Rolfe McCollister: Government model can’t sustain itself

By:  Rolfe  McCollister





We all see examples in this new global marketplace and on Main Street that many business models that were successful and even thrived in the past are now in decline.

These are “change or die” moments, when those in charge will embrace innovation and create better business models or products, or they will languish in failing practices and perish. The free market will determine the winners without mercy—especially when the taste or demands of customers change.

Of course technology has been a great disrupter. Just look at the impact of the digital revolution on Kodak, Encyclopaedia Britannica or Blockbuster. Beware.

But the threat is not limited to the private sector, and it appears that some who work for government institutions think they are exempt from the real world.

State and local government, as well as our K-12 and higher education institutions, often act as if they are immune—so essential that the public must unquestioningly support their continuation. They are in for a rude awakening.

Many of the institutional models they created decades ago are not sustainable and are on a collision course of rising costs (salaries, benefits, pensions) and limited or shrinking resources. The funding model isn’t working, and government has failed to innovate or embrace change.

Taxpayers may feel certain government functions can simply go away. Don’t need it. Don’t want it. Don’t want to pay higher taxes just to keep someone in a government job. Who can blame them?

The taxpayers also are demanding results, including better service, greater efficiency, priority budgeting, outsourcing and restraint on the expansion of benefits for public employees. They want new models for the future, just like in business. Government institutions must respond. In fact, it’s long overdue.

Look at our own local government here in Baton Rouge, which is proposing this month to raise the minimum hourly wage for its employees from $7.25 to $9.30, a 28% increase. New workers get 12 sick days and can carry forward up to five years worth of sick leave. Employees already get an automatic 3% annual pay increase until they reach the cap for their position, and can get full retirement after 20 years.

Also, the mayor is proposing a 2% raise for all employees after a 2013 compensation study showed they are behind their peers in salary. The same study also showed East Baton Rouge has more generous benefits than similar cities, but no one is talking about reductions there.

The fallacy lies in the comparison to other government employees who themselves are in the same old model and on the same collision course.

In the private sector, the minimum wage is $7.25, eight sick days are typical (U.S. Labor Department statistics), 401(k) plans are replacing defined pensions and there are no civil service protections.

Government needs to see the real picture. If it doesn’t, this is going to be one helluva train wreck.

Reluctance to change is not a new phenomenon, as brilliant people in the past have noted. For instance, Albert Einstein said, “We cannot solve our problems with the same level of thinking we used when we created them.” Are we expecting the elected officials and government staff who created the original model to fix it? Einstein also said, “Insanity is doing the same thing over and over and expecting different results.”

The late Steve Jobs said, “Innovation distinguishes between a leader and a follower.” I think you would agree that Apple, the company Jobs built, is one of the world’s leading companies. But I recently read a column by James Stewart in The New York Times that reported, among other things, that Apple was teetering on bankruptcy in 1999 while rival Microsoft flourished.

Things can change and innovation rules. So, by January 2015 Apple’s market capitalization had become the world’s largest and hit $683 billion, more than double Microsoft’s $338 billion. Stewart wrote, “Its free cash flow of $30 billion in one quarter was more than double what IBM, another once-dominant tech company, generates in a full year.” No bailout by taxpayers for Apple. Stewart noted, “The most successful companies need a vision, and both Apple and Microsoft have one. But Apple’s was more radical and, as it turns out, more farsighted.”

What is the vision of government and education leaders? Are they looking ahead at trends and responding by creating sustainable new models? There is no tax increase bailout coming, so what are they waiting for?

In other words, do they see the light at the end of the tunnel—and realize it’s a locomotive?

House District 66 endorsement

The runoff election for Louisiana House District 66 will be Saturday, March 28. As I stated here in the primary, I believe Buddy Amoroso is the best choice. He is very familiar with the issues. His record as a conservative has been consistent, and his actions on the Metro Council have shown he is ready to step into this seat. Amoroso will represent the people of District 66 well.

New jobs keep coming

Louisiana and Baton Rouge continue to have good news, rankings and records to celebrate.

  • Louisiana reached an export record of $65.1 billion in 2014, according to the U.S. Department of Commerce. The 2014 gain marked the sixth consecutive year of export growth for the state. Louisiana ranked sixth among U.S. states.
  • Livingston Parish officials, LEDC and Gov. Bobby Jindal announced that EPIC Piping would build a $45 million pipe fabrication facility. The project will create more than $30 million in payroll and over 560 direct jobs, earning an average salary of $56,000.
  • Site Selection ranked Baton Rouge second in the United States among major metropolitan areas for the number of deals that located here in 2014. This makes the fifth year in a row that the Baton Rouge area ranked in the top 10. Among states, Louisiana ranked in the top 10 at No. 9.
  • Jim Clinton, president and chief executive officer of Central Louisiana Economic Development Alliance, called the project “transformative” for the Alexandria-Pineville area. He was referring to the $2.4 billion American Specialty Alloys plant complex announced recently by Gov. Bobby Jindal. This aluminum manufacturing project is expected to create 1,400 jobs.

Let’s raise our cups

I mean coffee cups—filled with dark roast Community Coffee—in honor of the late Norman Saurage III. A business and civic leader, he spent almost six decades working at his family’s company, Community Coffee, founded by his grandfather in 1919. Saurage started driving trucks and rose to president and chairman. He and his wife, Donna, shared a passion for education, and they and the company have donated generously to help children. He will be missed. We extend our thoughts and prayers to his wife, family and friends.

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