wildly popular. But his approval rating did not fall because of this.
His tax increase, which he pushed personally onto the ballot, lost in November 2002 by a 70-30 margin. He finally gets his budget passed in June and the Legislature goes home. He calls them back into special session and says, We still have a transportation problem. Gridlock in the Seattle-Tacoma area was a huge issue. He said, I want to raise the gas tax by a nickel and devote it to specific transportation projects. I'm going to outline exactly what they are, and it will last for 30 years to pay for these projects. The Legislature passed it and the Howard Jarvis of Washington state said immediately, We're going to collect signatures, put a referendum on the ballot to repeal it - and he couldn't get enough signatures.
Governor Mark Warner in Virginia spent three years cutting spending, downsizing bureaucracy, pushing reforms, being a very aggressive reinventor and downsizer. Finally he said, We need some tax revenue, because we can't cut any further. The statement was so true, and so obvious to so many citizens, that the moderate Republicans in the Legislature agreed and it passed. He demonstrated the kind of leadership people are expecting. One of his lessons was: You can't do tax increases unless you have already proven that you can cut spending and you're going to make tough choices.
Governor Schwarzenegger is very popular now, but George Bush was very popular on the day he invaded Iraq. Ultimately, the question is: What's the outcome of a leader's decisions? It takes a few years before you know the answer, but in the latest poll 54 percent of Americans said invading Iraq was a mistake and it made the world a more dangerous place - and they're right. President Bush is in deep trouble, and I think he is going to lose this election. Arnold Schwarzenegger has put together a budget full of deadly deceptions; it just puts off a lot of the problem, and it's going to come back to haunt him. He's clearly making a bet that in two or three years the economy will generate enough revenue that he will be out of this crisis. I talked to people Wednesday in the State Treasurer's Office who say, No way will that ever happen. They speculate he'll serve two years and resign.
Q: You've said today that health care is the gazillion-pound gorilla. Are there any plans out there for universal health care that would solve the problem?
A: I don't think it would solve the fiscal problem. Health care is unlike every other industry. In any other industry, you make a product or a service and new technology allows you to raise quality and lower cost, and when the product wears out, we throw it away. We don't throw people away. We get new technology and it keeps people alive, so they live longer. In health care, technology drives costs up. We have the greatest medical technology in the world and we spend the highest percentage of our gross domestic product in the world on health care - 15 percent. Our health care system is highly inefficient, but if we go to universal health care, even if we reform the system, it's still going to cost money. It's still going to go up 10 percent or 8 percent or, if we're really good, 6 percent a year - which means we still have a problem. I cannot see how we avoid a fundamental choice in this country about ten years from now: gut Medicare, gut health insurance for the elderly, or raise taxes significantly at the federal level?
Q: Are there any solutions for dealing with the rising cost of K-12 and higher education in the states?
A: There are. The standards-based movement - there's a kernel of truth in it - but it's very misguided, and it's led to a very bureaucratic approach to trying to drive improvement in education - and a very expensive approach. I am a fan of using competition to drive excellence and efficiency in education. You get the most competitive market with a voucher, but I'm against vouchers, because part of what we want from education is equal opportunity. Public education gives kids from every walk of life an opportunity to get into the middle class. It allows us, at least to some degree, to have our children rub elbows with kids of different skin color, who talk different, and to understand something fundamental in a multi-racial democracy: that underneath our skin, we're all the same kind of human beings. If we go to vouchers, we lose all of that. We stratify the education market by income, which would be a terrible mistake.
So how do you get competition? Turn public schools into charter schools. Public schools should have a lot of flexibility and accountability, and they should have to compete for money and students. If you run a charter school, you get to focus on what you want to focus on, you manage the place the way you want to, but every five or four years, depending on the state, your charter comes up for renewal. If you're not producing the results promised, you might get shut down.
Now you get funded per student, so if you attract 100 kids away from other schools, you get the money and the schools where they were lose the money. How does that affect the schools that lose the kids? It gives them tremendous urgency to figure out why kids are leaving, what parents want and how they can offer it. That's what's missing from public education.
Q: Privatization and deregulation - how do you avoid disasters such as the California energy market?
A: Well, you don't deregulate in stupid ways. What Governor Pete Wilson and the Legislature did in California was idiotic, and everybody knew it at the time. One of government's fundamental roles is to regulate the marketplace. Markets don't work without regulation. The only markets without regulation are black markets, and they're ruled by violence and power. We need government to regulate markets. It's difficult, and politics gets in the way, but using privatization and competition is not the same as deregulation.
Lots of public services can benefit from competition, and there are lots of them where there's no reason not to have private companies compete. There are other public services where there's every reason not to have private companies compete - like police. But that doesn't mean you can't use competition. In Los Angeles County, lots of cities contract with the Sheriff's Department, or with a neighboring city to run their police services, and they re-bid the contract every three or four years. They are getting more bang for their buck.
Q: How do you get cooperation from unions and other public employee groups; other folks that could block the types of changes that you are trying to bring about?
A: With great difficulty. The best way is you force a reform that creates consequences for them, and then they'll play ball. When Mayor Steve Goldsmith, in Indianapolis, in the early '90s, forced most city agencies to compete with private firms through managed competition, the unions were opposed to him. He had to win that battle politically. He promised to devote all savings to rebuilding infrastructure in the inner city. So he got the inner-city members of the city council on his side. Once the unions had to compete, then it was in their self-interest to win the competition. They became very cooperative and very innovative. The head of the local American Federation of State, County and Municipal Employees (AFSCME) union spent years going around the country with Goldsmith and his staff at conferences, explaining how it worked. First you have to get the special interests into a position where their people have consequences, and then they will make different choices. You change the incentive system. To do that, you have to use politics, and you have to win.
