Thursday, July 26, 2007

Cost overruns aplenty in state government

The governor wants you to believe we are out of money because the cost of government has outstripped our income. The only solution she has to offer is tax increases. But is the CEO managing the state efficiently?  Read on.

Over the past several months, there has been much posturing about how to balance this year's budget shortfall which as of mid-May had ballooned to over $800 million.  The assumption from the governor's office is that we have "cut to the bone" and there is no where else to find savings, therefore we must raise taxes to balance the shortfall.

What the governor seems unwilling or unable to deal with is a basic problem of mismanagement in state government, a problem that only the head of the executive branch can address. Governor Granholm herself was quoted as saying in December 2003 regarding cuts to higher education, "just like any other entity, if you can't cut 5 percent a year, you are not doing your job." (Booth Newspapers, December 17, 2003). But since 2003 state government has grown by $4 billion and hundreds of millions have been lost because of gross mismanagement by the governor's own department heads.  Let me cite a few examples:
  • The Department of Information and Technology (DIT) signs a contract with Ameritech for voice and data communications worth $17 million, but after several "change orders" ends up paying $129 million.

  • The Department of Management and Budget signs a contract with EDS for computing hardware, software and services worth $58 million which explodes to $555 million after "changes".

  • DIT signs a 13-year contract with Oracle for software and support for "all state agencies" for $2 million, but somehow additions are approved to increase the contract to $144 million.

  • A forty-month contract with Policy Studies, Inc. for the Michigan Child Support Enforcement System to provide project management services worth $5.6 million is increased to $200 million, (over $1 million per week in overcharges!)

  • The Department of Community Health makes over $55 million in questionable or over-payments to its Pharmacy Benefits Manager.

Meanwhile, in 2006 the Department of Human services (Mary Ann Udow, Director) overspends its budget by $30 million, doesn't report it as required by law and goes on spending, even though they know two months before the end of the budget year that they are over-budget and in violation of the constitution.

All of these overpayments and many more like them were reported by the Auditor General of the State.  You can see this audit at:  The legislature responded when appropriate with new legislation to tighten controls.  But the only way to truly address these serious issues is for the Department heads to be held responsible by the "CEO" (the governor) for their incompetence.  This has not happened. To my knowledge, no department heads have been dismissed or even disciplined for their gross mismanagement.

The governor continues to ask for tax increases.  She has recommended an additional $1 billion in spending for next year.  She has recommended an additional 700 civil service positions, (while threatening to lay off 29 state troopers).  As a state representative responsible for sound fiscal policy, I cannot in good conscience even consider voting for tax increases when spending continues to spiral upward and hundreds of millions of dollars are mismanaged and misspent by government.  I am hopeful that the executive branch of government will get its house in order.

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