Closing the Gap

March 14th, 2003 by Leave a Comment

Like the rest of the nation, Georgia is facing some serious financial challenges – a shrinking tax base, skyrocketing health care costs and a slowing economy. Appropriately and understandably, the governor and the legislature are taking a long, hard look at the numbers and have asked everyone in state government to identify ways to cut costs and trim the budget.

This exercise is certainly going to force some tough decisions, and we hope that our leaders will choose the right ones. We have already seen some of the typical reactions to budget crises – eliminating salary increases, slashing slush funds and raising taxes – but rather than striking at the obvious, our leaders should seize this opportunity to dig deeply into the operations of Georgia’s government. Millions of dollars could be saved by rethinking and retooling the way many of the state’s administrative functions are carried out.

Performance audits completed in 2000 point to several areas where the state could both make operations more efficient and save substantial money. For example:

The audits show that the state has been paying twice the market rate for long distance phone services – nearly $8 million could be saved by entering contracts with qualified vendors. In addition, the audit maintains that another $5.5 million could be saved each year by restructuring how local phone service is provided. Every household in America is taking advantage of lower costs for phone service – why isn’t state government?

An analysis of the state’s construction management practices shows that upwards of $9 million could be saved each year by allowing the use of alternative construction delivery methods, such as “design-build” or “fast track” methods, which have been proven successful and are now used commonly in the private sector. 

The report indicates that the state could save over $5 million annually by using a statewide contract for temporary day labor and administrative services. One has to wonder how many other contracts could be consolidated at a savings to the state. 

An additional $8 million could be earned in interest every year if checks for sales taxes, individual and corporate income taxes and motor fuel taxes were deposited in a more timely manner. While the industry standard is same day deposits – it takes the state an average of 8 days due to cumbersome processing procedures and high thresholds for electronic funds receipt.

The auditors even found that the state is spending 14% more for overall mail operations than states using best practices.

The fact is, while this year’s problems are tough, putting together the budget next year will be even harder. Maybe some of these steps, and others recommended by the auditors, could be taken now. If not, they should certainly be strongly considered next year. 

One of the biggest problems with the state’s budgeting procedures is the fact that the majority of appropriations are brought forward as a continuation from the prior budget year. Agency heads are too quick to rely on a “that’s how we’ve always done it” approach to operations and budget requests and our leaders are too willing to accept this excuse. Our leadership should start now to build a “zero based” budget for next year that truly requires an analysis of and justification for how taxpayer dollars are spent.

As for the current challenge, Georgia businesses and families are facing the same tough decisions with regard to their budgets every day. They have to make tough decisions – streamlining where possible and doing without where necessary – and they can’t just get more money through a tax increase. The state should do likewise.

This commentary was prepared by the staff of the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (March 14, 2003). Permission to reprint in whole or in part is hereby granted, provided the source is cited.

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