Saturday, August 30, 2008

New Spending Caps Lead to Saving$

At the end of last year, as part of our 2008 budget deliberations, I proposed, and the Commission adopted, a new strategy to cut costs: imposing "spending caps" on the everday purchases the County makes. The results are in through August, and so far this strategy has saved us almost $1.5 million.

The background: Every year, the County makes tens of millions of dollars in "purchases" in order to support the functions we perform. From software, to office and janitorial supplies, to uniforms, to cleaning supplies, a County our size consumes all sorts of goods and services to get the job done. While many of these appear small, across the County, these purchases add up.

One of the cleanest and simplest cost reductions governments and businesses can make is to systematically get their arms around these purchases, consolidate them whenever possible to get the best bang for your buck, and be more thoughtful and disciplined about what they're buying, and how they're using/consuming those purchased goods. Simply consuming these goods more efficiently (ie. using every pen or notepad until it runs out, turning off the lights and computers, etc.) can lead to real savings, just as purchasing them cost-effectively can save money on their up-front cost. (Note: we are fortunate to have a strong purchasing department that works hard to get the best "buys").

At the end of 2007, as we were exploring ways to balance our 2008 budget, I asked to see a list of all purchases we made in 2007 and prior years by category. In doing so, I noticed there were huge fluctuations in the amounts of different items being purchased from year to year. This suggested there was need for more discipline in how these decisions were being made, and in how items were being consumed--and therefore a real opportunity to save money. We also noticed that even though we had a handful of preferred vendors for certain categories, departments were buying from all sorts of vendors beyond that list. Clearly, an inefficient way to buy things.

The Solution

For our 2008 budget, we targeted a number of key purchasing categories, and imposed a "spending cap" on the amount of each category that could be spent in 2008. Each cap was a percentage cut from our 2007 purchases in that area. For example, we would spend 10% less in computer software support services, 10% less for office supplies, and 33% less for subscriptions. In all, we identified 20 categories, and imposed spending caps on each that, combined, we thought would save us about $1.2M. (These caps were set Countywide, so they included departments that the County Commissioners do not directly control; but we asked them to participate nevertheless).

The Results

A report looking at our results through August showed that we are on pace to achieve our spending caps in 11 out of the 20 categories. And spending has declined at some level in 15 our of the 20 categories. (Electric costs have been the biggest area of unfortunate increase, which is not suprising due to higher costs overall). In total, though, we have saved $1.4M, so we are exceeding the anticipated savings by several hundred thousand dollars.

Biggest areas of savings include: consulting services (architectural), -77%; consulting services (engineering), -88%; food distribution services, -19.1%; office supplies, miscellaneous, -19.5%; police uniforms, -49%; subscriptions and memberships, -18.4%; training manuals, -96.6%.

Overall, this is clearly a direction that is bearing fruit. These results also beg for follow-up on why, in some areas, we have not met the spending caps. And we must ask what other systemwide changes we can make to ensure that all caps are met. And most importantly, it's an approach we will expand on in the coming budget so we gain far more savings in future years.

Big picture: this type of approach is critical because it allows us to cut spending without impacting services that go directly to citizens. We're able to provide the same services at a lower cost. Thanks to all those who helped take us in this positive new direction.

Friday, August 29, 2008

Presidential Politics

It's been a fascinating week of presidential politics:

The Democrats: Knowing that Hillary appeared out of contention from the outset, I thought Obama picked by far the best candidate from his short list in Joe Biden. And the two looked like a great team at the convention. (Though after watching her at the convention and seeing the polls, I think picking Hillary might have clinched the election--can you imagine the bounce?)

The Republicans: I also thought John McCain had to make an unconventional, risky choice to stay competitive, and he certainly did in Sarah Palin. But I think it was a risk worth taking--the others (Romney, Pawlenty) would have added nothing to the equation. (But given her longer resume, Kay Bailey Hutchison would have been the most formidable). I will say that some Democrats' initial decision to fiercely and immediately attack Palin showed bad judgment and could backfire. If she's not ready for prime time a la Dan Quayle, it'll show pretty quickly.

The Message?: While I certainly prefer Obama's, I don't think anyone's hit the home run message yet.

I may be speaking for myself, but I think the Beijing Olympics (and how imposing a confident/booming China appears to be, with their biggest cities more modern than our own), the feeling that we've lost control over our economy (China being our largest banker and all, and no control over energy), the new strength of Russia, the fear of terrorist attacks, along with other broader trends, have together left citizens wondering if we are slipping as a nation. I know all this worries me about where we are today, and where we are going. (see Fareed Zakaria's recent book:

Put a different way, 20% of Americans think we're going in the right direction. (More than 80% of Chinese citizens think THEY are going in the right direction.) This woeful number is not just a tactical opportunity to win the next election by promising change. It's far more. It reflects a people losing their confidence in our place in the world, worried we are losing control--losing our ability to shape our own future. And it reflects a people desperate to see leaders forge a new way.

