The Arkansas Legislative Council on Friday approved a $900,000 contract with an international consulting firm to help Gov. Asa Hutchinson's administration develop plans to reorganize state government, but approval came after one lawmaker questioned the size of the expense.
Hutchinson said in March that he plans to ask the Legislature in 2019 to enact a plan to reduce the number of state agencies that report to him from 42 to fewer than 19 to bolster efficiency and save money.
The Republican governor's plan contemplates the largest reorganization of state government since 1971 when Democratic Gov. Dale Bumpers led the enactment of a plan to reduce the number of state agencies from 60 to 13.
The consulting contract is with London-based PricewaterhouseCoopers. The contract begins May 29 and ends May 28, 2019.
The firm would work with the Arkansas Economic Development Commission. The commission's executive vice president, Amy Fecher, also serves as chief transformation officer. Hutchinson created the Office of Transformation and appointed Fecher as chief transformation officer in December 2016. He created a transformation advisory board in February 2017.
In response to a question from state Rep. Kim Hammer, R-Benton, Fecher told lawmakers that PricewaterhouseCoopers officials "are going to be working on reorganization with the Office of Transformation as well as the same type of work they did at DF&A in 2015, looking further and taking a deeper dive, doing a sort of audit of several state agencies ... and also looking across the board at processes that every agency has."
DF&A stands for the state Department of Finance and Administration. The consulting firm's $150,000 study of that agency was financed with private funds through the Arkansas Policy Foundation.
Hammer pressed Fecher on "what has been done, prior to us feeling it is necessary to spend this amount of money, to extract that information from the employees of the agencies or the agencies themselves, so we could formulate that approach without having a consultant or contract with a consulting firm."
Fecher said, "The governor has been working on transformation since he came into office" in January 2015 "and then he established the Office of Transformation in December of 2016 and the Transformation Advisory Board, which three of your members sit on currently."
State lawmakers have talked to the governor about hiring a consultant to do this type of work, and the Transformation Advisory Board also recommended hiring a consultant, she said.
PricewaterhouseCoopers' public sector consultants always recommend savings when working in other states and also identify savings that are larger than the contract itself, Fecher said.
Then, Hammer said, "It may appear like a little bit of sour grapes, but this is what I got an issue with."
He said he sponsored legislation in 2017 under which the state could have done "a 360[-degree] evaluation that is recognized ... by top [Fortune] 500 companies at a substantially less value than what this contract is.
"And I am wondering why we are jumping over that process, because from what I understand from the previous reports of this consulting firm and others, that we didn't have to pay any money at all. Those ideas originated out of those groups," Hammer said.
"And if we are going to pay a consulting firm to do something at nearly $1 million, and I am not sure we have exercised all the options under that, so would you care to respond to that, just give me your opinion about that," he said.
Fecher asked Hammer to clarify what legislation he was referring to.
"It was an employee evaluation process that cleared the House and the Senate and the governor vetoed, and it would have been for about $75,000, because a lot of ideas that have come up so far have originated from the employees and from some of the [agency] directors, and I'm disappointed we are going to spend a lot of money to do this when we could have spent less," Hammer said.
"That just seems to stick in my craw, just to be honest with you, and I wish you would pick that back up and look at it again because it would have been less money spent than what we are about to spend here," Hammer said.
Fecher replied that "I can relay your message to the governor."
Hammer responded, "Thank you, ma'am."
When asked about Hammer's comments, Hutchinson said, in a written statement, that Hammer's House Bill 1581 was about "employee surveys and engagement, and the bill was vetoed because it increased regulations and costs without any real benefit.
"The current contract is for an independent outside look at state government to create savings," the governor said.
In February, Hutchinson told lawmakers that he wants the Legislature in 2019 to enact his plan to cut the state's top individual income tax rate from 6.9 percent to 6 percent, effective Jan. 1, 2020, which he projected would reduce state tax revenue by about $180 million a year.
In 2015 and 2017, the Legislature enacted the governor's plans to reduce individual income tax rates for people with up to $75,000 a year in taxable income. The plans collectively have been projected by the state to reduce tax revenue by about $150 million a year.
Some lawmakers have questioned whether the state can afford to implement Hutchinson's latest tax cut plan. Hutchinson has maintained that he would finance the plan through economic growth and cost savings in state government, and he would review any suggestions for changes from the Legislature's tax overhaul task force. That task force is required under state law to issue its tax law recommendations by Sept. 1 to the General Assembly and the governor.
Hutchinson is seeking re-election to his second four-year term this year. In Tuesday's primary, he is being challenged by Hot Springs Republican Jan Morgan.
Metro on 05/19/2018