The XBRL taxonomy was mandated and funded in 2018 by Florida House Bill 1073, a bill written in consultation with Reason Foundation policy analysts. Florida’s first-in-the-nation XBRL government reporting taxonomy is a notable point of progress, but advocates of this technology are still overcoming objections from within the government finance sector. 

After then-Gov. Rick Scott signed the Florida law, the influential Government Finance Officers Association (GFOA) put out a statement saying it “opposes efforts to mandate the use of specific technologies by state and local governments for financial reporting and disclosure.”

GFOA also noted, “While numerous small-scale efforts have been made to develop a taxonomy that incorporates necessary elements of GASB {Government Accounting Standards Board] GAAP [generally accepted accounting principles] financial statements, there currently exists no viable taxonomy.” 

But, today, in 2022, two viable taxonomies have recently been published: one by the state of Florida and the other by the University of Michigan in conjunction with XBRL U.S., a group I’m affiliated with.

The latter taxonomy includes support for seven key financial statements and four notes that appear in annual comprehensive financial reports issued by governments nationwide and has been indexed to the Government Accounting Standards Board (GASB) pronouncements.  These are standards used by local governments in most states with only minor customization.  

Undoubtedly, these taxonomies can be improved, and a key source of ideas for improvement is GFOA and the government finance officers it represents. It is for this reason that I hope recent developments will encourage GFOA to review its current policy. 

GFOA was not always opposed to the application of XBRL to government finance. In its 2009 statement on “Best Practices for Web Site Presentation of Official Financial Documents,” GFOA stated, “Governments should monitor developments in standardized electronic financial reporting (e.g., extensible business reporting language [XBRL]) and apply that language to their electronic document process when appropriate.”

This contrasts with the organization’s current opposition to mandating any specific technology. It is certainly true that many government mandates should be opposed and there are alternatives to XBRL. For example, OpenSpending, a standard published by the Open Knowledge Foundation in the United Kingdom, offers a very easy way to produce visualizations of government revenues and spending. It is not, however, an ideal fit for U.S. audited financial reports which include balance sheets and cash flow statements as well as the income statement data supported by OpenSpending. 

By contrast, XBRL was developed specifically to handle accounting disclosures that present a comprehensive overview of an entity’s financial condition. Further, the XBRL standard has evolved over its 24-year lifetime to handle a wide variety of reporting scenarios while also attracting a community of software developers and subject matter experts. It is the best match for U.S. government financial reporting. 

Twenty years after academics first proposed applying XBRL to U.S. public sector financial disclosure, we may finally begin to see implementation. In the absence of a robust taxonomy and user-friendly tools for creating XBRL government financial disclosures, any government finance department interested in XBRL was faced with high implementation costs and a steep learning curve. And the absence of early public sector adopters deterred private software providers and accounting experts from making investments that would reduce the costs and complexity of adoption. 

While the Florida release is a major step forward, there is still a long way to go. First, no technical documentation or implementation guides were released with the taxonomy. These documents are commonplace with new taxonomies and help to ease new users into the process. Hopefully, these products will be forthcoming. Otherwise, Florida’s local governments may hold off on implementing the taxonomy, opting instead to hand-enter their results in the Division of Accounting and Auditing’s reporting portal. 

Second, the Florida taxonomy is specific to state reporting requirements which have historically been limited to a more detailed income statement than that included in annual comprehensive financial reports. Balance sheet concepts have been included in the newly released taxonomy, but it is still not a complete implementation of the GASB reporting model. Hopefully, the Florida taxonomy will evolve to cover more GASB reporting concepts in future releases 

The Florida release is an important step forward for XBRL in state and local reporting, but further advances may be slow in coming until GFOA reconsiders its stance toward machine-readable government financial reporting. 

The post Florida advances toward XBRL adoption, but Government Finance Officers Association opposes appeared first on Reason Foundation.

The state budget also authorizes “a pilot program for associations representing local units of government and government finance officers to do both of the following:

(i) Review the feasibility of local units of government using XBRL software to file required financial reporting with the Department of Treasury.

(ii) Assist the department in developing the information technology strategy.

Finally, the legislation states that “the department shall determine the feasibility and cost of implementing the ability to accept XBRL (extensible business reporting language) files on the department’s website as a substitute for annual financial reports, form F-65, and form 5572.”

Form F-65 is a state-specific financial report and Form 5572 contains information on pensions and other post-employment liabilities. Because these two forms contain redundant data with the annual comprehensive financial report that local governments currently report, they are being included in the Treasury program.

Michigan is now the second state to adopt machine-readable local government financial reporting legislation after Florida did so in 2018. Shortly before the COVID-19 pandemic struck, the California legislature also passed an XBRL bill, but it was vetoed by Gov. Gavin Newsom on the grounds that it created unbudgeted expenditures.

Michigan’s new law comes just weeks after the University of Michigan released a taxonomy for machine-readable local government financial statements. While Florida has been focusing on a state-mandated financial reporting form, the University of Michigan project targeted the annual comprehensive financial report (ACFR), whose format is primarily determined by the Government Accounting Standards Board (GASB), a national accounting standards body. This means the Michigan taxonomy could be easily adapted to most other states.

By building upon a project that targets GASB disclosure, Michigan may also be well positioned to impact national machine-readable disclosures. On July 14, U.S. Representatives Carolyn Maloney (D-NY) and Patrick McHenry (R-NC) announced that financial transparency legislation had been attached to the must-pass National Defense Authorization Act (NDAA), the bill that sets the Pentagon’s budget.

One provision of the Maloney-McHenry legislation would require the Municipal Securities Rulemaking Board (MSRB) to adopt data standards for submitted information that:

(i) render data fully searchable and machine-readable;

(ii) enable high-quality data through schemas…;

…(iv) be nonproprietary or made available under an open license;

(v) incorporate standards developed and maintained by voluntary consensus standards bodies; and

(vi) use, be consistent with, and implement applicable accounting and reporting principles.

The XBRL standard and the XBRL taxonomy released by the University of Michigan conform to the definition in the Maloney-McHenry proposal. As the self-regulatory body overseeing the municipal bond market, MSRB collects and publishes financial statements produced by all state and local governments that issue debt securities nationally.

If MSRB adopts the University of Michigan taxonomy or a modified version of it, it will enable tens of thousands of governments across the country to file machine-readable XBRL financial statements.

Although we do not know whether machine-readability language attached to the NDAA will ultimately survive a House or Senate, it appears that MSRB is already preparing to implement this technological advance. The board’s agenda for its July 27-28 meeting included a discussion of “potential new opportunities to collaborate with market participants in EMMA Labs, the MSRB’s innovation sandbox, to advance transparency and the quality and comparability of data in the municipal securities market.”

The Michigan Department of Treasury should work to implement its XBRL budget for the benefit of Michiganders and potentially for taxpayers and municipal bondholders nationwide.

The post Michigan takes step toward local government transparency appeared first on Reason Foundation.

In Mohammad Abdolmohammadi, Jonathan Harris, and Kenneth Smith’s The Journal of Government Financial Management article, entitled “Government financial reporting on the Internet: The potential revolutionary effects of XBRL,” the authors observed:

The difficulty in obtaining financial, budgetary and economic data about municipal governments has created possible inefficiencies in the municipal bond market… Despite the enormous size of [municipal] debt, pertinent information on particular bond issues is difficult and costly to obtain.

