New Governors Drive to Reorganize Agencies

When Sam Brownback took over as the governor of Kansas this year, he looked around state government and tried to make sense of the sprawling bureaucracy he had inherited. He decided to shut down several agencies, such as the Kansas Arts Commission and the state parole board, and fold their duties into other departments. Brownback figured the consolidations would save Kansas more than $9 million while making government smaller and more efficient.

Brownback, a Republican, was able to implement most of these changes through executive orders and without legislative interference. But he wasn’t able to do it without raising a few eyebrows along the way.

The most controversial change is to bring the Kansas Health Policy Authority, the agency that administers Medicaid, into the state health department. The old authority was governed by an independent board, but the reorganization now puts its duties directly under the control of Brownback’s administration. Critics of the move saw it less as a matter of gaining efficiencies than gaining power.

“We have a number of agencies that we have established as independent entities to limit the amount of political influence that is present,” says Kansas House Minority Leader Paul Davis, a Democrat. “My sense is that Governor Brownback would like to move a number of those agencies under his direct control. He needs to articulate a clear purpose for why he wants to do this if the legislature is going to go long with it.”

Kansas is not the only state where agency consolidation has become a hot issue. An unusually large number of governors are proposing merging agencies this year. That’s partially because the fiscal crisis has governors looking to find savings anywhere they can find them. But it’s also because a majority of states have new governors this year, and as chief executive officer, they often come into office with their own ideas about how government should be structured. 

“We have 29 new folks taking a fresh look at all of this,” says John Thomasian, director of the National Governors Association Center of Best Practices. “That is accelerating these types of changes.” According to Thomasian, there is a theme in the recent wave of consolidation proposals. States are moving toward having more mega-agencies overseen by directors who report directly to the governor. They’re hoping to increase cooperation among arms of the bureaucracy that carry out similar functions. 

However, experience shows that consolidating state agencies is easier to do on the organizational chart than it is in real life. Agencies often have different workplace cultures, a fact that can cause problems when they are told to merge. Expected cost savings tend to be relatively small and don’t always materialize. It’s not unheard of to see one governor combine two agencies only to have a successor break them apart again.

The classic example of a difficult government merger, Thomasian notes, was the merger of 22 federal agencies into the U.S. Department of Homeland Security. The consolidation made sense on paper but was notoriously difficult to pull off in practice. “One of the reasons the Department of Homeland Security took so long to get going,” Thomasian says, “is that you just can’t slam a lot of agencies together without it taking a while for the efficiencies to kick in.”

Departmental ping pong

That’s certainly proven the case in Michigan, where two environmental agencies have a history of being merged only to be separated again. The latest round of that cycle occurred just last year, when then-Governor Jennifer Granholm told the state Department of Environmental Quality and the Department of Natural Resources to consolidate once more. Just eight months later, Republican Governor Rick Snyder used his first executive order to split them back up.

The merger saved the state $156,000 in reduced rent costs. It also allowed five administrative positions to be eliminated. Snyder decided those benefits weren’t worth the strategic costs of having the two agencies struggle with defining what their one common role should be. Natural Resources focuses on forestry, parks and wildlife, while the Environmental Quality’s primary responsibility is environmental permitting.

“Being one big agency like that, based on what our state needs, it just diluted the mission too much,” says Mary Dettloff, a spokesman with Natural Resources. “This gets us back to a place where both agencies can focus on what they’re doing. We’ve got so much to protect here.”

Mitch Bean, the longtime director of Michigan’s nonpartisan House Fiscal Agency, has grown accustomed to new administrations coming in and shaking up the bureaucracy. “Every governor does it more than once,” he says. “Everyone is going to make things more efficient, save money, do this, do that. But the only place when you really get savings is where you eliminate duplication of services.”

Bean says it would be more useful if governors stressed the management benefits they hope reorganizations to yield, more so than the fiscal benefits. That’s the approach Snyder took with his one other significant change to the structure of the executive branch. He moved some workforce training programs and other functions that had been housed in the Department of Labor and Economic Growth into a newly created Department of Licensing and Regulatory Affairs. He stressed that the move would bring clarity to the distinct missions of each entity.

Administrative efficiencies

In Michigan, governors have the authority to make these sorts of changes unilaterally. It’s exactly the opposite in Washington State, where the governor must get the support of the legislature. Still, Governor Chris Gregoire proposed several significant reorganizations this year. The most sweeping of her ideas, a consolidation of cross-cutting administrative functions, passed with bipartisan support. 

The proposal is expected to save the state $18 million and eliminate 95 full-time employees. Stan Marshburn, deputy director of the Office of Financial Management, says there are other strategic benefits that are hard to quantify. “Those are the savings that we think we know, but they’re not the total sum,” Marshburn says. For example, the new structure is intended to create a stronger capacity for information technology planning and coordinating bulk purchasing across state government. 

Five agencies that service internal government operations are being consolidated into three. A new 1,200-person Office of Enterprise Services will pull together most transactional functions that are required to keep state government running internally, from human resources management to printing and accounting. The other remaining agencies, the Office of Financial Management and a new Consolidated Technology Services agency, will be able to concentrate on higher-level planning, oversight and policy setting across state government. 

Gregoire has put forward a number of reorganization proposals in the past, and has succeeded in eliminating numerous boards and commissions over the years as a way to cut costs. This, however, is by far the most significant restructuring to make it through the state legislature. 

Marshburn believes that the severity of the state’s budget situation and the internal government nature of the changes being proposed helped the proposal’s chances in the legislature. Government functions that interact directly with citizens tend to have vocal constituencies that make even minor organizational changes politically difficult to pull off.  As Marshburn puts it, “This created a better framework to have the discussion.”