Remarks at the National Governors' Conference in Seattle, Washington

[See footnote regarding the date of this speech.]

"Planning a Budget From Zero"

On the campaign trail, a lot of promises are made by candidates for public office to improve economy and efficiency in government if they are elected. This pledge has a natural appeal to the financially overburdened taxpayer. But when the winning candidates take office, they too often find that it's easier to talk about economy and efficiency in government than to accomplish it. Entrenched bureaucracy is hard to move from its existing patterns.

Taxpayers, on the other hand, hear the promises but see few results. It seems to them that for every new program in government there must be a tax increase. Each government—whether federal, state or local—seems to have an insatiable financial need. No matter how much money is collected, it never seems to be enough.

When I campaigned for governor, I promised that if elected there would be no general statewide tax increase during my 4 year term in office. At the same time, I outlined a platform of 8 general goals and 97 specific objectives that I wanted to accomplish. The twin promises, in my estimation, were not incompatible. I felt that this administration could reverse the past pattern of ignoring campaign promises.

Immediately upon election, I began planning a program to keep my commitments. I knew that simple appeals for greater productivity in government were not the answer. Economy and efficiency must come from basic, subtle changes that slice across the complete spectrum of a government's activity. The two areas that seemed to offer greatest possibilities of success were budgeting and planning. Through tight budgeting, more services can be squeezed out of every tax dollar spent. Through planning, the groundwork can be laid for implementing new programs and expanding existing ones in ways that will avoid possible pitfalls and launch the programs directly toward their goals from the beginning.

As a citizen interested in government and as a former legislator, I had long believed that too many governmental programs are botched because they are started in haste without adequate planning or establishment of goals. Too often, they never really attack the targeted problems.

The services provided by Georgia's state government are now greatly improved, and every tax dollar is being stretched further than ever before. There has not been a general statewide tax increase during my term. In fact, there has been a substantial reduction in ad valorem tax. Neither will a tax increase be necessary when my successor takes office next year.

In budgeting, we initiated a new concept called zero-base budgeting to help us monitor state problems better and attain increased efficiency. In the area of planning, we merged the roles of planning and budgeting—which had previously operated completely independent of each other—so that they could work together in promoting more economy in government. At the same time, we clearly defined the various roles of planning and assigned the proper roles to the appropriate organizational unit.

The functions of planning and budgeting were merged in a broad reorganization program that completely streamlined the executive branch of Georgia's state government. Much of our success during the past 3 years in improving state programs is a direct result of reorganization.

We reduced the number of state agencies from about 300 to 22 major operating agencies and combined functions to eliminate duplication and overlapping of services. For instance, 33 agencies were combined to form the Department of Natural Resources. Reorganization is a separate story of government in action. My interest now is to stress how we changed our budgeting and planning procedures to help accomplish the previously stated goals.

Georgia was the first government to implement a program of zero-base budgeting. Under this novel concept, every dollar requested for expenditure during the next budget period must be justified, including current expenditures that are to continue. It also provides for examining the effectiveness of each activity at various funding levels. This is a dramatically different concept from that followed by most governments, which concentrate almost totally on proposed new expenditures when considering a new budget. Except for nonrecurring programs or expenditures, the continuing expenditures in a current budget get little attention.

Take as an example a government with a budget of $1 billion. Projections are that the new budget will grow by $50 million during the next budget cycle because of growth in the economy, a tax increase or other factors. Department heads submit their budget requests with proposed increases to get a slice of the $50 million in new funds, either to expand existing programs, launch new programs, or to cover increases in costs through inflation. The governing officials rarely look at the existing expenditures to judge whether they are meeting their objective. The officials are concerned only with carving up the $50 million in new funds. If graded, a new program actually might become a greater priority than an existing program, but it doesn't get funded unless it can get a slice of the $50 million in new money.

Zero-base budgeting changed this practice in Georgia. Every program, existing and proposed, must now vie for funding in the new budget on an equal level. Every single dollar spent by a department in the current year must be justified if it is to be recommended by the governor for funding in the following year's budget.

Until the concept was implemented in Georgia, only one Texas corporation had ever used zero-based budgeting. The new technique was developed by that corporation as a means of reducing the costs of its overall operation. This was done by ranking every single function within the company's operations and abolishing the lowest priority functions. Thus, the company was able to reduce expenses as required in a manner that retained the most-needed functions.

On a larger scale, zero-based budgeting in Georgia has peeled the veil of secrecy from around bureaucracy by opening up for inspection and scrutiny the activities of every single state employee. For the first time, a governor, legislator, department head, or anyone else can study in detail what is being accomplished at the lowest level of state activity.

The heart of zero-based budgeting is decision packages, which are prepared by managers at each level of government, from the top to the bottom. These packages—10,000 in Georgia—cover every existing or proposed function or activity of each agency. The packages include analysis of the cost, purpose, alternative courses of action, measures of performance, consequences of not performing the activity, and benefits.

Merely compiling these packages would not accomplish any purpose other than to provide information. Therefore, they are ranked in order of importance against other current and new activities. This ranking forms the basis of determining what functions are recommended for funding in the new budget, depending, of course, upon the amount of money available. If less funds are appropriated than requested, the lowest-ranking functions and activities are cut out.

Besides placing priority on spending programs and revealing more information about actual governmental operations, zero-based budgeting achieves one more important action: it forces planning into levels of government where planning may never have existed. It forces all levels of government to find better ways of accomplishing their missions. It also gives a voice in governmental direction to the rank and file state employee who is responsible for delivering services. Besides making him a more integral part of the planning process, it elevates his own sense of importance of his position and prompts him to work harder and deliver more efficient services.

