The Accountability Agenda: Jersey City Budget Reform
Questions:
Why is there so much garbage on our sidewalks?
Why aren’t our parking laws enforced?
Why aren’t our streets safe?
Why does the city under-collect tens of millions of payroll tax dollars per year that should be funding our schools?
Why is our city’s tree canopy so meager?
Answer: The city routinely fails to do simple things right because nobody’s paycheck depends on doing them well.
It’s not the politicians. Not really. We’ve had these problems for a long time, even going back decades in some cases. In that time period, the entire city council has changed over, and even the mayorship has changed hands, so the problem isn’t whom we’re electing, and it won’t change by just electing a new batch of officials. And truthfully, lots of cities have problems like these with totally different city leaders.
In this post, we’ll explain the core underlying causes and the solution.
Table of Contents
I. How to Provide Services
When you look deeper at how the city operates, it’s clear that something in the process is fundamentally broken. The key thing to understand is how the city decides what services to fund and how much to invest in them. For this, it’s helpful to compare how the city thinks about delivering services versus how most other service providers do (for profit and non-profit).
A. Normal Service Providers
In a typical service relationship, it works like this: (i) customers/stakeholders tell decision-makers (a) what they want and (b) how much they’re willing to pay for it, and (ii) decision-makers figure out how to deliver it on budget. This is how it works when you go for a haircut, hire a contractor or buy an internet plan. For example, even in a process as frustrating as buying health insurance, you usually get a concise menu of options: some plans cover more and require higher payments and some plans cover less and have lower payments. It gets complicated with deductibles and caps, but other than fairly unlikely circumstances like needing a huge procedure, you largely choose the outcomes you’re interested in paying for.
B. Kafka’s Service Provider
Now let’s instead imagine that you’re trying to select health insurance in a nightmare. Imagine that instead of sending you a short menu of plans on offer, your company sends you a spreadsheet with hundreds of rows, each detailing the hundreds of component parts that go into providing a level of medical care. The spreadsheet would list things like: how much the in-network providers proposed to pay for their medical waste removal, how much the insurer proposed to pay its underwriting staff, how much nurses want for uniforms, what special features the technicians want the MRI machines to come with… and on and on and on.
Incredibly, as we’ll show in Part II below, this is essentially how our city government decides how to invest in services!
II. How the City Invests in Services
The city makes its investment decisions at year-end budget hearings for the next year. But it’s not what you’d think. Instead of residents telling their council people what they want and the council working with the executive branch (the administration) to deliver results at a sensible cost like a normal service provider would, we have the below:
A. Assembling the Building Blocks Without Instructions:
To kick off the process, each component of the administration sends a budget request to the city’s top bureaucrat (the business administrator). That’s the first problem. Over the decades, the administration has ballooned into more than 70 different administrative components, each with its own goals and operations, so the budget request list covers funding for hundreds of disparate tasks.
Artists’ rendering of the JC municipal org chart circa 2025
B. Hundreds of Trees but no Forest:
The business administrator, who can’t possibly be an expert in the hundreds of different things these component parts do, takes these requests to the mayor to decide on an overall budget proposal. Based on the mayor’s overall tax goal, the business administration then tells the top officers how much of each of their budget requests they’ll put in the official budget proposal.
The administration then sends the official budget proposal to the council. The administration’s top officers attend council budget hearings where they go line-by-line through the scores of requests in their departments. The council members also aren’t experts on the jumble of individual budget requests, so they hem and haw and make suggestions at the margins, but in the end they have little choice but to rubber stamp a budget that looks very much like the proposed budget.
And it’s not really anybody’s fault. When an organization operates like it’s really dozens of semi-autonomous mini-organizations, each pulling in its own direction, nobody can be expected to see the forest for the trees.
Watch in the clip below as the council struggles desperately to solve an easy problem in the administration. If it’s this hard for even insiders to parse the city’s bureaucracy to solve what should be an easy issue, you can imagine how difficult it is to get anything real done for you!
C. Prioritizing Process Over Outcomes:
You notice what’s not talked about in these budget hearings? Resident outcomes and whether the proposed budget will actually deliver those outcomes at a price residents are happy with! As a very representative example, last year’s public safety department budget hearing went over 2 hours. There was not one word about how effective the department had been in the prior year at deterring crime or how effective they expected to be in the coming year. Not one word.
