In his testimony before the House Finance Committee, Randy Cole, the Controlling Board President and Policy Advisor Office of Budget and Management, explains how Gov. Kasich's budget would encourage efficiency in government. Here's the testimony:
State of Ohio
The Executive Budget
Fiscal Years 2012 and 2013
The Jobs Budget
Transforming Ohio for Growth
Governor John R. Kasich
Reforming and Transforming State and Local Government
Testimony for the
House Finance Committee
State of Ohio
Controlling Board President and Policy Advisor
Office of Budget and Management
March 29, 2011
Reforming and Transforming State and Local Government
Mr. Chairman and members of the committee, thank you for the opportunity to share details about Governor Kasich's government reform agenda. These strategies for broad relief and reform lay the groundwork to transform the way government leaders deliver vital services and reduce bureaucracy across Ohio's 3,700 units of government. These reforms are critical to our efforts to get better results and more value for Ohio's taxpayers.
It's an honor to be here today. A little over Twenty years ago, I started my career as an LSC intern and then as a member of the Senate Finance staff. In fact OBM Director Tim Keen and I worked on the 1991 budget together as legislative staff. Since then, I've spent my career in local government and the private sector working to make government more efficient and save taxpayers money.
For the past two years I served Ohio Auditor of State Mary Taylor, leading Local Government Services (LGS) and the Performance Audit Section in her office. LGS provides support to schools and communities in Fiscal Watch and Fiscal Emergency and the Performance Audit Section makes efficiency recommendations and compiles best practices from around Ohio and the nation. I was one of the panelists that reviewed and selected "EfficientGovNow" projects in Northeast Ohio. At Mary Taylor's request, I coordinated the 2009 "Summit on Local Government Sustainability" and developed the "Shared Services Idea Center" website. During that time, I've seen the best and worst of what is happening around our state.
With that experience and perspective, I have been working with Policy Director Wayne Struble, OBM staff, and local government and education leaders throughout Ohio to develop the reform initiatives included in Governor Kasich's Executive Budget.
The Executive Budget utilizes four strategies, or as depicted in the graphic, four pieces of the puzzle for reforming and transforming state and local government services; reduce mandates, use 21st Century technology, expand shared services, increase flexibility and cost containment measures. When combined, these strategies prepare the way for delivering high quality services to Ohio's citizens at the lowest possible cost.
The Executive Budget reduces or eliminates a number of state-imposed mandates, rules and regulations. Many of them are obsolete, redundant or counterproductive. They drive up local government costs, often with little or no benefit to taxpayers. One of the reforms in this area is the modernization of prevailing wage. The current prevailing wage statutes have repeatedly been identified in my meetings as a mandate that drives up the cost of government building construction and limits the firms who respond to bid solicitations. We are not eliminating the prevailing wage, but rather modernizing it by increasing thresholds. However, we are exempting Department of Development projects and state colleges and universities.
As the administration works to reform healthcare in Ohio, we recognize the partnership we have with counties to deliver vital services to the most vulnerable Ohioans. We are reducing the maximum mandated county share for public assistance by 5% (from 110% of any previous year's expenditures to 105%)
Introducing 21st Century Approaches
While E-Commerce and new methods of purchasing have transformed business, local governments are still required to follow processes developed in the 19th Century to communicate with citizens.
We propose creating a statewide public notice website available for use by all public entities. This permissive program will apply to all public notices, and bid notices. There will be no charge to users and there is still an important role for newspapers because participants will still be required to run a smaller ad in the newspaper. We have estimated the potential savings of this website adds up to tens of millions of dollars. Data provided by Cuyahoga County showed that in 2007 alone they spent $750,000.
This isn't just a cost savings measure for government. In the area of public bidding, it helps link business with 3,700 potential customers. The postings will be searchable geographically and by type of purchase, and the public will be able to subscribe to instant notifications of new opportunities and notices.
This budget also allows local governments and schools to explore E-commerce opportunities and use internet tools and websites for advertising.
