The Cost of Doing Business

So just what do government services actually cost?

Do we know? Should we charge accordingly and let the free market determine whether or not it is worth the price?

For instance, what does smoking actually cost the government and should we charge that cost divided by the product usage?

Transportation. If people had to vote on projects based upon their usage and subsequent cost because of them via whatever funding mechanism, would the project be that important?

These were topics of a very lively discussion at the Mercatus Center breakfast on Friday held at the Jefferson Hotel. Speakers were Dr. Russell Roberts (thank heaven for U of Chicago!) and Maurice McTigue and they definitely were thinking outside the box.

Any thoughts along these lines?

Status of Wilder Commission Rec's

In the mail today (yes, on a Sunday), I received a copy of a JLARC study that reviewed the status of the recommendations made in 2002 by the Wilder Commission. The report finds that:

Of the 62 recommendations, 22 appear to have been fully implemented, and another 16 are partly implemented or underway." And:

There are 24 specific recommendations that remain unimplemented, including the consolidation of several executive agencies, the funding of constitutional officers, and a comprehensive review of the potential for privatizing the functions of the Department of Alcoholic Beverage Control.

As has been stated elsewhere, this last item could result in a $700 million savings each and every year. Seems as though that might pave a lot of roads, no?

But what are some of the others on the list?

Eliminate the Commonwealth's function as a power plant operator by developing the energy management process that will enable the private sector to take over the management, upkeep and upgrade of power plants.

Develop a common chart of accounts that can identify with precision the total amount of dollars spent on consultants, utilize a return on investment criteria for consultant engagements and implement periodic external reviews of consultant utilization and renewal procedures.

Remove Virginia Correctional Enterprises as a mandatory supplier for universities.

Reduce inventory balances in VDOT, DOC and ABC by 20%

Centralize distribution centers.

Standardize inventory management practices across state agencies.

And many more.

The Wilder Commission's recommendations are not a silver bullet for restraining costs. That can only come through diligence and will power. But they are a start. And it is in the long-term interest of the Commonwealth to see all these recommendations put in place immediately.

Other areas for reform: Education

We’ve been talking a lot about transportation reform, and while it is certainly the primary focus of this year’s legislative session, there are many other areas of reform being explored by members of the Cost Cutting Caucus, and plenty of areas of reform that are worthy of more debate.

One of these areas, that has been discussed previously here, is the area of school choice. Earlier this week, John Tierney had an article in the NY Times on the issue of school choice, in particular examining the very successful program in Milwaukee and the benefits it has had for African-American students in the city.

One of the most poignant lines from Tierney’s article states (emphasis added):

Radio audiences have been hearing an ad calling the voucher battle “one of the greatest social justice issues we have in the country.” The speaker is Ken Johnson, an African-American who leads Milwaukee’s school board.

You read that correctly: the head of the public school board supports giving students in his system a chance to escape public schools.

As has been mentioned before, educational choice produces competition, that leads to innovation and better opportunities for students, as well as cost-savings for states and localities.

The full text of Tierney’s article is posted in the comment section.

~whitney

Voting for Transparency and Accountability

Deviating a bit from transportation discussions, another issue dear to our hearts here at the Cost Cutting Caucus blog (and over at AFP) is accountability and government transparency.

Taxpayers- and those who write the budget-have a right to know where the money goes. How much money did an agency get last year? Why are they asking for X% more this year? Simple questions, but ones that add up to millions or even billions of dollars.

Delegate Saxman noted in his first post here that:

One of the first things that the members of the CCC, primarily freshman delegates, realized was that the actual budget document was unreadable. Yes, it is printed in English and uses arabic numerals but it really told you absolutely zero about HOW the money was being spent and if it was being spent well. Since those early days, transparency became one of our major themes.

To address those concerns, the CCC introduced and passed HB1838, calling for a transparent and understandable budget. Now, the budget is closer to being understandable, but improvements are still needed so that legislators and taxpayers alike can see where their money goes.

A couple of bills were introduced this year to address these concerns: HB544 by Delegate Morgan Griffith, and HB1473 by Delegate Saxman. HB544 requires the Department of Planning and Budget, in addition to providing copies of all agency budget estimates, to prepare an analysis of such estimates for the deliberative use of the Governor and the General Assembly. HB1473 adds more requirements for inclusion in the executive budget that is submitted to the General Assembly in December, including program measures and performance standards to be tied directly to the performance of the function.

