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Abstract:
There are several reasons for the obscurity of the organizational process model. Perhaps the most important is the widespread acceptance of the standard economic model, which holds that spending outcomes are determined by the supply of and the demand for publicly provided goods and services and that competition somehow constrains elected officials to serve the tastes and preferences of the median voter. The best way to define the organizational process model is to follow its interesting etiology across time and academic boundaries, focusing on the work of Herbert Simon, Aaron Wildavsky. John Padgett, John Patrick Crecine, and P.D. Larkey. We divide the development of the organizational process model into four distinct phases: pronouncement, formalization, differentiation, and diffusion, look in turn at each of these phases, and conclude that the time has come for scholars to revisit the model, exploring its potential for contributing not only to formal budget theory but also to other fields of public policy and management as well.

Budget, satisficing, organizational process, mechanisms

Abstract:
As John D. Donahue explains: sometimes corporate social responsibility is simple hokum. More often it is sincere but incoherent, wishful thinking. Introducing social objectives that might, in the misty long run, align with shareholder interests threatens to muddy private-sector accountability. Corporate social responsibility can thus become both irresponsible and anti-social. With this in mind, we draw on the notion of externalities from economics and cost-benefit analysis from capital budgeting literature to suggest some rules that could help managers make wiser choices. The first rule: Pay attention to competencies when developing program alternatives and attend carefully to their execution, remembering always that management attention is a scarce resource. The second rule: Develop a framework to assess all corporate initiatives, not just social programs or short-term, profit-driven programs in isolation.

: corporate social responsibility, cost-benefit analysis, externalities, business strategy, core competencies, corporate philanthropy

Abstract:
An age-old issue is how inquiry and action can reciprocally contribute to transforming existing into preferred conditions. Leading scholars of a recent generation repeatedly addressed this general issue in human affairs. Herbert Simon's major proposal was to develop design-oriented sciences or, equivalently, sciences of the artificial. In public management, the take-up of this proposal has been patchy. In this essay, we identify a recent attempt to construct foundations of a design-oriented science for public management, focusing on work by Eugene Bardach. In order to perceive its significance, we place Bardach's design-oriented approach within the compass of Simon's "sciences of the artificial" as well as other recent attempts to achieve intellectual control over practical thinking and action about public management. Finally, we catalogue unfinished business that must be completed for Bardach's design-oriented approach to achieve acceptance and reach.

Herbert Simon, Eugene Bardach, relational mechanisms, mechanism design, processes. narrative positivism, practice, evidence-based management

Abstract:
The efficacy of alternative institutional arrangements depends upon the information costs that obtain under each. The information revolution has dramatically transformed information costs and, therefore, the optimal placement of the boundary between government, non-governmental organizations, and the market. Insofar as government is concerned, many of the proposed boundary changes can be grouped under the rubric of the New Public Management. Inevitably, information technology will refashion the institutions of government and public administration and, perhaps, even the nature of the state itself.

information costs, transaction costs, information technology, new public management, excludability, exhaustablity

Abstract:
As an academic field, public management has three faces: the technocratic, the social constructivist; and the clinical or craft perspective. My purpose is to explain each of these discourses, how each would go about addressing the basic doctrinal issues of public management, and where each offers something uniquely useful to the practice of public management. I also offer an apologia pro curriculum vita sum, emphasizing my meta-theoretical beliefs about the pursuit our joint enterprise of researching, synthesizing, and teaching.

Abstract:
This article uses simple and self-contained optimal control theory and martingale methods to find optimal government expenditure consistent with present value balance and, implicitly sustainable saving, borrowing, and tax levels as well, since long-term sustainable paths are, in principle, not different from optimal paths. Our approach identifies time-consistent budget rules, where most other efforts to do so have not, because it makes the reasonable assumption that the stochastic nature of revenues is more or less given, and ignores the relationship between the level and kind of taxes employed and revenue growth. Further allowing governments to invest in risky as well as risk-free financial assets, we derive explicit formulas for optimal expenditure and the parameters of their future stochastic evolution, expected surpluses and deficits and their dependence on model parameters, and the probability of sustained long-term spending growth and its dependence on the initial size of the reserve account.

government expenditure, government investment, rainy day funds, sustainable debt levels, revenue volatility

