Dan Dunn’s Podium

As I was reading my daily blog circuit, I asked myself, “How much do I care about this Amazon and Macmillan thing, anyway?”  After thinking it over for a while, I decided that I care quite a bit.  Enough for a blog post, even, and everyone knows that if it’s blog worthy, then it is vital.

So what is the Amazon-Macmillan thing, anyway?  The short version is that Macmillan said that it wants to sell its ebook-for-the-Kindle at prices up to $15, and that’s $5 more than Amazon has set the price at.  Amazon’s reaction was to pull all Macmillan ebooks, hardcovers, and softcovers from its store – no sales.  After a couple days Amazon publicly relented, but the store still isn’t back to normal.

First, I’ll give two reasons that I don’t care about.  I don’t care about is the Kindle.  I hate the Kindle’s DRM, and I’m mildly surprised that so many otherwise-astute customers are willing to go along with it.  Why on earth would you “buy” a copy of a book that Amazon can remotely remove from your possession without your consent ?  You can pry my books out of my cold, dead hands is the way I feel about that type of thing.

The second thing I don’t care about is the price increase.  One company is trying to keep prices low so that it can create a huge marketshare useful for future profits.  One company wants to have a higher profit margin on bestselling books.  I couldn’t possibly care less which one wins; they’re both trying to extract money out of me.

Here’s what I do care about: my relationship with Amazon.  I’ve been their customer since 1998.  (I even worked for them for a while in ‘98-’99, when they bought PlanetAll.com).  I use them because they’re easy and they have a decent price.  I use them for their recommendations.  I use them to let me know when my favorite authors and bands have new releases.  I use them to complete trilogies and to find the early releases of my new favorite bands.  I order from them so much that I bought Amazon Prime for $79/year, which gives me free shipping.  Think about what my order volume is, given that I would spend more than $79 in shipping!

But I love my John Scalzi.  I love my Charles Stross.  I love my Orson Scott Card, Vernor Vinge and Neal Asher.  And Amazon isn’t giving them to me!  What kind of book store would I go to that wouldn’t sell me these authors?  What kind of recommendation engine would skip these authors who have provided me with so many hours of amusement?  The answer is: not one that I want to spend a lot of time in.

I’m not going so far as to boycott Amazon.  When they have what I want at the right price, I’ll still buy it.  But they’re no longer my go-to vendor.  They’re no longer the place I go to find the new album or the new book that will keep me interested.  I don’t trust them to give me the right answer anymore.  I now know that they’re willing to throw away 1/6 of my bookshelf in order to wield pricing power on a product that I’ll never buy. Amazon broke my trust this weekend, and I’m no longer interested in what they think I’ll find interesting.

I logged in to Amazon tonight and set my Amazon Prime to non-renewal status.  They didn’t ask why.  I guess I know why not: they don’t care about what I want, anyway.

For the last several years I’ve been pushing to change the way budgeting is done in Arlington. I’d like to explain my proposal, argue why it is a better process than the one we have today, and make some points about why now is a very good time to make the change.  (This is only about budgeting expenditures, not revenues.)

First, let’s look at the current town budget, in rough numbers. For the sake of example, if the budget was under $1 million, it got lumped into another budget. (You can see a much more detailed version of the FY10 budget here).

Those two last line items are not like the others. I know what the DPW does.  I know what schools do.  I know that the capital budget buys buildings and trucks, and I know the MBTA runs buses in town.  But pensions and insurance are different. They’re not a department, or a service, or a town activity. These two line items are different because they are an aggregation of costs that are incurred in other budgets. The insurance is the cost of providing a current health insurance benefit to our town employees and retirees. The pension is a combination of current and future obligation to provide a retirement benefit for our town employees.Pensions and insurance are related to all of the other line items, but they are secondary, not primary, to a town function.

So what drives the size of pensions and insurance?  Basically, it’s the number of town employees, and the amount of money they earn in wages. The town spends a bit more more than $50 million in wages. That $50 million number can’t be determined from the budget information I posted above; I did a back-of-the-envelope calculation from the various departments’ budget details.

To put it another way: for every dollar the town budgets for wages, it must also budget another $.50. For the purposes of this proposal, I’ll call those numbers “salaries” and “overhead.”

This is the root of why I don’t like the current budget process. Say you’re the Police Chief, and you’re looking a tough budget with unpleasant choices. You’d like to hire an additional patrolman, and you manage to scrape $50,000 out of your expenses budget in order to make it happen. That didn’t leave any budget for the $25,000 in overhead. A different example: say you’re the school Superintendent, and you’re trying to find a way to keep class sizes small in your biggest elementary class. You can’t fire any kids, but you can hire a couple more teachers – you forgo some text books, delay a network upgrade, and find the $100,000 in your budget to hire those teachers. Again, that didn’t leave any budget for the $50,000 in overhead for those new teachers.

