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HELP WANTED: A WAL-MART GOVERNOR
'Always Low Prices' and Better Value Aren't Just For the Private Sector
(Springfield, Ill.) The success of Wal-Mart is undeniable. This year the world's most profitable retailer will have nearly $300 billion in revenues and employ approximately 1.7 million workers. The brand has enhanced the lives of millions of Americans by providing them goods and services that were previously unaffordable.
Much of Wal-Mart's success comes from its simple value proposition: "Always low prices." Lower prices and better value is the deal Wal-Mart makes with customers and it is a big part of Wal-Mart becoming the world's most profitable retailer.
Management students from all over study Wal-Mart. Competitors, such as Target, Home Depot and Best Buy, try to identify niches where they can compete against Wal-Mart and bring lower prices and better value to their customers. All of this created a virtuous cycle where consumers are accumulating greater wealth at less cost. Like state government, Wal-Mart is a massive enterprise that offers services, collects revenue, and engages in logistics yet Illinois state government is the one place where the lower prices better value revolution refuses to be adopted.
Consider the deal we are currently getting from Springfield:
- In the first two years of the Blagojevich Administration, state spending grew by 10.7% compared to 6.4% in personal income growth.
- Less than six months into the fiscal year, Illinois must borrow money to pay its bills.
- In June, the Illinois Policy Institute and Citizens Against Government Waste added up $600 million in waste and what we found was just the tip of the iceberg.
- No-bid state contracts and ‚pay for play‛ for state contracts means favoritism trumps best value in Illinois.
- Illinois' ranks 50th in unfunded pension liabilities. And;
- A number of national business surveys and indexes – most recently Forbes Magazine -- rank Illinois among the worst states in which to do business.
Instead of always low prices and better value, the Illinois taxpayers have been paying higher prices for less value. Customers are responding to these incentives by fleeing the state.
So, what do we do?
As we move into the 2006 gubernatorial cycle Illinois voters should consider using the Wal-Mart value proposition to assess candidates. Illinoisans, we are told by the press, politicians and state funded ‚experts,‛ expect state government to run like a business where citizens pay taxes and receive services in return. Yet, these same experts tell us that the costs of services always rise and we shouldn't expect better results from government because it is different from business.
Experiences in other states demonstrate that our experts are selling us a bill of goods. The Wal-Mart proposition can be applied to state government. One example is South Carolina Governor Mark Sanford. He has reduced the tax burden and is currently seeking a federal waiver to improve South Carolina's Medicaid program by improving quality and saving money. He has also sought to enhance parental choice in education and has attacked wasteful spending. This is what we mean by lower prices and higher quality. We also see elements of the proposition being applied in such diverse places as Massachusetts, Vermont and Florida.
So, now that we know that the Wal-Mart value proposition can be applied to state government, what might one look like for Illinois?
The first half of the value proposition is lower prices. By reducing the personal (PIT) and corporate income tax rate (CIT) one percentage point over four years would be a good start. This would reduce the PIT to 2% from the 3% and the CIT to 3.8% from 4.8%. According to the Illinois-STAMP, a computer model of the Illinois economy, such reductions could create about 100,000 new jobs over four years. Revenue losses would be a manageable $775 million per year over the same period or less than 2 percent per year.
Proponents of big government would protest about ‚blowing a hole in the budget‛ and the press corps would deride by cynically demanding, ‚Who will you punish to pay for it?‛
But the truth is that we needn't cut services to pay for a rate reduction. Like Wal-Mart -- reforms, aimed at improving value is all that is necessary. This is the second half of the value proposition.
First, higher personal real income and fewer unemployed households will lessen demand for social services. Competitive councils could be established to identify which state programs work and which don't. Poor performing and redundant programs could be eliminated. Texas has saved more than $10 billion through their competitive council. Performance based budget measures could be adopted that would require state agencies to report progress. Those making progress are rewarded. Finally, state workers should compete with the private sector for government contracts. Indianapolis saved, on average, 20 percent when they competitively bid 70 city services. These are all proven strategies for improving services and reducing costs.
Springfield's entrenched special interests will chortle at such notions as a Wal-Mart Governor. They will argue that more spending and poor service are inevitable. They ignore that even notoriously liberal Vermont is moving toward a consumer based Medicaid system.
Regardless of what anyone says, the age of the Wal-Mart Governor is upon us. Illinoisans are every bit consumers of government services as they are as Wal-Mart customers. There is no reason why we shouldn't hold government to the same standard.
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