State spending comes under scrutiny as virus takes toll on budget
Lawmakers: Procurement needs centralized oversight
In March, the New Mexico agency in charge of computers got a great deal.
It bought 2,000 new laptops at $799 each, nearly half the retail price.
Around the same time, several other state agencies bought that Dell model for hundreds of dollars more.
The Gaming Control Board paid almost twice as much, at nearly $1,500 per laptop, while the Public Education Department shelled out over $1,200 each and the Public Regulation Commission spent around $1,070.
“That’s ridiculous,” said Rep. Patty Lundstrom, chairwoman of the House Appropriations and Finance Committee, when asked about the purchases. “That should be central purchasing, for goodness’ sake.”
How the government buys things — a process known as procurement — is just one of the areas of state spending the legislative branch says it’s trying to rein in as New Mexico aims to save money amid a huge decline in revenue caused by the novel coronavirus pandemic.
Lawmakers and their budgetary staff say state agencies are known to overspend for goods and services, aren’t always transparent in how they decide on purchases and don’t have enough oversight or coordination to ensure the state gets the best deals it can.
Legislators also say it’s important state agencies forgo expenditures that are no longer needed because much of their employees’ work has moved online amid COVID-19.
The office of Gov. Michelle
Lujan Grisham said Friday it has “instructed [the Department of Finance and Administration] to monitor executive agency spending.”
It added that the executive branch is considering a wide range of coronavirus-related spending reductions for next fiscal year, including “professional service contracts.”
Inefficient spending is not new in the state. According to a report last year by the Legislative Finance Committee, the contracts the state draws up with vendors actually discourage savings because they don’t force agencies to shop around for the best prices.
Because of this, agencies end up buying unneeded high-end vehicles and computers, don’t always buy in bulk to get better prices, and spend millions of dollars on “niche and highly complex” goods with nearly no oversight, the report said.
“Over the years, we’ve found examples of state agencies paying more than they probably should for goods and services,” said Jon Courtney, deputy director of the Legislative Finance Committee. “There are no incentives to negotiate with vendors for a better deal.”
While it’s never a good time to spend taxpayer money poorly, legislators say it’s more harmful to do so during a fiscal crisis that calls for major belt-tightening.
“I can’t imagine any Cabinet secretary wanting to make sure every paper clip has been accounted for and we got the best deal we can,” said Lundstrom, D-Gallup. “But I do think it needs to happen in these tight budget times.”
Dell laptops
As for the Dell laptops, The
New Mexican obtained purchase orders and invoices showing at least four agencies made purchases of a model called Precision 3540 Mobile Workstation over the past year at prices far above what the Department of Information Technology paid for them.
Had the other agencies bought their laptops at the same price as the technology department, they could have saved a total of over $29,000.
Asked about the purchases, the Department of Information Technology said it’s working on a way to negotiate the best prices for computer products.
“Since taking office, the governor has asked [the department] to formulate a plan and strategy for state IT procurements for executive agencies in efforts to negotiate best pricing based on volume purchases,” said Information Technology Secretary John Salazar, who was appointed to the department’s top job in February.
The state Gaming Control Board said it paid more for its laptops because it bought computers with more memory and storage. It also said it opted for a more expensive five-year warranty and support deal because the agency has a small IT staff and no budget for service or repairs.
“While the GCB could have purchased just the basic one-year warranty, the absence of budgeted funds and staff to fix a laptop that has issues would result in the laptop being taken out of service,” agency spokesman Richard Kottenstette said, adding the purchase was made under the state’s “price agreement” with Dell and was approved by the Department of Finance and Administration.
The state’s General Services Department, which includes the State Purchasing Division, said there are good reasons why one agency might pay more than another for what’s listed as the same product.
“Let’s take cars, for example,” said the department’s secretary, Ken Ortiz. “Agencies may pay different prices for the same model car because of accessories, warranties, service agreements, etc. Agencies also could pay different prices based on volume of purchase.”
Representatives of the Public Education Department and the Public Regulation Commission did not respond to inquiries about why they paid higher prices for their laptops.
‘No one is keeping an eye on this’
Legislative staff acknowledged higher costs for the same product might be justified in some cases but said the problem is broader: There’s nobody in state government overseeing all purchasing decisions, holding agencies accountable and reviewing whether more expensive items are indeed necessary.
They added there should be an entity that coordinates purchases in bulk for all agencies so they can get a greater collective discount.
The federal government requires its departments to follow specific standards on technology spending and to buy computers together to drive down costs. Yet in New Mexico, different bodies make smaller purchases on their
own and therefore have less ability to bargain.
That’s the case even though the Department of Information Technology’s website says the agency was founded in part “to create more accountability and efficiency in the information technology arena.”
“No one is keeping an eye on this,” said Micaela Fischer, a program evaluation manager for the Legislative Finance Committee who analyzes purchasing issues. “We let these agencies shop as if they’re you and me buying things, but they’re not shopping with their own money. It’s taxpayer money.”
Lundstrom agreed, saying, “I wish it was more centralized, quite candidly.”
One might assume the State Purchasing Division would provide that centralization and oversight, given its name. But it doesn’t.
Ortiz said the division puts in place “statewide price agreements” that allow agencies to buy goods and services with pre-negotiated price ceilings. After that, it’s out of the division’s hands.
“State agencies and local public bodies then make their own purchasing decisions,” Ortiz said. “Neither State Purchasing nor GSD has authority over those decisions.”
Coronavirus impact
Procurement isn’t the only area of spending legislators are concerned about as they urge agencies to rethink their budget requests for the next fiscal year in light of the novel coronavirus.
For instance, Lundstrom said, departments shouldn’t ask for a new fleet of vehicles if most of their employees are now working from home. Similarly, the Public Education Department need not request money for sports programs if they’re going to be canceled, and the Higher Education Department shouldn’t request as much money for university facilities if some classes will be given online.
“If they’re not retooling and thinking about how they’re going to deliver services in a different way, we’re going to have a real mismatch when it comes to the budget,” Lundstrom said.
Lujan Grisham’s finance department said it has the same goal of ensuring smart spending as it works with the governor on instructions and guidance for agencies crafting budget requests for fiscal year 2022.
“Everything is under consideration, including reductions to travel, sweeping positions that have been vacant over two years (unless they are health or safety-related), reduced costs due to utilities, subscriptions, training (most online), per diem, professional service contracts, anything associated with the new work environment,” the department said.
Lundstrom said she will begin asking agencies whether they’re adapting their budgets in response to the pandemic during a legislative finance meeting later this month in Cloudcroft.
She said such questions are particularly important given New Mexico’s budget shortfall.
While Lujan Grisham and the Legislature just gave the green light to a revised budget that plugs a projected $2 billion budget gap for fiscal year 2021, there’s another expected hole of $1.7 billion looming for the following year.
“They’re going to get it full level from me when we have our first LFC meeting,” Lundstrom said of state agencies. “I’m going to have to because our budget situation is so bad.”