A recipe for fiscal trust: part II
In this second part of our series expanding on our paper for the Institute on Municipal Finance & Governance, Munk School of Global Affairs, University of Toronto for Bang the Table, we show that five ingredients are needed for building public trust in general and fiscal trust in particular: information; communications; engagement; credibility; and earmarking of funds. The main finding of our work is that no one of these works on its own: all of them need to become part of the culture of government.
How do governments build fiscal trust?
In part I, we explored different definitions of trust and proposed a continuum of trust, mapped onto a typical public engagement process. The most important takeaways are that there are different types of trust that feed into each other and that the process of building trust is continual – there is no check-box for “trust building” on the public servant to-do list. In this article, we focus on what steps are needed to build fiscal trust, and look at the different inputs and actions needed to produce it.
The continuum of trust works as a general proposition, but we found that citizens trust their governments to do some things more than others. For example, research supports what many of us intuitively suspect: people are reluctant to pay more taxes and in particular are reluctant to shoulder short-term tax increases for benefits that don’t arrive until well into the future. Why? Two academics, Alan M. Jacobs and J. Scott Matthews, point to what they call “cognitive myopia”: citizens simply do not trust that long-delayed policy rewards will be delivered.
When taxpayers pay now for benefits that will not come until the future, this ask is based on the assumption that politicians will maintain their original commitment to deliver them. Yet, as we have seen time and time again, elected officials face pressures to divert the resources to other purposes, and changes of government may lead to shifts in priorities, moving decisions away from previous commitments. Over time, the temptation to divert the funds grows.
Jacobs and Matthews found that the farther into the future the policy tradeoff comes, the lower public support for the policy. However, the more people believed that politicians were good at carrying out the kind of task that was proposed, the less sensitive they were about timing. And the more transparent governments are in the short term about how money is being held before it is spent, the more time the public is willing to wait for identifiable returns on their money.
These findings, and our earlier exploration of trust, led to our identifying five elements for fiscal trust (of which the first three may be applied to all trust-building efforts). Each of them is critical, and none is sufficient on its own.
1. The importance of information
One way that governments around the world have been working towards transparency and clear communication with the public is through open government initiatives. Open government is typically framed as government that is transparent, accountable, and accessible/responsive.
The open government movement is built upon the assertion that in order for citizens to understand and trust the policy choices that governments face, they must be provided with clear information. Information can come in many forms and be distributed any number of ways, but it must be accessible, understandable, and relevant. Open data is one output of open government and is generally understood to be data that can be freely used, shared and built-on by anyone, anywhere, for any purpose. Studies on participatory budgeting, for example, note the importance of government officials’ sharing technical and budgetary data, as well as being transparent about policy development and decision-making processes.
Open data is a hot topic these days, but just making information available is not sufficient to change public perceptions or increase trust in government: a more deliberate approach is required. Open data cannot stand alone; they need to be viewed as an input into broader open government efforts in which all actions taken, including the releasing of data, are in pursuit of government’s being more transparent, open, accountable, and accessible.
2. Communicating the Information
Even in the best of all possible worlds, where governments produce a surfeit of information, a central tension still needs to be resolved: how can it be effectively communicated?
Good information tells a story. Given the current information-saturated environment, the search for a narrative that can make data come alive, or provoke an emotional response, is understood as an effective way to make information “stick.” Coupled with sophisticated marketing campaigns, a good narrative can be a persuasive tool.
The importance of charismatic leadership also cannot be underrated. In Los Angeles, mayor Antonio Villaraigosa was an impassioned and effective advocate for a regional sales tax for new transit; in London, mayor Ken Livingstone rallied politicians and the public alike to implement the city’s now-famous congestion traffic pricing system.
Yet, information and even great stories are still not enough. Building trust must clearly link the information to the choices under consideration, and make the public genuine participants in public policymaking on long-term investment.
As trust in government has declined, citizens have demanded more involvement in decision making, especially with respect to taxing and spending decisions. There are often statutory requirements for public consultation meetings for environmental assessments, annual budgeting debates, and land use planning. But progressive institutions already know one “dog and pony show” public meeting isn’t enough to bring local knowledge into the process to strengthen the quality of decision-making.
Our continuum of trust reminds us that trust building takes place through repetition. The shift to consistent and thoughtful public engagement efforts will require new expertise inside government agencies. For one, genuine engagement is labour-intensive. It requires that government and agencies develop new roles as enablers, negotiators and collaborators as well as facilitators. The public needs to be engaged early on when their input is most influential. And participants need to represent a balanced and inclusive cross-section of interests, so they can bring clear, evidence-based information and assessments to the table.
These tasks requires adequate organizational resources and commitment. Communities will need sufficient time and enough energy to learn about the issues and participate in a meaningful way, which can be hard. These requirements are the “new normal” and need new allocations for staff, budgets, and political support including regular reporting back into decision-making bodies such as municipal council. Most importantly, engagement never stops: it becomes a series of tasks built into the work of government.
4. Building credibility
Governments need to establish, and regularly point to, a track record of successful projects that are delivered on time and on budget. And building this track record is a challenge, given the small number of large infrastructure projects that have actually achieved this aim.
Activating transparent and measurable tracking systems can mitigate uncertainty, and help build fiscal trust. But transparency alone is insufficient to build trust – a system is needed that will allow governments to track and reward contractors who deliver on time and on budget. Matti Siemiatycki proposes a performance tracking system that will, over time, help cities develop predictive models to estimate the likelihood of cost escalations under various conditions.
To reinforce transparency and accountability, progress reporting should be regular and publicly accessible. Cities routinely share budget and finance information. Now it’s time to do the same for major projects so that people know what they are paying for and when. Some cities, like Los Angeles and New York, post clear, accessible and regular progress reports on major infrastructure projects, whether through high-level dashboards or detailed reports. This should be standard practice.
5. Earmarking funds
Finally, to build fiscal trust we need transparency on how money is raised and spent, connecting those who benefit and those who pay. This way expenditures and financing are seen as efficient, accountable, transparent, and fair.
We note the longstanding tension between the demand for more investment and services and the public’s willingness to pay. Earmarking taxes – when funds from taxes are raised for a specific purpose – is one way to mitigate the public’s uncertainty about funds raised for large-scale projects. Earmarking provides assurance that the revenues cannot easily be diverted to other purposes, making it easier for the public to track the funds spent.
Earmarking has its supporters and detractors. Governments often resist earmarked funds as limiting their financial flexibility, while others argue that public spending should be determined by policy decisions, not the amount raised by dedicated taxes. But, as Richard Bird and Joosung Jun note, “Politicians like earmarking as a means of reducing taxpayer resistance to higher taxes, and taxpayers like the greater accountability they perceive with respect to how their tax dollars are spent.”
Until governments can consistently deliver large infrastructure on time and on budget, earmarking can help assure taxpayers that their funds will be used for their intended purpose – thus building fiscal trust.
What does this framing of trust mean for those charged with convincing the public to part with their money in support of government activities, including infrastructure spending? Building trust to raise funds for large infrastructure projects in particular is a monumental task. These projects are likely to be challenged by cost and time overruns. Our conclusion is simple: there are no shortcuts. The five concrete and practical steps outlined above must all be taken to build fiscal trust. Cities need to invest the time and resources to build trust through all of the steps outlined, and do so in perpetuity.
Header Photo: Tim Evans/unsplash/cc