The Allen Alley way to remodel Oregon government

By Dave Lister,

“Government should run like a business” is an oft-repeated mantra I’ve never fully understood. Business is about profit. If you don’t make a profit, you don’t stay in business. A business strives to produce its products at the lowest possible cost and successfully sell them at the highest prices allowed by the competitive market. The profit differential allows the business to grow, compensate its employees and pay dividends to stockholders. How would we apply this model to government? We don’t expect government to generate income. We expect taxpayer-funded services to be delivered on a not-for-profit basis, and when we think that’s not happening, we get grouchy. Mention of tolls for new bridges evokes firestorms of protest. Portland’s hastily implemented leaf-removal fee caused such blowback that the city instituted an opt-out program, the administration of which may well cost as much as the removal fees would have generated. When Portland contemplated the purchase of Portland General Electric, most folks said “no way,” and bills that once read “City of Portland Utilities” have returned to reading “Portland Water Bureau.”

So if we don’t want government going into business, how is it supposed to run like a business? I put that question to Allen Alley, former Republican candidate for governor and currently co-chairman of the Oregon Transformation Project.
“I have a slightly different view,” Alley said. “In my experience a successful business wasn’t as much about generating profit as it was about providing value. If the customer’s perception was the product I provided was of greater value than the dollars they spent, then the business was successful and profitable. That’s what I think is missing in government. I think if you added up all the taxes and fees paid by an average Oregonian and asked them if the value of the services received was worth it, their answer would probably be no. And if after growing state government by 49 percent in four years taxpayers don’t think it’s a fair trade-off, the growth is unsustainable.”

In order to apply this value principle to the delivery of services, Alley thinks we need to do away with our accepted budgeting practices.

“Because they’re not operating in a competitive environment,” Alley said, “government agencies establish their budget by taking the amount of money spent in the last cycle and cushioning it for inflation or other factors for the next cycle. The result is an ever-increasing budget that does not take into account the value of the services delivered. We really need to go to zero-based budgeting where expenditures are evaluated based on value provided rather than historical spending.”

The big question is how do you begin to determine what those numbers should be? Rather than knocking down a couple of margaritas and dropping off the map after his defeat, Alley rolled up his sleeves and, in conjunction with Oregon’s Republican legislative caucuses, started the Oregon Transformation project (oregontransformation.com). After compiling Oregon’s budget on an agency-by-agency basis, they are now in the process of comparing the numbers to the budgets of other states.

“The only way we can establish benchmarks for appropriate spending,” Alley said, “is to make comparisons. How much are other states spending for comparable value delivery?”

Alley, who served as an economic adviser to Gov. Ted Kulongoski, laughingly refers to his time in Salem as his stint in the Peace Corps: “It was my opportunity to give back, and I really learned a lot.”

In a perfect world Gov.-elect John Kitzhaber would give Alley the same opportunity. But in a perfect world Republicans would have given Alley the nod in the first place.