Abstract:
Most organizational process theories of budgeting treat revenue change as an exogenous variable. Consequently, while these models often very accurately explain spending changes at the program or agency level in terms of last year's spending for a given purpose and global revenue or spending growth in the period in which the budget is executed, they lack predictive power. To close these models, a theory of revenue and aggregate spending growth, which is endogenous to organizational process theories, is needed. In this article, we offer just such a theory for jurisdictions that face a hard budget constraint. We construct our model using optimal control theory and martingale methods, take a jurisdiction's existing revenue structure and its fiscal assets (savings) as given, and treat revenue and savings growth as continuous-time, continuous-state stochastic processes. This means that next year's revenues and, thereby, funds available for spending can be predicted using current (in the period of budget formulation or enactment) state variables only.

Process, Mechanism, State and local government expenditure, State government savings, Martingale methods, Optimal stopping models

Abstract:
In recent years, scholars have developed new analytical tools and financial instruments that could help governments cope more effectively with financial volatility. In this essay we show how states can achieve fiscal sustainability using financial instruments based upon mean-variance analysis: present-value balance, revenue diversification, macroeconomic hedging, self-insurance, etc. In this essay, we explain these tools and show how they fit together.

state spending, state taxes, macroeconomic hedging, target budgeting, structural and cyclical deficits, rainy day funds, Oregon

Abstract:
In recent years, scholars have developed new analytical tools and financial instruments that could help governments cope more effectively with financial volatility. In this essay we show how states can achieve fiscal sustainability using financial instruments based upon mean-variance analysis: present-value balance, revenue diversification, macroeconomic hedging, self-insurance, etc. In this essay, we explain these tools and show how they fit together.

state spending, state taxes, macroeconomic hedging, target budgeting, structural and cyclical deficits, rainy day funds, Oregon

Abstract:
This literature survey distinguishes between public administration and economics, identifies some issues common to both fields and some reasons why public administration is not economics. Finally, it briefly surveys the contributions and limits of three bodies of economic literature that have in recent years profoundly influenced the study of public administration in America: public choice, modern corporate finance - and the contemporary macroeconomics it has inspired, and the new economics of organization.

rational choice, public choice, organization, networks, clinical methods

Abstract:
Ineffective controllership is, perhaps, the most common managerial failure found in the public sector. This failure affects outcomes and achievements in every area of public policy - often profoundly. Controllers design and operate management-control systems. The effectiveness of alternative control-system designs depends upon technology - the cost and production behavior of the good or service in question. But public-sector control strategies are often poorly aligned with circumstances. As a consequence, public programs are too often simultaneously over controlled and out of control.

budgeting, organizational process, mechanism design, alignment, incentives, agents, sequential decisions

Abstract:
Oregon has one of the biggest cyclical budget problems in the country, if not the biggest. Without a rainy day fund, Oregon's state government would have a budget shortfall ten years out of twenty; two of which would be equal to or greater than twenty percent of annual spending. Oregon could substantially reduce the frequency of unredressed budget shortfalls and their magnitude with a sufficiently large cash balance. The problem is that Oregon cannot afford a rainy day fund big enough to make a significant difference. It seems, in fact, that any state that really needs a rainy day fund probably cannot afford one and that any state that can afford a rainy day fund probably does not need one. Analyses that focus on averages or on individual states with stable economies and income inelastic tax bases conceal this reality. States with very volatile revenue flows should consider counter cyclical borrowing as an alternative to building large cash balances.

Rainy Day Funds, Oregon, cash balances, inventory model

Abstract:
In this article, I explain how the fiscal-governance mechanisms - budgets, administrative controls, and financial management practices proposed by the National performance Review differ from those currently used in the federal government and how the federal government's legislative budget process would need to be modified to accommodate the changes proposed by the National Performance Review.

