Original story: http://www.statesman.com/news/texas-politics/shrinking-the-state-budget-easier-said-than-done-662076.html?viewAsSinglePage=true

Shrinking the state budget easier said than done

Initiatives since 2003 have struggled to produce savings.

AMERICAN-STATESMAN STAFF

Updated: 8:32 p.m. Sunday, May 2, 2010

Published: 7:26 p.m. Sunday, May 2, 2010

Many Texas lawmakers have offered voters election-year platitudes when asked about fixes for next year's budget shortfall - expected to be more than $11 billion .

They promise that the state will tighten its belt, trim the fat and scrub the budget of all nonessentials - just as they did in 2003 when the state was in a $10 billion fiscal pickle.

It will take political will and some discipline, many Republican leaders say, but it will not take new taxes.

But fulfilling that promise could be a formidable task, if the state's recent budget experience is any indication. The most touted budget-shrinking initiatives have rarely lived up to the political hype of providing better state services for less. And the promised savings have often proved elusive.

Consider, for example, the 2005 legislation that mandated the consolidation of 27 agency data centers that house mainframes and servers. The data center consolidation was sold as a money-saver - $178 million over seven years - that would also improve operations and security.

The project, which is being run by IBM Corp. under an $863 million contract, has been mired by delays, equipment failures and service complaints. The contract is being amended, and IBM is said to have asked for as much as another $500 million to complete the task.

Then there is the sweeping 2003 legislation that aimed to save $1.1 billion in health and human services spending in 2004-05.

About half of the actual $927 million in savings from that legislation came from policy changes that trimmed the rolls of health care programs, including the Children's Health Insurance Program.

"The last time when we cut the budget, we did not do it by operating a more efficient government. We did it by not offering services," said Eva DeLuna Castro , a budget analyst with the Center for Public Policy Priorities , which advocates for low-income Texans.

But it was the administrative reorganization that merged 12 agencies into five that was heralded as the exemplar of streamlining in tough budget conditions.

"In 2003, Texas embarked on one of the most ambitious transformations of state government in U.S. history," the Health and Human Services Commission wrote in a 2009 update on the initiative.

The administrative changes aimed to reduce bureaucracy and improve operations. Early estimates showed savings of $50.4 million in the first two years by combining jobs and office space and reducing management positions.

State officials also projected another $335 million to be saved from 2006 through 2009 from the continued consolidation and by simplifying how Texans are deemed eligible for food stamps and Medicaid.

Central to achieving those long-term cost savings, however, was an outsourcing deal with Accenture LLP to manage CHIP and run call centers enrolling Texans in the programs. The project was seen as a way to save $300 million more over five years .

That deal fell apart in 2007 after widespread complaints that eligible families could not get benefits. The promised long-term cost-savings went with it after having paid Accenture $243 million .

The Health and Human Services Commission has not determined what, if any, cost-savings were realized beyond the first two years, spokeswoman Stephanie Goodman said.

Talmadge Heflin , who was the House Appropriations Committee chairman in 2003, said the streamlining was good policy even if it didn't meet the projected cost-savings.

"Had we not done that, I think we would have seen the growth (in the bureaucracy) outstrip what we're seeing today," said Heflin, now with the Texas Public Policy Foundation, a think tank that promotes limited government.

There are potential savings to be had by streamlining state government, but the amounts are relative chump change given the size of next year's budget gap.

The Texas Council on Competitive Government was founded by the Legislature in 1993 to seek ways for government to be more efficient and cost-effective. Its efforts produced almost $21 million in savings in 2009 by pooling the resources of several agencies to get better prices on services such as printing and fuel.

Heflin warned not to belittle relatively small opportunities in the mammoth budget.

"If you don't look at them, you're going to miss some savings," Heflin said.

Even though the recent big privatization projects have had serious problems, state officials should continue to question whether a program is really needed and can be done for less by someone other than government, Heflin said.

"If you don't do that, your government can grow out of control," Heflin said.

Another $200 million in potential budget savings have been identified by the Legislative Budget Board, which compiles efficiency recommendations for each Legislature.

The big-ticket items from the budget board call for shifting more than $161 million in health insurance costs to state employees and retirees, who will probably already be absorbing another $140 million in health care costs beginning in September.

Similar cost-shifting in 2003 helped to move $1 billion in health care expenses off the state and onto employees and retirees, as well as teachers and local school districts.

To balance the rest of the budget in 2003, the Legislature also raised fees, drained much of the rainy day fund, and employed some accounting maneuvers that delayed certain payments to the next budget. A last-minute infusion of federal money closed the rest of the hole.

The budgeting challenge before next year's Legislature will be about the same as in 2003. The most conservative estimate of 2012-13 shortfall - $11 billion -would amount to about 14 percent of the current general revenue fund, the portion of the $182 billion budget over which the Legislature has the most control. In 2003, that proportion was slightly higher.

Texas' relative fiscal condition is much better than many other states that already have instituted worker furloughs, let people out of prison and sliced money for public schools.

The Lone Star state knows that difficult decisions are coming.

This week, state leaders, including Gov. Rick Perry, are expected to tell state agencies how to cleave about $1 billion from the current budget to get ahead of the problem.

Among the options are laying off prison guards, reducing payments to doctors who serve Medicaid patients, and eliminating some teacher training programs.

There are the obvious targets for budget cuts, such as travel and unfilled jobs, said Sherri Greenberg , a former state representative from Austin who is now a lecturer at the LBJ School of Public Affairs.

"With the kind of shortfall that we're talking about, that is not going to get you there," Greenberg said.

kalexander@statesman.com; 445-3618