Tasmanian budget: the numbers only tell half the story

By Kevin Riley

Wednesday August 27, 2014

The Tasmanian budget, handed down on Thursday, provides an opportunity for a discussion about the future direction the Tasmanian government intends to set for the state — over this electoral term and beyond. While budget statements and the associated analysis will be focused on the budget bottom line, the numbers are not the whole story.

The complete story about the quality of the state budget will only be known if we explore beyond the budget bottom line and consider whether the budget:

  1. Sets out clear statements of the outcomes that government expects to be achieved;
  2. Establishes service delivery standards for critical services like health and education;
  3. Lays out the medium and longer-term fiscal strategy for improving the financial position of the government’s balance sheet, and;
  4. Is supported by governance and accountability arrangements addressing the risks that exist in delivering on the fiscal strategy, improving service delivery standards and achieving outcomes.

The most significant requirement of the budget is in setting strategic priorities. Budget papers talk about outcomes. Outcomes — in plain English, “results” — are what the government seeks to achieve over the budget and forward estimates years. Making these results statements clear is critical for setting priorities. This is a hard but necessary step in public sector budgeting.

The history of public sector budget management is focused on the “inputs” like employee numbers, school closures or amalgamations, consultancies and taxi fares. These inputs (“resources”) are paid for by the budget, but are not the purpose of the budget.

Clearly, individual employees will be concerned about their job security. Each of us must have regard for people who face a loss of income because of budget decisions, and employees in this case must be treated with respect. Of lesser concern are those whose concerns about the budget is more about protecting the status quo. The primary objective of the budget is to set the plan for delivering on the outcomes expected by the Tasmanian community, not protecting self-interest.

A strategic focus to public sector budgeting raises the bar and changes the focus from the resources to the results that government expect to achieve. The quality of the budget should be assessed by questions like does the budget:

  • Enhance the quality of teaching in state schools?
  • Contribute to improving student participation in years 11 and 12?
  • Make health services more accessible?
  • Reduce the average waiting time for the most necessary elective surgeries?
  • Lift investment in business activity?, and;
  • Produce improved employment opportunities?

The test for Treasurer Peter Gutwein will be the clarity of the results that the government seeks to achieve for the Tasmanian community over the budget year and beyond.

Citizens have every right to expect that public services are delivered to standards of quality, safety and timeliness. Without a focus on establishing benchmark standards for public services the budget will not build confidence that critical public services will be maintained or, even better, improved. At the same time government agencies often require these service improvement challenges in order to focus on continuous improvement and innovation.

Only when service delivery standards are set out will agencies be able to challenge existing service delivery models and redesign the “that’s the way we have always done things” approach of the past. The reality of delivering services with more limited resources is that the solutions often require more connected, “whole-of-government”, collaborative and innovative approaches to service delivery.

“Addressing the fiscal strategy for improving the financial position is a medium to longer-term objective.”

The solutions will not necessarily require any greater outsourcing or contracting out. Rather, more collaboration with and between the different sectors in the Tasmanian economy, including local government, where a greater understanding of the local service delivery requirements exist, offers a positive, community-focused solution for the Treasurer.

The budget papers and the analysis will focus on the deficit result for the budget year. In addition to the budget bottom line, the budget papers also include a less read and often misunderstood document called the balance sheet. This financial report sets out the assets and liabilities as at the end of the budget year and the three forward estimate years. This document is critical to understanding the financial position of the general government sector.

Addressing the fiscal strategy for improving the financial position is a medium to longer-term objective. Commentators have called for the Treasurer to consider assets sales. In some instances this works well. However, the decisions about asset sales and debt reduction require a case-by-case assessment of the costs and benefits of each initiative.

The budget needs to lay out the medium and longer-term strategy for enhancing the state’s financial position. This should be supported by the key criteria for assessing initiatives that affect the asset base and debt management. These decisions need to be made based on clear criteria and not ideology. Not all debt is “bad” and not every asset should be sold off.

The budget is a plan, based on a series of complex and inter-related assumptions, designed to deliver on the priority needs of Tasmanians. There are no guarantees that the budget will:

  • Achieve the desired outcomes for the Tasmanian community;
  • Ensure that service delivery standards will be achieved by agencies, or;
  • Improve the state’s financial position.

Risks exist across all of these elements of the budget. These risks need to be identified and appropriate governance and accountability arrangements established. Only then can we all see how the budget development process translates strategies into actions. The governance and accountability arrangements see the public light of day in the Parliament; public debate and question time are key accountability requirements, as are the inquiries of parliamentary committees.

Behind the scenes though the Department of Treasury and Finance needs to have very clear accountability arrangements in place with agencies and others involved in the implementation of budget strategies. This will require setting and monitoring key performance indicators around project implementation, service delivery standards as well as monitoring the expenses over the budget and forward estimates years. These are key features of the role of Treasury and Finance departments in each jurisdictions and have typically been well performed in Tasmania.

The key feature of the current fiscal environment is that early action is required when new budget initiatives are not working, or where risks are not actively managed by agencies. Without this good governance and strong accountability for performance, the purpose and intent of the budget could be lost. Tasmanians cannot afford to lose this opportunity for establishing a sound fiscal strategy for sustainable service delivery into the future.

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