On Measure A, Mahan forgets Biz 101
The failure of gov't agencies to follow fundamental good business practices led to the Great Recession of 2007-9, as regulators allowed subprime mortgage lenders to run wild, kicking off a global collapse of financial markets and years of lost earnings.
SJ's "pragmatic progressive" mayor lines up behind the county's fiscally irresponsible, strategically flawed, and economically illiterate Measure A. Opp Now unpacks the measure's three big business no-no's in this exclusive.
Matt Mahan should know better. Santa Clara County's rushed purchase of multiple troubled hospitals was always an unsustainable and a wrong-headed expansion of county responsibilities and risk.
But last week, SJ's "pragmatic progressive" mayor compromised his fiscal-responsibility credibility by endorsing county Measure A --a 5/8 cent sales tax increase that aims to use local taxpayer largesse to essentially bail out the county's reckless and unaccountable financial mismanagement.
This weekend, then, we take a little tour back to our college Econ 101 and Business 101 classes to remind our gentle readers of the fundamental business rules that are being broken by the county--and forgotten by Mahan and other supporters of Measure A.
Good business rule #1: Sweat the financial details--then sweat 'em again.
Use rigorous analysis and risk-management tools to avoid capital expenditure overextension and dangerous exposure. There were buyers--at the right price--for hospitals like O'Connor; the county didn't need to bust its budget to keep them in operation.
Good business rule #2: Fiscal planning trumps performative signalling.
Expansive, disciplined fiscal planning is fundamental for concerns like the county (and city, for that matter), with multi-billion dollar budgets. And core to that planning is cost & revenue forecasting, which considers all potential scenarios (like loss of fed dollars) before taking on large investments. Making sure you don't get caught short because you chased headlines should be Job #1 of county management--a task at which they failed palpably.
Good business rule #3: Don't go it alone.
Use partnerships and market forces to maximize your strengths and spread the risk. There is no reason the county has to own so many hospitals--no other county gov't entity in CA has such a broad and expensive health-care exposure. "We must run it" is a hubristic mindset that leads to massive cost overruns and long-term insolvency.
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