FINAL REPORT
GOVERNOR’S COMMISSION
TO PROMOTE GOVERNMENT EFFICIENCY
AND SAVINGS ON STATE SPENDING
December 2002
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OVERVIEW
In February 2002, Gov. Mike Easley issued an executive order creating the Commission
to Promote Government Efficiency and Savings on State Spending and named Mr. James B.
Hyler, Jr., vice chairman of First Citizens BancShares, as its Chair.
The Governor named 15
other North Carolinians with broad expertise to the Commission, which has met monthly since the
onset of the Commission.
Governor Easley created the Commission in the wake of two successive years of
budgeting expenditures exceeding projected revenue, General Fund expenditure reductions and
midyear budget actions to address unanticipated budget gaps. General Fund revenues fell short
of projections by more than $500 million in 2000-01 (or almost four percent) and an
unprecedented $1.55 billion, or almost 11 percent, in 2001-02.
The 2002-03 budget contains
almost $1 billion in spending reductions and transfers, but many of the budget-balancing
techniques were one-time in nature.
The Commission notes that its work must be seen in the context of studies completed in
previous administrations to make government more efficient. Governor James Holshouser,
whose first Executive Order as Governor was to create an efficiency commission and who co-
chaired Governor Easley’s 2001 Efficiency and Loophole-Closing Commission 28 years later,
addressed the Commission at its first meeting on this point. The best-known efficiency
commission – the Government Performance Audit Committee (GPAC) – issued hundreds of
recommendations eight years ago.
Some of the recommendations of this Commission are
based on that work.
The Commission was charged with the task of identifying long-run efficiencies, especially
in terms of personnel, information technology, program duplication and the elimination of
programs that are not part of government’s core mission. In May, the Governor’s recommended
budget used $25 million in savings from Commission recommendations, a figure that was
ultimately adopted by the General Assembly. The Office of State Budget and Management has
allocated the $25 million across all areas of state government on a pro rata basis. However, the
Commission approved several recommendations in May and June to achieve more than $25
million in savings.
These included recommendations to obtain efficiencies in utility billing and
usage, accounts receivable collection, contract renegotiation, motor vehicle enforcement,
legislative session limits and an efficiency grant program.
The Commission recommendations are broad in their scope and nature.
In most
instances, the Commission has not identified specific dollars in savings. Many of these
recommendations are for the long-term sustainability of the state and will not have short-term
payoffs. Rather, this report provides the foundation for further analysis of these issues that will
result in necessary change throughout state government.
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THE MISSION AND GOALS OF THE COMMISSION
In order to guide its work, the Commission discussed and approved a mission statement
and end results. The mission statement is as follows:
Now is the time to reform government practices and refocus on the public sector’s core
mission. The fiscal crisis provides the crucible for needed change to happen, but North
Carolina government must be efficient and effective all the time – not just when times are
bad. Any recovery in the state’s fiscal situation should not be an excuse for this
Commission’s work to fall by the wayside.
The Commission’s goals for end results included the following:
1. An enterprise-wide personnel system that gives managers flexibility, rewards employees
for high performance and allows the state to compete in the marketplace.
2. The use of information technology that takes advantage of economies of scale and
reduces the cost of doing business.
3. The state’s physical assets are well-maintained, financed with the most appropriate
modern tools and constructed to minimize cost of service provision. Maximum use of
space should allow the state to sell physical assets that are not needed.
4. Administrative functions (HR, IT, facility management, purchasing, public schools) are
staffed at appropriate levels.
5. Public sector becomes flatter.
6. Agencies perform their core mission well. Nothing else.
7.
Large program areas are reformed.
8. Progress on implementation of these reforms will be mandated, monitored and
measured.
The work of previous commissions directed toward a more efficient and cost-effective
government has been implemented to some degree, but the quantum changes necessary in this
environment of budget gaps demand a far different, more aggressive and proactive pursuit of
these and previous recommendations. Previously, substantial increases in state revenues
resulting from a very favorable and growing economy obviated the need for sweeping changes in
how state government conducts business. This is no longer the case.
