Stateline Story

States Team Up to Save in Tight Times

The governors of Minnesota and Wisconsin still like to spar over their interstate sports rivalries, but the recession is pushing them to team up in delivering some basic state services to save taxpayers on both sides of their border up to $10 million to start.

Each faced with budget deficits of close to $5 billion over the next two years, Govs. Tim Pawlenty (R) of Minnesota and Jim Doyle (D) of Wisconsin this week unveiled a 130-page report ( PDF ) that lays out ways the two states could save by getting their state bureaucracies to join hands instead of going it alone.

Wisconsin's prison farms could sell milk to Minnesota. Wisconsin could piggyback on a Minnesota contract to save 30 percent to 55 percent on shipping costs for small packages. Oversized trucks could get one permit to travel through both states, and the states could combine efforts to fight invasive gypsy moths and emerald ash borers, which know no state borders.

While Wisconsin's and Minnesota's plan would break new ground in melding some services that each state has operated independently up to now, s tates around the country have been squeezing out savings by working together or with local governments for years-even decades-on services ranging from health care to information technology to schools.

This year, from Connecticut to Hawaii, legislators in at least nine states introduced proposals to encourage different units of government to share services to trim spending. Among tasks proposed for streamlining: buying cafeteria food in bulk for multiple school districts, combining payroll departments for several city halls and using purchasing pools to buy computers at discount rates.

"The economy has mandated that we all change, whether we like it or not. That really drives people to look for new innovations, new ways to share, to do the same level of services or more services with (fewer) resources," said Steve Dahl, a Deloitte Consulting LLP financial-management expert, who is pushing Minnesota and other states to streamline operations.

Last year, 46 states pooled their buying power to purchase $2.57 billion worth of computer equipment. Under the arrangement, states can buy Lenovo laptops at a 25 percent discount and Dell computers for 10 percent cheaper. Certain Kyocera laser printers are sold at a 75 percent markdown.

It is the largest project operated by the Western States Contracting Alliance , a 15-state group formed in October 1993 that allows other states to participate in its purchasing agreements. Once the group decides to negotiate a contract, it lets one state head the effort. Minnesota, for instance, is the lead state in the computer contract.

Early this decade, states joined forces to curb the soaring price of prescription drugs. In April 2004, the federal government for the first time approved a multi-state Medicaid drug-purchasing program. By the end of 2008, 24 states used multi-state arrangements to buy medicine for their Medicaid recipients, according to the National Conference of State Legislatures .

At least 43 states allow cooperative purchasing, according to a 2007 survey by the National Association of State Procurement Officers (NASPO). Alabama and Florida do not. (Georgia, Maine, Maryland, Nebraska, Rhode Island did not respond to the survey.)

Most states have the authority to buy products with local governments, other states and the federal government, but some even can partner with other countries or nonprofit organizations.

In 2007, Delaware worked with local jurisdictions-from schools to fire departments-to buy electricity through a reverse auction, in which sellers bid to offer the lowest price. Savings amounted to $13 million in the first year with $8.2 million more likely over the next three years, according to state officials.

Savings aren't the only incentive. Proponents argue that collaboration can improve customer service, identify problems and even improve public safety, especially when governments share information technology.

For example, South Dakota used state and federal funds in 2001 to buy radios for local firefighters, police and paramedics statewide so they would all be on the same frequency and could communicate more easily during emergencies. Massachusetts is involved with a regional effort with municipalities and nonprofit agencies to standardize health records. Nebraska maintains a central computer network to help counties manage everything from payroll to traffic tickets.

Businesses are interested in the arrangement, too. They increasingly have asked how to sell their wares through existing multi-state collaboratives, said Nicole Smith, NASPO's issues coordinator.

Technology as a catalyst

When governments want to work together, information technology is an obvious place to start. State workers' computers, phones and Web sites in many cases can be standardized and tweaked to work better together. Once the equipment works better together, the workers who use it can work better together, too.

Gopal Khanna, Minnesota's top information officer and the president of the National Association of State Chief Information Officers , said government technology projects are now catching up to the private sector in pushing for increased integration.

Risk-averse bureaucrats, outdated equipment, oversight arrangements and an emphasis on security all can impede the sharing of information services, Khanna said. But that's changing, thanks to cheaper technology and customers' expectations that they should be able to get state services online anytime, he said.

