Government budgets have transformed since the Ancient Greeks began earmarking, but their purpose has remained the same: to allocate public money, providing a blueprint for the provision of public services. Today, governments face another budgetary transformation. For the first time in human history, governments are wielding cloud and data analytics technologies to create digital connections. These connections — within organizations, between governments, to infrastructure, and with the public — will spawn new insights and collaboration, improving government services and citizens’ quality of life. Only governments that embrace this transformation will be ready to confront tectonic technical shifts that are already underway.
I. Introduction
The school bell strikes three, and children scurry from their classrooms and stroll across the street to the library a block or two away. After devouring an apple or some crackers, the children hunker down in the library to work, read books, surf the web, or slyly slide a note to the boy or girl sitting across the table.
While perusing a Lincoln biography or an Animal Kingdom picture book, children use a wide array of municipal and special district services. A school district hones the reading skills needed to explore the library’s content. The city ensures the crosswalk is painted and equipped with functioning traffic signals, or staffed with a crossing guard. Library grounds must be maintained, the collections curated, the Internet connected. Toilets must flow to sewage systems and water fountains must emit clean water. Electricity keeps the lights on. Candlelit libraries are better left to the movies. Finally, police must protect the children.
Governments improve their constituents’ lives by providing services. These services, and every other government function, are driven by the annual budget. Budgets are governments’ souls; they materialize elected officials’ vision for the future, and prescribe how services are funded and delivered. The budget document stems from months of discussions within governments, between governments, and with citizens about how their elected representatives should allocate public resources. Well-designed budgets fuel a well-functioning civil society.
The budget process involves a perpetual struggle to provide and improve services by making public money go further. To figure out how to pay for broadband across a city. To fund an extra hour of library service. To employ an additional police deputy to combat human trafficking. To attract entrepreneurs and new businesses with economic development programs.
Budget and planning processes help determine whether governments succeed. And the Internet is transforming how governments manage existing operations, and prepare for the future.
Governments do not have the luxury of deciding whether to digitize their financial, planning, and budgeting processes. They are, or will soon, grapple with tectonic technological shifts that only digital governments can address. Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, describes these shifts in Foreign Affairs as a Fourth Industrial Revolution.
Professor Schwab writes, “Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.” This fusion is well underway, but there is a long way to go.
He continues, “The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.”
Governments face new problems as these technologies proliferate. Autonomous cars will create significant revenue gaps and present new infrastructure challenges. Broadband capabilities, smart power grids, and efficient utilities management balloon in importance as cities strive to attract entrepreneurs and businesses. Meanwhile, the public will pressure leaders to contend with accelerating structural unemployment — spawned by robotics and artificial intelligence — by investing in the services and infrastructure necessary to retrain the workforce on a massive scale.
Our leaders grapple with these demands during their budget processes, yet to thrive in this new era, governments from small towns to massive cities must leverage cloud technology to connect in four key ways. First, governments have to form internal connections to increase insight and collaboration, enabling better, data-driven decisions. Second, governments must connect to their infrastructure so data can inform both long-term capital planning and daily management, to the extent management is not automated. Third, citizens expect new levels of government engagement, and governments are embracing novel methods of connecting to the public. Finally, governments need to connect to each other. Innovations in budgeting and service delivery must spread within and between governments as never before to guarantee the health of our civic institutions.
Only connected governments have the insight and innovations necessary to allocate public money to meet the challenges presented by the Fourth Industrial Revolution. Governments face an inflection point: embrace new modes of financial planning, budgeting, and management — or struggle. But this is not the first budgeting inflection point governments have faced. Historically, governments that embraced new budgetary and planning innovations thrived.
II. Public Budgeting From the Ancient Era to Yesterday
The Athenian Acropolis, Credit: Antonio Gravante
Ancient Athens planted the seeds of modern budgeting in the Acropolis, Athens’ central public square. The Athenian government, Greece’s undisputed hegemon until the Peloponnesian War erupted in 431 BC, was the first to earmark revenues for specific purposes. Each earmarked fund had its own physical building, treasurer, and staff. Three funds for military defense, capital projects, and civil administration blossomed into a wide array of public treasuries tailored to complex revenue demands. These earmarking practices bolstered Athens’ finances, and gave the polis a decided financial edge against its rivals who failed to embrace these new techniques.
The Roman Republic and Empire expanded these principles, but Rome’s disintegration and eventual collapse halted budgetary progress until England’s Glorious Revolution of 1688, when Parliament asserted its authority over the British Crown. During the Revolution, Parliament assumed control of the military budget to stop the King from dissolving the legislature, but Parliament did not craft a complete or even regularly-timed budget for decades. The word “budget” wasn’t even used until 1733.