THE PROCESSES OF THE COMMISSION
The Commission has been organized into three subcommittees: the Processes of
Government subcommittee, the Structure of Government subcommittee and the Capital
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Management subcommittee. Due to staff and member conflicts resulting from the length of the
legislative session, most of the work in recent months has been done in full Commission
meetings.
Subcommittees have received input from state agencies, local government associations
and officials, representatives of the business community and other interested members of the
public.
THE COMMISSION’S RECOMMENDATIONS
Processes of Government
1. Personnel
The Processes of Government subcommittee convened a public-private Steering
Committee chaired by Chris Rolfe of Duke Energy.
The Steering Committee has
completed a more detailed backup report. The Committee found that North Carolina’s
human resources system and practices are dispersed, uneven and are designed and
supervised by legislators or others without human resources expertise.
North Carolina state government employs over 285,000 workers – about 7
percent of total employment in the state. Approximately half of these workers are public
school teachers or public university employees. Most state employees received a $625
increase in 2001 and no pay increase in 2002. State employees did, however, receive a
one-time additional two weeks of vacation in 2002.
The Commission emphasizes that these recommendations are not an attempt to
balance the budget on the backs of the state workforce. Nor can these recommendations
be implemented in a piecemeal fashion. Finally, the Commission fully recognizes that
some of the items that are recommended to be changed can only be done prospectively.
The Commission recommends the following:
•
Eliminate special pay increases (GPAC). Currently Highway Patrol officers,
magistrates and some other court officials receive automatic pay increases.
This practice creates a disparity with other state employees that is not
necessarily justified. This practice needs to be evaluated in the context of
competitive salary grades to attract and retain employees.
•
Prospectively eliminate longevity pay and fund additional pay for excellent
performance (GPAC).
The provision of additional pay based on years of
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service does not necessarily reward excellent performance. The original GPAC
report recommended that savings from the elimination of longevity pay should be
used for salary increases for employees performing above expectations. The
Commission recommends that longevity pay be eliminated prospectively, with
those currently receiving longevity pay having it folded into their regular salary.
As employees receiving longevity pay retire, an increasing amount of savings
can be used to reward performance.
•
Allow retirees with special expertise to return to work without penalty.
Recent media accounts have documented problems with retired employees
returning to perform similar tasks while employed by a private contractor. Just
as public schoolteachers are permitted to return to work, so too should retirees in
other hard-to-fill areas be permitted to return.
This practice must be closely
documented to assess the effects on the retirement system. This change will
reduce orientation and training costs and maintain valuable expertise. Some
agencies hire former retirees for temporary work now and work them to the
maximum dollar amount allowed for them to retain retirement benefits.
•
Achieve economies of scale through consolidated bids on optional
benefits. Currently each agency has a committee that issues bids for optional
medical benefits. This practice is not cost-efficient and increases the difficulty for
an employee or an agency division to move to another agency, as the optional
benefit package may not be the same. Administrative and operational efficiency
demands that this practice be centralized through elimination of the committees
and requiring the Flexible Benefits plan to administer all these programs.
•
Change eligibility standards for retiree health insurance and retirement
benefits to mirror practices in the private sector. A state employee with five
years of service becomes entitled to health benefits upon retirement. Retirees
that have not yet reached the age of Medicare eligibility are among the most
expensive for the State to provide health care coverage and are a primary reason
for the recent increase in health care costs and premiums.
The Commission recommends that the state increase the amount of time that an
employee is required to serve to be eligible for retiree health benefits. The state
should establish a minimum age to receive retirement benefits and retiree health
coverage.
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An actuarial analysis is needed to determine the fiscal impact of paying the
insurance for retirees that are ineligible for Medicare as well as determining what
a reasonable vesting period is for a paid health benefit at retirement.
•
Restructure health care pricing (GPAC). The state pays the entire cost of the
health care premium for employees and none of the cost of the premium for
dependents. As a result, many employees cannot afford to pay for dependent
health care coverage.
