Sage Thinking in Nevada

Faced with a looming budget shortfall totaling nearly $1 billion, Nevada Governor Jim Gibbons created the Spending and Government Efficiency (SAGE) Commission in May 2008 to review state government and develop recommendations to streamlining operations, reduce government waste, and improve efficiency and customer service. As Forbes notes, SAGE was modeled after the Reagan-era Grace Commission. SAGE is currently preparing its first batch of recommendations, and based on this Las Vegas Review-Journal editorial, it sounds like they’re off to the races:

The Spending and Government Efficiency Commission forwarded its first batch of money-saving suggestions to Gov. Jim Gibbons last week, the result of a months-long review of agency procedures and performance. The tentative recommendations, if adopted by the governor and the Legislature, could save the state hundreds of millions of dollars over the next several years.Share & Save Considering Gov. Gibbons is preparing a two-year budget 14 percent below current spending levels, with further reductions possible, every savings opportunity counts. Among the suggestions: closing a Washington, D.C., lobbying office; creating a new Department of Revenue to oversee all collection responsibilities now handled by the Taxation Department, the Department of Motor Vehicles and other agencies; and, of greatest promise, gutting the Public Works Board, which adds tens of millions of dollars in costs to every new public building with redundant reviews and meddlesome oversight. Other ideas include privatizing the DMV’s auto insurance verification program, having some state workers rent cars from private companies to reduce the state’s motor pool, and — gasp — starting a pilot project for performance-based funding for some agencies. These suggestions are a good start. But the SAGE Commission’s work won’t end here. Its members will continue to mine Nevada’s bureaucracies for inefficiencies and savings opportunities. [. . .] Nevada already has about $10 billion in unfunded pension and retirement health care liabilities, and only two ways to pay for them in the years ahead: budget cuts that will make this year’s reductions seem like a razor burn, and tax increases that will dwarf the record hikes of 2003. Let’s see lawmakers take either of those options to the voting public. The SAGE Commission must recommend putting future public employees’ benefits on par with those offered in the private sector: a defined-contribution retirement plan, similar to a 401(k), that requires state workers to set aside a portion of their own income to receive a modest, taxpayer-funded match; and health insurance that requires workers to pay a reasonable share of their own premiums, both during employment and in retirement.

It sounds like SAGE is off to a great start. Performance-based budgeting, agency/functional consolidation, and, of course, privatization are music to my ears. The key will be translating these ideas into action, a task that should not be underestimated. Right next door, the Governator’s California Performance Review has a ton of great recommendations that are gathering dust on the shelf. One more thing–the op-ed gets it right. Traditional public pension programs are inherently unsustainable, and unfunded pension liabilities pose a looming threat to state and local budgets–and a MASSIVE one. We’ve pointed out the critical need to shift public employees from defined-benefit to defined-contribution, 401(k) style retirement plans in our 2005 study, The Gathering Pension Crisis. Reason’s Privatization and Government Reform Research and Commentary Reason’s Annual Privatization Report 2008