In 1780, a Parliamentary commission responded to widespread angst over public finances by issuing fourteen reports replete with recommendations. The commission championed a consolidated expenditure budget, annual projections of departmental expenses, and uniform recordkeeping. Like the Ancient Athenians, the British experienced unprecedented levels of commerce and military superiority in part because of its financial management. No world-renowned British navy without innovative budgetary practices.
Over the next hundred years, the British implemented the commission’s recommendations in piecemeal fashion; the Treasury obtained full expenditure control in 1866. Meanwhile, across the British Channel’s choppy waters, French Revolutionaries and Napoleonic-era officials implemented Enlightenment ideals of rational government by improving budgeting practices. Napoleon established control over military and nonmilitary expenditures and, in 1803; the French Empire adopted most of the British commission’s recommendations. The French tried to sink British ships, but they sure loved British budgeting ideas. France fully implemented a universal accounting system, a standard fiscal year, and written complete budgets by the 1860s.
These innovations spread to America and were implemented during the late nineteenth century and early twentieth century. However, local government budgeting practices lagged behind their federal counterparts. Significantly.
Urbanization, immigration, and industrialization stretched local governments. Municipalities faced public health issues, housing demands, education prerogatives, and infrastructure necessities. Sound familiar? Political machines provided many of these services, but at the cost of theft, obfuscation, and significant inefficiency and corruption.
Progressive-era reformers in the early 1900s demanded action. Headline after headline across America proclaimed the case for reform — wrest control from the political machines. Reformers proposed budgetary practices such as universal accounting and reporting procedures, executive budgets, and enhanced auditing to thwart corruption. New York City was the first to implement these reforms, but their successes led cities across the country to follow. Governments that improved their budgets maintained better control over their expenditures, expanded services, and rooted out corruption. Those who didn’t faced a grimmer future.
Since the Progressive Era, governments have continued to refine their budgetary processes to expand the reach of public money. The advent of personal computing in the 1980s and 1990s injected new levels of sophistication into the budget process; spreadsheet programs like Lotus 1-2-3 and Excel empowered staff to introduce new analytics and data into budgetary planning.
This brief history of public budgeting teaches us some important lessons. First, countries and local governments that embraced new budgetary innovations thrived in part due to better financial practices that enabled expanded service delivery and quality of life. Second, governments learned from each other’s budgetary innovations; the Romans learned from the Athenians, the French learned from the British, and America’s local governments learned from New York. Each innovation introduced a new inflection point: adopt the budgetary improvement or fall behind.
The Internet takes us into a new era, with its own inflection point, where digitally connected governments take advantage of the latest cloud technology. Each connection transforms how governments budget for the future, expanding the reach of public money.
III. Connections Within Governments
Decisions about government services should be grounded in relevant data and analysis so decisions match current needs, but far too often, they are not. Outdated technologies prevent elected officials from receiving the information they need on time, and when information is available, it often takes hours of meticulous manual labor to compile. Decision makers forced to plan for the future with outdated and incomplete information struggle to make the best decisions to optimize public dollars.
These problems stem from insufficient connections within governments. Data are stuck in ERP, payroll, and other systems, retrievable only by scarce, trained analysts that can run complex queries. As many of these systems are run “on premise,” they are inherently hard to access by an increasingly mobile organization. Information is siloed by departments run like quasi-independent businesses. And the training and hours necessary to retrieve and analyze data limit the intelligence that can be gathered and shared in a timely manner. Information blockades are intelligence blockades.
Cloud computing will revolutionize connections within governments. Source: Rawpixel.com
Cloud-based, government-specific applications are uniquely capable of solving this problem by connecting government employees like never before. They can automatically pull data from ERP systems and enable users with little or no training to drill down and “slice and dice” through complex, multi-fund government financials. The cloud ensures easy access to stakeholders across the organization, breaking down information siloes and reducing the time between data generation and actionable intelligence sharing across the government.
Better connections between government staff and elected officials revolutionizes how our leaders allocate public money and deliver services. For example, the City of Northglenn, Colorado connected internally during fiscal year 2014. To aid its urban renewal efforts, Northglenn analyzes historical data on property valuations and sales tax by industry. The city leverages this data when selecting places to redevelop and industries to promote, and these plans occur during the budget process. Northglenn also breaks down information siloes, allowing department heads, finance staff, and elected officials to visualize and analyze financial data from across the city. Jason Loveland, Northglenn’s Director of Finance, explains how ““By giving directors and others within their departments a better understanding of the data that’s in the general ledger software, we have made it easier for them to draw up their budgets.” Citizens benefit from both targeted economic development efforts and budget proposals informed by current data.
Governments that embrace internal connections realize wide benefits in their processes:
Budgetary Buy-In: Budget teams are inundated with inquiries from departments asking about items they requested and the resources they will have for next year. These requests, while important for fostering buy-in, require significant amounts of manual labor that diminish the time available to think through the budget’s strategic considerations.Governments that connect internally make information sharing and budget proposal collaboration as easy as posting a Facebook status. Automated updates at key steps of the budget process give department heads the ability to offer input and bolster their planning.
