Markkula Center of Applied Ethics

Budgeting Is About Values

By Miriam Schulman

John Ellwood, professor of public policy at the Goldman School of Public Policy at UC Berkeley, talks with Judy Nadler, senior fellow in government ethics at the Markkula Center for Applied Ethics. Ellwood argues that city, state, and federal budgeting is not about accounting but about politics and about finding common ground between competing values.


John Ellwood, professor of public policy at the Goldman School of Public Policy, UC-Berkeley, had a message for the August meeting of the Center's Public Sector Roundtable: Budgeting is about values.

While many think budgeting is about accounting, the hardest part of the process, according to Ellwood, is to build consensus on the basis for making budget decisions. That is, he argued, a political process, where necessarily people will have to make compromises about things they value.

The process is even harder in difficult economic times. "We're down," Ellwood said, "and it's not clear we'll come back again soon in terms of GDP relative to our potential." Lots of states are in trouble, particularly, according to Ellwood, the "sand states" like Nevada, where a real estate decline has meant a decline in real estate taxes. The only way for governments that rely on property taxes to get more money is if property turns over. "When there's no turnover, as we have right now, you're in tough shape," he said.

The other major culprit in the crisis "at the national, state, and local level and in private life is health care," Ellwood argued. Eighteen percent of GDP goes to health care. Last year, for first time, states spent more money on health care than they did on education. "We won't solve the spending side without attending to health care," Ellwood cautioned.

Making the problem worse, he said, was that the Stimulus Bill allowed states and cities to retain employees they otherwise would have needed to lay off. "The rise in federal money given to states was steep, but it will not continue," he predicted. That will leave governments with employees they can not afford to pay and provide benefits.

"My challenge to you," Ellwood told the Roundtable, "is the hardest thing for a leader to do: build a consensus. Many of our communities are not very homogeneous in terms of political ideology." Getting the different sides to compromise without feeling they are compromising essential values is the challenge.

Miriam Schulman is the communications director of the Markkula Center for Applied Ethics.

August 2011


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