Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, December 14, 1994 TAG: 9412140037
SECTION: EDITORIAL PAGE: A-11 EDITION: METRO
SOURCE: WILLIAM D. EGGERS and JOHN O'LEARY
DATELINE: LENGTH: Long
In New York, George Pataki pledged to cut the income tax rate by one-fourth. In Connecticut, John Rowland vowed to repeal the state's income tax by the year 2000. Republicans won a majority of governorships by advertising itself as the party of budget-choppers.
Their opponents had solemnly intoned that state governments absolutely, positively cannot operate with a cent less than they currently spend. ``On the spending side, I don't see how you get from here to there,'' says Steve Gold, director of the Study of States, in Albany, N.Y.
History shows it can be done. In 1990, William Weld of Massachusetts was considered crazy for promising not to raise taxes in a state with an $850 million deficit. This year, he cruised to re-election with more than 70 percent of the vote, thanks to a balanced budget and, read his lips, ``No new taxes.''
Weld's boldness inspired New Jersey Gov. Christine Todd Whitman. Whitman was elected in 1993 by promising lower taxes, and she immediately pushed through a 30 percent tax reduction over the objections of skeptics. ``We cut [the budget] $2.6 billion in my first month,'' Weld told Whitman soon after her election. ``So don't let anybody tell you can't cut $1.4 billion in three years.''
The new crop of tight-fisted governors should learn from those who have been around awhile. Michigan Gov. John Engler is another ax-wielder who cruised to re-election, and he provides the first law of politics: ``The more tax money that flows into government coffers, the more money government will spend.'' Whitman states the corollary: ``As soon as you start limiting revenues, government will do more with less.''
Rather than crippling state governments, less money could make them healthier. Tax cuts create the discipline needed to streamline operations. Just like ordinary people, states will have to learn to live within their means. Here's how they can do it:
Cut the help. It's time to let the chauffeur go. Yes, Virginia, there is excess employment in government. Experience shows that employment can be cut significantly without reducing essential services.
In the first 21 months of his administration, Weld cut the number of state employees under his control by almost 7,000, a 14 percent decrease. To stave off privatization, employees in Massachusetts' money-counting operation of the subway system voluntarily cut the number of workers from 71 to 59. In four years, Gov. Engler has cut the state payroll by 8 percent. Gov. Branstead of Iowa laid off 1,200 workers to balance his state's budget during the recession.
Significant downsizing can't occur without taking on the unions, and fiscal necessity can often provide the political courage needed. A promise to control spending sends the message that a governor puts taxpayers first. ``Do I feel that I have an obligation to see to it that people who have been working in state government continue to work in state government? No, I don't,'' Gov. Weld told Forbes last year.
Taxpayers have been expected to play the role of generous uncle when it comes to public employees. A report from the American Legislative Exchange Council shows that since 1981, the compensation of state and local employees has risen $4.78 for every $1 increase in private-sector wages.
Shop for bargains. Stop buying overpriced brand names. If a state can find someone willing to perform a public function better and cheaper than public workers, they should do so. In Massachusetts, officials estimate that privatizing services such as road repair and prison food services saved $273 million in less than three years.
Competition in road repair saved money two ways. First, contractors delivered more for less. In Essex County, contractors delivered more service for less money than the state workers. Second, the competition spurred other public road maintenance to cut costs. ``They've brought their productivity up and the costs down,'' says a state official. Annual savings: $19 million.
Cut out the frills. No Club Med vacation this year. States will have to focus on their core services and cut back on the extras. This means the state of New York may have to close its cheese museum and reassess whether the state university system can afford to operate all 64 campuses.
Ending obsolete programs is politically difficult, and only fiscal necessity will force states to make the hard choices that politicians so often talk about. With an ironclad promise behind them, politicians can effect change. Whitman already has shut down the New Jersey Department of Higher Education and the Office of the Public Advocate.
With limited funds, marginal programs have to go. Gov. Engler abolished the Michigan Council for the Arts (savings: $11 million); closed the Department of Licensing and Regulation (savings: $25 million); relocated patients and closed five underutilized state mental hospitals (one hospital housed six patients and had a staff of 120); and eliminated four gubernatorial councils.
Limited income also forces tough choices on benefits. Some states may have to limit Aid to Families With Dependent Children eligibility to two years and then require recipients to find work, as Wisconsin has. Some states may have to end welfare for able-bodied adults, as Michigan has (savings: $150 million). Like Massachusetts, which no longer provides fertility drugs to welfare mothers, some states may have to restrict Medicaid spending.
Hold a yard sale. Clean out the attic. Arizona and Maryland both own airports. New York owns 18 golf courses, a ski resort and a tollway. Sale or lease of some public assets could generate large onetime revenues or a steady stream of tax revenues. Michigan, for example, enjoyed a $291 million windfall from sale of the state accident fund. New Jersey, meanwhile, is selling its marinas and is exploring the sale of Meadowlands sports complex, seven state armories and its public television station. ``Government ownership of the media went out with Pravda,'' quips Gov. Whitman.
Voters made it crystal clear that they want their government to go on a dollar diet. The tax cuts coming will not only make government smaller, but better. Long-overdue improvements may finally become reality. Privatization, productivity increases and re-engineering projects almost always result from fiscal necessity. In other words, government sometimes does the right thing, but only after exhausting all other alternatives.
A promise to limit taxes can sometimes be the best tool an incoming governor has to improve state government. After all, necessity is the mother of invention.
William D. Eggers and John O'Leary of the Los Angeles-based Reason Foundation are writing a book on streamlining government.
by CNB