That difficulty has remained for two decades. After an exhaustive data collection process, the Reason Foundation has determined that over 30,000 U.S. state and local governments filing audited financial statements reported a total of $4 trillion of revenue and $7 trillion of liabilities in the fiscal year 2020. If governments utilized XBRL, financial statistics like these could be instantly available to anyone performing a simple Google search.

While governments have made little progress toward XBRL adoption since the turn of the century, the technology has been fully rolled out at the country’s publicly-listed companies and among U.S. banks. It is also widely used abroad, both in the private and public sectors.

In the United States, the failure to adopt modern financial reporting might be attributed to inertia as well as the lack of unified oversight at the national level. Further, interest rates were very low for the last 14 years. With most state and local governments paying low financing costs relative to pre-2008 levels, the need to find efficiencies in municipal finance seemed less pressing.

But now that interest rates are rising sharply in 2022, the time for market efficiencies like those offered by XBRL financial reporting may be at hand. If so, the new effort from the University of Michigan will prove timely.

The CLOSUP/XBRL US taxonomy for state and local governments is built upon standards published by the Government Accounting Standards Board (GASB). These standards are used by all state governments as well as local governments in most states. The taxonomy covers seven face financial statements and four footnotes, including those for pension and other post-employment benefit liabilities.

Later in the summer, the research team, working in conjunction with Workiva Corporation and city financial staff at Flint, Michigan, will release an XBRL financial report for that city. This pilot is being supported by a grant from the Charles Stewart Mott Foundation.

CLOSUP’s executive director, Tom Ivacko stated:

“This project ultimately is about improving a community’s quality of life, because as local fiscal information becomes more available, a greater number of stakeholders will have eyes on the data and be able to act on potential problems long before they turn into crises.”

The state of Michigan will have the opportunity to make XBRL the permanent mode of operation moving forward. The state Senate’s draft budget for the 2022-23 fiscal year includes funding for the Michigan Department of Treasury to continue the project in conjunction with a public university. But it remains to be seen whether the Senate’s XBRL provision will make it into Michigan’s adopted budget for the fiscal year that starts October 1, 2022.

The release of Michigan’s project comes four years after Florida passed legislation mandating XBRL reporting, which is expected to be implemented next year. But the Florida bill only pertains to a state-specific annual financial report and is not directly applicable in other states.

Hopefully, progress on municipal financial transparency and reporting at the state level will overcome inertia at the national level. Although the Grant Reporting Efficiency and Agreements Transparency (GREAT) Act of 2019 (P.L. 116-103) required the adoption of machine-readable data standards for financial statements submitted by local government grantees to the federal government, executive branch officials have yet to implement this legislation.

Similarly, the Municipal Securities Rulemaking Board (MSRB), which oversees the municipal bond market, persists in requiring disclosures filed in PDF rather than XBRL format. This self-regulatory body may face pressure to begin an XBRL migration if states begin using XBRL and the Financial Data Transparency Act (S.4295) passes in the U.S. Senate. The House of Representatives passed a similar bill (HR 2989) last year. These federal bills would require MSRB to adopt standardized, machine-readable disclosure.

Should the Municipal Securities Rulemaking Board or the federal grants community decide to implement XBRL, the newly released University of Michigan taxonomy will give them a very strong starting point.

The post The University of Michigan moves to modernize government financial reporting appeared first on Reason Foundation.

The most widely known security identifiers are the ticker symbols used to denote publicly traded corporations. For example, the National Association of Securities Dealers (NASD) uses the symbol AAPL to identify shares of Apple, Inc., while the New York Stock Exchange (NYSE) uses the symbol XOM for Exxon Mobil Corporation.

These symbols can be used by anyone for any purpose without charge; NASD and NYSE do not claim copyrights over these descriptors. The fact that these symbols can be freely reused helps make it possible for dozens of companies to provide free websites containing information about stocks.

But the situation is quite different for bonds, including the municipal bonds issued by state and local governments mainly to finance infrastructure. In the United States, bonds are identified by CUSIP numbers, a nine-position alphanumeric identifier provided by CUSIP Global Services, which was created by the American Bankers Association (ABA), and, until recently, was operated by Standard & Poor’s (S&P), a major credit rating agency.

On March 1, 2022, S&P sold its CUSIP Global Services (CGS) unit to FactSet Research Systems, a financial data provider, for $1.925 billion in cash. FactSet now operates CGS on behalf of ABA, which is the titular owner and retains a portion of its revenue.

CGS makes money in two ways. First, it charges governments and corporations for new identifiers whenever they issue bonds. Second, it sells CUSIP licenses to market participants who need to use and distribute its identifiers. If CGS finds out that a company is using CUSIP numbers without permission, it demands that the firm cease and desist or purchase a license, which can cost tens of thousands or even hundreds of thousands of dollars annually.

CGS compels organizations that display CUSIP numbers on their websites to impose restrictive terms of use for site visitors. For example, the Municipal Securities Rulemaking Board provides a public information site for municipal bonds known as Electronic Municipal Market Access (EMMA). This website is widely used both by municipal market participants and other individuals tracking government finance. But it is hard to download and redistribute data from EMMA. This is partially because of CGS, which has required MSRB to include the following language in its Terms of Use. 

CUSIP Numbers and CUSIP standard securities descriptions are provided to the MSRB by the CUSIP Global Services. CUSIP Global Services and the ABA assert that the CUSIP Numbers and CUSIP standard securities descriptions are and shall remain valuable intellectual property of CUSIP Global Services and the ABA, and you acknowledge and agree that no proprietary rights are being transferred to you in such information…You agree that you will not use the CUSIP Numbers and Securities Descriptions contained on the Website for any other purpose. You may not download CUSIP Numbers and Securities Descriptions from the Website. Such information obtained from the Website shall not be re-disseminated other than as provided in these Terms and, to the extent such information is re-disseminated by you to other parties, you will take all necessary and reasonable precautions to ensure that recipients who obtain the information directly or indirectly from you do not use CUSIP Numbers or Securities Descriptions for any other purpose.

MSRB displays nine position CUSIP numbers as images, rendering them impossible to copy and paste into spreadsheets. Compiling lists of all the outstanding bonds issued by any large government entity is tedious and time-consuming. As a result, it is difficult for taxpayers to see all the debt their governments have assumed, undermining government financial transparency.

The financial firms suing FactSet and ABA are not necessarily concerned about government transparency and are more focused on their ability to do business in the corporate bond market. But the arguments they make in opposition to CUSIP’s intellectual property claims and monopolistic practices resonate across the world of fixed income securities.

The first suit was filed on March 4, 2022, by Dinosaur Financial Group, an investment bank, and Swiss Life Investment Management, an asset management firm. The two companies allege that CUSIP Global Services obliged them to pay excessive licensing fees. With respect to CGS copyright claims, the plaintiffs state:

Copyright protection in the United States subsists over creative works—such as sonnets, movies, and paintings—that result from human creativity. It may also extend to other works, such as compilations, evincing creativity through subjective selection and arrangement of components. By contrast, the content of each individual CUSIP results not from artistic, literary, or any other esthetic or subjective consideration. Instead, a convention established more than 50 years ago strictly determines the format of the CUSIP and each digit within it…This structure is so rigid and predictable that an issuer knows the CUSIP number of its next issue before it receives the CUSIP and with no need to hear from CGS. Indeed, injecting novelty, creativity, or subjectivity into the CUSIP would destroy its utility because electronic trading systems could no longer identify financial instruments from the CUSIP. This consideration exerts decisive force over Defendants’ putative claim of copyright.

