The State Fiscal Calamity and Competitive Sourcing

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Nearly every state is facing a budget crunch — not all severe as Minnesota ($4.3 billion of $20+ billion general fund) or California (between $21 and $34 billion of $75+ billion general fund). Tax and fee increases are considered by many as a necessary evil to prevent services from being cut. However some policy makers, including the newly elected governor of Minnesota, Tim Pawlenty, have taken no new tax pledges. They realize that since state government swelled in the fat years of the mid- and late-90s there has to be room for cuts. Simply getting government back to the mid-90s level will all but solve the current crisis.

Essentially, these policy makers are addressing the budget crunch as a revenue issue. They know that tax revenue collected by state government has more than doubled over the last 10 years, and that expenditures have more than doubled in the same time period. With coffers full, policy makers couldn’t help themselves. Rather than return the money, they funded every pet project they could while giving generous pay raises to state employees. When you or I spend more than we bring in, we tighten our belt and cut unnecessary expenses; its time that state government had to do the same. However, if you listen to California Gov. Gray Davis, the problem is that “millionaires aren’t making enough money,” a very short-sighted and unrealistic interpretation of the issue.


However, all is not lost. There is a powerful tool available to policy makers as they attempt to tackle this crisis. Competitive sourcing is a proven policy tool that can save upwards of 30 percent off of the provision of government services.

Currently the federal government, under the direction of President Bush is undertaking a massive competitive sourcing plan within the federal government. Recently Bush announced his ambitious plans to competitively source 850,000 federal jobs