THE BASICS OF EQUITY IN BUDGETING.

• Author: Kavanagh, Shane

Many local governments are taking an interest in equity in budgeting. But what does this mean, and how can it be put into practice?

WHAT IS EQUITY?

It helps to draw a distinction between equity and equality. Equality means treating all people the same. Equal treatment of all constituents has been a longstanding aspiration of local governments. The emphasis on equal treatment arose from a desire to combat the corruption and favoritism that was prevalent in local government in the late 1800s and early 1900s. (1) Most people would consider it wrong to distribute local government resources according to family background, personal connections, or political affiliation, but this was once a common practice. The push for equal treatment addressed this problem by calling for everyone to receive the same resources.

Equal treatment is also a moral imperative for some local government services. For example, the 14th Amendment states that all people should be treated equally in the justice system.

Though equality is a time-honored and important principle in a democratic system, it is not perfect. There are cases where the principle of equity has much to offer. Equity means people could be treated differently in the interest of giving all people access to health, safety, and welfare [the fundamental purposes of local government (2)]. Exhibit 1 is a popular depiction of the essential difference between equity and equality.

Why is equity coming to the forefront now?

Just as the principle of equality gained currency in public management in the early 1900s in response to conditions of the time [pervasive corruption], the principle of equity is coming to the forefront today because of pervasive and material differences in wealth, safety, and health, particularly along racial lines. For example, the United States has the highest level of income inequality among the top seven largest industrialized democracies. (4) This is true regardless of race, but the problem is exacerbated when race is taken into account. For example, the income gap between Black and White people has remained essentially unchanged since 1970. (5) The disparities become even more pronounced when looking at the wealth gap. In 2016, the net worth of a typical White family is almost ten times larger than that of a typical Black family. (6)

This is important because the United States is a democratic country where popular support for our system of government is premised on, in no small part, "the American Dream." Though there is no universally accepted definition of the American Dream, the opportunity for prosperity, success, and upward mobility are part of what the American Dream is generally held to include. Education, public safety, and essential services provided by local government support people's ability to pursue the American Dream. If people don't have equitable access to these services, it would be hard to argue that they have equitable access to the American Dream.

What are the practical concerns with equity in budgeting?

A fundamental tension between equality and equity has to do with fairness. Perceptions of fairness are essential to any decisionmaking system--without it, the system will likely fail. (7) One of the great advantages of equality as an organizing principle for budgeting is that it provides a simple and straightforward definition of fairness: everyone is treated the same. Equity brings a different perspective to fairness, one that is more nuanced. With this nuance comes practical concerns about measurement and allocation of resources.

For example, let's take another look at Exhibit 1. It implies that as long as all the flowers make it over the fence, success has been achieved. However, real life is often not so clear. Consider schools teaching children to read. Imagine the fence represents reading at grade level. Now imagine that the tall flower represents a talented and/or hardworking child who would exceed the standard with the given level of support. Is it acceptable to remove the support so that child now only reaches the standard, for the sake of giving extra support to another child?

Another conundrum posed by Exhibit 1 is the redistribution of resources. Imagine our flowers paid taxes [local governments can only wish]. Imagine it is a leaf tax, where some amount is paid for each leaf. Would the taller flower be pleased with an outcome where it pays more in taxes yet gets less support and ends up with the same amount of sun as everyone else? The situation might not be so different with a wealthier taxpayer who feels they aren't getting adequate value for their contributions to the local government budget. Psychological experiments show that people who feel they aren't getting an adequate return from their participation in a shared resource [like a local government] will look to withdraw their participation. (8)

Finally, Exhibit 1 does not explicitly distinguish between equity in opportunity and equity in outcomes. Put another way, is equity intended to "level the playing field" or "even the scoreboard?" This difference is critical for two reasons. First, the type and scale of government intervention in the community would differ dramatically, depending on the government's goal. Second, anytime government proposes to change the scoreboard, hard questions about fairness may soon follow--especially where a citizen's own agency has an important impact on the extent to which they achieve the...