Four days later, Hildene Capital Management, another asset management firm, filed a similar lawsuit. Unlike the original plaintiffs, Hildene was not required to purchase a CUSIP license. Instead, it has to pay an additional $10,500 annual fee to its data provider, Bloomberg, to receive CUSIP numbers in its data feed. Hildene’s view of CGS’ copyright claim is as follows:

The ABA’s purported copyright over the CUSIP numbers themselves is thin as it covers purely factual information (i.e., strings of numbers and letters) that identify specific financial instruments, no different than a license plate serves to identify a vehicle someone else produced. The CUSIPs are trivial and nothing more than a random string of letters and numbers. Anyone can generate random numbers and letters in a string. Plaintiff’s use of CUSIPs is also reasonable and fair as its use is proportional to the need to accurately identify specific financial instruments in connection with its analysis, purchase, sale, and monitoring of such securities.

While there are valid arguments to be made on behalf of intellectual property, the concept is subject to abuse. For example, patent trolls use litigation or the threat of litigation to extract money from firms attempting to offer innovative solutions. If extended too far, intellectual property claims can stifle innovation and handicap the economy. In the case of CUSIP numbers, a strong intellectual property claim hinders our ability to monitor state and local debt. If the copyright restriction is lifted, those of us who monitor government finance will be able to create and distribute government debt data sets at little or no cost. It will now be up to the courts to decide whether CGS’s intellectual property claims are justified.

The post Class action lawsuits against CUSIP could improve government transparency appeared first on Reason Foundation.

The delay in utilizing the COVID-19 stimulus funds suggests that state and local governments were, by and large, not facing the severe financial emergencies that proponents of federal stimulus insisted they were when the federal legislation was being debated. Further, data show that the state and local aid components of ARPA had little effect on second-quarter 2021 gross domestic product growth and likely had a minimal impact on third-quarter economic activity.

Although the 142 reports our researchers reviewed represent a small fraction of governments that had to report in time for the Treasury Department’s next deadline, Aug. 31, the state and local governments in our sample were predominantly larger units that are receiving the bulk of the federal assistance. 

We obtained the reports by visiting city and county websites, using state and territorial reports gathered by the National Association of State Budget Officers (NASBO), and filing a limited number of public records act requests. The local government reports are available here. Since U.S. Treasury rules instruct state and local governments to post their expenditure reports on the web as well as filing them with Treasury, it appears that many governments have yet to do so. The Treasury Department could post all the reports and aggregated data it has available on its own website—and says it plans to do so on or about Oct. 15. 

When reporting their information, the Treasury Department instructed state and local governments to include a table of categorized expenses, providing a list of 74 possible designations for their spending. The most heavily used categories in the reports filed were:

Note these rankings exclude federal funds that states transferred to their local governmental units. Reporting by lower-level governments on these so-called “Non-Entitlement Units” are not due until Oct. 31.

The slow rate of spending seems inconsistent with the belief in some political and policy circles that state and local governments urgently needed large amounts of federal aid to address fiscal emergencies. For example, a White House fact sheet, published in January as the bill was being debated, stated:

President Joe Biden is calling on Congress to provide $350 billion in emergency funding for state, local, and territorial governments to ensure that they are in a position to keep front line public workers on the job and paid, while also effectively distributing the vaccine, scaling testing, reopening schools, and maintaining other vital services.

Similarly, in February, House Majority Leader Stenny Hoyer (D-MD) issued a news release that said, in part:

The American Rescue Plan will provide crucial funding for state and local governments after a year of record revenue shortfalls and devastating budget cuts. Leaders on both sides of the aisle continue to raise alarm over the urgent need for assistance for state and local governments…

But as we observed at the time, evidence from state and local government revenue reports as well as Census Bureau surveys indicated that calendar year 2020 revenues were little changed from the prior year. In retrospect, it is now clear that $350 billion in federal aid was far more than state and local governments needed to offset any COVID-19 revenue losses. 

Because we only have a sample of the spending data, and therefore do not yet know exactly how much was spent before June 30 (the end of the second quarter), we can only offer some very rough approximations of the second quarter GDP impact of American Rescue Plan Act state and local assistance. Assuming that state and local governments spent $10 billion of ARPA funds in Q2 2021 and that this spending had a GDP multiplier of 1.34 (as estimated by Moody’s Analytics), the economic impact of this program amounted to only about 0.2% of that quarter’s GDP.  Unless spending ramped up substantially in August and September, the third quarter economic impact of the American Rescue Plan Act is also likely to be minimal.

Even still, the Moody’s multiplier and thus the GDP impact estimates are likely overstated because the biggest application of the federal aid has been to backfill depleted state unemployment trust funds. While replenishing unemployment funds is a sensible policy decision that will stabilize unemployment tax rates in the future, it does not result in any immediate spending.

These findings also offer reasons for caution and arguments against making major federal fiscal policy in haste before gathering and analyzing relevant information. But now that it has obligated $350 billion in aid, does Congress have any options to improve the performance of this program?

Congress isn’t going to go back and pass a bill requiring state and local governments to return unspent portions of the American Rescue Plan Act. But one reason the money is being spent slowly is that it came with so many strings attached as Congress limited how state and local governments could allocate the aid in various ways.

Congress could allow a state or local government to return a percentage of the funds it has received in exchange for allowing it to use the remaining federal funds without any of the restrictions in the American Rescue Plan Act. Since this would be offered as an option, it need not affect any state or local government whose leaders believe they can and should spend the aid in accordance with the existing restrictions. But, cities or states that think they could more effectively and efficiently spend federal aid could buy their way out of the ARPA-imposed limitations.

It is increasingly clear that state and local governments didn’t need the federal aid they’ve received. Congress should look for opportunities to save taxpayers money and ensure the federal aid is spent in the most useful ways possible.

The post Disclosures reveal state and local governments haven’t spent federal rescue funds appeared first on Reason Foundation.

Federal and state transparency laws, for example, serve an essential role in the ability of journalists and researchers to inspect the workings of government and inform the public. These laws also allow access to data and records that help voters decide whether to keep, amend, or eliminate policies and bureaucratic structures based on their real-world performance.

Transparency in law enforcement agencies is particularly important because the agencies exercise so much discretionary power and require significant trust from the public. If police officers are engaging in misconduct or failing to protect civilians from violence, we must be able to discover it and determine how to improve policing. Moreover, in order to ensure that all members of the public receive equal protection, law enforcement agencies must be accountable for actions and policies that have disproportionately negative effects on certain subsets of the population.

For example, in California, county sheriffs issue concealed carry permits for handgun owners, and these agencies generally do not publish the rate at which they issue permits to their civilians. But by filing requests under the California Public Records Act, researchers can access this information to determine if there are some jurisdictions in which obtaining a permit is more difficult than in others, as well as investigate the possibility that these statistical disparities result in outcomes that sharply diverge across racial lines and population density.

At the federal level, the Freedom of Information Act (FOIA) enables journalists, researchers and taxpayers to examine whether agencies like the Federal Bureau of Investigation, Drug Enforcement Administration, and the U.S. Immigration and Customs Enforcement’s engage in misconduct or ineffective activities.