D. The Proliferation of Unfunded Mandates:
But it actually gets worse. Throughout the year, the city council passes laws telling the administration to do things, like regulating food carts and cleaning bathrooms in parks. But remember, laws are passed throughout the year in a process totally disconnected from the resource allocation process. By the time a council person wants to pass a new policy, the budget has already been set for the year. As mind-blowing as it is, it’s totally normal for the council to assign the administration a task … but not empower them to invest the resources to complete it! Even to this day the parking enforcement laws have never been allocated resources sufficient to get the job done!
In sum, the existing investment process has two big consequences:
Because every service decision is the product of many semi-autonomous decisions at many layers of the bureaucracy, no individual ends up being responsible for delivering any outcome.
Because the council can’t effectively monitor or impact how services are being provided, they can’t do much to systematically address service failures or reward for doing things better, cheaper or faster.
III. Solution: The Accountability Agenda
To address the failings above, we’re introducing the Accountability Agenda to reset the city’s investment process. The Agenda consists of two parts: (A) goal setting and (B) massive organizational simplification.
A. Goal Setting:
1. Council Responsibility for Clear Goals:
The council needs to start to take responsibility for understanding the outcomes residents prioritize and how much they want the city to invest in achieving those outcomes. The first step in the budget process has to be that the council sets a handful of concrete goals for each of the city’s service lines (more on service lines below). Some of the goals should be objective and measurable key performance indicators so that service line leaders understand the outcomes they need to deliver. For example, sensible goals for law enforcement could be to achieve a target response time per incident and a target crime clearance rate.
2. Performance Pay for Senior Administration Officers:
Clear and concise goal setting unlocks a key pillar of the Agenda: performance pay. The city should compensate senior leaders (other than the mayor) for delivering good or great results. A portion of their salaries ($60K) should be fixed, while they have an opportunity to earn much more from a bonus performance pool for delivering good or great results based on the council’s assessment of their service line’s performance relative to the goals the council sets for it. For example, if the council sets as a goal for the law enforcement service line an 8-minute average response time and law enforcement achieves a 9-minute average for the year, the council could decide to reward law enforcement leaders 70% of their maximum possible performance pay. The cost of the performance bonus pool to taxpayers would be small. Even a $5 million total bonus pool would only cost each adult in the city about $20 per year, which is peanuts compared to the operational improvements it will yield.
B. Organizational Simplification:
At core, our city government, like most municipal governments, just provides 3 services: public safety, maintaining public infrastructure and managing the social safety net. We suggest splitting these 3 into 5 service lines and reorganizing everything the administration does around them: (i) Fire Safety, (ii) Law Enforcement, (iii) Physical Infrastructure, (iv) Social Infrastructure and (v) Social Safety Net Management. That’s it. All internal services, like HR and city building maintenance, are overseen by and embedded in the cost of the 5 service lines. This way, the entire administration is aligned to deliver great results.
By distilling the 70 legacy administrative units into 5 service lines and empowering service line leaders to control internal costs and find opportunities to innovate, we massively cut red tape and better align incentives to delivering you great service. We can improve things even further by activating the citizen’s budget advisory panel. Jersey City has no shortage of residents with the technical background to help advise the council on evaluating the budget and to setting performance pay. The city just needs to tag them in.
Finally, with these pieces in place, the city can start giving you honest reporting about its performance each year, just like you get with your 401(k). The citizen’s budget advisory panel can help the council craft an annual performance mailer that lays out the goals the council has set for the service lines and how well the service lines performed relative to those goals. It should be less than a 5 minute read.
With the Accountability Agenda, you can get succinct city performance data sent to your inbox.
TLDR:
Jersey City’s investment process is broken
We can improve it by:
a. Setting clear goals
b. Hiring great people and letting them cook:
Performance pay for senior officials to unlock innovation
Radical refocus on resident satisfaction
c. Activating the citizens’ budget advisory panel
d. Providing residents annual performance reports, just like your 401(k)
Accountability Agenda elevator pitch available here
