Cutting Costs the Montana Way - from the New York Times
Op-Ed Contributor
Cutting Costs the Montana Way
By BRIAN SCHWEITZER
Published: August 18, 2011
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WITH the debt crisis and the weakening economy fresh on their minds, most
Americans have probably concluded that government, as a rule, cannot manage
money responsibly. But it can. Just look at Montana.
For six years it has been one of the only states in America with a budget
surplus: this year it is a record $433 million, proportionally equivalent to
a federal surplus of $858 billion. Thus we've been able to cut taxes, invest
in education and infrastructure and keep essential services intact. We
recently got our first bond rating upgrade in 26 years.
And we're not simply riding the Western energy boom. The recession has
driven unemployment to 7.5 percent, and while we've had a great run with
oil, coal and gas, royalties from these commodities account for only 9
percent of our budget surplus.
How do we accomplish what most states and the federal government cannot? I
like to say we run government like a ranch. In ranching - my old job - you
either pinch pennies or go belly-up. We do the same in government. Perhaps
Washington can try it.
For one thing, we challenge every expense. If it isn't absolutely necessary,
we eliminate it. When the recession came we found $80 million in savings,
which helped us avert a budget crisis. Little things added up: we
renegotiated state contracts, cut our energy consumption by 20 percent,
auctioned off state vehicles and canceled building projects and computer
upgrades.
We even saved by spending: we stepped up our efforts to collect unpaid tax
bills from out-of-state and foreign corporations, an undertaking that more
than paid for itself.
This type of penny-pinching rarely occurs in Washington. As a small example,
I was recently at a military base where a private firm ran security. Why,
with the toughest soldiers on earth, would the federal government spend
extra cash to rent security guards rather than let troops take turns
guarding the fort? Sure, there might be a convenience to contracting, but is
it worth the billions spent? No doubt the lobbyists for the security firm
sprinkled plenty of money around Capitol Hill to get the contract.
The federal budget contains thousands of similar line items. A government
serious about tightening its belt would eliminate them all.
But we don't just cut costs. Like good ranchers, we also leave some grain in
the bin in case of drought. When times were good, we stashed away cash in a
special savings account. This was a political challenge, because almost
every state legislator, from both parties, wanted to spend it instead. But
the account proved to be a big help in getting us through the recession in
solid financial shape.
I cannot recall the federal government's ever banking surplus funds in a
protected account, even during the surplus-laden 1990s. If Washington ever
digs out of the current hole and runs a cash balance, Congress should
likewise put some grain in the bin.
And even as we've cut costs and socked away money, we've followed another
ranching principle: treat your ranch hands with respect. Like other states,
we've had to freeze employee pay and reduce the work force. But as in any
good organization, many of the best solutions for cutting costs come from
state employees. Some look at payroll as a burden; we look at it as human
capital, and we work hard to keep up morale in tough times. So when we cut
the state payroll, I cut my own salary.
Sadly, many politicians, especially in Washington, seem to relish the
opportunity to trash government workers. This is just cheap and ugly
scapegoating. More to the point, it does nothing to produce bottom-line
results.
Finally, we don't spend money until we've found the lowest price. Around
here, government contracts aren't a way to take care of friends. Quite the
opposite: we use our purchasing power to get the lowest possible rate. When
the real estate market softened, we told commercial landlords who rented
space to the state that if we didn't see rent reductions, we'd move to
cheaper premises when our leases were up. Most complied, saving the state
almost $4 million.
How does the federal government negotiate? Consider Medicare drug purchases,
one of the largest federal budget items. We are often told the cost of
entitlements can be brought down only by cutting services. Nonsense. In
2003, in one of the greatest sweetheart giveaways ever dreamed up by the
White House and Congress, they agreed to pay retail rates for Medicare
drugs, even when everyone knew they could negotiate lower, bulk prices. The
cost to taxpayers? An estimated $600 billion a decade.
There are savings to be found everywhere in government. Now that federal
spending is the country's top issue, Washington should try doing what any
rancher or family household does: save money, live by a budget, challenge
expenses, find bargains and invest wisely. Montana has proved that it works.
Brian Schweitzer, a Democrat, is the governor of Montana.
A version of this op-ed appeared in print on August 19, 2011, on page A23 of
the New York edition with the headline: Cutting Costs the Montana Way.
