Cutting the fat Riley leads in fiscal crisis
First in a Series
Editor’s Note: This is the first in a series addressing Alabama’s fiscal crisis and how government officials are tightening the state’s financial belt through massive and immediate agency cuts. The series will detail efforts to rewrite the state’s 1901 Constitution and how officials hope to offset a $500 million shortfall in revenues.
Gov. Bob Riley sat at the head of a long, mahogany table in the middle of his state Capitol office, periodically digging into a container of sunflower seeds. He pulled out one and crushed it between his teeth.
A small trashcan was placed next to his high-back chair. Your eyes followed the sunflower shell as it is tossed into the trashcan and you catch a glimpse of his neatly polished black boots as your glance returns northward.
With his shirt sleeves rolled slightly up his arms, he gazed down the long table at a group of Alabama editors, propped his elbow on the corner of the table and straight-forwardly declared: &uot;Fellows, you cannot believe how bad it is.&uot;
It was with those words that Riley began telling the story of runaway governmental spending that has bootstrapped the state financially and placed Alabama in one of the most severe economic crises since the Great Depression.
&uot;Unless we have immediate fundamental and structured changes across the board, we’re in for big trouble,&uot; Riley said.
Sitting around the table was Drayton Nabers, the former chief executive of a billion-dollar insurance company, whom Riley convinced to join his team as Finance Director to help put out the fires and find ways to fix the problem. Also there were Toby Roth, his chief of staff and David Azbell, Riley’s press secretary.
No one spoke until the governor had laid out his plans to make immediate and drastic cuts, while maintaining necessary state services. In the end, the governor said the cuts would help erase a portion of an anticipated $500 million shortfall in the coming fiscal year.
&uot;We’re going to take the next three to four months cutting expenses,&uot; he said. &uot;The people of Alabama have to be convinced that we’re running state government as credible, effective and efficiently as possible before we can make any suggestions for revenue changes.&uot;
Shortly after taking the oath of office, Riley directed Nabers to find financial fat and cut it.
&uot;We uncovered millions of dollars in bad decisions, bad deals and indefensible expenditures of our tax dollars. We realized it would be difficult to find that much in cuts but we understand that the responsibility of funding government – our most common means of fulfilling those duties – rests upon those capable of shouldering its costs.
&uot;But nothing is worse, or more of a breach of the social contract between citizens and state, than for government officials, bureaucrats and agencies to waste the money entrusted to them by the people they serve. We all work too hard for this to be tolerated,&uot; Riley said.
Nabers moved quickly and made a laundry list. He began implementing cuts that, to date, total about $127 million annually. With state tax collections showing a 5.6 percent increase, the combination comes out to about $220 million in revenue and savings.
Nabers began attacking the problems immediately.
A legal team was hired to end a Department of Transportation lawsuit that has cost the state about $500,000 per month in litigation costs. More than $200 million has been spent so far on the lawsuit.
Riley ordered all state departments to reduce personnel costs by at least 5 percent, saving about $75 million annually, and he froze pay raises. He banned &uot;pass-through-pork&uot; projects – the process of hiding money within state agency budgets only to be later handed out by lawmakers as political favors – which will save about $1 million annually.
He cut the money state employees who travel can spend each day, a move that should save $6.1 million annually, and he revoked all state cars permanently assigned to government employees, saving about $7 million a year. He cut all but essential out-of-state travel.
Nabers said the cost of purchasing state-owned automobiles has risen from approximately $11.4 million in 1999 to almost $20 million in 2002. He said the costs of operating those state vehicles went from $13.5 million in 1999 to more than $20 million in 2002.
The Finance Director said he plans to reduce the cost of purchasing new state cars by at least $5 million and reduce the annual operating costs by at least $2 million. His directive included no more purchases of luxury state cars, such as Crown Victorias.
The moratorium Riley placed on merit raises for state employees will save some $25.6 million annually.
Riley said the state must operate like a business.
&uot;If the CEO of a company is expecting a $500 million drop in revenues, it doesn’t make good sense to give thousands of employees an 8 percent pay raise, and that’s exactly what’s happening in state government,&uot; he said.
Riley said cuts would get down to the basics too, for items such as pens and pencils, and copy paper. That’s why he hired a professional state purchasing director, who he said can save some $11.7 million in purchasing costs annually.
Riley cut his own staff by 30 percent and payroll costs by 20 percent, including his own salary. The total savings in the executive branch was expected to be $750,000 annually.
Even with all the cuts, Riley said he must have the Alabama Legislature’s help to trim even further. A measure he hoped to be part of a package of bills on constitutional reform would give him line-item veto authority. That would allow him to make further cuts in spending.
&uot;It doesn’t make any sense if the CEO can’t manage the business spending,&uot; Riley said. &uot;This is absolutely necessary in the process.&uot;
That issue has been one every governor before him would like to have had, but lawmakers will tell you that the line item veto issue will be dead when it hits the floor of the Legislature. That’s because legislators see control of the state’s budgets as their basic function. Riley disagrees.
&uot;As stewards given the power to spend public money, government officials must first treat every dollar as if it was being taken directly from their own wallets,&uot; the governor said. &uot;Only then will the machine of government run properly, and only then will the people voluntarily make whatever appropriate investments are necessary.
&uot;In the final analysis, if expenditures cannot be justified and balanced against the weight of having that money taken directly from your own purse, then they shouldn’t be taken from the public purse,&uot; he said. &uot;That simple notion has become a policy within my administration, and we’re using it to steadily shape a government worthy of the public’s trust.&uot;
For more information on Gov. Bob Riley’s plans for state government, visit www.governor.state.al.us