I know we hire smart administrators in Arlington. I am certain that the people making these hiring decisions know that the employee benefits cost money. Still, the current budget process doesn’t provide any incentive for them to account for it. Their professionalism keeps them from taking advantage of the system. But when the toughest decisions are being made in the wee hours of the morning, when the edge cases are being decided, they have the luxury of making the overhead cost someone else’s problem. I’ve been on the Finance Committee for five years now, and I know that it happens. I interview the budget writers, I quiz them on their decision process, and I know that it happens. This statement is not meant to blame the town’s administrators. “You get what you measure” is one of my favorite aphorisms. We measure our administrators to deliver services on a limited budget, and we can’t hold it against them when they do that with some creativity.  With our current budget process, the cost of that creativity is hiring decisions that don’t account for the full cost of the employee.

So here’s the alternative. Reshuffle the budgets such that overhead is included in each departmental budget. Apply the cost of the health care and pension at the same place that it is incurred, right with the salary. Here’s what my new budget would look like, roughly (the by-department overhead budgets are very rough estimates):

Some key points about the model:

• It’s a net zero-budget change. This doesn’t make any changes in service levels, doesn’t move money from one department to another, and doesn’t save any money (at least not in and of itself).
• A few people I shared this idea with were concerned that it would be a health privacy (HIPAA) violation to print what insurance various employees are getting. I’m not suggesting that we do that. I’m suggesting we use average healthcare and pension costs, based only on salary and other already-public information. Departments don’t get charged for their individual employee health care decisions. They get charged for the average cost, multiplied by the number of employees.
• Computationally this is pretty easy. At the start of every budget cycle the Town Manager (or Comptroller or Treasurer or whomever) would publish that year’s overhead rate, and every department would get it in their budget spreadsheet.
• The insurance budget is always a difficult one to predict, not least because the town sets the rates in December, halfway through the budget cycle. This plan doesn’t help or hurt that risk. It still needs to be managed.
• No overhead is charged when there is no salary paid.  That’s why budgets like the capital budget would be unaffected.

There’s another interesting side-benefit to this method.  The town’s labor contracts are negotiated in two chunks, one by the Town Manager and the other by the school Superintendent.  The current system doesn’t really reward a specific budget when there is a negotiated health care savings.  The new method would permit the parties to come to an agreement that is more specific to the union in question.  If the firefighter’s union wishes to trade higher salary for a smaller health benefit, the new budget system would be able to accommodate that.  Likewise, if the teacher’s union wishes to negotiate a lower salary for a larger health benefit, that isn’t difficult to place into the budget.  This idea isn’t core to my proposal, but it’s worth mentioning.

I’d also like to make the case that now is a better time than any other to make this change:

• We’re going into the next year without a five-year plan. If we change the budgetary rules in the middle of a planned period, we’d also have to update the plan, and that is contentious. By making this change now, we get to tackle the challenges separately.
• The town is already in an introspective period. The Town Reorganization Committee is already meeting, and this is a perfect topic for it to consider.
• The town’s budget process is already changing. Nancy Galkowski has been the budget’s shepherd for a long time, and she has moved on to a different job. The process is certain to change as a new cat herder is brought to the process.

This overhead-based budget process brings the true costs of hiring closer to the hiring decision. Our town budget makers will be reminded of the actual cost of hiring at the time they make their budget. Armed with that information, they can make the best, most-informed decision in the town’s best interests. Now is the right time to make the change.

So on Tuesday Massachusetts will have its first open Senate election since 1984.  A 26 year wait, and this is the best crop of candidates we can come up with? Kinda depressing, if you ask me.

The candidate I’m most passionate about is Scott Brown – and why he should never be a US senator.

First and most is what he thinks about gays.  He thinks that gays shouldn’t be allowed to marry, and he thinks that the states should vote on the question.  Vote on it? I’ll let him vote on my marriage as soon as he lets me vote on his.

I’m equally inflamed by his preferred policy regarding high school gay support groups.  He thinks that students should get parental permission before attending the groups!  Whatever your position on gay marriage, just think about some poor scared teenager who doesn’t know what the heck is going on – and Scott Brown thinks that poor kid needs parental permission before getting help from a peer group.  Brown might as well give the kid a teen suicide how-to guide with the permission slip.

I know there are a lot of conservative voters out there who don’t care about the social issues but see Brown as a voice of fiscal sanity.  The thing is, Brown isn’t a fiscal conservative.  He’s a big-government, big-regulation, tax raiser.  He may even be more dangerous because he claims to be fiscally conservative.