A call to find this national purpose, to put together a strategy to regain our stride and confidence and place as a country, is the most unifying message out there, and is still up for grabs. That message would frame the rebuilding of our economy/infrastructure, and becoming energy independent, and getting all kids educated far better than today, and helping those who are poor find skills that allow them to contribute as much as the well off, and rebuilding our alliances, as not just important ends in and of themselves, but as the building blocks of the broader strategy that will keep us competitive and preeminent in the world.

In the same way, outlining the problems we face today should not simply become an exercise in decrying our woes one by one. Yes, the problems we see with education, stagnant growth, the middle class squeeze, and other issues are critical concerns we must solve for many reasons. But more deeply, every uneducated young person, every high school or college dropout, every idle or unemployed or undertrained citizen, and all that oil we import from the Middle East, are problems that hold us back from being our best in the fierce global competition we find ourselves in. With these issues together, we're competing with one hand tied behind out back.

This election presents a huge opportunity to lay out that broader, unified mission, and tap into every citizen's belief that we can and should do so much better. That we always have. To call upon the Olympics again, I think citizens are looking to feel about their country the way they did when they saw Michael Phelps win those eight golds. That our best, a kid from Baltimore with a single mom, outperformed the world and all it had to offer, over and over. And he did it in a quintessentially American way.

So while I have no doubt that "small" issues, tactical skirmishes and negative ads will occupy much of the the next 70 or so days, if one candidate taps into this often unspoken, nagging worry that America is losing its place in the world, and proposes a broad, bold, confident and credible strategy to turn that around, I humbly submit it will be the message that transcends our many divisions and puts him over the top.

Wednesday, August 27, 2008

Times Are Tough: Help If You Can, However You Can

We all read and hear about tough times, but here at the County, we are seeing it every day play out in the lives of our citizens. Recent statistics show just how many people are living on the edge--and how this troubled economy, high gas prices, stagnant wages are pushing many over that edge into real need.

A couple indicators:

1. Our County's August sales tax receipts showed just how much high gas prices are squeezing citizens and the broader economy. (FYI: The County's sale tax is not collected on gas or most food sales, so when people spend more on those items and less on other non-essentials, we feel it immediately). Compared to August 2007, August 2008 sales tax receipts were down 10.8%, or $643,000, from August 2007. Perhaps most alarming, while July to August of 2007 saw a sizeable jump in tax receipts, July to August of 2008 went down. (Overall revenues through August of 2008 are down 1.8% versus the same time last year).

It's important to point out that the Count doesn't see the revenues until three months after the sales occur. So this large drop in revenues coincides with the very time (three months ago) that gas prices were peaking above $4.00. As transportation (and food) take up more of a family's spending dollars, it's clear they are spending far less on other items. They are being squeezed, and it's squeezing the rest of the economy--from small shops and large businesses, to governments like our's.

2. In the last several months, the number of people coming to our County filing for food stamps and Medicaid benefits has increased 12%. That number speaks for itself.

3. Most alarmingly, over the past several months, 35% of the total number of citizens in programs like food stamps and Medicaid are new to the system. These are people who are experiencing these challenges, to this degree, for the first time. This is a startling number, and it is one being experienced throughout the State.

Together, these three statistics paint a bleak picture of the economy's impact on individual lives.

There's a lot we at the County are doing to deal with this , with very limited resources (and these resources are also diminishing, due to state and federal cuts). Whether its identifying and enrolling those who are eligible for Medicaid, the Earned Income Tax Credit, veterans benefits, or the economic stimulus package, or even more importantly, linking thousands of people to job training and job opportunities, and reconnecting young people who have dropped out to a second chance at a degree and gainful employment, we are doing the best we can to help those in need.

At the same time, there's also a lot that citizens can do, if they happen to be doing well enough to avoid the squeeze so many others are seeing. Today, for instance, is the kickoff of the United Way drive--and the United Way focuses on some of the very solutions that are most beneficial to help people in need. There are many other ways people can get involved, or make a difference.

If you're able, now more than ever, volunteering and supporting such efforts can change the lives of those who are struggling.

Tuesday, August 26, 2008

Casino Dollars? We'll Take 'Em (But Must Spend Them Strategically)

An article in yesterday's Enquirer highlighted a little known fact about the casino plan that will appear on this year's state ballot: an allocation will be made to each County, based on population, from the overall revenues of the casino:

You can go to to study the entire issue. The basics are that if approved, this issue would allow for one casino, in Wilmington, Ohio. And 30% of the proceeds will be split among Ohio's 88 counties. Hamilton County is estimated to receive just under $16M in the first year (but clearly, that should be taken with a grain of salt). So far, statewide polls have the issue ahead--although the track record of similar past efforts has not been too good.

My Basic View

Given that Ohioans are gambling close to home every day in Indiana, Michigan, West Virginia, and Pennsylvania, and those states are investing Ohioans dollars into their citizens' priorities, I've never been troubled by the idea that Ohio join the club. If Ohio dollars can build roads, schools and help economic development in Indiana, we might as well have those dollars do the same in Ohio itself. I voted for the 2006 effort for that reason. And I wasn't the only one--a majority of Hamilton County citizens supported that effort (I suspect because they also see so much of our money going to Indiana).

