State hiring of private workers

State taxpayers spent $653 million last year on private workers.

MADISON – From laundry and legal services to computer upgrades and health care, state taxpayers spent $653 million last year on private workers, part of a growing reliance on outside firms to do public business.

In the final term of Democratic Gov. Jim Doyle, these payments dropped, falling from $490 million in 2006 to $417 million in 2010, according to figures from the state Department of Administration.

But under the first six years of GOP Gov. Scott Walker, spending on contractors rose by 57%, or several times the rate of inflation for that period. Contractors are often more expensive than state employees — but not always, officials said.

Senate Minority Leader Jennifer Shilling (D-La Crosse) said that she would seek a nonpartisan audit of the spending on contractors, saying she’s worried taxpayers are paying more than they would for state workers.

“Positions have been cut and outsourcing has happened and we have seen the price tag increase,” Shilling said.

Overall, state jobs haven’t been cut under Walker — they’ve actually risen by nearly 3% during his time in office to 70,400 full-time positions, according to the Legislature’s budget office.

But outsourcing has risen more quickly. The Walker administration says the increase has been driven in part by a once-in-a-generation overhaul of state computers and by a shortage of state workers in some jobs.

“Wisconsin’s historically low unemployment as well as a nationwide nursing shortage has led some agencies to utilize short-term contract staffing while vacancies are filled,” Department of Administration spokesman Steve Michels said.

Michels said the audit wasn’t necessary since the administration already published a lengthy report on state contracting expenses earlier this year.

Unions and other critics of contracting say that state workers often can do jobs at a cheaper hourly rate than contractors, particularly in white-collar professions. They say public employees don’t always have the political clout of a business with lobbyists and political

contributions

Those who defend outsourcing say those cheaper hourly rates may not always account for the state’s full cost of paying a worker and providing him or her with an office, phone, computer and benefits. Contractors have skills that state employees sometimes lack and can be hired quickly and then let go when a job is done, they say.

In the 2015 budget bill, Walker sought to eliminate much of a requirement in state law that agencies analyze whether it’s cheaper to use contractors or state workers before outsourcing work. Lawmakers nixed the change.

A Journal Sentinel analysis of these cost comparisons from 2016 found that contractors cost more than state employees in more than two-thirds of the estimates.

Michels said that in some cases contractors are cheaper and that in some technical fields like computers state employees simply lack the skills and certifications to do the work.

More than half the state’s spending on contractors in 2016 came from just two agencies: the Department of Health Services and the University of Wisconsin System. Other top spending agencies include the Department of Corrections and the Department of Administration.

In some areas like health care, the state has struggled to attract and keep enough workers to meet its obligations, providing an incentive to use contractors. Turnover among state workers last year reached its highest level in more than a decade.

Some of the state’s recent spending on contractors has helped pay for a massive IT effort known as the STAR project in which the state has replaced dozens of older computer systems handling back-office functions.

To help hold down contractor costs on computer work, Walker and lawmakers approved hiring dozens of state IT workers in the current two-year budget. Michels said the state expected to save more than $4 million over two years by doing that.

The governor and lawmakers took a similar step in 2013 by authorizing the hiring of 180 more highway engineers to cut down on consultants used by the state Department of Transportation.

A nonpartisan audit released in January looked at the cost analyses that the DOT is required to perform when considering whether to use state staff or contractors. State staff are cheaper on about 90% of the jobs, according to the analyses and audit.

DOT spending on outside engineers has been controversial going back to Doyle’s years as governor — when it grew rapidly — and has actually slowed under Walker.

But this summer, Republicans on the Legislature’s budget committee essentially undid the hiring of more engineers by directing DOT to cut 200 positions across the agency by June 2019.

Tim Hanley, president of the State Engineering Association, called that a mistake for taxpayers, saying that some other states such as Tennessee have moved in the opposite direction.

“No doubt this is going to cost us money,” said Hanley, whose union represents DOT engineers.

Chris Klein isn’t so sure. Klein is the president of the American Council of Engineering Companies of Wisconsin and he pointed to a study commissioned by his national group and done by New York University. That study found state engineers can cost more after accounting for benefits and overhead costs such as office space or equipment.

It was not clear from the report, however, whether the state DOT would always be able to save on all those overhead costs by switching from state employees to contractors. For instance, the state might have to pay for DOT office space regardless.

“Contracting out provides DOTs with engineering services when they need it, without the costs associated with maintaining those services when they’re not needed,” Klein said.

Klein noted that Walker and GOP lawmakers have repeatedly declined to raise the gas tax in recent budgets to increase spending on roads, preferring instead to delay highway projects. That may be another reason lawmakers also cut jobs at DOT, he said.

Overall, state jobs haven’t been cut under Walker — they’ve actually risen by nearly 3% during his time in office.