07 May 2012

Committee action, May 7: HB 327, HB 328

HB 327 by Rep. Dee Richard would cut up to a tenth in total spending of all contracts, for next fiscal year only. Treasury John Kennedy testified to the House Appropriations Committee there were at least 19,000 contracts spread across the state, with perhaps as many as $7 billion in value. He thought $500 million could be lopped off, which should not be priorities for this budget year. He read a few summaries which seemed particularly trivial, such as seat belt usage by school children, chimpanzee viewing, and field trips for fashion. He also gave examples from correspondents of how procedures can allow for lack of oversight for the scope and amounts of them. He said one approach could be to have the Joint Legislative Committee on the Budget review contracts from $50,000 and above, in a simple procedure.

Kennedy, in response to questions, noted that this was a result of policy-making within agencies that needed further review. He said the 10 percent approach was a way to flush out those of presumed low priority. Perhaps both approaches, which would create a bottleneck, could do the trick. Rep. Joe Harrison wondered whether current state employees became future contractors; Kennedy claimed no review was occurring to know this.

Rep. Franklin Foil asked how much was federal money. Kennedy said there were but could give no specific amount, and said regardless of source, low priorities should be eliminated. He also said renegotiation was possible to save money, and said maybe an amendment could add that.

Rep. Tony Ligi asked whether the bill would prevent those rejected or vetoed items from reappearing in contract form, as Kennedy testified he had found at least 24 instances. Kennedy said not, but an amendment would be welcome.

Rep. Pat Smith wondered whether the priorities such as poverty reductions would not get short shrift. Kennedy said federal dollars probably will start declining for this area anyway, and on the state side priorities would be upheld with bureaucrats, although legislative review would provide greater assurance. Smith said that addition might be too costly and time-consuming.

Rep. Roy Burrell said that with all of the questions that were out there and with the amendment suggestions, why not convert the bill into a study resolution? Kennedy said the Commission on Streamlining Government in essence had done that, and he thought the problem was obviously rendered through its review.

A representative of the Secretary of State said even this cut would lop off in federal contracted money what they argued were priority and irreplaceable. Kennedy said another amendment could allow for an escape provision. Chairman Jim Fannin said even with that, it would push greater reductions onto others.

Commissioner of Administration Paul Rainwater spoke in opposition, saying that the Gov. Bobby Jindal Administration already had cut over 9 percent in contracting from the previous year, and 15 percent the year before and this could be checked through budget authority granted. He said the budget process existed to vet contracting money requested (except for emergency adjustments). He also noted this could be a barrier to privatization as well. He claimed overall the present process was working and provided greater flexibility than the bill’s approach.

Burrell asked whether vetoed legislation was reappearing in contracts. Rainwater said he had not heard of that and it would be something that would draw a serious response. However, some areas of government are granted autonomy, especially higher education and for everything under $20,000, where this might happen. But an arbitrary approach, he noted, was what the bill did and would not work as well. Kennedy responded by saying it would not be arbitrary, in a small breach of protocol as this was happening during to the opposition testimony phase. Burrell also asked Rainwater about the utility of a study bill, who said more information was good when regarding the many unintended consequences that could occur with the bill.

Responding to questions by Smith, Rainwater noted the inspector general’s office, his divisions own resources, the Legislative Audit Advisory Committee, and the Legislative Auditor all were existing methods to review contracts, that a process was in place. Smith recommended agencies themselves conduct these kinds of review to justify. Rainwater pointed out that a large number of the examples Kennedy had brought up had come through federal dollars that the state would not have gotten anyway and had become extinct. Some were required as part of other high-priority items by federal law.

Rep. John Schroder wondered whether the 30-day escape clause in contracts would not be used as a tool for renegotiation. Rainwater said that would be on legally shaky ground as a tactic, because it would circumvent the legal bid process. They could reduce demands on contractors for lower amounts, and had been.

Closing, Kennedy said the time was right to proceed, and not to study it. There was no objection to favorable passage.

Richard’s HB 328 would reduce 5,000 jobs over the next three years in the executive branch as well. Kennedy said attrition should take care of this, and it would force reorganization to make state government less top-heavy, which the Legislative Auditor said was the case. Or, spending cuts on personnel could do the same, which he said constituted $8 billion in all compensation. Even if some was forced onto the state by federal jobs, significant reductions still could occur.

Rainwater again spoke in opposition. He said strategic cuts were necessary and they were being done, both in numbers and jobs – producing the lowest numbers in 20 years, claiming $1 billion in savings. However, benefits costs were driving compensation costs per employee higher. Plus, responding to questions, he said while some agencies like higher education had autonomy in hiring, they still had to adhere to their budgets.

Kennedy closed by saying the cost of labor was not being controlled as it should be, and this bill could do it. He said at the salaries that cabinet secretaries got, they should be able to do this strategically. Without objection, it passed.

If you can't find $250 million to cut from this, you must be from Ole Miss.
Kennedy, in his closing remarks on HB 327.

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