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Ethics/Government TransparencyReadTaxes/Government Spending

AUDITORS EXPOSE AGENCY DOUBLE-TALK

In 2019 the legislature passed Governor Asa Hutchinson’s plan to reorganize state agencies into fifteen super departments.  The reorganization was sold to legislators and the public as reducing state government.

Conduit News did not buy that narrative and said the plan was not so much about curbing the size of government as it was about the Governor’s effort to control the large number of state agencies, especially semi-independent boards and commissions. We noted the plan included a new higher level of state government employees. We thought the plan might or might not reduce the size of government, depending on the commitment of bureaucrats.

Because of the way the reorganization was sold, legislators have been looking to see some savings.

The Arkansas Department of Transformation and Shared Services issued a report in November 2020 claiming the reorganization resulted in the state saving $57 million. That would be nice, but Legislative Audit analyzed the report and showed the department’s claim of supposed savings was inflated by many millions of dollars.

Legislative Audit based its analysis on the clear benchmark: Are agencies spending less money? Legislative Audit’s look at agency spending found the department report substantially overstated savings.

The Department of Transformation and Shared Services defended its report claiming there are lots more types of savings that do not cause a reduction in spending. Huh?

A department spokesperson defended the report to the Democrat Gazette:

“The transformation department countered that the audit report ‘dismisses offhandedly’ the budget reductions, reallocations and efficiencies ‘because they do not represent decreases in expenses’This is a fundamental misunderstanding on Legislative Audit’s part,” because Act 565 asks for a detailed statement of each Cabinet-level department’s plan to reduce general-revenue expenditures and create efficiency and identify other potential cost reductions.”[i]

What? Somehow the department decided potential cost reductions (and we suppose wishes and hopes) equal actual savings, even if government spends just as much money.

The department’s odd interpretation of “savings” is like a person who spends too much money every month but who claims to have made lots of savings because, although he spends just as much money, he now uses coupons and gets rewards for using his credit card.  He can claim all the savings he wants, and his bank account will be just as empty.

It is responses like the one from this department that cause people to distrust anything the government says.  Even in Arkansas government statements can be full of double-talk to gloss over the real situation.

A BIT MORE ABOUT THE REPORTS

We won’t go through the points made by Legislative Audit, so here is a link to the report. There is a nice summary at the beginning.

Conduit News has some additional comments on the claims, and we want to provide some examples of why we do not share the same rose-colored glasses the department wants everyone to wear.

FIRST, the reports focus on General Revenues.  Not all state spending comes out of General Revenues.  In fact, many of the boards and commissions gathered within one super department rely on Cash Funds.  Cash Funds are moneys collected from fees and deposited, not in the Arkansas Treasury, but in a bank account.  We wonder whether the Cash Funds spending is up or down and whether Cash Funds have been used to substitute for General Revenues in an attempt to claim savings.

SECOND, even if you were to buy into the department’s claim of $57 million in savings (which would be nice) you might want to remember the state General Revenue budget passed in 2020, even in the middle of the pandemic, was $5.89 BILLION.

THIRD, lets look a little closer at the department’s good news that staffing had been reduced. The report said there are 1,400 unfilled positions and that together six agencies saved $6 million by surrendering 166 of those unfilled positions.

  1. This means, of the claimed 1,400 unfilled positions, the state agencies were only confident enough of a permanent reduction to supposedly surrender only 166 of those positions. That is only 11% of the unfilled positions.  To us, it looks like the agencies are stockpiling positions for future growth.
  2. Legislative Audit pointed out that some of the 166 positions claimed to have been surrendered are actually still in the agencies’ budgets.
  3. Leaving a state position vacant does not mean there is no cost. State law requires state agencies to pay into the state employee health insurance program for each position BUDGETED not just filled positions.[ii]  So, essentially agencies are spending money just to keep the positions in their budgets.
  4. Legislative Audit noted salary expenses have not gone down as much as you would expect with 1,400 unfilled positions because there have been salary increases. For starters, remember the reorganization act of 2019 created another layer of bureaucracy.
  5. We also wonder what kind of positions make up the unfilled positions and the surrendered positions. What percentage of those positions are of such a low grade they are no longer attractive to job seekers?  If they are low paying positions, are the agencies hanging on to so many unfilled positions because in future budget requests they want to upgrade some to higher level positions, while surrendering a few positions to make it look like they are reducing their workforce.

Okay, we think you get the point.  There are lots of variables … and then the department also created some variables out of thin air.

The department’s report tries to put the reorganization in the best light, but when you look at expenditures the reorganization does not live up to the hype.

Governor Hutchinson’s executive branch agencies may be masters at government double-talk but thankfully Legislative Audit, from the legislative branch, is able to cut through the gobbledy gook when given the opportunity.

When the reorganization plan was unveiled in early 2019, Conduit News said the plan did not necessarily mean a reduction in state government.  While there seems to be some temporary savings (far less than claimed), what the future holds is unclear. We say “temporary” because agencies appear to be stockpiling positions and resources for future growth.

Yes, Conduit News was right about the reorganization being more of a management tool than a tool to limit government.

 


[i] Department of Transformation and Shared Services, Democrat Gazette, 2/20/2021

[ii] 21-5-414. State contributions generally — Partial state contribution of employees’ premiums.

(a) The Department of Transformation and Shared Services shall seek the advice of the Legislative Council and the House Committee on Insurance and Commerce and the Senate Committee on Insurance and Commerce before additional state contributions can be made to the State and Public School Life and Health Insurance Program on behalf of state employees.

(b) Participating entities shall make a monthly contribution equal to the number of budgeted state employee positions multiplied by the monthly contribution authorized by the Chief Fiscal Officer of the State, not to exceed four hundred fifty dollars ($450) monthly for each state employee budgeted position into a fund designated for state employee health benefits to partially defray the cost of life and health benefits for state employees and retirees participating in the program.

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