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"The choice of cut more or tax more is not acceptable. You have to do it better," says Lenny Mendonca, a McKinsey senior partner who has spent 20 years analyzing productivity. "Right now, the conversation is all about the near-term cuts. But over the long term, the only way out of this is massive productivity improvement."
Cuts must be made, particularly to unsustainable pensions, but seeing them through the lens of productivity looks very different from slashing and burning through with the blinders of ideology on. Washington state senator Rodney Tom has introduced a bill to require school districts to make necessary teacher layoffs based on performance ratings, as opposed to by seniority alone. That's reform based on results. Then there are Wisconsin Governor Scott Walker's proposed pension and health care changes, which would exempt police officers, state troopers and firefighters who have among the most expensive benefits. That's change based on politics, which is how we ended up here to begin with.
We know we can do government better because it's already happening. America is a carnival of high- and low-functioning bureaucracies. In North Carolina, the pension system is just fine, thank you. That's because public officials and pension-fund managers there have consistently minimized risk, assumed a realistic rate of return on their investments and paid what was owed into the system. "It's not magic," says Elizabeth Kellar, head of the Center for State and Local Government Excellence. "It really is a matter of fiscal discipline over time." By comparison, officials in New Jersey and Illinois have recklessly underfunded their pensions, in some cases granting retroactive benefit increases without paying for them.
People who study government performance can rattle off a list of the better-run states and cities in the country: Virginia, Washington and Utah; Phoenix, Austin and Portland, Ore. These places have almost nothing in common except that their leaders decided to make more policy choices based on data and measure their results and they got rank-and-file workers to buy into their vision.
It's risky to generalize about 21.6 million government workers (akin to generalizing about the 108 million people in the private sector, from IHOP to Apple). But let's get a few things straight right from the beginning.
None of them are faceless bureaucrats. They are regular people but more educated and a bit older than the average American. In Ohio, 1 out of every 7 employed people works in government. In New Jersey, the number is closer to 1 in 6. That state's governor, Chris Christie, is at war with the teachers' unions, but his own late mother worked for a board-of-education office and was a mandatory union member for 25 years.
Many Americans think of Washington when they think of government workers. But the vast majority are state and local employees. The country has 2.2 million federal civilian workers compared with 19.4 million at the state and local levels. While more than half of Americans think federal workers are overpaid, federal pensions and salaries are actually less generous on average than those of many state and local jobs.