Administrative controls, budget process, capital budgeting, responsibility budgets, NPM

Abstract:
This article raises several issues regarding the valuation and disclosure of pension commitments, quasi-commitments, and guarantees. We all know that the annual process of budgetary decision-making is prone to myopia and to tunnel vision. The long-term consequences of fiscal commitments are frequently over-looked, as are off-budget items. At the state and local level, tunnel vision often manifests itself in an exclusive concern with the general fund. Unfortunately, pension commitments suffer from both of these pathologies. They involve substantial future costs, which are largely off budget. In this case, we look closely at the State of Oregon's Public Employee Retirement System (PERS) to show how the disclosure standards adopted by the Government Accounting Standards Board (GASB) can help to correct the fiscal vision of state and local governments. The case is comprised of a narrative account of the development of PERS over the last twenty-five years and a detailed assessment of one apparently casual commitment on the part of the Government of Oregon: a decision to guarantee an annual rate of return of 8 percent on the individual contribution component of PERS. We will show that the present-value of this guarantee was in fact very large and probably should have been disclosed. Unfortunately, it is not clear that current or proposed GASB standards would have required its disclosure. Consequently, we conclude that the issues raised by this guarantee ought to be addressed in GASB's comprehensive review of the effectiveness of its pension accounting and reporting standards scheduled to be carried out in 2008.

options, present-value budgeting, public employee retirement systems, Oregon, accounting standards, FASB, GASB, defined contribution plans

Abstract:
Accurately predicting revenue growth is nearly impossible. Predicting the peaks and valleys of the business cycle is even more hopeless. This matters because tax revenues are largely driven by economic growth. Volatile, unpredictable revenue growth causes all sorts of unpleasant responses on the part of governments, most commonly manic-depressive patterns of spending and taxing. Fortunately, modern financial economics gives us a set of tools that can be used to manage volatility. These tools include tax portfolio analyses, hedging and buffering strategies, and, in the context of present-value balance, consumption smoothing based on sustainable spending rules. These tools are based on mean-variance analysis, analysis of covariance, the use of stochastic processes to model movements in financial variables, and optimal control theory to formulate solutions to those processes. This article shows how these tools can be used to inform fiscal decision-making. Our focus is on state governments, but our analysis applies to all jurisdictions that face a hard budget constraint and must therefore balance spending increases against revenue growth.

fiscal sustainability, revenue forecasting, volatility, mean-variance analysis, tax-portfolios, covariance, martingales

Abstract:
Based on the indirect arbitrage opportunities afforded citizens by tax-exempt debt issue, this article presents a model establishing equilibrium in the market for tax-exempt debt. The model yields two predictions. Increases in Federal income tax rates increase the spread between taxable and tax-exempt interest rates, but have no effect on the equilibrium quantity demanded and supplied of tax-exempt debt. The latter prediction contrasts with a conventional point of view that increases in tax rates increase demand and supply of tax-exempt debt. The model’s predictions are supported by empirical evidence.

capital structure, tax policy, tax-exempt debt, indirect arbitrage, state and local government

Abstract:
What we really need is a careful program of experimentation to determine how acquisition life-cycle costs vary with alternative acquisition-process designs and whether short lines of communication, clear responsibility, accelerated schedules, and a modicum of congressional neglect will produce the benefits touted by the experts. Not only is this information needed by program managers, it is also needed to help persuade Congress to back away from its direct supervision of the systems acquisition process, something that neither theory nor hearsay can accomplish.

acquisition, contracting, systems development, defense, deregulation

Abstract:
Governmental reform depends upon aligning strategy with structure, effective decentralization, and establishing an account structure that is firmly grounded in the principles of responsibility budgeting and accounting.

Administrative controls, budget process, defense, contracts, responsibility budgets

Abstract:
Budget policymakers should focus on expected revenue growth (average growth over history) and on the risk or volatility around that average. It makes sense to think about this risk as having two components purely random risk unrelated to the economy and risk associated with an economy that is hard to predict. Budget policymakers should reduce random (unsystematic) risk by building a diversified revenue portfolio within the constraints of practical tax policy objectives. They should use hedging, reserve funds, and other strategies to offset risk that cannot be diversified away the risk associated with the underlying economy and unsystematic risk that is not practical to diversify away. And, they should adopt spending rules that will balance the budget over the long run while allowing it to be unbalanced in any given year. They can do this by balancing the present value of revenues against the present value of spending over the long run or, second best, by balancing over the business cycle.

fiscal sustainability, revenue forecasting, volatility, mean-variance analysis, tax-portfolios, covariance, martingales

Abstract:
This article shows how to design and organize the delivery of public services to promote the kinds of co-productive behavior needed to make public efforts effective. Second, it specifies human-resource management practices that foster an inclination on the part of public employees to encourage citizens to contribute their attention and efforts to the production and delivery of public services. Last, it outlines the kind of institutional arrangements that are needed to capitalize on the voluntary, cooperative behavior of citizens.