Both measures have passed the House, and HB544 (passed House 64-36) was reported from Senate Finance this morning by a vote of 10-5. HB1473 (passed House 100-0) was also heard by the Senate Finance committee this morning, but no motion was made on the measure.

Before they even begin to talk about sending more money to Richmond, legislators must have greater oversight and endorse greater transparency in the budgeting process. To do otherwise would be irresponsible.

~whitney

Transportation: A better way

On Friday, Senator Marty Williams, Chairman of the Senate Transportation sent out a news release hailing the efforts of his committee. He states:

Yesterday my Senate Transportation Committee passed out several House measures to hold down construction costs by expanding design - build contract opportunities. Next we will closely examine expanding maintenance privatization and require the Transportation Commissioner to report each year plans and progress in privatization.

Another Senate bill sets in motion the process to amend the state Constitution to put transportation funds in a lock box. Citizens will be assured that transportation taxes are spent for transportation and nothing else.

This is great news, and it's good to see the legislature moving forward on some of the “better ways” to addressing transportation that have been discussed here on the blog. We hope that these types of efforts continue to move forward so that we can address transportation needs smarter and more efficiently.

Unfortunately, many in Richmond, including the executive branch, are still claiming we cannot wait for these reforms to kick in and generate cost savings. Yes, we have immediate transportation needs—which is why the House has dedicated a significant portion of the state surplus to addressing those needs now. That also gives time for the other reforms to be instituted, lowering costs and making sure our tax dollars are invested wisely in future projects.

Pouring long-term money into a broken machine does not make sense. Fixing the problems, and then investing wisely in future projects makes far greater sense, both now and into the future. Now that’s a “better way.”

~whitney

CCC attendance

Geoff Segal's presentation on free market alternatives to our transportation problems was thought provoking to say the least. I hope that he will post on specifics of particular projects around the country and what it takes, in legislation, to get private capital moving here in the Commonwealth.

We were joined by the Secretary of Transportation Pierce Homer and Delegates Parrish, Toscano, Lohr, Iaquinto, Sickles, Oder, McQuigg, Waddell, Cole and Bulova. There were also several legislative aides in attendance.

There was excellent Q&A throughout the program. Mr. Segal clearly made a strong case for free market solutions to a problem brought on largely by the free market.

Secretary Homer was very informative in the discussions and I personally want to thank him for his participation.

More on the Transportation Plans

In light of the recent Rasmussen poll that shows 58% of Virginians do not support raising taxes for transportation needs, it is essential that legislative leaders continue to think outside the box and push for real reforms that will address needs at a lower cost.

Chad had this post up yesterday over at Commonwealth Conservative about the House Transportation package.

Highlights, including some of the ideas that have been discussed on this blog, include:

• Support better transportation asset management and protection of higher costs for highway maintenance.
• Strengthening Transportation Partnership Opportunity Fund to help jump-start PPTA projects.

Delegate Callahan states:

"...we have developed a plan that provides immediate and long-term answers to the challenges facing our transportation system."

This should be our focus in developing a transportation plan: not only implementing plans for immediate relief, but giving serious thought to the long-term needs and making sure we are addressing those needs in a responsible and cost-effective manner.

~whitney

Council on Virginia's Future

Yesterday, I had a great meeting with Dubby Wynne, vice-chairman of the Council on Virginia's Future, and Jane Kusiak, the director of the Council.

I came away very impressed with their committment to long-term structural transformation within the operations of the Commonwealth's government. I was equally impressed with the progress that the Council appears to have made on in getting prepared to implement these necessary reforms. As we discussed, the culture of change must be embraced by willing participants within the government.

We agreed on just about every issue 1) this must be done 2) the people deserve to know that their money is being spent wisely 3) this is not politically exciting and that other efforts like the Wilder Commission have been very ineffective in really changing anything 4) that millions will be saved in the out years and that, sadly, 5) those out years will be not be soon.

This is structural change management and Mr. Wynne has recruited some of Virginia's best companies to donate their top talent to train state managers so that they can implement strategies that will work.

