THE BLOG

Physician, Heal Thyself -- Where's the 'Affordable Government Act'?

07/23/2013 03:06 pm ET | Updated Sep 22, 2013

President Obama strides toward the podium and makes an announcement.

"For years, too many middle-class families saw their taxes go up and up and up, without much explanation of as to why or how their money was being spent. But today, because of the Affordable Government Act, federal agencies have to spend at least 80 percent of every dollar that you pay in taxes on mission critical services for you -- not on overhead, not on profits, but on you.

"Now, many federal agencies are already exceeding this target, and they're bringing down costs and providing better value to taxpayers. But those that aren't now actually have to reimburse you. If they're not spending your premium tax dollars on services that directly affect you -- at least 80 percent of it -- they've got to give you some money back.

"Last year, millions of Americans opened letters from their government -- but instead of the usual dread that comes from paying taxes -- they were pleasantly surprised with a check. Last year, tens of millions of rebates went out, in all 50 states. Millions more rebates are being sent out this summer, averaging around 100 bucks each. And for families that are working hard, every dollar counts. It makes a difference.

"That's one of the core principles of the Affordable Government Act -- holding the federal government and agencies accountable so that we all get a better deal."

The president didn't actually make that speech. But he could, and he should.

Instead, President Obama used his pulpit and the same language to boast about the 80-20 provision of the Affordable Care Act and how it was working as intended to provide rebates to Americans when health care providers spend less than 80 percent of customer premiums on health care.

But think of the power of paying each taxpayer back -- rebating the Treasury -- when the government isn't efficient enough and spends more than 20 percent maximum on administrative costs. If federal government agencies do that, they must issue a check to taxpayers.

That would be the essence of the Affordable Government Act. And if enacted, it would do more to change the way government works than any measure in recent memory just by mandating a reduction in the current level of inefficiency and overhead.

The federal government hires one administrative staffer to support every 6.25 employees. More than 32 percent of every payroll dollar in the federal government's Cabinet level agencies goes to pay for administrative personnel.

At a time when the private sector has had to cut into bone to live within its means and the government has forced provisions like the 80-20 rule in the Affordable Care Act on health insurance providers, the federal government continues to do just the opposite.

Time for a rebate.

So, for example, the FAA -- which drew complaints when it was forced to pull back air traffic controllers and service from smaller airports because of the sequester -- has one administrative staffer for every 3.5 FAA employees and one for every 1.5 air traffic controllers. That's a full 28 percent of its staff in administrative occupations and completely upside-down for meeting mission-critical needs.

In crafting the Affordable Care Act, the 80-20 provision was designed to ensure funds were efficiently directed to the mission, providing direct health care services, in much the same way that charities have an effectiveness measure. Charitable organizations, for example, use this same benchmark as an effectiveness, integrity, and efficiency measure -- a nonprofit is expected to disperse 80 percent of charitable contributions directly to the intended beneficiary, while retaining 20 percent to cover operating costs or overhead.

In government, success is measured by the size of your budget and workforce. The government scales with people instead of technology -- and that is the underlying reason government is so expensive and carries an overhead that is more akin to mid-20th Century policies than 21st Century realities.

Federal Cabinet level agencies have a direct-to-indirect payroll ratio of 67.84 percent to 32.16 percent -- that is, 68 percent of payroll supports the people working on the agency's core mission, such as delivering health care for veterans, border defense, and social security claims processing. A whopping 32 percent of payroll is engaged in mission support or administrative work. And that doesn't even begin to address the total cost of administrative services.

To translate that into taxpayer dollars, let's take current Cabinet-level agency spend. An eye-popping $45 billion a year is spent on payroll for administrative personnel -- not including what those agencies are spending on contractors or intergovernmental shared-service agreements.

In the private sector, general and administrative (G&A) expense for organizations with $1 billion-plus in revenue averages 7.6 percent. In smaller organizations, it can average as much as 14.2 percent. In Walmart, the only company larger than the entire civilian federal government, G&A has held steady at 19 percent.

The government's G&A at 32 percent screams inefficiency and waste.
Curing administrative overload is not a particularly difficult problem. The government should be mandated to scale with technology -- instead of people -- and redistribute scarce tax dollars direct to agency missions or to the Treasury.

With an Affordable Government Act in place, President Obama could continue his speech:

"Now, even if you don't get a rebate, even if you didn't get a rebate there's a good chance that these reforms are helping you as well, because one easy way to meet the goal of spending 80 percent of every tax dollar on mission critical services is to have you pay less in taxes. Now, we've got more work to do to get the cost of government under control. And some of the gains that we've made, some of the progress we've made in shrinking overhead at federal agencies isn't always passed on to workers.

"But generally speaking, what we've seen is that the costs of running the government have slowed drastically in a lot of areas since we've passed the Affordable Government Act. We've got a lot more work to do, but administrative costs in government are not skyrocketing the way they were. And because of this new rule, because of the fact that it improves the value of the taxes that you pay, last year alone, Americans saved $3.4 billion in taxes. That's $3.4 billion on top of these rebates.

"So that's just one way this law is helping middle-class families. But it represents everything the Affordable Government Act means: better benefit to you, stronger protections, more bang for your buck -- the basic notion that you ought to get what you pay for.

"So the upshot is the American people deserve a fair shot. They expect their government to play by a fair set of rules. And that's why this fight is so important. Our broken government and its associated costs threatened the hopes and the dreams of families and businesses across the country who feared that the exploding costs of running the federal government could cost them everything they'd spent a lifetime building. And step by step, we're fixing that system."

If only ...

The Affordable Government Act. It's time for a rebate.

Linda E. Brooks Rix is co-CEO of Avue Technologies. Founded in 1983, Avue Technologies has pioneered smart technology for better management. The company provides the public sector with integrated technology and service solutions that dramatically increase enterprise-wide visibility and management effectiveness, workforce productivity, and manager and worker satisfaction. In the fight against business-as-usual in Washington, Avue helps power "business-as-unusual." Avue is a privately held company headquartered in Tacoma, Wash., and with offices in Washington, D.C.