In order to broaden the risk pool for the state health plan, the Commission
recommends that employees share in the cost of their own health care premiums
and the State partially defray the cost of dependent health care coverage. This
change would more closely match up with private sector practices. The State
should also enhance existing wellness programs to increase the health of its
employees, which will result in long-term health care savings.
The Commission recommends the consideration of a plan to allow state
employees to choose how they would like to spend their fringe benefit amounts,
in order to maintain equity across employees.
•
Consider flexible work arrangements. Private sector organizations have met
with success through permitting job sharing or three-quarters time positions. The
state may consider adopting such practices to aid in recruitment and retention of
employees, as some agencies allow this.
•
Modernize personnel governance.
The personnel system should have
discrete roles for agency staff, the Office of State Personnel, and the legislature.
•
Modernize personnel administration.
Personnel administration should
maximize the use of technology to reduce errors and improve productivity.
•
Require use of the Return to Work Program. State employees who receive
workers’ compensation deserve the opportunity to return to employment as soon
as possible. The Return to Work program has a proven record of success in
North Carolina and other states. States that mandate its use in all agencies
experience cost savings. The Commission recommends that the program be
made mandatory, rather than optional.
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•
Modify payment rules for those leaving state service. The state’s current
severance pay system contains an age factor, which is not commonly used in
severance pay calculations. The Commission recommends that the state move
to a best practices model of severance pay based on years of service.
Also, the payroll systems make it difficult for the state to pay employees who
leave service for less than a full month. As a result, the state has to attempt to
recoup this pay from these employees, which has been time consuming. The
Commission recommends that the state pursue alternatives to recover unearned
pay.
•
Reduce duplicative personnel systems. The Commission found that the state
has over 40 personnel systems.
Within the University system, for example,
there are three systems – one for most non-faculty employees; one for senior
academic, administrative, instructional and research personnel; and one for the
faculty.
Consolidating personnel systems where appropriate will result in
substantial administrative savings.
The Commission recommends that the
Office of State Personnel evaluate these systems, especially the University, with
a goal toward reducing inefficient structures and costs while ensuring
accountability and competitiveness.
•
Reduce headcount in a smart manner. Personnel costs are the single biggest
state expense. To achieve personnel savings and mitigate the need for layoffs,
the Commission recommends a much tighter scrutiny over positions that become
vacant. Agencies and departments should be required to justify the critical need
for the position. If it is critical, then the agency or department should assess the
possibility of distributing the duties of the position to others. The savings should
be split between the general fund and the agency, either to provide salary
increases for those taking on more work or other investments to improve
efficiencies.
The Commission recognizes that many vacancies have been eliminated or gone
unfilled over the past three years.
Clearly the recent experience in individual
departments or agencies must be considered when this evaluation is undertaken.
The potential for savings and reinvestments is substantial.
In 2001-02, there
were approximately 10,000 vacancies created through retirement and other
departures from service, not including corrections, the University and the public
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schools. If one-half of those positions were eliminated at an average salary of
$30,000, approximately $180 million in savings and reinvestments might have
been made.
The Commission notes that many agencies have used the savings from unfilled
positions to fund other items. The State Budget Office and the agencies should
identify these other items and include them in the continuation budget, rather
than provide backdoor support through the use of reverted salaries.
2. Information Technology
The state currently relies heavily on legacy systems with numerous business
infrastructure systems, especially for payroll. The Office of State Controller estimates
total state information technology costs at almost $700 million for FY 2001-02, with $411
million from General Fund sources. The Processes Subcommittee has written a white
paper (that is attached) detailing the important issues surrounding the state’s use of
information technology.
The Commission recommends the following:
•
Establish clear roles for the Office of Information Technology Systems
(ITS) and for the agencies for IT. ITS should concentrate on areas of
enterprise-wide importance. These issues include network, security, email and
data-sharing platforms across agencies. ITS needs the authority to enforce
agency compliance to enterprise-wide standards. One agency made more than
170 modifications to a software package it used, making it non-standard and not
interoperable. The costs of the modification, long-term support and maintenance
were substantial.