Mr. Wynne and I both know, from our experiences in business (his much more extensive than mine), that this will not be an easy task. We also both agreed that Virginia government is a mess but that there was no one area or person to blame but that this occurred over a long period of time. We did not get here over night and that this will not be resolved over night.

We also admitted that we have great concern for the other 49 states if Virginia is the best managed state.

Later this year, the Council will brief the Cost Cutting Caucus about their progress and how we can help. We look forward to engaging this effort that was begun by one of members in 2003 - Michele McQuigg. Thanks again Michele! Performance based budgeting and operations is on the way.

Well, they are out there.

All of the transportation plans that will be submitted this year are out for public discussion. Please comment on them as it will be the topic of conversation for the next 30 days.

What do you think of the House reforms for transportation? Obviously, I am encouraged that the House leaders have embraced such a strong emphasis on better managing the current $4.4 billion spent on transportation each year.

I must say that I was impressed to see the VDOT trucks ready to roll this morning in preparation for the snowstorm. Thank those hard working men and women who are taking time away from their families to make our roads safe this weekend.

"Piggish on America"-- A look at Virginia's spending

This one comes a little late, but I was just flipping through last Sunday’s Richmond Times Dispatch last night, when I came across this great commentary by Delegate Frank Hargrove.

Delegate Hargrove has been involved with the Cost Cutting Caucus, and he and his office are often a source of insight and innovative cost-savings ideas. In Sunday’s Commentary section, he busts a number of myths about the “budget crisis,” and really gets to the heart of the problem.

Why is a tax increase necessary when the state budget is in surplus? It seems the government's appetite for spending is insatiable. No matter how much of the people's money is confiscated through taxation, some politicians dream of more. Manufacturing a crisis is the primary tool employed by the big spenders to convince the public of the "need" to donate more of their hard-earned money.

It is a good read, and Del. Hargrove is able to break down several key myths about the state of state spending. The article really underscores the importance of the Cost Cutting Caucus and legislators who are committed to bettering the way the state operates, not just selling the public on ever-growing state “needs.”

~whitney

Crossover

Sorry for the delay in posting on this blog, but we are getting very close to crossover and it seems that all of the time has been spent in either subcommittee or committee. The good news is that the universal sense in the House is that the application of the rules in subcommittee and committee have really moved the process along this year. We will probably not have to go into session on Saturday which is a major milestone in efficiency.

While we have been busy, you would not believe how many "little birdies" have been stopping by my office to whisper in my ear their bits of information on how we can reduce spending here in the Commonwealth. Many of these ideas have been quietly forwarded and hopefully will be addressed. Most of these will never be seen or felt but will make a difference.

Just by providing this forum in the Cost Cutting Caucus and this blog, we have stimulated real action. Thanks to all who comment on this blog, email me or stop by my office. Keep it coming!

Open Thread: Cost Cutting Ideas and Suggestions

Based on a comment left at Commonwealth Conservative asking how to communicate with the Cost Cutting Caucus, here's an open thread for readers to submit cost cutting ideas or suggestions for places to investigate to uncover potential state budget savings.

Surely there are state government employees, vendors, or citizen observers who have seen or experienced areas where streamlining operations/programs, doing things differently, or eliminating waste could save the taxpayers money and improve services. Let the caucus hear from you.

More on the Business Case for Enterprise Applications

As promised yesterday, here’s a preview of this afternoon’s Cost Cutting Caucus meeting where the Caucus will be hearing a presentation from Tim Bass on the Enterprise Applications Program.

For a preview of why this is so important, and why this is a key area to begin examining potential cost-savings, here’s the introduction from Bill Leighty’s presentation Jan. 24th to the Senate Subcommittee on Capital Outlay and Special Projects:

What we learned in May 2005 …
· Due diligence activities in 2005 uncovered an amazing situation. After surveying and interviewing 46 Executive Branch agencies regarding just 26 business processes, the following was discovered:

o 250 Administrative, Financial, Human Resource and Supply Chain Management systems

o All shapes, sizes and varieties – manual, spreadsheet, PC, server, mainframe and web

o 4750 FTEs are needed to run/use these systems (this includes technical staff to support them)

o It costs $308 million annually to keep this environment going

o Extrapolated to the rest of the Executive Branch (minus Higher Ed) the annual cost is estimated to be $441 million

o Redundant data entry and, therefore, duplicate data

o Old and inflexible technology (such as COBOL) that is difficult to change and which support for is getting more and more difficult to find in the marketplace

o A LOT of suggestions for improvement from the agency staff, they need more capabilities than what the current systems provide – VALUE ADD

Plenty of Perspective

We here at AFP- Virginia have made it a point to keep the tax questions off this blog. However a recent editorial by the Roanoke Times has asked some questions in regards to our tax campaign that are relavent to the work we are trying to accomplish with the Cost Cutting Caucus.