Performance analysis: Police Chiefs can monitor real-time expenditures, crime and, with the click of a button, inform elected officials who in turn will decide which resources to give the police. Public utilities managers are tracking current revenues and expenses, gaining new insights into the financials driving essential services like power grids. City Managers set organization-wide goals to implement Council’s directives, then seamlessly measure cross-departmental progress toward these goals. The goals and actions of connected governments are better aligned than ever before in connected governments.
Monitor departmental spending: Connected department heads use automatic integration into ERP systems to track expenditures against a budget in real-time variance reports. But these department heads do more than monitor spending and performance. Data analytics will inform governments about projected spending and performance, and in the future, platforms will highlight potential improvements to meet financial targets.
Real collaboration: Sophisticated yet intuitive sharing capabilities multiple departments to access organizational data for multiple departments. For example, the City of Edgewood tracks vehicles’ actual speed relative to speed limits. Police use this data to plan enforcement patterns, Public Works uses the data to plan signage placements and prioritize construction projects, and other departments will track traffic volume. Double-dipping may be poor etiquette at restaurants, but it will become the norm for government data.
Government departments do, and should, provide distinct services. But insights are often valuable to more than one department, and departments are united to execute a common vision of service delivery, a vision that was charted by the people’s elected representatives. Internally connected governments are in a position to respond to new challenges:
Connections Within Governments and Driverless Cars
State and local governments will face new financial challenges as driverless cars proliferate, but connected governments will be prepared. Governments can rapidly share financial and performance information across departments like never before. The Finance Department will collaborate with Public Works and Public Safety to share revenue and transportation data to craft a driverless car strategy. How will law enforcement priorities as cars follow speed limits without question? How will revenue declines affect every department? These, and other, questions require cross-functional collaboration and information-sharing to answer.
IV. Connections Between Governments and Infrastructure
The Internet of Things has captivated popular imagination. Physical objects like refrigerators, bridges, and cars are embedded with electronic sensors and software, enabling them to connect with each other and seamlessly exchange data. The Internet of Things represents one of the most significant opportunities for improving national and local infrastructure. But governments and agencies must adopt technologies that turn massive amounts of data into actionable information.
For example, cities are embedding sensors in their most travelled roads to detect traffic volume and road health. These sensors are able to deliver real-time data that government staff use internally, and share with third-parties, to improve services. Public administrators visualize and analyze this information to inform budgetary decisions about which capital projects to prioritize and how much to allocate to specific infrastructure maintenance programs.
In another example, some cities embrace the Internet of Things by embedding sensors in its water pipes to measure water consumption. This data is sent to the city’s staff who then visualize and analyze consumption data. Water allocation and production decisions are being enhanced by providing accurate knowledge of demand patterns to the people who everyone who needs it.
Governments currently rely on routine inspections and similar tactics to assess their infrastructure. Although better than nothing, periodic inspections do not close the information gap between infrastructure and governments. This inhibits budgeting from being as driven by “facts on the ground” as possible. The Internet of Things is closing this information gap, ensuring completely informed capital planning and efficient use of public money.
By 2025, the global capital projects and infrastructure market is expected to total over $9 trillion. As urbanization accelerates, the need for new spending on infrastructure ranging from plumbing to power grids to roads and bridges will only increase. Only governments that embrace connected infrastructure will have the insights and efficiencies necessary to meet ballooning demand.
V. Connections Between Governments and Constituents
Connections with citizens will become more important than ever in the networked era. Source: Rawpixel.com
The mobile devices and social networks that are the driving forces behind the latest industrial revolution enable instant global communication among citizens. In this environment, dissatisfaction with government decisions, government employees, and elected officials can have a detrimental impact on a government’s ability to innovate and provide essential services. While this dissatisfaction can be warranted, too often it stems from poor communication and citizen engagement.
As a result, forward-thinking governments around the world are embracing transparency initiatives to engage their constituents. Public records have existed for decades, but only in the past ten years have governments placed their data on the Internet. When data are online, they are typically stored in difficult-to-decipher PDF documents or spreadsheets. Many citizens don’t have the time to browse and decipher this information, but they hold local governments accountable for services nonetheless.
Interactive storytelling is the new imperative. Leading-edge governments are sharing positive stories with the public like never before. With the right technology and a click of a button, governments are sharing dynamic visualizations and tables with the public.
For example, the City of Stanton, CA experienced massive revenue shortfalls after California ended an economic redevelopment program that funneled money to Stanton. To plug the shortfall, voters approved a 1% sales tax on goods.. A burgeoning repeal campaign is erroneously claiming the tax revenue is being used for park construction and salary improvements, and not for its intended use. Stanton is using interactive visualizations from data in its financial system to show that park construction is financed by a restricted fund that contains the new tax revenues, and the repeal campaign’s salary figures are incorrect.
