State News

Perdue's cost-cutting plan raises concerns

Posted December 10, 2010 1:35 p.m. EST
Updated December 11, 2010 10:08 a.m. EST

State budget

— A plan by Gov. Beverly Perdue to shrink government and privatize some operations made waves through the state government Friday as some expressed concerns about merging agencies and eliminating positions.

Perdue’s plan, announced Thursday, comes amid an anticipated $3.7 billion budget shortfall for the 2011 fiscal year – about $500 million more than was expected when the current year's $19 billion budget was approved last summer.

Most of the gap is caused by the loss of federal stimulus dollars and temporary taxes set to expire.

The governor’s plan to reduce that budget deficit would consolidate 14 Cabinet-level agencies into eight to improve efficiency and save an estimated $200,000 a year.

The Departments of Correction, Juvenile Justice and Crime Control and Public Safety would be combined into a proposed Department of Public Safety.

But Linda Hayes, secretary of the Department of Juvenile Justice and Delinquency Prevention, says that consolidating and trying to find the savings isn’t going to be an easy task.

”I think it’s going to be very arduous,” she said Friday. “I think it’s going to be one of those processes that I just can’t say, ‘OK, these two people have the same title – I can’t tell you that I can blend my HR director into the (Department of Corrections’) HR director, because we hire very differently. But I think there are similarities where I can do some savings on.”

Advocacy group Action For Children said in a statement that it has concerns about merging "a child-serving agency whose mission is about prevention and intervention with departments that handle adult criminals and focus on punishment."

Incoming House Majority Leader Republican Paul Stam, R-Wake, believes the different groups will continue to be treated differently even under the same umbrella.

“Really, the only reason we had a separate department to start with is because one of the previous governors needed to make someone else a secretary and give them fancy offices,” he said.

Also under Perdue’s plan, the Employment Security Commission would merge with the Commerce Department and bring in the State Controller’s Office into an expanded Department of Administration.

“I don’t support it,” State Controller David McCoy said. “I don’t think it makes much sense.”

McCoy said he believes the proposed change will strip his department of its independence and potentially compromise the state’s accounting process.

“We’re not in the business of painting a pretty picture by the numbers,” he said. “Rather, we’re in the business of painting the actual story.”

The Office of State Auditor, in a statement, said that “any change that would affect that independence would have to be carefully considered.”

Stam said he’s already considered it and supports the governor.

“By flattening the lines of control, we can do away with a lot of useless waste,” he said.

The proposed changes require approval by the General Assembly, which doesn’t reconvene until next month.

It’s unclear how many jobs could be lost. Perdue said Thursday that she would release more details early next year.

Another cost-saving measure Perdue announced is privatizing some of the duties now handled by state workers, such as information technology – an area where the government spent $1.1 billion in fiscal year 2009.

Perdue said a private vendor handling the state’s IT operations could save millions, but some in the industry believe it will cost taxpayers more.

“I haven't seen anything in other states where it's saved them any money,” said Lynn McGarrah, a state IT support specialist for 20 years.

She pointed to published media reports about a collapsed outsourcing deal with Indiana and IBM in which that state sued the provider over mishandling of welfare claims.

Virginia outsourced its IT services to Northrop Grumman and has been plagued with rolling computer outages, and Texas has accused IBM of “chronic failures” on its outsourced services.

McGarrah said there is also a difference in accountability between the public and private sectors.

“We don’t serve a stockholder,” she said. “We serve the citizens of North Carolina.”