The piece begins by mentioning a "gargantuan shortfall" in regards to the cost of fully funding our transportation needs. They point out that under the current system we should expect a $108 billion shortfall in transportation funding over the next 20 years. Wow!

The piece then went on to close out with this little line in response to AFP's radio ads and comments by Lt Gov Bolling:

Rousing anti-tax sentiment is easy. Making vague recommendations for cutting "unnecessary" spending is easy.

Governing responsibly and facing the monumental challenge of a $108 billion transportation shortfall over the next 20 years is hard.

I would disagree with much of the premise of these comments. The truly hardwork of government is not making the knee-jerk reaction to simply take money away from citizens when Richmond has broken the bank. The immediate desire always seems to be to "raise revenues" verse reforming how we spend our current dollars. Reform-- that is the truly "hard work".

So, lets do some of the heavy lifting and go back over some of the many reforms mentioned by the contributors to this blog, other AFP publications and the work of many other organizations in Virginia.

1. I would suggest the Editors of the Roanoke Times take a moment to read the research booklet entitled "21st Century Highways" published by the Virginia Institute and Heritage Foundation. This work provides several different studies on how to address issues such as congestion, road maintenance, regional planning and tolling. Good read. Several solutions that might work in Virginia.
2. We should look at new ways to maintain our roads as pointed out by Will Vehrs on this blog and at Bacons Rebellion. Will points out that legislation already proposed would knock out almost 20% of the estimated "shortfall" this year. When projected long term it would be interesting to see if it stays at 20% or if it grows as maintenance is a major fixed cost for transportation.
3. Mike Thompson of the Jefferson Institute points out that if you expand the above mentioned reforms to all state maintained roads the total annual savings could reach $400 million. Well, there is 40% of the immediate "shortfall".
4. Geoff Segal of Reason suggests several other reforms that can take place to save the state money. A key point here is to embrace the free market and implement tolls for future expansions and new roads. This my friends will truly impact those who use the roads as opposed to taxing folks in Blacksburg to alleviate the traffic in Falls Church.

Fact is there are several options out there to help save money before we raise taxes. The key is to ensure first that our dollars already being taken are being used effectively and only for transportation. Second, we must develop an equitable system where people are truly paying for the roads the use instead of making "donor regions" of the state help fund infrastructure they will never utilize.

The free market and competition is the key. The "hard work" as pointed out by the Roanoke Times is to find ways to utilize the free market to the benefit of the state government, the business community and taxpayers.

When my family seems to have a "funding crisis" I do not go to my boss and demand "additional revenue". Instead the family finds ways to spend money more effeiciently and address wyas to get more band for our buck. Why should government be immune from this concept?

The political leader willing to stand against rasing taxes and fights for real reform to how we travel in Virginia will be courageous. Those wishing to raise taxes when we enjoy a budgetary windfall and simply looking to do maintain the "business as usual" mentality.

-Rob

Cost Cutting Caucus to examine the Enterprise Applications Program

The Cost Cutting Caucus will be having its regular meeting this Thursday, February 2 in the Fifth Floor West Conference Room (General Assembly Building) from 4:00 to 5:00 pm.

This week we will be joined by Tim Bass, Deputy Secretary of Technology and the Enterprise Applications Program Director. His presentation will include an overview of Human Resource Management, Financial Management, Accounting, Budgeting, and Procurement procedures and applications in Virginia Government.

As a reminder, the Cost Cutting Caucus is a non-partisan, bicameral group that works to find cost savings in state government, and make government more efficient, transparent, accountable and competitive. All are welcome to attend!

More details on the Enterprise Applications Program to be posted later today.