ITS should relinquish support of agency-specific programs and services. The
new NC NET initiative should fully explore this recommendation.
Duplication on different technical platforms and the lack of seamless integration
currently exists and must be remedied.
•
Streamline information technology oversight. The state Chief Information
Officer (CIO) should, and does, report to the highest senior management level.
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This person is the logical one to handle the planning, initiation and management
of the consolidation processes necessary to attain a shared services
environment. The consolidation strategy for enterprise support should include
manpower, processes, development, budgeting and procurement.
There are
other important functions that need to be performed that go beyond the day-to-
day management of ITS.
These include economic development and
development of a vision for information technology in North Carolina.
The Commission notes that the current CIO responsibilities are varied and
enormous and must be evaluated to ensure that enough support is provided to
do all these things well. At the same time, responsibility for IT governance is
diffuse and overlapping.
The Commission recommends an independent
evaluation of the role and relationship of the State CIO, IRMC, the ITMAC, and
the CIOC. Duplication of staff roles in these entities should be eliminated.
•
Identify and summarize information technology costs.
Significant IT
expenditures are scattered throughout unit budgets, making global prioritization
more difficult.
This practice limits the ability of the state to aggregate
requirements to leverage volume discounts and structure a cost-effective,
enterprise-level IT organization that provides support across boundaries. The
Commission recommends that ITS be empowered to take the appropriate steps
to provide transparency on IT spending and employment.
Moreover, the Commission recommends that OSBM establish a budget analyst
position to review IT spending from an enterprise level to include all state
agencies, departments and the education systems.
•
Provide centralized purchasing authority.
Currently, there are no centralized
funds for the purpose of purchasing statewide software licenses. Software and
maintenance costs would be reduced.
The Commission recommends
centralization of this function.
•
Support IT infrastructure through multiyear funding (GPAC).
The state
needs a multiyear plan, similar to a capital planning budget, to finance
technological improvements on a timely basis.
Private sector and local
governments already use such techniques. The Commission also recommends
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that the state explore the use of financing to pay for large-scale infrastructure
investments.
The Commission also finds that funding some information technology
investments on an annual basis discourages lower cost alternatives. This
practice reduces the ability to save through multi-year leasing of hardware and
software.
•
Reform funding for ITS.
Currently, ITS charges agencies for the use of its
services according to a rate schedule set annually.
This practice should be
changed to fund ITS through the continuation budget and therefore simplify ITS
finances and administration.
•
Enforce accountability.
The Commission recommends that the State Auditor
or State Controller evaluate major initiatives by focusing on accountability and
cost overruns. Currently, vendors and agency program managers are the ones
responsible for dealing with cost overruns and subpar performance.
This
practice is not working well.
•
Increase the use of electronic forms.
Several efficiency commissions have
recommended the increased use of electronic forms for time and attendance,
certified email (rather than express or overnight regular mail) and other routine
tasks. Off-the-shelf programs with a minimum of specialized changes in the
software should be explored for appropriateness. The State Personnel Office
has designed an electronic time and attendance program that is used currently
by some state agencies.
•
Reform the state’s business infrastructure. Last year, the General Assembly
supported a study of the state’s business infrastructure in order to examine the
feasibility and need to integrate the state’s human resources, personnel and
budget systems.
The Office of the State Controller was designated as lead on
this project. However, the budget crisis led to a freeze in funding for this project.
The Commission recommends that the state provide the investment as soon as
possible to move this process forward. The Commission notes that the state
currently has over 40 separate payroll systems, none of which can “talk” to each
other. Redundancy therefore exists, with no value added to crucial services.
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•
Reengineer business processes.
Technology provides the potential to
dramatically change processes and service delivery. IT investments are focused
more on automating existing processes, rather than questioning the efficiency
and effectiveness of these practices.
The Commission recommends the
creation of an enterprise technology strategic business planning process that
includes all of state government.