Shared Services and Collaboration
Governor Kasich's Executive Budget empowers and assists local governments to collaborate through shared services arrangements in two ways. First, we are tearing down barriers which have prevented them from working together and secondly we are proposing four different initiatives aimed at reducing costs and allowing government and education leaders to focus their energy and resources on their core missions.
We are providing local governments and schools with universal authority to work across boundaries. As an example, currently, four different sections of the Ohio Revised Code permit townships to collaborate with other governments for the provision of services. Cities, villages, counties, schools and many other government entities have specific statutes that require or allow for collaboration. Government officials across the state have requested clarification of their authority to develop shared service programs and collaborate with one another. From now on they will be able to share staff, pool together or perform joint projects without having to clear unnecessary hurdles to do so.
County commissions will be able to require other county offices to use centralized services for purchasing, transportation, vehicle maintenance, information technology, human resources, revenue collection, printing and mail operations. Independently-elected officials will maintain the authority to carry out their core functions, while creating economies of scale for back-office administrative functions.
The recent Knowledgeworks study has estimated $1.37 billion in potential administrative savings in schools. There are currently multiple regional organizations in place to provide services to Ohio's schools. The maps of their overlapping service boundaries and undefined service offerings overlay the state without coordination or quantified benefit. The Jobs Budget calls for integrating these entities by July 1, 2012 with a single collection of Regional Shared Service Centers that can provide administrative support services to both school districts and local governments.
The Board of Regents is requiring smaller colleges to explore shared services and efficiency opportunities and creating an "Efficiency Advisory Committee" to find and review efficiency plans across all of the institutions of higher learning in Ohio.
Rising health care benefit costs create an added burden to local budgets. The state has pooled its employees in order to negotiate better rates and create more efficient health plans. Since 2006, the School Employees Health Care Board has studied the opportunities for savings and increased benefits coordination across Ohio's primary and secondary schools and institutions of higher learning. If the identified recommendations and approaches were implemented, a recent analysis has quantified more than $300 million in potential two year savings. Local government officials across the state have requested the same opportunity. It's time to stop studying the problem and start working on the solution. The creation of the "Public Employees Healthcare Program" will allow local governments and schools to develop regional or statewide pools of their employees for a more efficient delivery of quality health benefits for government employees.
Flexibility and Cost containment
Finally I'd like to address some important management flexibility and cost containment measures that are included in the Executive Budget.
First, shifting the pension contribution amount by 2% from employer to employee saves $570 million. All but $60 million of that is saved by schools and local government. For government employees in PERS, the amount is comparable to the amount self-employed people have traditionally paid and the continued employer contribution exceeds almost any private pension or 401-k plan provided by businesses.
On some building projects, colleges and universities, schools and local government will be able to replace multiple prime contractors with a single prime contractor, and use the design build process to share risk, create new incentives on construction projects to help bring construction costs down.
We recognize that these are difficult financial times. In 2009, the Auditor of State had to take the historic step of declaring that Scioto County was in Fiscal Emergency. With more authority, the county commissioners could have taken action to prevent the declaration. Quarterly spending plans will allow county commissioners and other officials with an avenue to keep spending in line and adjust to changes in local revenues. Counties and other local governments will also be able to utilize furlough days and modified work weeks during times of fiscal distress. These changes will ensure delivery of services while maintaining fairness for employees.
Foster New Approaches to Governing
The bottom line is this: by reforming the ways local governments are structured and funded in Ohio, the Executive Budget helps build a new approach to governing, giving communities the tools they need to strengthen the fiscal stability and quality of services provided by local governments. The Government Relief and Reform graphic provides a second symbolism and was just backed up in a Cleveland Plain Dealer article this past Saturday that was titled "Unite and Conquer." Government and education leaders can fight against the cuts or they work together to fight for the reform elements in this budget. We have exciting opportunities to modernize government for the 21st Century and stop fighting to defend the status quo - or worse - holding onto outdated concepts that were born in the 19th Century.