John Taylor,
President of the Virginia Institute for Public
Policy, publisher of Virginia Viewpoint.
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As
we move closer to the start of another budget cycle
in Virginia, the picture remains dismal.
The state is still facing a billion-dollar
plus deficit, and the economy has yet to recover
fully. Citizens
have made one-thing clear – no new taxes.
This stance will force our leaders in Richmond
to focus on innovative ideas, as opposed to new
taxes and fees, while putting Virginia’s budget back in balance.
Truth
is, we can’t blame our state’s fiscal challenges
on declining tax revenues.
Rather, our state government has overspent.
Now is the time to reel in state spending,
especially if there are opportunities to do so
without cutting vital services.
One such opportunity exists and remains
untried in Virginia — human resources outsourcing.
Virginia, in fact, has a history with outsourcing thus
demonstrating itself to be an innovative state
government. However,
our leaders in Richmond
have lately shied away from innovations like HR
outsourcing. In
the lexicon of civil service, outsourcing is often a
dirty word. It
shouldn’t be.
Governments
that effectively outsource services better performed
by the private sector have more money to do the
important work that attracts many people to civil
service. Typically,
this is also the work on which the public relies and
values most.
None
of this is foreign to Virginians.
The state already uses private companies to
deliver important state services including highway
road maintenance, prison operations, and information
technology systems.
Ironically, however, in the Commonwealth
of Virginia
the sector
in the worst financial shape and in the most need of
creative ideas to close its budget gap, doesn’t
outsource enough. Specifically,
the outsourcing of Virginia’s internal human resources functions could save
taxpayers millions of dollars a year and, amazingly
enough, give state workers the benefit of much
improved HR services.
Like
all cash-strapped governments, Virginia
is looking for ways to maintain core services while
reducing costs to balance the budget. Faced with the
untenable option of raising taxes or cutting
services, our leaders need to find new ways to do
things. Already,
cuts have been made in a number of agencies with
higher education taking one of the most significant
hits.
For
over thirty years, the Reason Foundation has tracked
the effects of competition and outsourcing.
Not only are there significant savings, but
also the quality of services provided dramatically
improves.
Even the federal government is actively using
competition and outsourcing to reduce costs and
improve efficiency. Several
reports document average savings of 30 percent in
addition to quality enhancements and service
improvements.
For
a current example, lawmakers should look to Florida
where a revolutionary project is underway to
outsource much of the state’s administrative
back-office operations.
Just last summer Florida
signed a contract with Convergys Corporation of Ohio
to administer almost all of its routine personnel
functions including payroll, insurance benefits,
employee training, and recruiting.
The contract will save the state an estimated
$173 million over seven years.
Florida will not only avoid $80 million in
capital spending to replace the state’s aging HR
computer systems, but will also cut millions of
dollars in recurring expenses for many years to
come.
There’s
more good news. State
employees and retirees in Florida
will have access to the latest in HR computer and
web-based technology, not to mention the HR
practices and service levels enjoyed by employees at
many of the finest Fortune 500 companies. For the
first time, every state employee will be able to
access his or her personal account and make
transactions on a 24/7 basis.
Perhaps
the chief benefit of outsourcing is that it allows
states to devote fewer internal resources to
burdensome administrative tasks and instead
concentrate resources on the core mission,
responsibilities, and programs of state government.
Rather than contemplate cutting essentials
public services, state leaders should outsource
those operations that can be performed better and
more cost effectively by the private sector.
As taxpayers, isn’t that what we want?
--
August 25, 2003
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