For example, much of the federal enforcement of anti-sex-trafficking laws has been directed against Asian women engaged in consensual sex work. By tracking federal enforcement activities and subsequent charges, Reason’s Elizabeth Nolan Brown uncovered a widespread practice of “human trafficking” raids on Asian massage parlors that rarely result in any human trafficking charges or arrests of pimps or johns, but almost always result in arrests of Asian women for prostitution.

Sometimes, this kind of original research is the best way to discover malfeasance in law enforcement activities. But other times, FOIA requests provide the only opportunity for members of the public to learn of agencies targeting particular populations. The American Civil Liberties Union discovered that the FBI was engaged in widespread racial profiling.

The FBI has been targeting American communities for investigation based on race, ethnicity, national origin and religion according to documents released today by the American Civil Liberties Union and its affiliates that were obtained under the Freedom of Information Act.

The documents show that FBI analysts across the country are associating criminal behaviors with certain racial and ethnic groups and then using U.S. census data and other demographic information to map where those communities are located to investigate them.

This reporting and data allows citizens to question the motives, public safety efficacy, and fairness of policies and enforcement.

The federal Freedom of Information Act, which first took effect in 1967, established the federal government’s obligation to respond to public requests for information. If a federal government agency has records that are considered “responsive” to the request, the agency must provide them to the requestor. However, there are several exceptions, including information relating to national security, personnel and medical files, and trade secrets. All states have some form of public information law, such as the California Privacy Rights Act (CPRA), often similar in structure and statutory exceptions to the federal FOIA.

In 1983, the United States Court of Appeals for the District of Columbia Circuit wrote in McGehee v. CIA:

“It has often been observed that the central purpose of the FOIA is to ‘open up the workings of government to public scrutiny.’ One of the premises of that objective is the belief that ‘an informed electorate is vital to the proper operation of a democracy.’ A more specific goal implicit in the foregoing principles is to give citizens access to the information on the basis of which government agencies make their decisions, thereby equipping the populace to evaluate and criticize those decisions.”

This decision seems to imply that truly responsible public agencies would make the information people need to understand agency decisions and activities easily available online and not require public information requests to share it.

Transparency laws occupy a space alongside the First Amendment as an essential element of an informed democracy. The right to “petition the government for a redress of grievances” depends on the ability to first determine what grievances we might have. To demand that California sheriffs issue concealed carry permits more permissively in urban areas or insist that the government stop targeting Asian sex workers, we must first discover that these phenomena are occurring.

Government agencies will always be imperfect, but democratic policymaking on behalf of an informed public is the best tool we have to improve it. Ongoing and informed public input is essential for building community trust in law enforcement agencies. If a police department reports a high number of officer-involved shootings, residents of that jurisdiction may use the available information to demand a change to the department’s use of force policy. If police records show that officers are routinely unable to respond to civilian crime reports due to being understaffed, residents may use that information to demand that the city shift its law enforcement priorities and how it uses existing resources or call for more resources. Similarly, if a police department reports a high number of arrests for a crime that residents consider minor or unobjectionable, they can demand that the department shift its resources away from that crime and toward the crimes they consider more serious. And if officers are accused of bias against an individual due to their race or another characteristic, residents can demand that officers receive training or suffer disciplinary consequences designed to reduce such behavior.

Additionally, transparency laws likely provide a deterrence effect for government agents engaging in misconduct. Rather than allowing officers to hide behind anonymity, transparency laws force law enforcement agencies to admit to the public that there may be “bad apples” in their bunch. An additional benefit of this accountability is that it also serves as a mechanism to reward and publicize good behavior. Publicity for good deeds and excellence in service can incentivize officers to act within policy and serve their communities well.

Transparency laws have immense benefits for society. Citizens need to trust we have access to information about government and law enforcement. Information and transparency can help rebuild appropriate levels of trust and accountability for law enforcement agencies.

The post Transparency Laws Improve Accountability, Trust in Law Enforcement appeared first on Reason Foundation.

The Open, Public, Electronic, and Necessary (OPEN) Government Data Act does several things, but its main purpose is to ensure that all federal government data that falls under the Freedom of Information Act (FOIA), including data from every agency, is published online in electronic, machine-readable form.  In practice, it means that federal agencies will be required to work together to create data standards and publish as much information as legally possible in a machine-readable format.

First, it creates a set of universal technical definitions that apply to all agencies.  Among the most important of these definitions is “machine-readable.”   The bill defines machine-readable as “data in a format that can be easily processed by a computer without human intervention.”  Effectively, this means that this data has to be published in an easily accessible machine-readable format, such as a spreadsheet or text file, and cannot only be reported in a PDF file.

Governments have been able to comply with open data requirements mostly by publishing in the antithesis of spreadsheets, mostly via the PDF.  But PDF files often don’t let you get the data out of them except through a manual process of reading and typing the data into a machine-readable form manually. So, in that case, while the information may be publicly available, it is hard to use and find.  With 90,000 state and local governments, the volume of data is so large that gathering it and making it analyzable by computers extracts a heavy toll and has not been done as much as may have been expected.  So now requiring that data be published in machine-readable format means analysis and tracking of government by journalists and watchdog groups can be done immediately as data is published, which will greatly improve efficiency and transparency.

Second, the law switches the default status of agency data from closed to open.  Previously, agencies considered all their data closed and then selectively decided which portions to publish, alongside FOIA requests.   Now, open data is supposed to be the default and agencies would have to give legitimate reasons as to why certain pieces of data should be withheld from the public.  In many cases, rather than having outside bodies request specific pieces of data via FOIA requests and then having a government official process and respond to that request, the data should be automatically be published, allowing both sides to essentially skip costly parts of the process.  This should help initiate a much needed cultural shift away from federal government agencies “owning” their data to the public owning the data.

Lastly, the law appropriates money for each agency to have a dedicated Chief Data Officer (CDO) whose sole responsibility is to ensure that agencies comply with this law through the proper management of its data assets.  A common concern among agencies being pushed towards open data is that it would detract resources from the agencies’ main missions.   Technically, requiring agencies to accomplish all the law demands without funding could be considered an unfunded mandate that places stress on the Chief Information Officer (CIO).  By supplying the data officer position these concerns are quelled and the CIOs are allowed to focus on more general technology concerns while the CDO focuses exclusively on data.

The OPEN Data act could be a pivotal moment in the progress of government technology operations and public access to data. It should also prompt state governments to try something similar.  Last year, Florida took a step in this direction when it passed a law that would make local government financial statements machine readable.

The federal OPEN Data Act takes important strides by laying out universal operating definitions, changes the agency culture of “owning” data to defaulting to open data, and provides the guidance and resources for a Chief Data Officer to help agencies comply with the law.  It’s important to note that this law does not authorize the collection of any new data beyond what the government already collects.  Thousands of state and local governments could see a massive gain in efficiency and intelligence by implementing better data practices, like those in the OPEN Data Act.

The post State and Local Governments Should Mimic the Open, Public, Electronic, and Necessary (OPEN) Government Data Act appeared first on Reason Foundation.

On March 23, Florida Gov. Rick Scott signed HB 1073, which, among other things, empowers that state’s Chief Financial Officer to implement an XBRL (eXtensible Business Reporting Language) taxonomy for local government financial reporting, requiring public agencies to file their comprehensive annual financial reports (CAFRs) in machine-readable XBRL format rather than as PDFs starting in 2022.

