FPSI

The Cost of Bad Results
What is it?; Why do it?; How to do it?; What do we do with it once it's done?

What is it?: The idea of costing "bad results" starts with idea of "wanted" results. Wanted results are conditions of well-being we hope to achieve for children, families and communities. They are such things as children born healthy, children ready for school, children succeeding in school and staying out of trouble. Bad results are the opposites. Much, if not most, government spending for children and families, other than elementary and secondary education, is spent for bad results: children born un healthy, children not ready for school, not succeeding in school, not staying out of trouble. The costs of these bad results show up in both governmental and non-governmental expenditures. It is possible to measure and track these expenditures, and to begin to frame our social and fiscal policies in terms of reducing the growth in these costs.

Why do it?: If this were a business, we would be tracking the money we spent on repair. If repair costs started to eat up unreasonable amounts of corporate resources, we would do something about it. The first step would be to know how much we were spending on repair, and keep track of repair costs over time. We would use this tracking system to see if our preventive efforts to control repair costs were working. Our spending on bad results for children and families is (roughly) equivalent to business repair costs. We know preventive maintenance is less expensive than repair. We know preventing children's problems is less expensive than treating their problems later. The only way to get on top of the high costs of bad results is prevention. And the benefits of prevention are not just lower long term costs, however important, but a better, safer, more prosperous place to live for all of our children and families. The starting point for controlling the costs of bad results is to know what they are.

How to do it?: The question to be answered in this work is "What costs exist today because we are not getting the results we want?" The other way to ask the question is "What are the costs we want to go down in the long run because we need less of it?" or "What costs would go away if we got 100% good results?" When the question is posed this way, whole programs go into the answer. Welfare, foster care, juvenile crime programs and all their attendant costs are part of the cost of bad results. It is possible to create a multiyear picture of all spending for children and families and then cull out those pieces which fit the answer to this question. The total costs must then be adjusted for inflation and population growth so that we can see real changes over time. 

We start this work with the total costs for all bad results for a few simple reasons. Total program expenditures are known facts. We do not have to break programs up and split their costs between results. (We avoid, for the moment anyway, trying to answer what portion of welfare expenditures is caused by one bad result or another.) Second, when success is defined in terms of total cost of bad results, "solutions" which shift cost from one place to another (or just as importantly from the present to the future) are seen for what they really are: irresponsible and ultimately ineffective. The product we need to produce is a picture of where we've been and where we're headed with the costs of bad results. The analysis should have an historical and forecast component. Taken together, these provide a fiscal baseline for our work on repair costs.

What do we do with it once it's done?: Two uses: first as a tool to measure our success or failure. We need to track whether the strategies we develop to produce desired results are working in fiscal terms. The cost of bad results is one of two kinds of baselines we can and should use to measure the effectiveness of our work. The other kind of baseline is the one developed for each of the benchmarks of well-being. Second , we can begin to think about the long term financial benefits of improving the well-being of children and families and communities in real dollar terms. This could lead to new ways to think about financing the investments in prevention necessary to make this happen. We can ask ourselves a second question: "What expenditures are embedded in the total cost of bad outcomes which are now devoted to turning the bad cost curve?" This starts to get at the portions of our agenda for children and families which could be part of the solution and not the problem. Developing a "cost of bad results" analysis is not a panacea. It is one of several tools which make up a new approach to result based decision making and budgeting, designed to improve the long term well being of children families and communities. By itself, an analysis of bad results may not mean or do much. As part of a larger effort to reshape our budgeting and decision making systems to focus on results, it could be a powerful new tool in a more disciplined, and maybe more effective, approach to deciding about our children's future.

 

 

 

 

 


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