Massachusetts has a big budget gap but tax hikes and service cuts shouldn't be the only approach. We must also change practices to help close that gap. Here are five things Massachusetts should do right now to become more efficient and more effective.
1. Cut Supplier Costs by Repealing the "Pacheco Law"
The most effective way for Massachusetts' state government to cut its supplier costs is to repeal the Pacheco Law (named for its chief legislative sponsor) which places severe restrictions on the delivery of state services through outsourcing, lease arrangement, and outright privatization. Repealing the Pacheco Law would allow state entities to access a full range of procurement options available to similar public entities across the country and around the globe.
For transportation and infrastructure procurement, the state would have options to employ Design-Build-Finance-Operate-Maintain and Design-Build-Operate-Maintain agreements, which have reduced life-cycle costs by up to 40% while reducing delivery time by 25%.
2. Lower Structural Costs through Group Purchasing
On the municipal level, participation in the health insurance purchasing entity (the "GIC") for state employees and mandatory enrollment of municipal retirees in Medicare should be enacted. In Springfield, MA, these two steps resulted in savings of over $10 million per year. Viewed statewide, from 2001 to 2007, GIC's health expenditures grew at 7.5% per year on average versus 13.2% for municipalities. If municipal health expenditures had grown at GIC's rate, the resulting savings would have been roughly $500 million in 2007.
3. Shed Unneeded Assets
State government is the largest landowner of record in the Commonwealth, yet it has difficulty managing and maintaining a number of its assets. Finding taxpaying use for unneeded assets would bring multiple benefits - for municipalities the transfer of tax-exempt property to productive use, for the state a one-time inflow of revenue, and relief from maintenance expense. From 2003 to 2005, the state received approximately $30 million annually from the sale of assets. Yet, the Legislature has allowed these powers to lapse and has failed to pass viable alternatives.
4. Leverage Low Cost Policies
During the fiscal crisis, attempts to manage state government more efficiently will require expanding programs that have proven both effective and cost-effective, rather than launching new ones. Lifting the cap on charter schools and aligning district curricula with state curriculum frameworks are two proposals that would provide tremendous benefits to Massachusetts' students, particularly students in chronically underperforming districts, without adding significant costs.
5. Reengineer Systems To Avoid A Recurrence of the Current Crisis
Despite the need to focus on the immediate crisis, the Commonwealth should also take the opportunity to put processes in place to avoid a recurrence of these problems in the future. Those processes should include capping spending increases, absolutely and durably segregating capital gains funds, and limiting the use of 'rainy day' funds to actual fiscal emergencies.
Given the ongoing fiscal crunch facing state and local governments, innovative practices must be part of the solution. These five things would be a good first step toward a state government that makes the most of its limited tax dollars.