The current issue, though, provides a far more direct benefit to counties than the one in 2006. The proceeds will flow directly to our general fund. And in Hamilton County, for those who choose to go to casinos, it actually will be closer to many County residents than Indiana. For those who don't want a casino in their backyard, it's plenty far away.

Ultimately, though, each voter can make up his or her own mind on supporting the issue.

Strategic and Disciplined

At the same time, I'm a firm believer that rather than scrambling around after the fact, we are best off to plan ahead in the event that this issue passes (of course, when we budget for 2009 and beyond, we will budget assuming it does NOT pass).

That's why I have asked County Administration to think through the ideal way to invest these dollars strategically, over time, and am doing the same analysis myself. Short-term, our priorities are clearly to replenish our reserves and ensure we are providing for our core public safety responsibility.

But short-, medium- and long-term, the most important thing we need to do is grow economically, create jobs, and invest accordingly. We have to better compete to bring in new jobs and businesses, we have to retain and grow our current jobs and businesses, and we have to connect our citizens to those jobs. That work takes infrastructure, site development, redevelopment of "brownfields" and "grayfields," and proactive retention and attraction efforts.

And if you look at our budget picture today, and compare it to other counties, where we are truly lacking is a robust and strategic economic development approach that does these things. Compared to other counties, we aren't investing in creating economic growth, or good sites or infrastructure for economic and job growth, so we don't get enough of it as a result. (The G.E. and US Playing Card decisions are just two recent examples where our financial incentive package was competitive, but the sites we offered were not). All this leaves us with fewer overall dollars in revenues to fund the basic services that our citizens rely on.

Which is why the formula of how to spend these potential casino dollars should balance our near-term priorities (budget crunch and public safety) with this critical need to grow economically. Only that growth strategy will put us where we need to be over time. More to come as we develop that strategy. (And even if the casino doesn't pass, this is something we must do either way with whatever funds we can; but the new funds would greatly accelerate and bolster such an approach).

Finally, some seem to be criticizing the very idea that we plan ahead in case this issue passes. By doing so, we're "already spending the money," they say. Actually, the opposite is true. By creating a method of allocation that reflects our priorities prior to it passing, we can lock in a disciplined and strategic spending method and process, and apply it when the time comes. If we do nothing, and then it passes, that's when the feeding frenzy begins, and undisciplined, nonstrategic spending sprees occur.

In this case, planning ahead and thinking strategically will ensure that any new dollars are invested most effectively. Failing to do so will result in the same old status quo.

Monday, August 25, 2008

No Increase in Dog License Fee

A story in today's paper mentioned that the Administration proposed that we raise the dog license fee in order to reduce a $700,000 cost from our general fund to pay for dog warden activities.

Today, after a public hearing and much public input, (and despite a little confusion in the online story), the County Commission decided NOT to increase the dog license fee, but to instead explore other ways to get people to follow the law and register their dog.

Here are the basics of this issue:
- citizens are required by law to license their dogs
- the current fee is $13 per dog; this is a little less, but not by much, most of our surrounding and peer counties
- these dollars pay for dog warden activities that benefit both dog owners and the broader community
- fewer than 50,000 people have dog licenses, which we estimate is well less than 50% of total dog owners; some areas of the County comply at a rate of less than 15%
- mandated dog warden activities cost about $700,000 more than we receive through the license fees, so our general fund must make up that difference
- the proposal was to raise the dog license fee to $26 to try to cover that difference

After hearing input, and considering the issue, it came down to a simple business decision: we can make up the difference by doubling the rate on those who already pay for the dog license, or we can make up the difference by doing everything we can to get everyone else to obtain the dog license they are required to have.

We chose the latter. But in doing so, we proposed that the County and SPCA become far more proactive and creative in persuading people to do the right things and license their dogs, and explore: conducting promotions in partnership with private sector businesses in the pet "industry," and with dog-related events and locations; more public education overall; increasing the fines for NOT registering as required; targeted work in areas (such as the City of Cincinnati) that we know have the highest rate of noncompliance; and using the internet to promote and process licenses as easily as possible. Basically, promotion and enforcement.

The proposal to raise the price might in the short-run lead to an increase in revenue, but it might at the same time cause others to stop complying altogether. And those who haven't paid until now will be even less likely to do so in the future. Either way, it punishes those that are following the rules, in order to make up for those that are not.

We will produce a formal plan on our alternative approach in the coming months, but I am confident that with the right plan, we can greatly narrow the gap on folks who are not registering their dogs as they should. And this should also greatly reduce the amount of dollars we pay for dog warden services from the general fund.

Citizens ask us all the time to run government like a business--and today we did exactly that. As we do so, I welcome any other suggestions on how to improve the numbers on dog licenses?
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