Khanna said he expects to see more integration of services in information technology, such as consolidating the maintenance of Web or e - mail servers or designing Web sites that let users interact with multiple agencies, for example, allowing them to apply for Medicaid and Food Stamps at the same time.

Plus, citizens expect more information about how their government works, especially since the passage of the federal stimulus package that's sending billions of dollars to the states to revive the economy, he said. To track the money, it's even more important for computers to be able to work together.

Schools as a battleground

As the most visible outpost of government in most communities, schools are also a frequent target of efforts to streamline government.

Currently, 45 states authorize regional entities to help school districts get cheaper prices while buying supplies or providing services-up from 31 in 1997, said Brian Talbot, executive director of the Association of Educational Service Agencies , a national group of state-authorized regional authorities. He said interest in sharing services among school districts has "really, really picked up" since the recession started.

Regional offices can centralize payroll or provide a superintendent to handle multiple school districts. Schools can share special education teachers and vocational services. Districts in Washington state held down costs on new school construction by collaborating on architectural design, Talbot said.

However, prodding school districts to work with one another to cut costs also can be controversial. Pawlenty, for example, touched off a fight in the Minnesota Legislature this year when he proposed in his January state of the state speech that the state's 490 school districts and charter schools do bulk purchasing of information technology, food services, textbooks and supplies.

The speech led to a debate over whether current joint efforts by Minnesota school districts were enough, especially during this recession.

"Many districts have done this, and their experience shows why more districts ought to. It's something that is happening, but it is not happening across the state. We want to take those good examples and regenerate them in every school district," said Pawlenty spokesman Brian McClung.

A proposal worked on for the last four years by Minnesota state Sen. Terri Bonoff for a joint purchasing measure for schools, similar to Pawlenty's plan, failed 33-31 this year on an initial Senate floor vote, though the measure could be revived.

"This has been a great case study of resistance to change," said Bonoff, who ran into opposition not only from Republicans but fellow members of the DFL (Minnesota's equivalent of the Democrats).

(The Government Performance Project , which, like Stateline.org , is part of the Pew Center on the States , provided Bonoff with informal analysis of the bill earlier in the session.)

Minnesota school officials say their biggest problems with the idea are that they're already doing much of the cooperative work Pawlenty suggested and that they don't want state interference.

A technology consortium of 38 school districts called TIES recently surveyed the state's school districts, and three-quarters responded. When asked whether their district bought school supplies, classroom equipment and office supplies through a joint-purchasing agreement, more than 80 percent said "yes."

Lee Warne, executive director of the Minnesota Rural Educational Association , a group representing 150 school districts, said forcing school districts to buy from a state-supplied list of vendors could undermine schools' standing in their communities and eventually cost them money.

More than 90 percent of Minnesota school districts rely on extra property tax money approved by voters to pay for day-to-day expenses, he said. Often, local business owners help schools convince voters to support tax increases, in part, because the money will stay in their communities. Without support from local businesses, voters would be less likely to back the tax hikes, Warne said.

In Minnesota, school districts already purchase equipment through the state or through one of nine regional cooperatives, first created in the 1970s. One, the Northwest Service Cooperative , for instance, works with 43 school districts and organizes food programs, negotiates contracts for office supplies, trains local school staffers on how to comply with federal workplace-safety laws and sells 54,000 health insurance contracts a year.

School officials also recoiled at a requirement in Bonoff's bill that they hire consultants to find ways to cut costs, and then give the consultants a cut of the savings.

Grace Keliher, the top lobbyist for the Minnesota School Boards Association , said school boards shouldn't have to use state money to pay consultants for ideas schools have themselves. Dahl, the Deloitte consultant, said outsiders are needed to make sure schools follow through with the reforms.

A different approach by the Minnesota House seems to have more legs. State Reps. Marsha Swails (DFL) and Carol McFarlane (R) decided, after seven weeks of hearings, to propose setting up a Web site through the legislative auditor's office where school districts, cities and counties could swap ideas about ways to collaborate.

"I honestly think that there are so many people who do not know what's going on. I mean, Carol and I didn't know how extensive the sharing and cooperating was until we really dove into this headfirst," said Swails. The measure is still in committee.