coproduction, coprovision, HRM, Information costs, transaction costs, excludability, exhaustablity

Abstract:
Douglas and Wildavsky argue that environmental activism is rooted in an egalitarian cultural bias. Others, like Paehlke, counter that environmental commitments and concerns are autonomous from redistributive concerns. Students of the "New Politics" agree that environmentalism is autonomous from conventional left-right distributive concerns but also argue that environmental attitudes and beliefs are embedded in 'postmaterial' values, such as citizen participation. Still other scholars emphasize a cultural consensus around environmental values and beliefs. What distinguishes environmental activists, in this view, is less what they believe than their willingness to make sacrifices for those values and beliefs. Drawing upon several surveys of environmental groups and the mass public in the Pacific Northwest, we test these four hypotheses and find that the Douglas-Wildavsky "cultural theory," although not without its limitations, appears to provide the more satisfactory account of environmental preferences. We think that this goes a long way toward explaining the persistent opposition of environmental activists to the use of market-oriented incentive mechanisms to fix environmental problems.

environmental activism, cultural theory, market-oriented incentive mechanisms

Abstract:
During recessions, the newspapers are filled with stories of the pain caused by state and local budget cuts: slashed mental health funding, reductions in school meals, further delays in long-overdue infrastructure maintenance and replacement, and new taxes. During booms, they are filled stories of state and local spending initiatives, tax cuts, and rebates. This manic-depressive pattern of binge and purge is usually attributed to revenue volatility. But putting first things first, the problem is spending volatility. Governments ought to be capable of growing spending at a sustainable rate, using savings and/or borrowing to smooth out spending over time. The solution to the real problem lies in defining budgetary balance in terms of sustainable growth.

This article shows how to identify an optimal spending level for a particular jurisdiction, one in which the present value of its exhaustive expenditures is equal to its net-financial assets (or liabilities) plus the present value of future tax revenues minus transfers. At this level of expenditure, the sustainable rate of spending growth is approximately equal to the geometric mean rate of revenue growth (tax revenues minus transfers). At higher levels of current expenditure, the sustainable rate of spending growth is less and, at lower levels, slightly more than the geometric mean rate of revenue growth. If actual revenues in the budget period exceed the forecast, the difference should be saved or used to reduce outstanding debt and vice versa.

These are fairly simple rules (although their calculation is not). They are relevant to any jurisdiction that can neither force central banks to buy their bonds nor expect some other entity to rescue them from fiscal distress. Moreover, their application would reduce the tendency of public officials to let concerns about revenue volatility override equity, efficiency, and adequacy considerations in the design of tax codes and transfer mechanisms.

State government expenditure, State government investment, Reserve funds

Abstract:
This essay shows how to align governance mechanisms to achieve public purposes more effectively. First, it explains the alternative governance arrangements employed by public agencies, which boil down to four elementary mechanism designs. Two of the mechanisms (outlay budgets and fixed-price contracts) impose "before-the-fact" or ex ante control, while the other two (responsibility budgets and flexible-price contracts) rely on "after-the-fact" or ex post control. Then, it demonstrates that mismatching control mechanisms and task requirements can be very costly. Finally, it shows how decisions about alternative designs can reflect the objective of minimizing the sum of delivery and transaction costs.

Administrative controls, budget process, acquisition, contracts, responsibility budgets

Abstract:
Alternative models of regulatory decision making/legislative choice are presented and evaluated. A limited rationality model oriented to the common good is proposed as more complete and no less accurate than any of the more cynical alternatives. The implication of this model is that many inefficient regulatory policies are mistakes and that under specified conditions these mistakes can be avoided or corrected.

regulation, legislative process, bounded rationality, interest group theory of politics

Abstract:
This article provides a brief history of tax and expenditure limitation initiatives in Oregon, along with a narrative of contemporary events. Largely as a consequence of the initiative's increased role in the formulation of Oregon's fiscal policy, state and local taxes paid by Oregon households declined from 7.4 percent of income in 1989 to 6.8 percent in 2003; state revenue, which is heavily dependent upon personal income taxes, has become increasingly income elastic; and state and local governments now rely on user fees to an almost unprecedented degree.

