Cutting Costs the Montana Way

WITH the debt crisis and the weakening economy fresh on their minds, most Americans have probably concluded that government, as a rule, cannot manage money responsibly. But it can. Just look at Montana.

For six years it has been one of the only states in America with a budget surplus: this year it is a record $433 million, proportionally equivalent to a federal surplus of $858 billion. Thus we’ve been able to cut taxes, invest in education and infrastructure and keep essential services intact. We recently got our first bond rating upgrade in 26 years.

And we’re not simply riding the Western energy boom. The recession has driven unemployment to 7.5 percent, and while we’ve had a great run with oil, coal and gas, royalties from these commodities account for only 9 percent of our budget surplus.

How do we accomplish what most states and the federal government cannot? I like to say we run government like a ranch. In ranching — my old job — you either pinch pennies or go belly-up. We do the same in government. Perhaps Washington can try it.

For one thing, we challenge every expense. If it isn’t absolutely necessary, we eliminate it. When the recession came we found $80 million in savings, which helped us avert a budget crisis. Little things added up: we renegotiated state contracts, cut our energy consumption by 20 percent, auctioned off state vehicles and canceled building projects and computer upgrades.

We even saved by spending: we stepped up our efforts to collect unpaid tax bills from out-of-state and foreign corporations, an undertaking that more than paid for itself.

This type of penny-pinching rarely occurs in Washington. As a small example, I was recently at a military base where a private firm ran security. Why, with the toughest soldiers on earth, would the federal government spend extra cash to rent security guards rather than let troops take turns guarding the fort? Sure, there might be a convenience to contracting, but is it worth the billions spent? No doubt the lobbyists for the security firm sprinkled plenty of money around Capitol Hill to get the contract.

The federal budget contains thousands of similar line items. A government serious about tightening its belt would eliminate them all.

But we don’t just cut costs. Like good ranchers, we also leave some grain in the bin in case of drought. When times were good, we stashed away cash in a special savings account. This was a political challenge, because almost every state legislator, from both parties, wanted to spend it instead. But the account proved to be a big help in getting us through the recession in solid financial shape.

I cannot recall the federal government’s ever banking surplus funds in a protected account, even during the surplus-laden 1990s. If Washington ever digs out of the current hole and runs a cash balance, Congress should likewise put some grain in the bin.

And even as we’ve cut costs and socked away money, we’ve followed another ranching principle: treat your ranch hands with respect. Like other states, we’ve had to freeze employee pay and reduce the work force. But as in any good organization, many of the best solutions for cutting costs come from state employees. Some look at payroll as a burden; we look at it as human capital, and we work hard to keep up morale in tough times. So when we cut the state payroll, I cut my own salary.

Sadly, many politicians, especially in Washington, seem to relish the opportunity to trash government workers. This is just cheap and ugly scapegoating. More to the point, it does nothing to produce bottom-line results.

Finally, we don’t spend money until we’ve found the lowest price. Around here, government contracts aren’t a way to take care of friends. Quite the opposite: we use our purchasing power to get the lowest possible rate. When the real estate market softened, we told commercial landlords who rented space to the state that if we didn’t see rent reductions, we’d move to cheaper premises when our leases were up. Most complied, saving the state almost $4 million.

How does the federal government negotiate? Consider Medicare drug purchases, one of the largest federal budget items. We are often told the cost of entitlements can be brought down only by cutting services. Nonsense. In 2003, in one of the greatest sweetheart giveaways ever dreamed up by the White House and Congress, they agreed to pay retail rates for Medicare drugs, even when everyone knew they could negotiate lower, bulk prices. The cost to taxpayers? An estimated $600 billion a decade.

There are savings to be found everywhere in government. Now that federal spending is the country’s top issue, Washington should try doing what any rancher or family household does: save money, live by a budget, challenge expenses, find bargains and invest wisely. Montana has proved that it works.