Cutting Costs the Montana Way
By BRIAN SCHWEITZER
Published: August 18, 2011
WITH the debt crisis and the weakening economy fresh on their minds, most
Americans have probably concluded that government, as a rule, cannot manage
money responsibly. But it can. Just look at Montana.
For six years it has been one of the only states in America with a budget
surplus: this year it is a record $433 million, proportionally equivalent to
a federal surplus of $858 billion. Thus we've been able to cut taxes, invest
in education and infrastructure and keep essential services intact. We
recently got our first bond rating upgrade in 26 years.
And we're not simply riding the Western energy boom. The recession has
driven unemployment to 7.5 percent, and while we've had a great run with
oil, coal and gas, royalties from these commodities account for only 9
percent of our budget surplus.
How do we accomplish what most states and the federal government cannot? I
like to say we run government like a ranch. In ranching - my old job - you
either pinch pennies or go belly-up. We do the same in government. Perhaps
Washington can try it.
For one thing, we challenge every expense. If it isn't absolutely necessary,
we eliminate it. When the recession came we found $80 million in savings,
which helped us avert a budget crisis. Little things added up: we
renegotiated state contracts, cut our energy consumption by 20 percent,
auctioned off state vehicles and canceled building projects and computer
upgrades.
We even saved by spending: we stepped up our efforts to collect unpaid tax
bills from out-of-state and foreign corporations, an undertaking that more
than paid for itself.
This type of penny-pinching rarely occurs in Washington. As a small example,
I was recently at a military base where a private firm ran security. Why,
with the toughest soldiers on earth, would the federal government spend
extra cash to rent security guards rather than let troops take turns
guarding the fort? Sure, there might be a convenience to contracting, but is
it worth the billions spent? No doubt the lobbyists for the security firm
sprinkled plenty of money around Capitol Hill to get the contract.
The federal budget contains thousands of similar line items. A government
serious about tightening its belt would eliminate them all.
But we don't just cut costs. Like good ranchers, we also leave some grain in
the bin in case of drought. When times were good, we stashed away cash in a
special savings account. This was a political challenge, because almost
every state legislator, from both parties, wanted to spend it instead. But
the account proved to be a big help in getting us through the recession in
solid financial shape.
I cannot recall the federal government's ever banking surplus funds in a
protected account, even during the surplus-laden 1990s. If Washington ever
digs out of the current hole and runs a cash balance, Congress should
likewise put some grain in the bin.
And even as we've cut costs and socked away money, we've followed another
ranching principle: treat your ranch hands with respect. Like other states,
we've had to freeze employee pay and reduce the work force. But as in any
good organization, many of the best solutions for cutting costs come from
state employees. Some look at payroll as a burden; we look at it as human
capital, and we work hard to keep up morale in tough times. So when we cut
the state payroll, I cut my own salary.
Sadly, many politicians, especially in Washington, seem to relish the
opportunity to trash government workers. This is just cheap and ugly
scapegoating. More to the point, it does nothing to produce bottom-line
results.
Finally, we don't spend money until we've found the lowest price. Around
here, government contracts aren't a way to take care of friends. Quite the
opposite: we use our purchasing power to get the lowest possible rate. When
the real estate market softened, we told commercial landlords who rented
space to the state that if we didn't see rent reductions, we'd move to
cheaper premises when our leases were up. Most complied, saving the state
almost $4 million.
How does the federal government negotiate? Consider Medicare drug purchases,
one of the largest federal budget items. We are often told the cost of
entitlements can be brought down only by cutting services. Nonsense. In
2003, in one of the greatest sweetheart giveaways ever dreamed up by the
White House and Congress, they agreed to pay retail rates for Medicare
drugs, even when everyone knew they could negotiate lower, bulk prices. The
cost to taxpayers? An estimated $600 billion a decade.
There are savings to be found everywhere in government. Now that federal
spending is the country's top issue, Washington should try doing what any
rancher or family household does: save money, live by a budget, challenge
expenses, find bargains and invest wisely. Montana has proved that it works.
Brian Schweitzer, a Democrat, is the governor of Montana.
A version of this op-ed appeared in print on August 19, 2011, on page A23 of
the New York edition with the headline: Cutting Costs the Montana Way.
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