Reason’s policy experts helped shape the process from the beginning. Senior Policy Analyst Marc Joffe, who has researched and advocated this idea since 2013, drafted a concept document and legislative language describing how Florida might implement XBRL for local reporting. These materials were shared with legislators and staff in the CFO’s Division of Accounting and Reporting. The agency determined that the XBRL-based solution meshed well with their own plans to upgrade their Local Government Electronic Reporting (LOGER) system. After consulting with Reason staff and others, the CFO’s office revised the language and incorporated it into their 2018 legislative package, advanced by Rep. Bill Hager in the House and Sen. Kelli Stargel in the Senate. Florida-based Reason Policy Analyst Spence Purnell managed the legislative outreach, providing education and technical assistance to committee members and staff at appropriate points during the process. As the package moved through House and Senate committees, Joffe and Purnell consulted with the CFO’s office and legislative staff on revisions and clarifications.

Once fully implemented, Florida’s municipal financial reports will finally be on the same technological footing as corporate financial reports. In 2008, the Securities and Exchange Commission (SEC) instructed public companies to file their annual (10-K) and quarterly (10-Q) reports in XBRL format. The SEC mandated transition process was completed in 2012.

Read Reason Foundation’s Policy Explainer: Mandatory XBRL Reporting Standards

The Challenge of Antiquated Government Financial Reporting

So-called electronic financial reporting is now quite common — at least outside the world of state and local government finance. The most familiar example of electronic financial reporting is the transition away from paper income tax forms to e-filing. Although the paper Form 1040 still exists, over 90 percent of tax returns are now filed with the IRS electronically.

By contrast, when states and municipalities produce their audited financial reports, they “print” the statements to PDFs, leaving information consumers with the unattractive options of diving through the filings (which can run to hundreds of pages) to find relevant numbers, or using PDF extraction software (which can be expensive and unreliable) or relying on unaudited (and potentially inaccurate) data compiled by the Census Bureau and state agencies.

As a result, standardized information on state and local financial performance is not nearly as accessible as corporate financial data. This lack of data makes it harder to identify and possibly assist fiscally distressed local governments. It also inhibits accurate reporting of key public sector financial aggregates. For example, no one has calculated total Other Post-Employment Benefit (OPEB) obligations, because doing so would involve gathering and reviewing tens of thousands of PDF financial statements.

The Solution: Improving Transparency Through Mandatory Financial Reporting Standards

The new Florida law begins the process of bringing government financial disclosures into the 21^st century. HR 1073 authorizes the CFO’s office to create local government financial taxonomies along with electronic filing software that can be used by local governments. The CFO will choose one or more vendors to develop these technical deliverables, and then assess them in consultation with external stakeholders. These stakeholders include representatives of local governments that have to prepare the XBRL filings and a municipal bond analyst who would consume the information.

The legislation envisions a timeline ending on September 1, 2022, when the CFO will begin accepting XBRL filings instead of PDFs and placing the data on an updated version of its LOGER system.

Shortly thereafter, LOGER users will get a much more detailed look at local government fiscal condition, including details of their pension and OPEB obligations.

Unlocking More Government Transparency Nationally

The Florida legislation could be the first step toward the creation of a comprehensive, national data set of audited state and local government financial statistics that would be publicly available at little or no cost. Such a data set would enable us to answer important policy-relevant questions about government finance about which we can now only guess — such as the national total of OPEB obligations. 

The database would also allow oversight bodies, municipal bond analysts, academic researchers and concerned citizens to monitor the fiscal well-being of states, counties, cities, school districts and special districts using standardized data and analytics. It will improve the efficiency of the municipal bond market, allowing issuers to raise money for infrastructure finance at a lower cost to taxpayers. It will empower early warning systems that will flag potentially troubled entities well before they end up in bankruptcy court.

To achieve the goal of a national database of audited government finance statistics, other states would have to follow Florida’s lead, or a national body such as the Municipal Securities Rulemaking Board (MSRB) would have to implement it.

To date, progress at the national level has been slow. As the Securities and Exchange Commission was rolling out its XBRL mandate for corporate filers in 2008, the Association of Government Accountants (AGA) piloted XBRL with the state of Oregon’s CAFR. Unfortunately, the AGA researchers did not publish a taxonomy and there was no meaningful follow-up.

The MSRB, despite taking many steps that have improved municipal financial transparency, has never prioritized electronic financial reporting. Similarly, the Governmental Accounting Standards Board (GASB) has been relatively silent on the topic, not updating its electronic financial reporting web page for the last five years. The Government Finance Officers Association has taken no official position on the matter.

Conclusion

It can be all too easy for policymakers to look past the need to modernize antiquated financial reporting methods, but fortunately, the state of Florida and its Chief Financial Officer’s Division of Accounting and Auditing have recognized the benefits of electronic financial reporting. By incorporating XBRL taxonomy development and an eventual filing mandate into legislation, they moved the ball forward at the state level in the absence of national action.

Reason looks forward to championing the adoption of machine-readable local government financial reports in other states. As state and local governments struggle with growing pension, OPEB and Medicaid costs, we need better tools to monitor fiscal sustainability. The long-delayed rollout of electronic financial reporting for state and local governments is finally underway.

Reason Foundation Policy Explainer: Mandatory XBRL Reporting Standards

The post Florida Passes First in the Nation Data Reporting Standards to Improve Local Government Financial Transparency appeared first on Reason Foundation.

Every city in Orange County has a municipal code as thick as a phone book, full of obscure laws that are ineffective, have unintended negative consequences and are no longer necessary (if they ever were to begin with).

For example, Costa Mesa and Irvine have banned leaning bikes against trees or buildings in public places. In Irvine, it is illegal for taxi drivers to smoke in their cabs even when they are alone in their vehicles. Orange County has a ban against sleeping in your car. And more than 50 California cities have bans on where you can sit or rest in public.

Some of these bans are targeted at, and disproportionately impact, the homeless. In some cases, convictions for dumb laws may render homeless people ineligible for social services.

In other cases, dumb laws prevent entrepreneurs from pursuing their dreams and boosting the economy. For example, California banned motorized skateboards in the 1970s over concerns that gas-powered skateboards created heavy air and noise pollution. Today, high-tech skateboards are environmentally friendly, 100 percent electric and produce zero tailpipe emissions.

Assemblywoman Kristin Olsen, R-Modesto, the Assembly Republican leader, has been working on a bill to legalize electric skateboards. Even though the bill has no political opposition, the snail’s pace of the legislative process means the ban is still in place and continues to stifle the growth of an innovative industry.

More often than not, though, elected officials are too busy making new laws to spend time getting rid of the obsolete ones already on the books. How often do you think city councils go back to measure whether or not the laws they passed five years ago are actually working as they expected? Rarely, if ever.

One solution is to put a sunset provision into almost every new law, meaning the law expires after a set period of time, say five years, unless elected officials vote to extend it. If the law is still useful and working as intended, it can be quickly and easily renewed. If things have changed, the sunset review creates an opportunity to modify or eliminate the law.

Perhaps the best-known sunset effort takes place at the state level in Texas. Each year the Texas Sunset Advisory Commission thoroughly reviews 20 to 30 state agencies. “Since Sunset’s inception in 1977, 79 agencies have been abolished, including 37 agencies that were completely abolished,” the commission’s website reports. “Every dollar spent on the Sunset process has earned the State approximately $25 in return.”