There are three ingredients necessary for successful implementation of zero-based budgeting: (1) unqualified support from top executives, (2) effective design of the system, and (3) effective management of the system.

Zero-based budgeting has been well received in Georgia. It has become an important planning tool to insure that we are placing our priorities on the proper programs and are constantly seeking the maximum services for every state dollar.

I don't want to mislead you and leave the impression that implementation of zero-based budgeting has created miracles in Georgia's state government. Obviously it has not. But it has been subtly at work for 3 years making basic changes in the operations of our government and will continue to pioneer further improvements in the years ahead.

The merging of budgeting and planning services into one cohesive organization has worked so well that one wonders why they were ever located in separate, noncooperating agencies.

State planning was a function of the Bureau of State Planning and Community Affairs when I took office, while the Budget Bureau handled all budget matters. Although both agencies were under control of the governor since he appointed both agency heads, they operated separately with no cooperation between them—a fact that minimized the probability of the planning output being implemented.

One of the most critical problems was that the Bureau of State Planning and Community Affairs, which had been created in 1967, had never really established its mission in Georgia's state government after 4 years of operation. Legislators didn't understand its functions and were skeptical of its entire operation. They felt that the planning bureau and the individual state departments were overlapping in their responsibilities. In some instances this was true. More importantly, the planning bureau was doing most of the program planning in state government without adequately synchronizing its efforts with the state agencies. When it came time to implement the planning efforts, department heads were skeptical and too often were reluctant to push for implementation of the proposed improvements. This created an impasse that made the work of state planners generally ineffective.

As soon as reorganization brought the budgeting and planning functions together into the same agency, the Office of Planning and Budget, changes began to occur. For the first time, planners and budget analysts worked side by side and began to coordinate their efforts.

Over a period of another year, further changes took place that changed completely the role of state planning. Through reorganization, most state agencies began to do their own functional program planning. This was made possible by creation of planning divisions within these departments for the first time, and also by the fact that the reduction in number of departments made them large enough to justify their own program planning divisions.

Concurrently, planners in the planning division of the Office of Planning and Budget assumed a new role of policy planning rather than program planning. By restricting program planning to the agency level, there is now a greater chance that it will be implemented.

Georgia state law changes the OPB planning division with the responsibility for assessing accurately Georgia's physical, social, and economic needs. On a periodic and timely basis throughout the year, these needs are identified, documented, and analyzed.

One method that I have used to secure citizen participation in the state planning process was the Goals for Georgia program. This was a year-long program in 1971 in which Georgia citizens were given a chance to outline the types of programs they wanted their state government to emphasize in the years ahead. Since that time, state planning has been updating the results of this program continuously in the formulation of the state's goals and policies.

The role of OPB planners in preparation of the 1975 budget tells the story of how state planning is now done in Georgia.

Long before the state's budget analysts got deeply involved in preparation of the proposed fiscal year 1975 budget that would be submitted to the general assembly, OPB planners started meeting with department heads to determine their program priorities for the following year. Detailed analyses were prepared and submitted to me for review. At the same time, I was meeting with the planners to outline my priorities. Later, I met with the planners and each department head to discuss both of our priorities. We reached a mutual agreement on many programs to be pursued and disagreed on others. Even though we .didn't reach unanimity, we established a common ground of understanding about our conflicting goals. Later, when the budget analysts started putting together the actual budget proposals in dollars and cents, the spadework done by the planners proved to be an immense help.

OPB's planning division didn't stop at this point Its staff continued to attend every budget meeting and provide assistance in ironing out details of the actual budget proposal to be made. Although planners had been involved in preparation of the proposed fiscal year 1974 budget, this was the first time they had actually been involved with a clearcut role established for them. I can only say that I wish we had had this type of budget-planning relationship available when I became governor. I am more than pleased with the working rapport that has been established. The relationship between me and all department heads concerning budgeting preparation has been improved considerably.

The work of the planners is reflected in our printed budget documents as well. One of the three budget documents we prepare in Georgia is an outline of proposed spendings on a program basis with a 4-year projection of future needs for each program. This document is keyed by page number to the main financial display document for easy cross-reference.

One role of planners has been retained—program evaluation. This involves determining whether each program has attained its objective and making a thorough analysis of the strengths and weaknesses of each program.

OPB planners were left with this function because an objective, outside- the-agency evaluation is needed, and because many programs cross agency lines. It would not be fair for one line agency to evaluate the effectiveness of a related program in another line agency.

Along with die new objectives of OPB's planning division, one major change has taken place in our recruiting efforts. Instead of recruiting trained planners, we hire experts in the various areas of governmental activity such as education, law enforcement, mental health, et cetera. We provide them the in-house training necessary to work within the framework of our planning organization. This policy has been successful. By virtue of being experts in their activity of assignment, OPB planners can discuss programs on a level with department heads. They have an expertise that is creating more trust in state planning and is helping to establish better rapport between the governor's office and the various state departments.

Georgia's state government still has a long way to go to achieve the quality of service that I would like to see. But we've come a long way since I took office in 1971.

The innovations involving zero-base budgeting and merging of the budgeting and planning staffs will be felt in Georgia for a long time. We are leaving a legacy to our next governor that will allow him the flexibility and mechanism to move quickly into the decision making process of a new administration that hasn't been available to Georgia's past governors.