Budget Plan Press Conference – Wed., Oct. 9, 2002
I’m here today to announce the progress that I have made on saving money and cutting the budget in the current fiscal year, moves we were forced to make as a result of a reduced revenue forecast.
It has been three weeks since DEFAC projected a $95 million deficit for the current year. After that happened, I announced a four-part plan for making up the projected gap between revenues and expenditures. They were:
• 3 percent cuts in the discretionary spending of state agencies
• an intensive hiring review
• a review of all purchase orders, and
• further efforts to save money by changing the way we do business.
In the three weeks since I announced that plan, I have been able to identify $10 million so far in identified savings or in cuts that I have already approved.
Let me take you through each area.
In the area of the 3 percent cuts, I am releasing today a first round of cuts that I have approved. The total for these items is $6.5 million dollars.
These cuts mainly fall in three areas: (1) reducing non-essential operating funds, such as travel and supplies; (2) using federal and other funds to replace general fund expenditures; and (3) using in-house expertise for training and professional development instead of outside consultants or contractors.
You will receive a list of cuts by department. Please remember this is just the first round in this process, encompassing cuts that required the least amount of analysis and discussion.
As I have said before, this is the third time since I took office that we have had to go through a budget cutting exercise. In the first two rounds, which amounted to over $100 million, we took and made permanent many of the “easy” cuts.
This time, given what’s left and the magnitude of the cut necessary, the decisions are much tougher, I can tell you that. That’s why I will be taking my time and being deliberate, so I can make sure we make the right decisions.
Any suggested cut must be examined for its impact on services, to make sure it’s “real,” to find out if it is sustainable, to make sure a cut in one area won’t cause problems or more expenditures elsewhere, and even to make sure that it is legal.
I will remind you that this process last year (which only involved a 2 percent cut) took more than seven weeks. I will give you further updates on these cuts as I make them, but I expect the process may take at least another month. As I said, it’s more money this year, and it’s also tougher decisions.
In the area of the hiring review, I can report that in the three weeks since it was imposed, I have approved just one position to be filled. It was a 911 operator and by filling that positions we will actually save money because we will be reducing overtime by other operators that have been necessary to cover the shift.
In the area of purchasing, I have stopped non-essential purchases totaling over $200,000 for further review, including furniture and computer equipment.
Finally, in the area of reengineering and trying to make government more effective, we already have three successes to report.
First, by refinancing some of the state’s outstanding bonds with the current low interest rates, we have saved $3 million. That is to say, without refinancing, our debt service would have been $3 million more this year than it will be now.
Obviously, part of the reason we have been able to take advantage of such rates is the state’s AAA bond rating. That’s a measure of our state’s fiscal health and the higher it is the lower the interest rates are for us. By being fiscally responsible – not dipping into emergency funds or using accounting tricks to balance the budget – we have kept our top rating and so we have saved – and will continue to save -- millions of dollars a year.
Next under reengineering, by implementing a safety program among state workers, we project that the state will save half a million dollars in workers compensation costs this year. The main benefit of this program is obviously in making our workers safer, but by preventing injuries and lost time, we will also be saving money.
Finally, our effort to combine the purchasing power of our state agencies in order to negotiate not only better prices, but rebates as well, has resulted in a $100,000 rebate already.
As I said, the result of these first three weeks of effort – budget cuts, reengineering, reviewing hiring and purchases – is $10 million. My financial team and I will continue to work diligently on these cuts and do so as quickly as possible in order to maximize the savings from them.
As in the past where my own time and energy was devoted to homeland security, my time and energy for the next few weeks will be focused on this budget situation, perhaps to the detriment of other issues.
I will say this again – this round of cuts will be the toughest yet and thus requires the most diligence and care. It would be premature to release cuts or suggestions for cuts before all the homework has been done.
So, over the next month or so, I expect I will be able to announce further rounds of cuts that have been finalized. I will also be announcing some further initiatives to save money.
I want to thank the people of Delaware for their understanding, but I especially want to thank the state employees who are so working hard to keep government running in these tough times.