Orange County should create a commission to review its existing laws. The organization would determine if laws are still relevant, do a benefit-cost analysis of laws for which circumstances have changed significantly, and recommend changing or eliminating laws.

When the San Diego created “Regulatory Relief Days” in the early 1990s, council members and citizen volunteers reviewed regulations and changed or eliminated many. For example, they changed a rule that required warehouses to use what had become obsolete fire prevention technology. Simply updating the fire code saved many warehouses $150,000 or more.

Rapid changes in outlooks, lifestyles, technology and society mean that some laws that may have made sense years or decades ago no longer serve us well. Obsolete laws help make harmless acts criminal and keep power in the hands of the authorities. It’s time for Orange County and its city governments to review their laws.

Adrian Moore is vice president of research at Reason Foundation. This article originally appeared in the Orange County Register.

The post How to Get Dumb, Obsolete Laws Off the Books appeared first on Reason Foundation.

The problem of crony capitalism comes in a wide variety of policies that benefit specific individuals, firms and industries at the expense of everyone else. From occupational licensing laws to corporate tax breaks, and from federal flood insurance to ethanol mandates, capital is being misallocated due to state and federal policies. As a result, innovation, economic growth and employment are being undermined. However, legislation being considered in the House this week offers an opportunity to signal the commitment of Congress to counter this cronyism.

On June 2, Airbus announced that it had chosen to locate a new production facility in Mobile, Alabama. According to the company’s press release, the plant is expected to cost $600 million and to employ around 1,000 people. That’s the good news. The bad news is that Alabama’s taxpayers will be subsidizing the facility to the tune of around $160 million. That’s $160,000 per job.

In its defense, Airbus might argue that its main competitor, Boeing, has long benefited from such subsidies. In March, the World Trade Organization (WTO) affirmed that Boeing had received over $5 billion in illegal subsidies for the development of the 787 Dreamliner, including tax breaks totaling $476 million from Kansas. In an earlier ruling, the WTO had identified over $16 billion in subsidies, including $2.2 billion from Washington State, though not all of those were found to be illegal under WTO rules.

Airbus too has long benefited from government subsidies. In a case finally decided last year, the WTO ruled that Airbus had received $15 billion in illegal subsidies from European governments to develop the A380.

However, the fact that both Boeing and Airbus have received subsidies hardly exonerates them. My parents taught me that two wrongs don’t make a right. And this case is no exception. The sucking of tens of billions of dollars of taxpayer money in the U.S. and Europe by the two companies has contributed to the economic malaise on both sides of the Atlantic.

If no subsidies were available, Boeing and Airbus would compete on a level playing field with smaller competitors, such as Bombardier, Embraer and Gulfstream. The various manufacturers would each seek to meet the perceived wants of customers and would be incentivized to innovate newer, better aircraft with lower total cost of ownership. Production location decisions would be based on cost effectiveness evaluations.

Knowledge about which product to buy, where and when is dispersed among the entire population. The late Nobel laureate economist Friedrich Hayek observed in a famous 1945 article, The Use of Knowledge in Society, that the prices resulting from such transactions provide important signals to market participants, enabling them to make decisions about what to produce, where and when. Subsidies effectively distort those market prices and bias investment decisions.

The billions of dollars given by Washington State to Boeing no doubt preserved many union jobs but caused both unionized and non-unionized workers in other states not to be employed. And the provision of subsidies in one state encourages government officials in other states, such as Alabama and Kansas, to offer similar deals in order to “create jobs.” Each such job comes at a high price.

The $160,000 subsidy per Airbus job in Alabama looks like a bargain compared to the average cost of “green jobs” created under the U.S. Department of Energy Section 1705 Loan Program. This program, which funded 26 projects, guaranteed approximately $16 billion in loans and is estimated to have created 2,378 permanent jobs. If those loans are not eventually repaid, the cost would be $6.7 million per job. One of the recipients of 1705 was Solyndra, which received $535 million in Department of Energy loans. On March 20, 2009, Solyndra claimed it would create 3,000 temporary construction jobs and 1,000 permanent jobs. On August 31, 2011 it filed for bankruptcy and laid of its 1100 person staff.

The tax dollars that are given in subsidies are not available to taxpayers. So investments and purchases that would otherwise have taken place do not occur. Subsidies can also impact innovation indirectly by reducing competition. When two companies each receive billions of dollars in subsidies, it is difficult for smaller companies to enter the market. With the smaller competitors excluded and the market effectively carved up, the two dominant companies have less incentive to innovate.

Of course we can’t know what innovations have not occurred. Subsidies are thus a classic example of what French philosopher Frédéric Bastiat referred to in his essay, “What Is Seen and What Is Not Seen.” What we see is the company that continues to produce goods, often inefficiently, in the wrong place and at the wrong time (both Boeing’s 787 and the Airbus A380 experienced lengthy delays). What we do not see are the foregone innovations; they are absent and hence invisible.

But when companies produce goods inefficiently, they usually become vulnerable to competition at some point. This happened all too visibly with subsidized renewable energy companies. For decades, oil and gas companies had been developing techniques of hydraulic fracturing, horizontal drilling, and 3D seismic imaging. In the past few years, these technologies came together to deliver what amounts to a revolution in the extraction of gas from shale deposits, causing the price of natural gas to plummet – and making many “renewable” technologies uncompetitive even with subsidies.

There is another problem with subsidies: companies spend money attempting to persuade governments to hand them over. Economists call this behavior “rent seeking” because the subsidies are a form of economic “rent” (earnings over and above the normal profit that would be earned if the market were competitive). In theory, each company will be willing to spend almost as much lobbying to receive a subsidy as it receives in the subsidy itself – all that matters is that it generates positive rent from its lobbying. These lobbying expenditures effectively dissipate the rents from subsidies, further reducing the resources available for investments in innovation.

Subsidies are a form of cronyism – but they are not the only or even the primary form. In his seminal 1971 paper, The Theory of Economic Regulation, Nobel laureate economist George Stigler observed that regulation by the state is a more important source of rents, benefiting incumbent firms and individuals at the expense of potential competitors (this rent is sometimes referred to as gains from “barriers to entry”). Moreover, Stigler suggested that regulation is sought by the regulated industry – and is designed and operated primarily for the industry’s benefit. Consumer activists Mark Green and Ralph Nader largely concurred, writing in 1973, “the verdict is nearly unanimous that economic regulation over rates, entry, mergers, and technology has been anticompetitive and wasteful.”

While some forms of regulation have become less prevalent than in the 1970s, in general regulation has increased. Environmental regulation, for example, has become increasingly strict, often benefiting incumbents at the expense of innovative competitors – or even one incumbent over another. As natural gas has fallen in price over the past few years, several states have banned hydraulic fracturing (fracking) and others are contemplating similar bans or other stringent regulations. At the same time, the EPA has introduced several new regulations in the past couple of years the effect of which is to restrict the use of coal as a source of energy. Meanwhile, energy companies continue to receive tens of billions of dollars in tax breaks.

In a fabulous paper published this week by the Mercatus Center at George Mason University, Dr. Matthew Mitchell traces the history of cronyism in America back to the tax breaks given to the East India Company. While that particular instance of cronyism was not well received by Americans, more recent instances have so far not led to widespread protest. The Pathology of Privilege: The Economic Consequences of Government Favoritism provides numerous examples of cronyism, from the $181 billion of subsidies to agriculture – of which 74 per cent goes to just 10 per cent of farms – to the arbitrary sequence of bailouts following the financial crisis in 2008.