Abstract:
The research-practice gap has emerged as an acute problem in management scholars' internal professional debates. Evidence-based management (EBM) has been proposed as a remedy, and it is gaining adherents. This article offers a critical examination of the EBM proposal and its justification. The proposal is found to be poorly conceived and justified. Therefore, search for a different response to the same concerns are in order. The direction of search is to understand how existing scholarly practices offer advice to actors in managerial roles. While advice-giving scholarly practices are diverse and disconnected, a commonality is that they define design issues and offer value- and knowledge-based argumentation schemes for resolving them. An alternative to EBM can be envisioned: to strengthen the management field's network of design-oriented approaches to advice-giving. By employing the unorthodox style of a dialogue, this article shows how common ground about EBM and its alternatives can be established among management scholars who identify with conflicting intellectual traditions.

Abstract:
This analysis reflects the presumption that the principal-agent relationship is central to an understanding of government spending. Our model's structure is adapted from Jack Hirshleifer's (1970) use of the state-preference theory of decision-making under uncertainty to delimit the information asymmetry problem that lies at the heart of the principal-agent relationship. Our principal conclusions are quite straightforward and can be summarized as follows. If elected officials reward budget makers solely on the basis of budget accuracy, budget forecasts will not be biased, i.e., they will always equal expected revenue. Since in our model budget makers are assumed to be risk averse with respect to rewards, we conclude that risk aversion is not sufficient to explain biased forecasts. Alternatively, if rewards are mixed - based partly on budget accuracy and partly on other criteria - budgets will equal, exceed, or fall below expected revenue, according to the characteristics of the probability distribution of tax revenues. Because these distributions are likely skewed to produce budgets that fall below expected revenue, we conclude that mixed rewards are both necessary and sufficient to explain the budget makers' observed bias. Finally, insofar as reward structures are determined by the budget makers' political masters, we would not discount the possibility that this bias ultimately reflects the interests and preferences of their masters, although the more conventional view is that the preferences of elected officials run in precisely the opposite direction.

budgeting, organizational process, mechanism design, alignment, incentives, agency theory, state-preference theory

Abstract:
This article explains why previous empirical tests of the size principle have failed to produce conclusive results. Particular stress is given to formalizing certain aspects of the legislative process that cause minimum-winning coalitions to comprehend very large majorities; the implications of this process for legislative outcomes are explored by means of a simple Monte-Carlo simulation. It also proposes a new test of the size principle and reports some initial empirical findings based upon this test.

Congress, legislative process, choice mechanisms, Monte-Carlo simulation

Abstract:
In this essay, we try to get beyond the mantra of waste, fraud, and abuse to deal seriously and constructively with the question of government waste. We offer a logical taxonomy of nine types of waste, which we use to examine the question from several directions. One of the main conclusions we draw is that much of the waste created by government is not included in the budget. Indeed, efforts to reduce budgetary waste all too often cause substantial spillovers elsewhere.

Waste, fraud, abuse, spillovers

Abstract:
The quantitative analysis presented in this article suggests that reductions in American contributions to the defense of its allies will if necessary cause them to increase their efforts to defend themselves. This analysis should, therefore, help to allay fears that reductions in the U.S. contribution to the defense of its allies would reduce the capacity of the Western Alliance to meet direct military threats to its Western Europe and Japan. Reductions in U.S. contribution to the defense of Western Europe and Japan would, therefore, permit reductions in U.S. defense spending and/or its reallocation to increase America's military capability to respond to new threats elsewhere. It must be understood, however, that shifting the burden of defense to America's allies involves more than mere cost savings. Significant burden shifting, including the redeployment of America's forces elsewhere, will necessarily involve substantial changes in the alliance authority structure. The United States cannot make such a shift and expect to continue to dominate its relationships with its Western European and Japanese allies as it has in the past.