Government finances and accounting are complex, yet the stakes of public misunderstanding are high. As the pace of change accelerates, and governments face more pressure to adapt to changing economic and technological circumstances, organizations that embrace modern approaches for connecting with their constituents will be in a better position to serve them.
VI. Connections Between Governments
Benchmarking is a critical activity for governments. To adapt to new challenges, and improve services, it is critical to understand how other governments that are geographically, economically, and/or demographically similar are allocating funds and achieving performance goals.
Benchmarking helps governments prepare their budgets, provide context for key services, recruit and retain employees, and spread innovation. However, this can be a time-consuming, and error-prone process. Despite being connected in our personal lives like never before, connections between governments are still relatively antiquated — relying on old technologies and paper-based research. Furthermore, differences in how governments organize their financial Charts of Accounts make true “apples to apples” comparisons difficult, so it takes a long time to compile data, standardize the formatting, and contact other governments for more information. When organizations cannot learn from each other rapidly, the pace of innovation, and response to challenges, slows.
In the private sector, specialized vertical and functional networks connect people, departments, and organizations, enabling better collaboration and providing the opportunity for the emerging practice of “data science” to unlock insights from data that were never before possible. In the same way, emerging government networks will enable continuous benchmarking and improvement, accelerate learning across organizations, and leverage data to provide actionable insights that improve spending power and service delivery.
For example, a Public Works Department contemplating a need for increased training dollars in next year’s budget will be able to instantly see what departments in similar governments spend on training. The network automatically directs staff to relevant data from other governments, within seconds, where they can visualize training expenditures per capita for Public Works Departments without any manual effort or spreadsheet calculations. Staff can then contact other governments’ Public Works staff over to learn more about training practices. These insights are incorporated into the budget, leading to better service delivery and better use of public money.
Many of the most important issues governments face require innovation that spreads from government to government. Escalating pension costs. Law enforcement expenditures and organization. Economic development. Job retraining. Preparing for the revenue impact, training requirements, and infrastructure investments resulting from new advancements in technology. Organizations planning for these issues will need to learn from each other, and new connections between benchmarks will foster precise insights.
Connections Between Governments and Driverless Cars: Exemplifying Viral Innovation
Governments will face a plethora of challenges and opportunities as Americans release their grips on steering wheels. Infrastructure will become more important as cars’ sensors depend on well-kept roads and speed limits increase because computers can react faster than humans can. Revenues will decline as violation fees decrease. Driverless cars won’t be programmed to exceed speed limits or park illegally. Innovations in how to respond will occur in piecemeal fashion across the country, and without a network, these innovations will remain siloed in a few lucky cities and states. Connected governments will easily find these innovations, speak with other governments to learn more, and adopt relevant practices and financial responses to driverless cars.
Collaboration on driverless cars is just one example of a new trend: governments will surpass the private sector in innovation-sharing. By definition, private companies providing similar services are competing. Why would Coca-Cola share insights with Pepsi? Both the private and public sectors have incentives to receive information on new innovations. But private sector companies have no reason to share innovative information. A company’s “secret sauce” is a trade secret to protect profits. Governments face no such supply-side constraints. Therefore, governments are in a unique position to leverage collaborative technology and hasten the adoption of new innovations around the country. Network governments together, then watch their innovations go viral.
VII. Conclusion
These four connections are empowering government leaders like never before. Governments are filled with staff, administrators, and elected officials who work day and night to provide the best services to constituents. But, until now, technology has left these leaders behind. The connected government give leaders the tools to budget and manage with new insights, and make public money go further. Technology does not replace the need for human initiative and creativity, but it does empower leaders to make better decisions and provide better services for their constituents.
When governments adopt innovations, citizens prosper. In 1850, only one railroad passed through Chicago — The Galena & Chicago Union Railroad. Nevertheless, urban planners and private industrialists recognized the technology’s immense potential. The Chicago Tribune wrote how Chicago’s plans for and adoption of railroads would cause Chicago to become “the commercial centre of a numerous, wealthy, and prosperous people.” According to Harvard Professor Benjamin Dreyfus, this is exactly what happened. By 1856, Chicago had ten railroads and the city surged as an economic, demographic, and cultural powerhouse. The railroad spurred innovation after innovation that improved the lives of Chicago’s residents, both new and existing.
Chicago embraced a new mode of transportation connections, and prospered. Over the next few years, thousands of governments will embrace another new connection. And like Chicago, they will position themselves for success in a new era.
Chicago became a railroad hub because its leaders realized in the 1850s that the city needed to connect to the emerging railroad network to thrive. Governments face a similar choice today. Source: welcomia
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