The Commission notes that the private sector is rapidly moving processes online
and the public sector should do the same through moving services such as
permitting and licensing online. This approach needs to be a significant part of
the strategic business planning.
•
Improve contracting practices.
The State Budget office has made several
recommendations to improve IT contracting based on an in-depth study
completed earlier this year. The Commission supports these recommendations
and would recommend that service contracts be treated like commodity contracts
in the state procurement process.
Moreover, the Commission recommends that the state initiate innovative,
incentive-based contracts with outside suppliers that encourage cost reduction
and service improvements.
The Commission has already recommended
renegotiation of existing contracts for better pricing and added value services.
•
Implement Host to Post mail technology.
The Department of Health and
Human Services has saved several million dollars annually by implementing
host-to-post technology.
This technology should be expanded to other
departments and consolidated when appropriate.
•
Establish a universal list of primary and secondary statewide funding
priorities.
•
Explore the use of seat management approaches. Seat management offers
crucial flexibility, uniformity and support and should be used where shown to be
cost-effective.
•
Modernize legacy applications and systems.
Many legacy systems
(essentially obsolete systems that are no longer robustly supported by vendors)
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are used by the state for critical state functions. This presents significant risk and
expense. The Commission recommends the identification and upgrade of these
applications.
•
Create a universal asset/inventory management system. All state entities,
including the educational systems, should have one repository of the entire IT
inventories. The Commission recommends that such a system be housed in the
State Controller’s Office or ITS.
•
Establish an enterprise approach to public school connectivity. The State
Department of Public Instruction should manage an enterprise approach to IT
using service level agreements (SLAs). Currently, all LEAs do implementation
independently, leading to inequitable and inefficient provision of service.
•
Invest in training and staff development. These areas are the first sacrificed
to budget cuts, but the Commission recognizes that investing in the development
and implementation of systems without training leads to inefficient and ineffective
use of technology.
•
Achieve IT efficiencies throughout the UNC system. UNC needs to engage
in university-wide and campus-wide IT budget planning to aggregate central
computing and other unit computing budgets in order to identify duplication and
inefficiencies. This can also be used to leverage infrastructure investments and
economies of scale, while recognizing the differences in mission and purposes of
campuses through collaborative management models. The lack of ability to enter
into long-term contractual commitments for IT was identified as an issue for the
university system.
3. Revenue Collection
The ways in which the state collects its revenue are as important as the
processes and procedures by which it spends the revenue. Special care must be taken
to ensure compliance with revenue laws in order for taxpayers to have confidence that
the state performs this function in the fairest and most efficient manner possible.
The Commission recommends the following:
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•
Centralize the collection of revenues in a single agency. The Commission,
by previous action, recommended that the state improve accounts receivable
collections through the addition of a collection fee and by centralizing the efforts.
In 2001, total accounts receivable were $567 million (not including delinquent
taxes). The Office of the State Controller notes, however, that only a fraction of
this amount can be collected. Legislation was proposed, but did not pass in the
2002 legislative session.
Moreover, the Commission recommends that the
Office of State Controller and Department of Revenue devise a plan for the
Department to collect more of the agency fees in order to streamline the process
and take advantage of the Department’s capacity and expertise in this manner.
The Department already performs this function for some fees payable to the
Secretary of State.
•
Assess the use of fees to recover costs. The Commission supports the draft
recommendation by the Commission to Modernize State Finances to require the
State Budget Office to analyze the use of fees, especially the cost of collection
and the fee payment related to the cost of service provision. Departments and
agencies should study their own operations for opportunities to use appropriate
fees and eliminate taxpayer subsidy where appropriate.
•
Invest in Department of Revenue efforts to improve taxpayer compliance.
The Department’s Project Collect Tax, an effort to collect delinquent taxes, has
met with great success. However, the Department needs additional resources
to recover uncollected taxes in the underground economy and from non-filers
and those who file fraudulent returns. Efforts to simplify the tax code will help
avoid some compliance problems, but there are substantial issues with the
current complicated tax code that the Department should explore for retroactive
recovery.
