Economic Forces In 1995 May
Require Government Review
"Agencies in the public sector will see an increasein
economic pressures in 1995 that will require them to
re-examine their operations and use financial analysis
techniques borrowed from the private sector," according to Michael N. Mayo, Midwest Director of Public
Sector Services for Deloitte & Touche LLP.
Mayo cites the following trends that will force public agencies to examine how, or if, they can continue to
provide services:
• A slow recovery with no dramatic increase in tax
revenue.
• Public resistance to tax increases.
• Federal mandates without corresponding revenue streams.
• Health care costs for government workers spiraling out of control. Governments have traditionally had rich plans for their workers, often with no contributions and low co-payments to attract talent from the private sector. These costs are mounting.
• Double digit increases in the State's share of Medicaid costs.
• Equitable funding for education.
• Increasing interest rates.
These pressures will likely be accelerated by the
recent Republican electoral victories especially in the
U.S. Congress. The Republican platform calls for allocation of fewer Federal dollars to state and local governments.
According to Mayo, "In this era of taxpayer resistance to tax increases, yet increased public expectations, our recommendation is for public sector managers to begin re-thinking what services they are providing and how they deliver those services.
"The public sector management culture must now
shift and think in terms of analyzing how they are
organized, costs, processes, operational efficiencies
and what can be learned from the practices of private
sector firms in similar or allied fields," said Mayo.
"Defining adequate performance measures, which
has not been done satisfactorily to date, is critical to
understand how efficiently governments are delivering
services," says Mayo. For example, he notes that in
March 1995 / Illinois Municipal Review / Page 13
education, the primary measure is how much money
gets spent, instead of what are the resulting outcomes.
Top management of government agencies must ask
themselves some basic questions:
• What is the service we are delivering?
• Who are our customers?
• What do our customers think of our performance?
• Do we have what it takes inside our organization
to get the job done correctly and efficiently?
In the end, government agencies that become more
efficient will survive. The viability of these public entities will be restored and those jobs that remain will be more secure.
"In general, public sector managements are several
years behind the trend to reengineer their processes,"
said Mayo. "Now, for the first time, governments are
creating task forces focusing on this concept. While
there has not yet been a major upswing in reengineering
projects, we do see it on the horizon. The mood of the
taxpayers for fundamental change is real and will necessitate reengineering of the way government services
are delivered."
In all likelihood, reengineering will require the purchase of new technologies in order to realize efficiency.
This additional capital requirement, in an already tight
budgetary environment, will force public sector managers to demand even greater efficiency.
The Midwest Croup of Deloitte &Touche LLP provides accounting and auditing, tax, and management consulting services through
more than 1,000 people throughout Illinois, Iowa, and Wisconsin.
Page 14 / Illinois Municipal Review / March 1995
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