If you’re thinking about voting for Brown because of his fiscal chops, please consider the following:

• He urged people to vote against Q1 to end the income tax.
• He doesn’t support this year’s question to roll the sales tax back from 6.25% to 3%
• Repeatedly voted to override Romney’s (rare) spending vetoes
• He lists the MA health care plan as a major accomplishment, but the average Massachusetts family’s health care insurance premium rose from $9,867 to $13,788. A 40% increase! 21% higher increase than the national average.
• He joined the Democrats and passed legislation requiring Massachusetts to join the Regional Greenhouse Gas Initiative in a cap-and-trade pact among Northeastern states requiring power plants to reduce emissions or to buy credits from cleaner industries. “Reducing carbon dioxide emission in Massachusetts has long been a priority of mine,” Brown said in a news release in 2008. “Passing this legislation is an important step . . . towards improving our environment.”

I am deeply sympathetic to the statement that one-party rule isn’t healthy for Massachusetts.  But is this really the kind of Republican you want to encourage?

I was watching state Senator Galluccio’s legal problems as 2009 drew to a close, and I cynically was thinking to myself about how my post would be different if he made it to 2010 before he resigned.  And he did make it to 2010, making half of my lines obsolete.  Multiple arrests, multiple innocent victims in the hospital, and he finally went to jail and resigned today.  He made the new year, the new decade, but I still think he’s a new year story.

The story by itself is just sad.  It’s the story of one man’s addiction and poor judgement and how he hurt himself, his family, and a collection of random people who had the misfortune of being on the road at the same time as his drunken self.  But when you put his story into a larger narrative, it becomes a statistic, the latest chapter in a book about Massachusetts legislators who couldn’t figure out how to follow the laws that they wrote and swore to uphold:

• 2008: Senators Wilkerson and Marzilli resign under indictment, a full 5% of the senate down in one year.
• 2009: Speaker DiMasi resigns and is indicted, the third consecutive house speaker to fall to a felony.
• 2010, day 5: Senator Gallucio resigns with a letter written from jail.

Am I saying that all of our legislators are criminals?  Of course not.  But I can’t help but notice that they’re going to jail at a higher rate than the general population.

It’s an election year.  Let’s hope the voters remember it in November.  Otherwise, we risk being like my buddy Loopus: “How am I supposed to repeat my mistakes if I can’t remember what they are?”

chippy and loopus

I sent a tweet about this topic earlier, but it deserves more than 140 characters.

There are plenty of ongoing investigations about last week’s terrorist attack on the plane from Amsterdam to Detroit.  It seems safe to say that all the facts are not in.  Still, I think this post is on safe ground – there are some parts of the story that seem pretty solid.

One of the biggest mistakes that Bush made after 9/11 was to take the threat of future terrorist action too seriously.  He shut down domestic air travel for days.  That decision had a bigger psychological and economic impact than the actual physical damage of the attack.  Bush ended up inducing more terror in America than bin Laden ever did.

Are we going to learn from that?

The first reaction of the Homeland Security department to the latest attack appears to be incredibly restrictive.  Gawker has a compelling recording of a JetBlue flight’s enforcement of the new rules.  In order to prevent future terrorist attacks, the government is requiring no pillows, blankets, reading materials, TV, or bathroom breaks for the hour before landing.  (It sounds like some of those restrictions are being relaxed, but its not clear how much.)

Let’s review exactly what we’re protecting against.  Nate Silver at fivethirtyeight.com did an analysis.  Here’s a summary:

Over the past decade, there have been 99,320,309 commercial airline departures that either originated or landed within the United States.  There were a total of 674 passengers, not counting crew or the terrorists themselves, on the flights on which terrorist incidents occurred. There have been 7,015,630,000 passenger enplanements over the past decade. Therefore, the odds of being on given departure which is the subject of a terrorist incident have been 1 in 10,408,947 over the past decade. By contrast, the odds of being struck by lightning in a given year are about 1 in 500,000. This means that you could board 20 flights per year and still be less likely to be the subject of an attempted terrorist attack than to be struck by lightning.

When there’s a lighting storm, the average person finds it prudent to seek shelter.  What if I told you that you were 20 times more safe if you sat quietly with your hands in your lap for the duration of the storm.  Would you do it?  Or would you just read a book and not worry about it?

The early evidence is that the current terrorist protection system has holes big enough for an explosive-laden truck to drive through.  It appears that the terrorist was on a watch list and had been denied a visa by Britain.  Its going to be interesting to see what parts of the system designed to catch this guy failed – I’m sure we’ll hear more about that in the future.

Still, all of the early questions are whether or not the government is doing enough.  Millimeter ray inspection of all passengers? Purchasing more explosives detection? Increasing passenger pat downs?  I just don’t understand this reaction.  We have a fundamentally safe system – safer than our highways, even safer than our national lightning protection system.  Why are pundits bemoaning our lack of protections in a system that isn’t failing?

As we learn from this event, I just hope that we learn the right lessons.  Most of us are smart enough to get inside during a thunderstorm.  I worry that our government – and the media – doesn’t know that.