•
Change the method of providing the sales tax preference for state and local
governments from refunds to exemptions.
Currently each agency has to
complete paperwork to recover its upfront payment of sales taxes, thereby
complicating the process substantially. Eliminating the tax payment at the time
of the sale would reduce administrative errors and burden at both the state and
local government level.
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Structure of Government
The Structure of Government subcommittee recommendations focus on the key
questions of what services should government provide and who and how should these services
be provided.
The Commission recommends the following:
1. Explore privatization and managed competition.
The state should provide services in a manner that ensures the quality of service
and the cost-effectiveness of the service. A number of services are already privatized in
state government, including:
custodial, maintenance, health services, information
technology, vehicle repair, food services and so forth.
The Processes Subcommittee
found that outsourcing can be used to supplement state employees in information
technology. State employees should retain core competencies, while using outsourced
personnel for value added to projects and programs. There can also be instances where
the public provision of services can be most efficient and these opportunities should be
explored as well.
The Commission recommends that a panel serve to review state
government to identify key areas for consideration. This panel, and state government,
should review privatization efforts in other states to determine best practices, and give
appropriate consideration to these ideas. The Commission recommends the following
areas as likely candidates for privatization/managed competition.
•
Creating public defender offices, rather than use of the private bar. The
Administrative Office of the Courts has conducted a cost-benefit analysis that
shows that public defender offices may result in savings over payments to private
lawyers to defend indigent clients.
•
Use private contractors for secondary road construction (GPAC).
Private
contractors already are instrumental in building the state’s highway system and
fuller use of their capacity should be made.
•
Privatize the Raleigh and Charlotte DMV offices (GPAC).
DMV offices are
private operations in most areas of the state, including the Raleigh and Charlotte
areas. These two offices are the exception to this practice. In recent years,
however, the transaction fee to contractors has been increased to cover their
costs when more citizens began to register online. Any change must be
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scrutinized to make sure the cost savings envisioned at the time of GPAC would
be realized.
•
Improve child support collections. Private sector efforts in other states to
collect child support have increased state revenue and support for the child.
This success demands that the state explore this effort here, although some
preliminary efforts have not fared well.
•
Sell state assets.
The Commission believes that the state’s assets should be
inventoried and considered for privatization, where appropriate.
2. Shift Authority in Service Provision
The question of service provision is not only one of public or private. It also
demands changes in which state agencies provide the service and what level of
government is most appropriate for service provision.
As such, the Commission
recommends the following:
•
Reduce the workload for DHHS education agencies by shifting provision to
local education agencies.
Officials in Morganton noted to Commission
members that the distance from Raleigh exacerbates the difficulty of service
provision. They recommended, and the Commission agrees, that coordination
with local education agencies for schooling may be appropriate.
•
Shift responsibility of alcohol and drug treatment from the state to area
mental health authorities (GPAC). In recent years, there has been a shift from
the use of institutionalized care to community-based care. Institutionalization is
more expensive and many believe that it is not the most appropriate means of
treatment.
•
Shift responsibility for museum operation and oversight to one agency.
Currently, the Department of Environment and Natural Resources, the
Department of Transportation and the Department of Cultural Resources all
operate museums across the state.
The Department of Cultural Resources
operates the majority of these, and should be given the responsibility to oversee
the others in order to ensure administrative efficiencies.
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•
Move the duties of alcohol law enforcement to local officials and the SBI
(GPAC).
•
Reduce the use of sworn law enforcement provisions (GPAC). The state’s
law enforcement agencies should review their personnel practices to eliminate
the use of sworn officers for jobs that do not require such a credential and avoid
more costly personnel.
•
Require local counties to pay for Butner public safety functions (GPAC).
Currently the state provides for all public safety in the Town of Butner, which
houses numerous state facilities. This subsidy of local residents should not
continue.
•
Examine the role of the Department of Juvenile Justice and Delinquency
Prevention.
