Slowdown is Opportunity for Reform

Commentary, Frontier Centre, Public Sector, Uncategorized

Recession and a military emergency are handing all levels of government a unique challenge. Our most important trading partner, to whose fate we are inexorably tied, is trimming corporate taxes and accelerating tax rebates while throwing in spending for lots of guns and butter to boot.

We’re not as wealthy and our political culture is generally reluctant to lower taxes. Moreover, it still ties its hands by insisting that key areas such as healthcare and education be run like the old post office, a monopoly whose costs constantly rose while service levels fell. We have much less room to manoeuvre because our government is already a third larger as a percent of the economy. More than ever, our public sector needs to tie itself to a framework of high performance and fiscal prudence.

This unusually turbulent scenario brings risk. Will governments dust off their 1960s economic textbooks and return to deficit spending and panicky job-creation programs? That would be a pity because quality policy options are available.

What if we pour money into the public trough and it doesn’t work? Japan has tried this approach for more than a dozen years, and its economy remains flat on its back, in a semi-permanent stupor. Besides ultra-expensive bridges to nowhere, it is left with little growth, a ballooning debt and increasingly non-competitive tax levels. Nobody, save the odd university professor and a shrinking minority of government-stimulus advocates, still believe deficits can magically produce prosperity.

Manitoba’s big temptation might be the construction of dams up north, to take advantage of last year’s energy market. These types of government projects are too time consuming. A Canadian recession, especially Ontario’s, translates into falling equalization payments for Manitoba, a form of easy money that troublingly makes up a third of the provincial budget. The crunch is coming.

What can Finance Minister Greg Selinger otherwise do? He might profit by reading the annual report of a program he controls, the Special Operating Agencies Finance Authority.

SOAs are operations within government where the civil service is separated from the ponderous regulations and archaic operating systems that characterize the traditional public sector. They focus on results, setting performance goals and then systematically developing strategies to attain them. While they lack the more extensive flexibility afforded the world’s most innovative models of high performance government, they are relatively free to use best methods in an environment where output is measured and excellence is rewarded. Their track record as quasi-independent business units within government speaks for itself.

They have garnered international recognition for the province. (Take a look at the World Bank’s web site). Greg Selinger and company could easily build on their demonstrated, if low profile, success.

The program began with the Fleet Vehicles Agency, which was converted into an SOA in 1992. It now includes 17 other government operations, incorporating such varied services as the Fire Commissioner’s Office, the property registry and the Manitoba Securities Commission. All told, SOAs represent 5% of the Manitoba civil service and $112 million in business activity. The latest annual report documents significant improvements in efficiency and service quality, including a 21% reduction in costs, faster response times and a doubling of clientele. The old way of doing things was not the best way.

In spite of this encouraging record, there appear to be no immediate plans to expand this hotspot of public sector innovation. This is too bad. The other 95% of provincial spending would benefit from the principles that govern SOAs. From the outset, the program was restricted to public sector niches that had existing or potential revenue streams, but its values have application across the board.

If a general lesson can be taken from this performance-oriented model, it is that we can benefit by operating services on a more personalized, customer-connected scale. Instead of government’s easy, slightly soviet tendency to centralize and amalgamate service activities and organizations in the elusive quest for so-called economies of scale, the SOA script goes in the opposite direction, decentralizing control and pushing responsibility and accountability down to the client level. Get the central agencies, notorious for micromanagement, creating burdensome paperwork, hidden costs and delays, out of the way. Let front-line workers use their brains. Focus on results and forget about rigid processes that smother front-line employees. Use concrete performance measures to benchmark progress and tie it to employee rewards. Know the costs, including those hidden or ignored in a bewildering maze of internal subsidies.

The tough spot ahead for governments should be seen as a marvellous opportunity to try new things. In the stifled Canadian context the SOA philosophy is truly a breath of fresh air. More than ever, the public sector has to be affordable and at the same time do a first-rate job. A little SOA magic gives civil servants that chance.