Having described the types of cronyism, the author goes on to explain their causes and consequences. Most worryingly, Dr. Mitchell provides instances of cronyism causing widespread economic instability and (associated) diminished trust. The implication is that if the U.S. continues on its present trend, the consequences could be dire.

But as the American revolutionaries demonstrated, the transition to a crony state is not inevitable. This week, the House of Representatives will vote on bill HR 4402, the purpose of which is to streamline the process by which extraction of certain kinds of minerals is regulated and permitted. The legislation almost certainly has flaws and is far from revolutionary, but in its incremental way, HR 4402 might go some way towards reducing the cronyism currently inhibiting the U.S. economy by removing some of the discretion to allocate rents and inhibit economic activity currently enjoyed by bureaucrats and politicians in the permitting process. Much, much more is needed. The only problem is that turkeys don’t usually vote for Christmas.

Julian Morris is Vice President of Research at the Reason Foundation.

The post The Economics of America’s Crony Society appeared first on Reason Foundation.

The State Budget Reform Toolkit-a joint project of the American Legislative Exchange Council, Reason Foundation, Americans for Tax Reform, The Mercatus Center at George Mason University, Washington Policy Center, Evergreen Freedom Foundation and State Budget Solutions-offers a practical set of budget and procurement best practices to guide state policymakers as they work to solve the current budget shortfalls, assisting legislators in prioritizing and more efficiently delivering core government services through advancing Jeffersonian principles of free markets, limited government, federalism, and individual liberty.

Topics covered in the State Budget Reform Toolkit include:

• Priority-Based Budgeting/Budgeting for Outcomes
• State Pension Reform
• Privatization and Competitive Contracting
• State Tax and Spending Limitations
• Balanced Budget Requirements
• Non-Partisan Revenue Forecasts and Independent Budget Certification
• Performance Assessment and Management
• Performance Audits
• Independent Recovery Audits
• Budget Transparency
• Budget Timeouts
• The Item-Reduction Veto
• Sunset Review Processes for State Agencies, Boards, and Commissions
• State Privatization and Efficiency Councils
• Statewide Real Property Inventories
• State Hiring Freezes
• Restructuring State Retiree Health Care Plans
• Activity-Based Costing
• Employee Incentive/Gainsharing Programs, and more.

Attachments

• State Budget Reform Toolkit

The post State Budget Reform Toolkit appeared first on Reason Foundation.

In July 2007, Mr. Obama signed Reason Foundation’s Oath of Presidential Transparency, pledging his commitment to “open, transparent, and accountable government principles.”

“Every American has the right to know how the government spends their tax dollars, but for too long that information has been largely hidden from public view,” said then Sen. Obama. “This historic law will lift the veil of secrecy in Washington and ensure that our government is transparent and accountable to the American people.”

If his promise for transparency was important then, it is even more critical now in the wake of Uncle Sam’s recent spending binge.

Mr. Obama should press for a complete, itemized – and publicly available – list of how much money taxpayers are already on the hook for to bailout failing entities. There are so many different bailout-related programs – TARP (Troubled Asset Relief Program), Federal Reserve programs, auto bailouts, and investment guarantees that we don’t have a firm dollar figure. No one knows exactly what to count. Different sources have given different estimates that vary by as much as $1 trillion or so. The New York Times, in December, calculated bailout spending to be $7.8 trillion. CNBC thinks it is about $7.3 trillion. If you count all the taxpayer money spent in 2008 on bailouts, including the $150 billion stimulus in the spring of 2008 and the early bank rescues, such as IndyMac, the figure rises to over $8.4 trillion.

During the campaign, Mr. Obama talked about “putting the government online” and he has already announced a website for stimulus spending – www.Recovery.gov.

“We plan to create a Web site that will contain information about the contracts and include PDFs or contracts themselves and also financial information about the contracts,” Peter Orzag, Obama’s choice to lead the Office of Management and Budget, encouragingly told the Washington Post.

Sen. Claire McCaskill (D-MO), one of Mr. Obama’s most boisterous supporters, recently told Time magazine that taxpayers are demanding accountability. “I call it the grocery-store test: How many aisles can I get down the grocery store without someone yelling at me?” said McCaskill. “I couldn’t even get to the produce section at the front of the store before people started screaming at me about the TARP. If we can’t get transparency for taxpayers on this, it’s going to be difficult to get my vote [on the stimulus package].”

But President Obama and Congress should not limit transparency to just the stimulus spending or even TARP – everything should be on the table.

The Treasury Department – in association with the Federal Reserve and FDIC – should create an “online checkbook” showing how many checks it has written, when they are cashed, and offer detailed notes about what they paid for. The government should also list who it has loaned money to, what has been paid back, and how much interest it has earned. Ultimately, the key is simplicity and clarity.

Neel Kashkari, interim assistant Treasury Secretary for financial stability and one of the people theoretically in charge of the bailout money, has told the House Financial Services Committee that he is directing his staff to establish a formal monitoring program to track TARP dollars. But with the Bush administration and Congress having failed to provide accountability for the bailout spending thus far, it will be up to the Obama administration to halt the government’s policy of handing out taxpayer money first and asking questions later, if ever.

The lack of accountability thus far should be unacceptable to the taxpayers who have had trillions spent in their name. With talk that the upcoming stimulus package may grow beyond $825 billion, taxpayers now, more than ever, need President Obama to lead the charge for transparency and accountability.

The post Obama Needs to Push for Online Stimulus Transparency appeared first on Reason Foundation.

Earmarks, not aliens, are the real threat to Americans. Beyond encouraging Congressional overspending, earmarks create “an unfair and unbalanced representative government,” says Oklahoma Sen. Tom Coburn. “If you’ve got money and you can influence things in Washington, you get benefits. If you don’t have money and you can’t influence, you’re not necessarily benefiting.”

This alien pork project is just one example of how elected officials use earmarks to funnel your federal tax dollars back to powerful interests in their districts. Since 1991, Americans have paid over $271 billion for pork projects, according to Citizens Against Government Waste.

“Look at the omnibus package in the Senate right now,” says Gillespie. “They’ve rolled 35 bills into one, with over $10 billion in spending stuffed into it. With the federal government facing a record $490 billion budget deficit in 2009, maybe Congress should consider how it will balance the federal budget before it goes running up more credit card bills that taxpayers get stuck with.”

Full Video Online

The Reason.tv Drew Carey video, Earmarks: The Alien Menace, is online at http://reason.tv/video/show/483.html. An archive of Reason.tv’s feature videos is online at http://reason.tv/featuredvids/.

About Reason.tv

Reason.tv is an online community showcasing the best libertarian ideas and videos on the Internet. Reason.tv gives you the opportunity to create videos, share videos and suggest topics for Drew Carey’s upcoming documentaries. For more information, please visit www.reason.tv.

About Reason Foundation

Reason Foundation is a nonprofit think tank dedicated to advancing free minds and free markets. Reason Foundation produces respected public policy research on a variety of issues and publishes the critically acclaimed Reason magazine and its website www.reason.com. For more information, please visit www.reason.org.

Contact

Chris Mitchell, Director of Communications, Reason Foundation, (310) 367-6109

The post Earmarks: The Alien Menace appeared first on Reason Foundation.