This department operates youth development centers and
delinquency prevention programs. The State Auditor is currently conducting a
performance audit of this Department, which may contain relevant
recommendations to eliminate duplication of functions.
•
Consolidate workforce development programs (GPAC).
Perhaps no other
area of state government is cited more often as an example of inefficiency as
workforce development.
The diffuse authority over these programs developed
largely as a result of different eligibility criteria by the federal government. Within
the past few years, the federal government has consolidated a number of funding
streams and the state should take full advantage of that change to find
efficiencies in this important policy area.
State funding for workforce
development programs totaled $929 million in 2000-01 – a huge enterprise for
state government. The Commission strongly recommends that the Governor
designate an agency to lead these efforts.
•
Integrate early childhood programs.
The General Assembly required various
public and private organizations to improve the efficiency and effectiveness of
services to at-risk preschoolers. These programs include Smart Start, More at
Four, Head Start among others.
The Commission supports this
recommendation.
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•
Allow municipalities to perform more transportation functions through
municipal agreements (GPAC).
•
Combine worker safety programs found in the Industrial Commission and
in the Department of Labor.
Testimony to the Commission revealed that
worker safety had been the province of the Industrial Commission until the
federal Occupational Safety and Health Act (OSHA) resulted in the creation of
similar programs in the Department of Labor. These programs should be
examined for consolidation.
3. Provide Services More Efficiently
•
Consolidate administrative and support functions in areas of high
concentration of state facilities. Commissioner Morse spent substantial time
pointing out the efficiencies possible in these consolidations. Similar approaches
should be taken throughout the state, and the Morganton action was enacted by
the General Assembly. The legislative change may result in a model that can be
replicated elsewhere.
•
Reduce frequency of services such as trash pickup and lawn service.
Several corporations pointed out that reduction of some nonessential services
could help save costs.
•
Improve contracting practices.
The State Budget office has made several
recommendations to improve personal services contracting based on an in-depth
study completed earlier this year.
The Commission supports these
recommendations. Routine quarterly reporting on these contracts has begun,
with routine analysis to be provided to the General Assembly.
•
Reform motor vehicle management. A recent State Budget analysis of the
motor fleet management made several recommendations regarding the reduction
in fleet size, reduction in billing, streamline fleet maintenance and periodic
surveys of repair costs to ensure competitiveness. The Commission endorses
these recommendations.
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•
Adopt Medicaid Reforms (GPAC). GPAC made several recommendations to
reform the certificate of need (CON), ICF/MR reimbursement and hospital
reimbursement. Also, the state should permit over-the-counter drugs to be
eligible for Medicaid reimbursement, which would avoid the current need to use
expensive prescription drugs.
•
Change DMV registration practices.
Extension of vehicle registration to two
years and drivers license renewal to eight years could reduce the caseload at
DMV offices. GPAC recommended the closure of several DMV offices.
•
Streamline school aid formulae.
While the state has consolidated funding
streams around at-risk formulas, the combination of formulas to accomplish
specific goals could increase efficiency.
•
Improve economic development performance (GPAC).
The Commission
recommends that regional partnerships, state regional offices and economic
development nonprofits should work together in a more efficient manner.
The
General Assembly has authorized UNC-CH’s Kenan-Flagler Business School to
recommend a performance-based funding mechanism to support this purpose.
•
Avoid education program duplication.
The General Assembly required
community colleges within close proximity of each other to avoid program
duplication. The Commission endorses this recommendation and supports its
use by the University as well.
•
Explore community college consolidation. The Commission recognizes that
there may be significant savings achieved through the consolidation of
administrative functions at the 58 community colleges.
A move to a
multicampus structure with centralized oversight is appropriate.
•
Reduce education administrative costs. The General Assembly required the
State Board to study whether local education agencies can coordinate central
office functions and operations across school districts.
The Commission
endorses this recommendation and supports its use by the community college
system as well.
