State approves $900,000 for adviser to help curb waste

Arkansas plans to pay a consultant $900,000 to help the state save money.

Legislative panels on Wednesday approved Gov. Asa Hutchinson’s request to use so-called “rainy day” funds to hire global management firm PricewaterhouseCoopers as a “transformation consultant.”

The Republican governor has focused on changing the structure and processes of areas of state government deemed inefficient since taking office in 2015, creating the Office of Transformation in 2016 and the Transformation Advisory Board in 2017. Earlier this year, Hutchinson announced plans to cut the number of agencies reporting to him, 42, in half.

Hutchinson’s spokesman, J.R. Davis, said Wednesday that PricewaterhouseCoopers will partner with the transformation office to help the board prepare recommendations for the governor later in the year.

“[ PricewaterhouseCoopers] will serve as a kind of private sector audit of some of our agencies,” Davis said. “They have the appropriate resources and manpower to look deeper into each agency to identify efficiencies and savings for the people of Arkansas.”

The London-based firm has worked with other states on similar projects, said Amy Fecher, chief of the Transformation Office, and it studied the state Department of Finance and Administration in 2016, offering a handful of recommendations that the agency has implemented.

Scott Hardin, a spokesman for the finance department, pointed to the new statewide pay plan approved by the state Legislature and the increase from one revenue office service available online at the start of 2015 to about 20 services now available. Both changes were recommended in PricewaterhouseCoopers’ report.

That contract, which cost $150,000, was privately funded by the Arkansas Policy

Foundation, and it identified millions of dollars in savings to the state, Davis said.

Hutchinson created the Transformation Advisory Board shortly after PricewaterhouseCoopers’ report on the finance department was released, and he said at the time that the board should review the firm’s findings for possible recommendations.

The 2016 report identified up to $50 million that could be saved through efficiency measures, $43 million of which could come by targeting inefficiencies in revenue collection and education programs.

Beginning last year, the finance department launched a pilot program in response to the report allowing those with outstanding taxes to call an after-hours phone line. In 2017, the program collected $10.7 million, and the agency is continuing it this year.

The governor’s office, Davis said, sees the new PricewaterhouseCoopers contract as an investment.

He also said the contract requires PricewaterhouseCoopers to identify and implement two or three “quick and immediate efficiencies” during the contracting phase before issuing a final report after the six-month engagement period.

PricewaterhouseCoopers “has a track record in identifying much more in savings than the cost of their contract, and that is what we are asking them to do in Arkansas,” he said.

Lawmakers approved $500,000 in rainy-day funds for the contract on Wednesday; the full Legislative Council will review the contract on Friday. The firm has agreed to accept payment for the contract over two fiscal years. The remaining $400,000 will be paid in fiscal 2019 using discretionary funds that haven’t been determined. The rainy-day fund is intended to be used for emergencies and gubernatorial priorities that can’t wait for the next legislative session.

Fecher said her office, which includes one full-time employee from the governor’s office, has started to look for areas to save the state money, but it lacks the resources of a global consulting firm like PricewaterhouseCoopers. Fecher is also the executive vice president of operations at the Arkansas Economic Development Commission.

“We’ve identified a lot through the Office of Transformation, but [PricewaterhouseCoopers] will help with digging deeper and the resources that they have,” she said. “And they’ve done it in other states.”

A PricewaterhouseCoopers spokesman didn’t respond to a request for work references from other states on Wednesday afternoon.

Hutchinson’s proposal to reduce the size of his Cabinet would be the most comprehensive reorganization of state government since Gov. Dale Bumpers reduced the number of state agencies reporting to him from 60 to 13 in 1972.

The number of agencies ballooned again over the four decades after Bumpers left office. Former Gov. Mike Huckabee proposed legislation to shrink 53 agencies into 10 departments, but it failed to pass the state House of Representatives after winning Senate approval.

In addition to the changes at the finance department, Hutchinson has realigned several offices under new agencies, billed as “efficiency” moves. For example, the state’s energy office was moved from the Economic Development Commission to the state Department of Environmental Quality, and War Memorial Stadium was placed under the Department of Parks and Tourism.