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Crawford: Running it like a business can cost money
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You will often hear this said when a newcomer is elected to public office — a new governor, a new legislator, a new commissioner, whatever. The newly elected official will tell his constituents: "I want to run government like we run a business."

That statement is usually followed by a decision to outsource or privatize something that local government had been doing so that the service is now provided by a private business.

The theory is that a private business will perform a function or deliver a service more efficiently than a government agency can, so the taxpayers will always save money.

It's a nice theory, but in real life it often does not work out that way. The cost of providing a government service can dramatically increase when a private business takes over.

This happened two years ago when Gov. Sonny Perdue outsourced state government's computer and telecommunications services by awarding no-bid contracts totaling nearly $1.2 billion to IBM and AT&T.

"I look forward to our partnership in providing the state better services than we have today at a cost savings to the taxpayer," Perdue said in announcing the contracts.

There were no cost savings to the taxpayers, however. Under the new contracts, the money spent on computer equipment and services by state agencies increased by several million dollars. That irritated legislators who had to balance the budget to account for this unexpected bump in spending.

"At this point, they (the private contracts) are not saving money," said Rep. Carl Rogers, R-Gainesville, during the last legislative session. "It's an added cost." Another legislator, Rep. Austin Scott, R-Tifton, called the computer contracts a "money pit."

Another entity to learn the hard truth about running government like a business is the Board of Regents.

Back in 2006, at the urging of Perdue, the regents hired a businessman to be the new chancellor of the University System. Erroll Davis had been a top executive at Wisconsin Power & Light and the thinking was that his CEO background would enable the University System to reap the benefits of being operated like a business.

Davis made a business decision that the University System could save money by consolidating all of the payroll and benefits functions that had been handled individually by the colleges. The University System, Davis said, should buy an expensive computer system from a New Jersey company to manage these payrolls from a central location.

A white paper prepared by University System officials said the money saved by implementing the new computer system would pay for it within three years.

With all of these assurances from the top office that they were going to save millions of dollars, the regents voted to go ahead and buy the new computer system.

Once again, reality trampled upon all of the rosy scenarios.

Internal auditors from the University System recently reviewed computer operations to see if the regents were getting all of the cost savings they had been promised from the new payroll system. They weren't.

Auditors discovered that the new system had resulted in savings of about $10 million since the implementation began in 2008. But the costs of implementing the system had totaled nearly $32 million during that same period - leaving the project $21.6 million in the red.

Auditors also concluded that the new payroll system may not even be the right one to handle payrolls for the state's public colleges.

"We do need to ask the question of whether this is the correct system and if it isn't, be prepared to move to something else," said John Fuchko, the University System's chief auditor, in a recent presentation to the Board of Regents.

Some of the regents, needless to say, were not happy to hear this news.

"Nobody ever said to me we'd spend north of $30 million to save $10 million," said board member Richard Tucker. "That's not a business decision that I would have voted for."

In light of these incidents, I'd like to offer some free advice to the new governor: Be very careful about trying to run state government like a business. You may think you're going to save a lot of money by outsourcing, but it can also be much more expensive for the taxpayers.

Tom Crawford is the editor of The Georgia Report, an Internet news service that covers government and politics in Georgia. His column appears Wednesdays and on gainesvilletimes.com.

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