The Commission also endorses the concept of funding a
maximum of one administrative support structure per county regardless of the
number of local education agencies. Further, the Commission recommends that
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regional consolidation across county lines be incented through allowing local
agencies to retain a share of the savings from such a move.
4. Focus on Core Mission
Over time, many programs that provide valuable services have been added to
state government.
Last year, Governor Easley required his Cabinet to provide
recommendations to reduce their budgets by up to 11 percent by focusing on the core
mission of the agency. The Commission supports this move and notes that it will require
discipline to continue to do this task.
The Commission recommends the following:
•
Eliminate or transfer the advocacy functions located in the Department of
Administration (GPAC).
The Department of Administration should function as
the general services provider for state agencies and departments. Over time, a
number of advocacy functions have located in the Department for various
reasons. Some of these functions may be appropriate for government to provide
and, if so, then they should be transferred. Others should be provided by the
private or nonprofit advocacy sector.
Capital Management
The state has had virtually no capital budget in the past few years.
The efficient
management of assets will be imperative.
•
Sell the Blount Street properties. These assets will meet with high demand
from the private sector and will restore valuable real estate for local tax rolls.
•
Improve aircraft operations.
The Subcommittee has helped organize the
state’s pilots to make several recommendations that will result in substantial
efficiencies and improve safety.
Many of the state’s 67 aircraft are for
specialized purposes, such as law enforcement and firefighting.
The
Commission recommends that further study of aircraft for centralization and
consolidation to reduce assets be done.
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•
Implement performance contracting. This crucial piece of the Utility Savings
Initiative was approved by the General Assembly.
The Department of
Administration should take the leadership role of prioritizing projects to maximize
General Fund savings.
•
Explore the use of tax-advantaged leasing. Several cities have leased their
properties to private interests that can take advantage of depreciation on their tax
returns (public entities cannot). North Carolina may want to consider such a
move.
•
Use more efficient facilities to save program costs.
The state has
successfully used certificates of participation to finance three cost-effective
prisons that will be less expensive to operate and were constructed in a timely
manner. The state should use similar tools for facilities that will reduce overall
operating costs, such as additional prisons and mental health institutions.
•
Monitor, manage and reduce energy costs. The State Energy Office has
identified nearly $700,000 in savings from reviewing electricity rates. Monitoring,
managing and reducing energy costs should be a core mission of the fiscal and
facilities management sections of every agency.
•
Centralize office space.
The General Assembly has required the State
Property Office to identify regional offices and develop a plan to consolidate them
in each region.
The Commission endorses this recommendation and
recommends the involvement of the State Budget Office in the process.
•
Close regional offices.
The Department of Revenue should consolidate
regional offices and provide services more effectively through a taxpayer
assistance call center equipped with modern technology. The Commission
supports this restructuring in the Department of Revenue.
•
Update transportation priorities.
The Department of Transportation has
fashioned proposals to reprioritize and accelerate crucial transportation projects
through the issuance of bonds already authorized by the voters.
The
Commission endorses this concept.
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Systemic Change Recommendations
The Commission has noted that the work of previous commissions has tended to be
ignored when the economy recovers and the immediate fiscal crisis passes. Several steps
should be taken in addition to those listed above to avoid that process.
•
Analyze the current organization of state government.
The Commission
believes that a comprehensive examination of the executive branch is in order to
examine the core services and best structure to provide these services. The
organization of other state governments should be studied for best practices.
•
Reduce the scope, size and numbers of boards and commissions.
The
state has several dozen boards and commissions, some with significant budget,
fee-raising authority and rulemaking authority. Often, these public entities are
not part of the budget debate because most of them are supported by funding
streams other than the General Fund
The Commission recommends that all
boards and commissions:
Establish a sunset to ensure that the need for their function is
examined periodically.
Reduce the number of members and meetings
Eliminate or reduce the regulatory burden that they place on state
agencies.
Regulatory commissions merit special consideration for
elimination or consolidation.
Submit their budgets in a uniform manner to the State Budget Office
and the Legislative Fiscal Research Division.
The State Budget Office is currently conducting an analysis of these issues.