STUDENTS

Easy as A-B-C
Students take on somerville budget overhaul

SOMERVILLE, MASSACHUSETTS Mayor Joe Curtatone received an early Christmas present when he stopped by the Burren, a popular Irish pub in Davis Square, not far from Harvard Square, one night last December. In the back room, he joined a large group of Kennedy School students who were celebrating the end of the semester. Coaxing the energetic Curtatone up to the music stage, the students presented him with their gift: a simple three-ring binder, wrapped in a ribbon and bow. Curtatone held the notebook above his head like a trophy. “You’re making me look good,” he said with a grin.

The notebook, containing the students’ final class assignments, was the culmination of a unique partnership between the Kennedy School and a city government. Last fall, 60
students from Kennedy School Professor Linda Bilmes’s budget and financial management class, STM-411, were enlisted to help fulfill a promise the 37-year-old Curtatone made during his 2003 campaign for mayor: to improve the city’s fiscal health and deliver services more efficiently and cost-effectively to Somerville’s 77,500 residents.

A significant part of Curtatone’s plan will be to transform Somerville’s line-item budget to a performance-based budget. While a line-item budget shows what things cost, a
performance-based budget breaks down what is actually spent on the myriad services and activities that are performed on a daily basis, which, for a city the size of Somerville, can total in the thousands, from processing a building permit application, to filling a pothole, to responding to a four-alarm fire. Knowing the costs of carrying out these tasks will help managers better understand how and for what funds are being used — and how to better allocate them.

That’s where Bilmes’s students come in. Working in four-person teams, they spent several hours a week over the fall semester interviewing city officials about the jobs each of the city’s 18 departments performs. They then charted that data into “activity maps” that city managers will use to do the requisite number crunching. The new budget should be in place in 2006.

Activity Based Costing (ABC) is commonly used in the private sector, Bilmes explains, where companies “understand their costs very well because every penny of cost saved is a penny of profit.” The public sector operates differently. “Most cities and nonprofits have costs, not profits. Their revenues are not usually set up in a way that offsets their costs. ABC helps determine what it costs to fill in a pothole, for instance, how much is idle time, and how it could be done for less, and more effectively.”

Somerville’s partnership with the Kennedy School began last year when Curtatone met Bilmes at the Institute of Politics’ biennial New Mayors Conference. Bilmes had given a presentation on performance-based costing, and a lightbulb went on in Curtatone’s head. He figured that hiring a professional consulting firm might cost the city anywhere from $40,000 to more than $100,000. Kennedy School students, on the other hand, bring plenty of professional expertise to the table, which costs only their time, energy, and effort. Why not get them involved in helping the city transform its own budget?

Impressed with Curtatone’s enthusiasm and vision, Bilmes decided to make a class project out of it. The Kennedy School’s Rappaport Institute for Greater Boston pitched in with a small grant to cover the costs of students’ transportation and other incidentals, along with some logistical assistance.

“This classwork isn’t just a problem set, where if you screw up, who cares,” says course assistant Brendan Dallas MPP 2005, whom Bilmes credits for holding the project together. “This is taking skills learned at the Kennedy School out of the theoretical and applying them in the real world.”

“It makes sense to use the resources of a university for
community building,” says Melody Flowers MPP 2005, whose team worked with the fire department. “It’s a two-way street. We learn from the mayor and the fire chief, who are seasoned professionals in their own right.”

“Many mayors are being elected on this kind of platform,” observes Mid-Career student Stephanie Sanchez MPA 2005, who had served as a selectwoman and deputy mayor for the city of Greenwich, Connecticut, and worked with the Somerville Police Department. “It’s what citizens expect from their government.”

“Real-world experience is a tremendous thing to have in your back pocket,” adds Dan Newburger MPP 2005, who worked with the Department of Public Works. “Anyone can apply this to whatever they will be doing after the Kennedy School.” — JB