By STEVE BRAWNER
Could state government save $300 million over the next six years, and what would it do with the savings?
Those questions arise after Gov. Sarah Huckabee Sanders’ Arkansas Forward initiative last month released a report written by the consulting firm McKinsey & Co.
The 956-page report, dated Oct. 9, identified 300 possible cost-saving initiatives across the 15 state agencies in Sanders’ cabinet, which does not include the semi-independent Department of Transportation. McKinsey had done the work on a contract paying it up to $5.5 million. As of Dec. 18, it had been paid a little more than $4 million.
Sanders’ administration says it will save $300 million over six years, which is less than what McKinsey identified. The administration at this time is not releasing details as to which proposals it will choose to implement, said Courtney Traylor, the Arkansas Forward project director and chief of staff at the Department of Transformation and Shared Services. She said most of the savings will come from information technology and procurement changes.
As for procurement, the report says the state could save between $140 million and $230 million in purchase orders and purchasing card spending out of the $1.7 billion it spends annually. It recommends 40 initiatives based on “getting the ‘right stuff,’ at the ‘right (total) price,’ through the ‘right processes.’” The state should be able to negotiate better deals considering all the money it spends. Less than 10% of the $1.7 billion is purchased through statewide contracts now.
The report also says state government could save $65 million to $130 million annually on its information technology spending. It manages $680 million to $700 million in spending each year, which is $150 million to $170 million more than peer states. It could save money by retiring and consolidating applications, de-prioritizing less critical and duplicative projects, modernizing applications, and negotiating better prices from IT vendors on a statewide basis.
But it should spend more money in a critical area: cybersecurity. State government is spending much less in that area than its peer states – $6 million compared to $60 million. That’s very concerning because there are a lot of bad guys out there.
Other recommendations are more nickel-and-dime stuff, although nickels and dimes can add up to a lot of money. The state could save between $3 million and $5 million annually in its vehicle fleet. Most fuel currently is bought at retail stations at retail rates, and the state doesn’t have a statewide maintenance contract. The 15 agencies operate a total of 3,980 passenger vehicles, and the agencies don’t pool them. More than 600 traveled less than 100 miles in 2023. In fact, the state could reduce its fleet size by at least 860 vehicles and decrease its average vehicle age from nine to four years.
There’s also excess in state government’s real estate holdings. It has double the office footprint it needs in Little Rock, so it could save between $15 million and $25 million annually there. It also could consolidate space in other parts of the state.
What would the state do with an extra $300 million? Sanders pledged in her campaign to responsibly phase out the state’s income tax. That pledge came at a time of historically huge surpluses, but those have shrunk somewhat after three tax cuts in her first two years. Another tax cut isn’t planned in the upcoming legislative session, although there could be one in a later special session.
Meanwhile, we still don’t know how much the Arkansas LEARNS education reform package or the state’s new 3,000-bed prison will cost.
One last thing to point out: It’s easy for citizens to shake our heads at government’s inefficiencies – for example, the fact that 15% of the cabinet agencies’ vehicles traveled less than 100 miles in 2023.
However, the start of a new year is a good time for all of us to consider how to tighten our own budgets. My 1997-built Ford F-150 pickup truck, which I use mostly for garden supplies, travels not much more than 100 miles a year. That’s 33% of my fleet, and this past week it cost me $575 to replace the fuel pump.
McKinsey probably would tell me to sell it and rent or borrow a truck when I need one. Should I?
Steve Brawner is a syndicated columnist published in 17 outlets in Arkansas. Email him at brawnersteve@mac.com.