production functions, club goods, alliances, free riders

Abstract:
Public choice theorists generally assume that bureaucrats seek to maximize their own utility functions, subject to externally imposed constraints. Changes in constraint values may, therefore, be expected to result in predictable changes in the behavior of most organizations, not just businesses. The usefulness of this perspective is, however, frequently denied. Because decision making in public and nonprofit bureaucracies, schools, etc. often reflects (1) multiple, ill-defined, inconsistent preferences; (2) technological ignorance (ignorance of how their production functions work); and (3) fluid participation in decision-making, it follows that these organizations lack the capability to maximize (or even satisfice). The implication is that if these collectivities can't optimize, they won't. Nevertheless, the findings reported here tend to confirm the utility of assuming that not-for-profit organizations behave as if they maximized something - revenue, prestige, whatever - despite the processes of collective decision making in these organizations. Indeed, empirically speaking, the method of partial equilibrium seems to make as much sense of the behavior of the organizations examined here as it does the behavior of for-profit, hierarchically organized businesses. .

collective decision making, inconsistent preferences, technological uncertainty, fluid participation, bureaucracy

Abstract:
A regulatory budget would require the federal government to treat compliance costs incurred by the private sector as if they were incurred by the government, without requiring the government to actually assume those costs. For example, EPA could be given a regulatory compliance budget of say $80 billion in FY98. A regulatory budget would provoke an annual debate in Congress on the size of EPA's or OSHA's budget. Such a debate would force the proponents to weigh the benefits and costs of various regulatory programs, something now lacking in the political process.

Interest in a regulatory budget reflects the slight gains in the quality of regulatory decision-making resulting from mandatory regulatory review. It is now apparent that better information about the costs, benefits, and distributional consequences of regulation will not automatically improve regulatory decision-making - although it would not hurt.

Abstract:
This inquiry concludes that America's bloated military base structure results less from demands for political 'pork' than from a decision-making process that inevitably results in a stalemate. This finding is encouraging. With a little imagination, we ought to be able to design a process that would permit facilities with highly valued alternative uses to be identified and promptly allocated to those uses and, at the same time, to insure the propriety or appropriateness of such transfers.

legislative choice, military bases, pork-barrel politics, administrative processes

Abstract:
No abstract available

Abstract:
Budgetary decision-making is prone to myopia and to tunnel vision. Pension commitments suffer from both of these pathologies. In this case, we look closely at the State of Oregon's Public Employee Retirement System to show how the disclosure standards adopted by the Government Accounting Standards Board (GASB) help correct the fiscal vision of state and local governments and further conclude that postemployment commitments ought to be comprehensively examined in GASB's review of its accounting and reporting standards scheduled for 2008, ideally from the standpoint of present-value budgeting.

Abstract:
No abstract available.

Abstract:
This article surveys the empirical literature on voter turnout in an attempt to determine whether the claim that individual behavior in public-regarding decisions conforms to the mini-max-regret rule (precautionary principle) is valid, and also to determine whether or not what we know about voting/not voting behavior provides any useful information for the design of regulatory policies and practices. The article concludes that voters do not practice mini-max-regret. That they maximize risk-adjusted expected value seems nearly as unlikely, unless it is assumed that votes are intended to influence the behavior of whoever is elected. On balance, Kahneman and Tversky's prospect theory appears to be the best guide to understanding voting behavior. It is also directly relevant to the design of regulatory arrangements.

voluntary participation, voting, not-voting, minimax regret, uncertainty, risk aversion, prospect theory

Abstract:
The authors write that Oregon couldn't afford to establish a rainy day fund; borrowing in times of state fiscal crisis is cheaper. The only workable alternative to countercyclical saving or borrowing is a substantial overhaul of Oregon's revenue code, and that's a high price to pay for fiscal stability, the authors say.

Abstract:
This literature survey distinguishes between public administration and economics, identifies some issues common to both fields and some reasons why public administration is not economics. Finally, it briefly surveys the contributions and limits of three bodies of economic literature that have in recent years profoundly influenced the study of public administration in America: public choice, modern corporate finance - and the contemporary macroeconomics it has inspired, and the new economics of organization.

rational choice, public choice, organization, networks, clinical methods

Abstract:
This essay provides a brief history of tax and expenditure limitation initiatives in Oregon, along with a narrative of contemporary events. Largely as a consequence of the initiative's increased role in the formulation of Oregon's fiscal policy, State and local taxes paid by Oregon households declined from 7.4 percent of income in 1989 to 6.8 percent in 2003; state revenue, which is heavily dependent upon personal income taxes, has become increasingly income elastic; and local governments now rely on user fees to an almost unprecedented degree.

referendum, initiative, tax limitations, expenditure limitations, cyclicality