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2003 NCSL Annual Conference Notes
Getting the Most for Our Money: The Role of Program Evaluation in Finding Savings
Moderator, Roger Brooks, former Deputy Legislative Auditor, Office of the Legislative Auditor, Minnesota
Panelists:
- Gary VanLandingham, Interim Director, Office of Program Policy Analysis and Government Accountability, Florida
- Marty Galvin, Legislative Audit Supervisor, Office of the State Auditor, Colorado
- Ken Levine, Assistant Director, Sunset Advisory Commission, Texas
The moderator, Roger Brooks, explained that policymakers are faced with tough choices to balance their state's budget. Do you decrease expenditures or increase revenues? In most states, tax increases are off the table. Then the question is, "How do we cut expenditures?" Do you make across-the-board cuts or targeted cuts? Do you explore ways to make existing resources go further? He introduced the panel to let them explain what their states were doing.
Gary VanLandingham's presentation was entitled "Show Me the Money." He pointed out that most states are facing budget problems and that state evaluation units want to help their legislatures deal with critical problems. To help legislatures deal with these problems, it is important that they can quickly identify the value of the recommendations that we propose. Our office makes recommendations to eliminate unneeded functions, modify outdated fee structures, update business practices, and create incentives that result in cost savings. However, our shops face challenges developing a "hard" savings estimate due to limited information.
To produce savings estimates, evaluators have lots of problems because agencies frequently do not have good cost data; some information may not be accessible because the data is considered proprietary; the future is uncertain; and, in some instances, there may be unintended consequences if our recommendations are implemented. Even with the obstacles, evaluators need to try to meet these challenges. For example, we can work with agencies to develop better estimates of current costs, use industry guidelines or experiences from other programs or states, consider different scenarios to estimates the effects of change. While perfect data does not exist, not giving an estimate only moves the problems to other staff to make the estimate if our recommendations are implemented. Often, we have better information to make these estimates and can provide a reasonable "ballpark" estimate and appropriations staff can use this information to help them in their presentations. However, we should use conservative assumptions and disclose caveats when we make our estimates.
Gary went on to explain that his agency stresses the importance of potential savings. Not only do we include savings estimates, we also track how much savings are achieved by implementing our recommendations. We produce an annual Fiscal Impact Report, which is provided before each session. To compile this report, teams complete a form for each recommendation that describes how the fiscal impact was developed. This information is included in a data base which allows ready compilation and we count savings only once. To produce the annual impact report, staff update estimates each year so they will be current, drop those that can no longer reliably be estimated, and wrestle with the issue of how long to we keep an issue in the report if the legislature has not chosen to implement our recommendation.
Marty Galvin's presentation highlighted that performance audits provide opportunities for cost savings and revenue increasing recommendations. He explained that their agency has an annual goal to identify cost savings in excess of its operating costs. He explained that there are important considerations when making cost saving recommendations. The recommendations should be practical, conservative, worthwhile, and easy to implement. He also shared that their state's constitution protects state jobs and this protection requires creativity on their part if savings result from possible staff reductions. Many of their recommendations can be implemented through legislative changes, executive orders, rule changes, staff reductions, and resource reallocations.
Marty then highlighted two reports that their office had performed and the savings they estimated if their recommendations were implemented. The first report addressed statewide travel which represented $51 million in expenditures during fiscal year 2002. The audit reviewed each program component for cost savings or revenue enhancement. Examples of savings included that the state could save about $2.4 million if airline tickets were purchased over the internet. Additional savings could be obtained by making sure travelers used negotiated fares for some trips. They estimated another $1.1 million in savings if these contract fares had been optimized. They also identified savings or increased revenues relating to rental cars ($220,000), and charge card usage ($150,000).
In another review, the auditors reviewed the Division of Central Services which provides state agencies in the Denver area with print, microfilm, mail, and office copier needs. The division had negotiated a contract with a vendor to provide copiers to agencies which included a per-copy pricing structure based on the size and capacity of each copier. This agreement covered 265 copiers in Denver. The auditors reviewed usage data for all copiers and found that 63% of the copiers were either under- or over-utilized and that this resulted in about $100,000 a year in unnecessary operating costs. While the division had required agencies to follow the price agreements, it did not ensure the most cost-effective use of state resources.
These two reports identified a total of $3.8 million in cost savings and $280,000 in revenue increases and none of the recommendations required a change in personnel costs.
Ken Levine from Texas made the final presentation. Originally, Representative David Swinford from Texas was to make the presentation from a legislator's viewpoint, but due to an extended session, he was unable to make the conference. Ken explained that his office tries to provide the best data they can in their reports, but in some instances they have had to "wing it" to provide timely information to the Legislature. Legislators appreciate what we do; sometimes they use our information, sometimes they don't, and sometimes our work gets in the way with what they want to do. What is important is that we remember that it is not personal.
TX is facing a potential $10 billion shortfall and the legislature was asking for ideas that ranged from the good, the bad, to the ugly. Ideas not only came from the TX Sunset Commission, but they also came from others including the budget committee, the government reform committee, as well the State Auditor's Office. The only general guideline restriction we had was not to propose new taxes, but fee increases would be considered. Seeking this input generated lots of ideas. Many ideas were not fully researched and had less quality. For this reason, decision makers had to exercise additional caution.
How did Texas cut its budget? Through the budget and appropriation process, it looked more closely at an umbrella process for licensing agencies and it considered technology improvements (increased funding today) if they would result in decreased costs in subsequent fiscal years. They also considered consolidations and privatization. Other savings came in the form of early retirement incentive bonuses, legislation delaying the entry of new employees into the retirement system for three months as well as delayed entry into the health system. The Sunset Commission recommended savings totaling $17 million. All of the recommendations had to go through the political process, which makes the entire process more interesting.
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