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State spending on outside service contracts rising

Bill Lueders is the Money and Politics Project director at the Wisconsin Center for Investigative Journalism.

Bill Lueders is the Money and Politics Project director at the Wisconsin Center for Investigative Journalism.

Each year, as state law requires, the Wisconsin Department of Administration produces a “Contractual Services Purchasing Report.”

It tracks spending by state agencies and the University of Wisconsin to outsource tasks ranging from information technology to janitorial work. State workers long have argued they could do many of those jobs for less.

The latest report, for fiscal 2014, shows state agency spending on outside services is up for the fourth straight year. That happened despite the Act 10 benefit changes under Gov. Scott Walker that arguably make state workers more cost-effective than the private sector.

“During a time of alleged austerity, the administration continues to spend taxpayers’ money like an inebriated sailor,” said Bill Franks, a retired state employee and union steward. “You would have thought, if anything, those numbers would be going down.”

The report was released quietly Dec. 22, more than two months past its statutory due date. Late filings are not uncommon under both Republican Walker and his Democratic predecessor, Jim Doyle.

State agencies, the report shows, spent $451 million on outside services in fiscal 2014, which ended June 30. That’s up 56 percent from fiscal 2010, before Walker became governor. During that same four-year period, the UW’s spending on outside services declined nearly 11 percent, to $114 million.

State agency spending on outside services has been higher in the past. In 2003, it totaled $556 million. But that sum fell each year after that, to just $290 million in fiscal 2010.

DOA spokeswoman Stephanie Marquis, to whom the governor’s office referred questions, noted that Walker was governor for just half of fiscal 2011, which had the largest increase.

“We prefer to use our own employees in providing services and programs to the taxpayers,” according to an email attributed to Marquis. But contractors are used when required by federal or state law, when necessary to maintain a license or warranty, when the state lacks infrastructure or expertise, or when contracting is “more efficient or cost-effective.”

The top state agency spender, by far, is the Department of Health Services at $178 million in 2014. That’s slightly higher than in 2011, when a Legislative Audit Bureau report questioned DHS’s use of outside providers and urged it to “identify whether cost savings could be achieved by using state employees.”

DHS spokeswoman Stephanie Smiley said the agency has had to continue using external contracted services to comply with Medicaid changes and the Affordable Care Act. But it “continues to review the efficacy of using contractors and will seek approval to convert contracted services to state positions to achieve cost savings when appropriate, as it has since the 2011 audit.”

The report summarizes the cost-benefit analysis required for each proposed state-agency service procurement of more than $50,000. The report does not tally the numbers or explain whether a given analysis led to a job being contracted out.

But a review by the Wisconsin Center for Investigative Journalism showed the estimated cost of contracting was higher than the estimated cost of using state workers in 152 of the 250 analyses, as well as for the total sums.

According to the report, 75 percent of these cost-benefit analyses were for information technology services. The report recommended agencies “continue to examine the availability of state employees” before contracting out for IT jobs and cited ongoing efforts “to reduce the state’s use of contracted employees.”

That same language has appeared in past reports. Actual progress in that direction, Franks said, “would mean doing something no administration wants to take credit for: increasing the size of state government.”

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