Washington can’t seem to stop borrowing and spending.
Montana, on the other hand, is one of the only states in America with a balanced budget and a strong surplus. And we’ve done it six years in a row, with an average surplus of $389 million (in the previous 20 years before I was governor, the average was $68 million).
This tight fiscal discipline has allowed us to cut taxes, invest in education, and keep the government running. And unlike the feds who got downgraded, Montana recently got its first bond rating upgrade in 26 years. Our credit rating has never been better.
How do we accomplish this?
We run government like a ranch. In ranching — my old job — you either pinch pennies or go belly-up, and when times are tough you tighten the belt. Perhaps Washington should try it, by following our basic rules.
First, we challenge every expense. Rather than cut services, we cut overhead. When the recession came we found $80 million in savings which helped us avert a budget crisis. Small things added up. We renegotiated state contracts, turned down thermostats, auctioned off state vehicles, and canceled building projects and computer upgrades, and did dozens of other things to save money. We even saved by spending: We invested in our efforts to collect unpaid tax bills from out-of-state and foreign corporations, and it has paid back seven dollars for every dollar we invested.
Unfortunately, nobody pinches pennies in Washington. As a small example, I recently visited a military base in Texas at which 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, it’s always easier to outsource things, but is it worth the billions spent? No doubt the lobbyists for the security firm sprinkled plenty of money around Congress to get the contract.
The federal budget contains thousands of similar line items. They should all be eliminated.
Second, we always leave some grain in the bin, in case of drought. When we run a surplus, we set aside a chunk of it in a savings account, in case revenue declines the following year. This is always a big fight in Helena, since most legislators would rather spend the extra dough. Just look at the newspaper. A few weeks ago, a leading GOP legislator was publicly criticizing me because one of our state agencies spent $28 million less than it was allocated by the legislature. In other words, we found a way to save the taxpayers $28 million, and he’s upset that we didn’t spend the money. A rancher he is not.
In fact, this person has a Washington, D.C., mentality. I cannot recall the federal government ever banking surplus funds in a protected account, even during the surplus-laden 1990s. They always come up with ways to spend the money. Well, if Washington ever digs out of the current hole and runs a cash balance, Congress should put some grain in the bin.
Third, we treat our ranch hands with respect. Like other states, we’ve had to freeze employee pay and reduce the workforce. But many of the best solutions for cutting costs have come from state employees. 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 never spend money until we’ve found the lowest price. We don’t view government contracts as a way to take care of friends. Quite the opposite: We use our purchasing power to get the lowest possible rate. For example, when the real estate market softened, we told commercial landlords who rent 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, a giant federal budget item. In 2003, in one of the greatest sweetheart giveaways ever dreamed up by the White House and Congress, they agreed to pay the drug companies 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.
Now that the debt is the country’s top issue, Washington should try the Montana method, by doing what any rancher or family household does: Save money, live by a budget, challenge expenses, find bargains and invest wisely.
We’ve shown that it works.
(Brian Schweitzer is governor of Montana.)