The state of California is up against an interesting problem - How do you do more with less? I have always found the process of public policy decision making fascinating. The process is well modeled by Neal Mitchell's public policy triangle. It is simple: decision makers must decide which initiatives to fund in order to create the most value for their constituents. If you follow Steven Covey's example of starting with a defined end state: the goal is to achieve stasis through creating the most value for your constituents by funding the right initiatives, while keeping a balanced budget.
Yet something changes when public policy decision makers are faced with large budget cuts: panic enters the decision making process. The major issue is that the budget becomes the primary focus and the end state of creating value is lost in the panic. This usually leads to broad cuts across all programs to keep the budget balanced; which in turn leads to a drop in the value that is being created. This is where the second order effects of panicked public policy decision making get interesting; the drop in value is often not proportional to the cuts made, it is exponential. The reason this happens is that broad based cost cutting handicaps the initiatives by doing a little of everything but not enough to satisfy anyone.
Understanding why this happens is important and has application outside the realm of public policy. Broad based cutting makes the fundamentally incorrect assumption that all initiatives are equal. A closer look at a portfolio of initiatives through strategic planning and decision modeling will reveal that there are some initiatives that increase value, and some that create little to no value; ultimately acting as a drain on resources.
The correct way to balance a budget in the face of huge cuts is to maintain the focus on the end state of creating value. Decision makers that successfully execute this practice find that they can cut a sizable portion of their initiatives and still create the same value by continuing to fund initiatives that are creating value. The most successful decision maker will continue to cut even the least-producing-value-creating initiatives and reinvest the money, time, people, and resources into the top tiers of the most successful initiatives. This is not as easy as it sounds because it often means layoffs, giving up pet projects and hurt feelings, but the people who able to execute end up creating dramatically more value with fewer initiatives.
This practice applies to personal productivity and creativity. It models the end state Merlin Mann is teaching in his blog 43 folders and David Allen teaches in his book Getting Things Done. The premise is simple remove the (or automate the necessary) things that create little to no value in your life, intensely focus on the things that do, and the end result will be a dramatic increase return on investment. Now if only we could get the decision makers in California to rationally decide which initiatives to cut and which to keep, instead of dealing with broad based cuts; I think we would see see a much better use of our tax dollars.