All of the major presidential candidates have been invited to sign the “oath of presidential transparency” which is being promoted by a diverse coalition of 36 groups, led by Reason Foundation, a libertarian think tank that has advised the last four presidential administrations.

“The next president should be committed to transparency and accountability,” said Adrian Moore, vice president of research at Reason Foundation. “Redesigning the federal government so that it is more accountable to taxpayers is a nonpartisan issue. Transparency will help produce a government focused on results instead of our current system, which is plagued by secrecy, wasteful spending and pork projects.”

“Every American has the right to know how the government spends their tax dollars, but for too long that information has been largely hidden from public view,” said Sen. Obama. “This historic law will lift the veil of secrecy in Washington and ensure that our government is transparent and accountable to the American people.”

“Government transparency is essential to government accountability. Americans need to feel they can trust their government,” Sen. Brownback stated.

“When government spends the people’s money, it must be done with utmost possible transparency,” Rep. Paul, the first to sign the oath, declared. “Signing the Oath of Presidential Transparency was a no-brainer for me.”

The oath was sent to every presidential candidate who has met the Federal Election Commission’s filing requirements and has “raised or spent $50,000 or more (the threshold for mandatory electronic filing) from sources or to payees other than the candidate him or herself.” The oath was first distributed to every presidential candidate’s headquarters on July 17, 2007. Subsequently, at least five follow-up emails or calls were made to each campaign.

Full Oath Online

The complete oath of presidential transparency is available online at www.reason.org/Letter_Oath_of_Presidential_Transparency.pdf.

About the Coalition

An alliance of 36 diverse groups is advocating the presidential accountability oath. The following groups are part of the coalition: American Association of Physicians and Surgeons, American Association of Small Property Owners, Americans for Tax Reform, Budget Watch Nevada, Capital Research Center, Center for Financial Privacy and Human Rights, Center for Individual Freedom, Citizen Outreach Project, Citizens Against Government Waste, Doctors for Open Government, Electronic Frontier Foundation, Evergreen Freedom Foundation, FreedomWorks, Grassroot Institute of Hawaii, Iowa Public Policy Institute, Liberty Coalition, Mackinac Center for Public Policy, Minnesota Free Market Institute, Mississippi Center for Public Policy, National Taxpayers Union, Nevada Policy Research Institute, Reason Foundation, Republican Liberty Caucus, Research Accountability Project, Rio Grande Foundation, Taxpayers League of Minnesota, Texans for Fiscal Responsibility, The Harbor League, The Performance Institute, The Project on Government Oversight, The Pullins Report, The Rutherford Institute, US Bill of Rights Foundation, Velvet Revolution, Virginia Institute for Public Policy, and Washington Policy Center.

About Reason Foundation

Reason Foundation is a nonprofit think tank dedicated to advancing free minds and free markets. Reason produces respected public policy research on a variety of issues and publishes the critically acclaimed monthly magazine, Reason. Reason Foundation does not endorse any political candidates. For more information, please visit www.reason.org.

Government Contact

Presidential candidates interested in signing the oath, or organizations interested in joining the coalition, should contact Reason Foundation’s Amanda Hydro at (202) 236-9193.

Media Contacts

Adrian Moore, Vice President of Research, Reason Foundation (661) 477-3107
Chris Mitchell, Director of Communications, Reason Foundation, (310) 367-6109

The post Obama, Brownback and Paul Promise Executive Order Mandating Google Government appeared first on Reason Foundation.

The second event is the release of the final report from the General Accounting Office-led Commercial Activities Panel. Two years ago Congress ordered the GAO to convene an expert panel to recommend changes in how the federal government conducts public-private competitions and outsourcing. The report did what many who watched the process expected, and recommended scrapping the Office of Management and Budget Circular A-76 process for competitive sourcing and replacing it with the best-value competition process from Federal Acquisition Regulations Part 15. These two events come together to foster federal agencies’ strategic use of partnerships with private firms.

President Bush’s competitive sourcing goals are for competition, not outsourcing. An outsourcing goal is an ephemeral thing, with nothing to sustain it over time, and a lightning rod for organized resistance. President Bush is looking instead to change the institutional structure in which decisions about what an agency should be doing are made. He is asking agencies to use competition between employees and private firms to evaluate who can deliver the best performance.

The President’s goals come together with the Commercial Activities Panel report, because the competitive sourcing approach in FAR Part 15 allows performance-based, best-value competitions in a way the A-76 process does not. OMB is judging agency plans to meet the President’s competitive sourcing goals to a large extent on how much they are based on improving agency performance. And flexible best-value approaches, such as those allowed in FAR Part 15 and recommended by the Commercial Activities Panel, are crucial to basing competitive sourcing on performance criteria rather than simple low cost.

Most federal agencies will probably choose to buy political space with their staff by using public-private competitions even where A-76 or the much more generous FAR Part 15 process allows direct outsourcing. But, again, OMB has demonstrated that it will accept a wide range of approaches to meeting the competitive sourcing goals, as long as each approach is grounded in demonstrable performance criteria. As agencies move forward, they should develop performance criteria for deciding when to take a public-private competition approach and when direct conversion makes more sense.

One way for agencies to identify where to begin applying competitive sourcing, and later to help decide whether to use public-private competition or direct conversion, is shown in the figure. If an agency has done a good job of analyzing how important an activity is to meeting the agency’s performance goals and also analyzed how well the activity is performing, it can plot the activity in the graph. The more important the activity is to the agency’s overall performance, the higher on the graph it is. The better the activity is performing, the farther to the right on the graph it is.

Based on which box the activity falls into, an agency can determine what opportunities for change may exist.

• Attention Needed-Activities plotted here are important to the agency’s overall performance, but are not performing very well. These activities are prime candidates for competition designed to improve activity performance.
• Proven Success-Activities plotted here are important to the agency’s overall performance and are performing very well. Enough said.
• Exit Opportunity-Activities plotted here are not important to the agency’s overall performance and are not performing very well. The agency may choose to shift resources to more important areas after ceasing these activities and allowing the private sector to meet any demand for them.
• Resources Available-Activities plotted here are not important to the agency’s overall performance but are performing very well. The agency may have resources and staff here that can deliver similar high performance in more important activities and again may choose to shift resources to more important areas after ceasing these activities and allowing the private sector to meet any demand for them.

But such an approach to focusing on and allocating resources to agency performance will only succeed if the process is improved, as the Commercial Activities Panel report suggests, and if Congress follows through by being willing to oversee agencies and make appropriations based on performance criteria rather than micromanaging service delivery. Without a bottom line and without competitive forces, program structures and approaches often stagnate, while success is not always visible, and is hard to replicate. Worse, since budgets are not linked to performance in a positive way, too often poor performers get rewarded as budget increases follow failure.

The President’s Management Agenda is aimed at creating the institutional change that creates a bottom line and a competitive system. Performance is the common thread. In applying competition to decisions about doing activities in house or moving them to the private sector, these institutional changes begin to solve the problem of inadequate cost information to begin with and no longer accept an agency’s failure to use performance measurement to track and compare quality and value. Performance becomes embedded in all service decisions, including contracting. Unnecessary or poor performing programs cannot survive the transparency and the scrutiny that follows it. They change or they go away.

Adrian Moore is Vice President of Reason Foundation.

The post Opportunity and Performance in the President’s Management Agenda appeared first on Reason Foundation.