AUGUSTA, Maine — Gov. Paul LePage says the cost of administering the hundreds of millions of dollars in state contracts each year — mostly with the Department of Health and Human Services — is too high and his office will target savings in that area.
“As tough as it is going to be, we have to prioritize spending and we have to make sure every dollar is as effectively and efficiently spent as it can be,” LePage said in an interview. He said a 2009 study done by the Legislature’s Office of Program Evaluation and Governmental Accountability found that in one narrow area of contracted services — children’s outpatient mental health services — administrative costs were 27 cents of every dollar.
“Only 73 cents of every dollar gets to provide a service,” he said. “I believe it should be 88 or 89 cents.”
David Flanagan, a former president of Central Maine Power Co. and a member of the budget-cutting task force, said he is concerned about all of the contracting procedures and whether administrative costs can be reduced in a systematic way. He said while DHHS may contract the most, all contract administrative costs should be a target for review by the panel.
“One of the issues we have that adds to the cost of government is having a very large number of very small contracts that entail huge costs of contract administration and oversight,” he said. “What I would like to get at is what the quantity is, and the quality and what the procurement practices are of contracted services.”
Finance Commissioner Sawin Millett said that is an area the Appropriations Committee has looked at over several sessions. Millett said a previous session added two staff positions at the Bureau of Purchasing to improve contracting policies. Millett served on the panel for eight years.
The contract review process was an initiative from then-Finance Commissioner Ryan Low, who is now vice president for finance at the University of Maine at Farmington and a member of the budget task force.
Rep. John Martin, D-Eagle Lake, also serves on the budget task force and on the Appropriations Committee. He said the issue has been tackled several times by different legislatures and governors but has not been resolved because service providers lobby against caps on administrative expenses or other cost controls. He is convinced there are “significant” savings to be realized by changing the way the state contracts for services.
“It’s one of those things where there are many players and many people covering the various bases and preventing things from happening,” Martin said. “But if we have the momentum in the Legislature and from the governor’s office to achieve that goal it is doable and achievable and will be a great money saver for Maine people.”
He said the panel also should explore the possibility of limiting the number of vendors providing the same services in the same area of the state. He said the current practice increases administrative costs and reduces the amount of dollars going to direct services.
LePage said the state has to reduce its spending. He said in addition to the $25 million in reductions needed to keep the budget in balance, there will be significant reductions in federal spending as Congress tackles deficit reduction. He said that will lead to tough budget choices.
“We spend way too much in DHHS, far more on a per capita basis than most states in the union,” he said. “We need to look at DHHS more as a safety net and less as a way of life. Some programs may just have to go away.”