Wednesday, April 4, 2012

Inelasticity and Shrinking Budgets: Service Delivery Innovation

In recent years the combined pressures of an economic recession and the push-down of unfunded mandates onto local governments has put an undue financial burden on local governments, one that has left many budgets stretched too thin. The video below demonstrates the budgetary constraints that St. Paul faces in light of the recent LGA cuts:

The reality for many cities is that public safety services, or police and fire, cannot be fully cut out of the budget. The demand for these services is the most inelastic of all local government expenditures.

So then, how do cities and counties continue to provide public safety services at the current level while functioning in the new economic and budgetary realities? One way local governments have been attempting to rethink their costs is through the restructuring of service delivery to cities and counties, especially the public safety services. This topic is so prominent that the Minnesota Commission on Service Innovation was created in 2010. The recommendations from their first annual report all center on the rethinking of service delivery. Their report leans toward innovation, over status quo, which for some cities has meant very different things.

Earlier this year a small town in western Minnesota, Foley, got a lot of attention because of their decision to outsource their police force to a private security company. Since January, Foley has re-instated a bare-bones police department, but they serve as an interesting case for exactly what innovation can be in terms of service delivery.

As budgets grow tighter and revenue sources become more constricted many more cities will have ask themselves what innovation means to them. The conversations about services have mostly been about service sharing and contracting to the county level, though we may see more "extreme" cases like Foley as the demand for services increase and budgets continue to shrink.

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