Consolidating State Agencies

Last week I wrote about the large number of modernization initiatives that were approved this year by members of the Government Modernization Committee, the Legislature and Governor. In that article I described a small sampling of these initiatives. These efforts were designed to result in cost savings and greater transparency. In this week’s update I have described House Bill 2140 and House Bill 1304. These two modernizations bills are designed to transform Oklahoma state governance and result in millions of dollars of savings to the taxpayer.

Until passage of House Bill 2140, Oklahoma’s central service functions such as procurement, human resources and financial services were divided into seven different agencies. In some cases, these bureaucracies offered competing shared services services. State employees were forced to navigate a gauntlet of central service bureaucracies to obtain services for their agency. HB 2140 consolidated five of these agencies into one and created a central services one-stop shop for state employees. A multi-million dollar savings mandate was attached to the legislation.

This consolidation should allow the state to focus its policy efforts and yield considerable additional savings to the taxpayer. Here is one example of an absurdity created by the fact that so many agencies overlap on policy. State employee benefits policy has historically been divided between two separate state agencies. This year, one of these state agencies subsidized the state employees’ PPO health care premium costs by using income from that agency’s investments. This means that the employees’ cost for their PPO health plan premium did not increase.

A second state agency awarded HMO contracts that reflected an increase in premium. Because the state employee benefit allowance is tied to a formula that accounts for the price of the HMO plans, the employees' benefit allowance is set to increase.

This means the cost of purchasing health insurance will stay the same for many of the employees who use the PPO plan. This is at time when their benefit allowance is increasing. Many employees already have 100% of their benefits paid for, so the excess allowance will be taken in the form of direct monetary compensation. In other words, state agencies must now pay their employees thousands of dollars in benefit allowance that is not needed to purchase benefits. This is a pay increase without a vote of the Legislature or approval of the employees’ agency-level employers.

House Bill 2104 consolidated both of these agencies, and should put an end to these types of absurd outcomes.

House Bill 1304 consolidates much of Oklahoma state government’s information technology processes. Currently, millions of dollars of information technology spending is segregated across countless state agencies. Information technology is not coordinated, strategized or planned on an enterprise-wide basis. A 2011 study found that Oklahoma spends over $40 million more than comparable organizations in IT spend each year. HB 1304 cuts through the bureaucracies and views information technology activities from the perspective of a single entity. Once completely implemented, the legislation is designed to save about $80 million each year.

The Department of Education volunteered for inclusion in the IT consolidation even before the law takes full effect. This one state agency alone is estimated to experience an approximate savings of $600,000 per year because of the consolidation.

This article has just began to scratch the surface of the impact that these bills will have on state policy in the years to come. If properly implemented, the savings and efficiency will be considerable.