How to save $1 billion without even trying
Michael W. Thompson
2008-05-27 17:26:42
As the economy flirts with a recession caused by a housing fiasco that our leaders should have seen coming, Virginia's lawmakers avoid making the hard choices that their counterparts in the business world have no choice but to grapple with.
After a prolonged struggle to patch up the current two-year budget, the General Assembly passed a $77 billion spending plan for the next two years.
Spending will increase almost 7 percent, yet lawmakers called the session difficult because money was so tight.
Only people in government would have such a feeling.
There is every reason to believe that when the General Assembly comes back to a full session in January 2009, the state will be faced with continued "shortfalls" in revenues.
"Shortfall" is the term applied when government plans to spend way more money than in the previous budget, but the revenues don't flow in as optimistically anticipated.
During this year's General Assembly session, an obvious measure to staunch state spending would have been to freeze all vacant job positions for the upcoming two-year budget.
The Democratic governor of Arizona took such an action in February, but no one in Virginia even thought to do it.
The average annual cost for a state job, salary plus benefits, is $68,743. So how much can be saved by simply not filling the jobs that are currently vacant?
With the help of Del. Dave Albo's (R-Fairfax) office, I have found some fascinating numbers that show that huge savings are available.
Last Dec. 31, there were 8,927 vacant job positions, not counting faculty at our state universities.
As a former business owner, I would readily freeze the academic jobs as well. Our institutions of higher learning are considered independent, so only they can decide what to do with these positions. But that doesn't mean that the General Assembly has to fund them.
To tide the state over during the economic downturn, the legislature could withhold funding for a substantial percentage, say 75 percent, if not all, of those vacant university positions. But it didn't.
Of the 8,927 vacant nonfaculty positions that were vacant last Dec. 31, about 1,000 positions are allocated to prisons, jails and the state police. These public-safety positions have been left out of the following calculations.
Let's take 300 more of these vacant positions and label them as "critical" for the management of our state government, key managers. All other job openings, all 7,627 of them, should be on the table.
These vacant positions should be immediately frozen and kept frozen until such time as our economy turns around and state tax revenues justify filling them.
Freezing those 7,627 vacant positions would save an incredible $524.3 million a year ?or more than $1 billion during the two-year budget beginning July 1.
A further analysis of the state employment numbers shows something truly fascinating.
From Dec. 31, 2006, to Dec. 31, 2007, when it was clear that Virginia was heading into economic turbulence, the state hired 3,949 additional people. That increase in employment added $271.5 million to our state spending at the very same time that our elected officials knew the state would have to cut expenditures.
If the state really wanted to run its operations more like a business or a family, as it should, it would never have added $271 million in additional payroll just as we were entering an economic slowdown.
And, for sure, instead of taking money from the Rainy-Day Fund, from teachers and universities, and from our transportation needs in the two years ahead, the General Assembly could simply have frozen 7,627 of the 8,927 vacant nonfaculty positions and the budget problem would have been resolved.
Why is it that our elected officials won't bring a reasoned business approach to the management of state government?
Next year, we are faced once again with a race for governor. Hopefully, that campaign will offer a robust and healthy debate on how our government can be better managed.
Freezing vacant government jobs as outlined above is one reasonable management tool that was left off the table this year. Our next governor should not make the same mistake.
Michael W. Thompson is president of the Thomas Jefferson Institute for Public Policy, a nonpartisan "solutions tank" in Virginia. These ideas are his and do not necessary reflect the opinions of the institute or its board of directors. He can be contacted at info@thomasjeffersoninst.org.