How many Firehouses does your town need?
The example of Firehouses provides an interesting discussing for balancing government spending and services. Winegarden writes,
In Beyond the New Normal: Accounting for Government, we illustrated this point using the example of a firehouse. Establishing a firehouse in a town without one provides tremendous value. Now, trained professionals can fight fires and reduce the dangers and damage created by fires. If the town is large, a second firehouse will also provide tremendous value, although slightly less value than the first. There comes a point where funding an additional firehouse does not sufficiently improve the town’s safety, relative to the cost of establishing the firehouse. Paying for firehouses beyond this level detracts from the town’s welfare. (ibid p. 7.)
My town of Los Altos chose to have two fire houses, due to the response time. Further, they decided to outsource them to the county. There were many argument for having the county run the fire department. First, it was less expensive since there was an economy of scale to having a large organization such as the county manage the fire department; they can backup and shift resources as needed without additional hiring. Additionally, managing more public employees comes with quite a burden and risk. Due to the large unfunded pension liability for public employees in CA, public employees pensions put a city at great financial risk. See our previous blog Pension Reform.
It was not without a few missteps. They county personnel did not know the city geography well, and managed to drive a brand new half million dollar fire truck over a light wooden bridge, and everyone ended up in the creek! Nonetheless, it has bee a good partnership. This just brings up another wasteful government practice, which is driving a fire truck when it is simply a medical emergency and all that is needed is an ambulance. If this were a business, they would not likely do this.
Los Altos chose to outsource fire services to the county, minimizing cost and putting some of the risk for the employees unfunded pension liability back on to the county. Simply, Los Altos minimized expense and risk, while maximizing service. This is generally how government should be managed. Getting local government spending down to 10% of GDP will require a lot more than this, but it is a start.