Sunday, March 13, 2011

Lexington As A Business?

I have been hearing the new mayor saying for a while, like many others before him, that the government should be run like a business. That business principles should be used in the running of our or any government. To that I would like to ask - Do we have a particular business model in mind?

Is there a business model that applies to government?

Businesses usually are formed for the purpose of making a profit. The larger the business the larger the profit. Businesses typically perform some kind of service for which they can charge a fee and good businesses will charge a large enough fee to cover their costs AND make a profit. Entrepreneurships will make enough profits to allow small families to get by and possibly support a few others as employees. Corporations will use the money of many investors and split the profits among them as dividends.

Non-profits provide services for which they charge a nominal fee and they may solicit money from willing benefactors consisting of individuals and corporations. Should a non-profit have funds left over after all programs have been completed and salaries paid, then new services or programs may be considered or undertaken.

Governments, on the other hand, are put in place usually to do for the citizens what they cannot, or will not do for themselves. They work for the general public good an taxes are collected to ensure that such services will be funded to their proper levels. Governments are not supposed to make a profit but they should collect enough in taxes to enable themselves to properly provide such services.

What business model would work best for a local government?

Lexington's government is a corporation primarily for legal reasons of liability and as a non-profit needs to charge some nominal fees, solicit from the citizenry(otherwise known as the usually willing benefactors) and provide services in return for those fees and funds. There should be NO profits to be distributed to the investors or returned to the willing benefactors. All the proceed should go to provide for the general citizenry.

So, what happens when the need to provide services exceeds the amount of funds gathered from the various sources? What would a corporation like FedEx or UPS do if the costs of fuel rose above a certain point? What have the airlines done when fuel and personnel costs rise? Did they go back to the investors or did they go to the users of the services? FedEx and others have raised their fees and the airlines have applied many new fees along with fare increases. Such fiscal moves are thought to be unheard of for government.

Should we manage our government like some of our larger, successful corporations? The ones where the CEO is paid at 300% the wages paid to the line workers and massive dividends are distributed to the stockholders. In this case, the services are being provided to those other than the investors/benefactors and governments just don't work that way.

Just what business model would you like to see for running government?


elric said...

When I (and I think many people) say that the government should be run like a business, I mean that the government should not spend more money than it has. It should do a cost benefit analysis of the investments it makes rather than deciding based on what feels good. It should hire people to perform a particular productive task and not to simply fill out useless paperwork.

When a business does not do these things, it will often go out of business. Fortunately, the government cannot go out of business, but this also makes it dangerous as there is really no penalty for failure.

Streetsweeper said...

Our local government cannot spend more money than it has(or can borrow) and, as a reflection of the populace which elected it, has chosen to embark upon many usually, worthwhile endeavors. As a business, we must not now choose whether or not to continue to follow those paths, to seek sufficient funding accomplish those endeavors or a combination of both. This is where the playing politics comes in.

What are the important services and which one can we do without? Do we need to provide fire protection, police protection, sewer service, trash pick-up, health care, arts programs, social services to the elderly, street maintenance ...? How far can we cut back until we have to generate more funds? Is everything "on the table"?

Which business model would you choose?