Can a state reduce spending (or, more accurately, reduce the rate of increase in spending) without reducing services? The answer is “Yes, but.” The “but” part is that the governor and legislature have to be committed to doing it. They have to believe they can do it, and they have to want to do it.
If the governor and legislature are forced into doing it when they don’t think they can, they won’t be able to do it. They will spend their time whining and complaining, instead of embracing the need for change and trying to make it work.
To “cut”* spending without cutting services, you have to want to look and hunt for savings. You have to be excited at the prospect of providing services at less cost – or providing more services for the same cost.
Governor Scott Walker of Wisconsin talks about the need to reform spending, not just cut it. Instead of merely spending less, he says, we need to change the way money is spent. When Governor Walker changed the collective bargaining rules for public employees in Wisconsin, one of results was that public employee unions could no longer bargain with local governments and school districts to force them to buy their health insurance, etc., from union-affiliated providers. The governments would still provide the same benefits; they just wouldn’t have to buy them from the unions or their affiliates. When governments/school districts were able to buy insurance from companies other than those affiliated with unions, many of them found they could save a lot of money. They could provide the same health insurance benefits to their employees and still have money left over. With the extra money, schools districts could hire more teachers. Local governments could balance their budgets, or even reduce taxes. And they could so this while providing the same benefits to their employees.
Mitch Daniels did the same thing in Indiana during his eight years as governor of Indiana. For example, Indiana saved $14 million by hiring an outside company to provide meals to inmates in state prisons, instead of cooking the meals in local kitchens at each prison. In addition, the food, based on its nutritional content and feedback from prisoners, was better. In another case, when IBM failed to perform on a contract to redo Indiana’s computer system, Governor Daniels fired them, something you can’t do with a state department. (For more examples, see Mitch Daniels’ book Keeping the Republic. You can buy it used on Amazon. Most books “by” politicians aren’t worth much. This one is. The examples I gave are at pages 111 and 114-16.)
Mr. Daniels is now doing the same thing as president of Purdue University. In his nineteen months as president of Purdue, he has frozen base tuition through the 2015-2016 school year. According to Mr. Daniels:
“When you impose a (budget) limit, people suddenly begin to do common sense things they should have done before. When money is easy, when you can dial up tuition or fees, people tend to postpone even the most basic efficiencies.”
What you have in all of these cases is a governor (or chief executive) and, in the case of Wisconsin and Indiana, a legislature that was committed to running the state more cheaply and to finding ways to provide the same services more economically. It wasn’t a matter of cutting spending; it was a matter of spending differently and more wisely.
The key point is this: A state (any government) can “cut” spending without cutting services – if its political leaders want to. And if its voters elect political leaders who want to.
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* Throughout this post, I use “cut” not to mean an actual reduction in spending, but to mean a reduction in the amount of the increase in spending that would otherwise occur. Opponents of “cutting” spending like to talk as if those who want to “cut” are going to spend less in absolute terms in one year than in the prior year. Sometimes that is possible. Most of the time, however, a “cut’ in spending is merely a lower increase than would otherwise occur.
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