Savings put at $26.7M in state agency merger

FILE — The state Capitol is shown in this undated file photo.
FILE — The state Capitol is shown in this undated file photo.

Gov. Asa Hutchinson's administration has saved $26.7 million so far from his overhaul of executive branch agencies, according to the secretary of the state Department of Transformation and Shared Services.

The plan was carried out in Act 910 of 2019, which merged 42 executive-branch agencies into 15 departments, effective July 1, 2019, in the most sweeping reorganization of state government in nearly 50 years. Under Act 38 of 1971, Gov. Dale Bumpers, a Democrat, led an initiative to meld 60 agencies into 13 departments.

The reported savings have been overshadowed by Hutchinson's March 23 announcement of a $353.1 million general revenue budget cut, to $5.38 billion, in fiscal 2020, which ends June 30. The cut is tied to the economic impact of the coronavirus pandemic. His administration reported Thursday that net general revenue in fiscal 2021 is predicted to be $205.9 million less, also because of the pandemic.

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Amy Fecher, secretary of transformation and shared services, said in a six-page summary to lawmakers that each of the 15 departments has completed a report required under Act 565 of 2019 that identified the savings, efficiencies and delivery of service improvements realized in less than a year because of the reorganization.

"In addition, you will find an overall snapshot of savings in Arkansas State Government identifying $26,751,030 in savings because of transformation," Fecher wrote.

Last year, Hutchinson said he expected the reorganization to save at least $15 million in fiscal 2021.

"I am definitely satisfied with the progress so far," said Rep. Rick Beck, R-Center Ridge, sponsor of Act 565.

The reports from each secretary provide a roadmap for future efficiencies, he said.

Rep. Megan Godfrey, D-Springdale, said, "Whether or not we realized extensive direct savings in the first year is less important than the fact that a more streamlined government can better respond to the changing needs of Arkansans.

"In addition to savings, we should continue asking whether transformation is indeed improving services for Arkansans," she said. "I know that the Act 565 report does not require it, but I would also be interested to know how services have improved, if there have been growing pains, and what adjustments need to be made to continue to improve services."


The largest savings is a $10 million general revenue reduction in the performance fund, which is available to supplement department budgets as needed for raises resulting from employees' annual performance reviews, she said.

On March 4, when Hutchinson unveiled his then-proposed $5.83 billion general revenue budget for fiscal 2021, he pointed out that the proposed increase in the performance fund was trimmed from $15 million to $5 million and the difference would be covered by savings from not filling vacancies.

Fecher also reported that three departments absorbed $6.2 million in their existing budgets without dipping into the performance fund. That includes $2.8 million at the Department of Finance and Administration; $1.73 million at the Department of Health; and $1.7 million at the Department of Commerce, she said.

Finance department spokesman Scott Hardin said that in fiscal 2020, including all funding sources, the department absorbed $2.8 million in performance raises without additional funding or appropriation.

"While the department absorbed all of these performances raises, not all of the raises would have been eligible for funding from the performance fund. Because of this it is not a $2.8 million savings specifically to the performance fund but a savings to all of the department's revenues," he said.


The 15 departments reduced their number of filled positions by 310, from 23,862 on July 1 to 23,552 on March 4, Fecher reported.

"Of course, this number is always fluctuating; however even a snapshot view shows the commitment of leadership to lower filled positions through a shared services model, while finding innovative ways to improve the delivery of services and managerial support for their department," Fecher wrote. "Additionally, as the governor promised, no jobs were lost as a result of the transformation of Arkansas government."

The number of filled positions totaled 25,051 on Jan. 15, 2015, the month Hutchinson took office. Except for one year, it has declined each year since.

More than half of the drop in filled positions from July to March was in the Department of Commerce, according to Fecher's report -- a drop of 158, from 1,580 to 1,422.

About 100 of those positions are related to the September 2019 closing of the Arkansas Career Training Institute residential facility in Hot Springs, said Alisha Curtis, chief of communications and legislative director at the Department of Commerce.

But Alex Johnston, chief communications director for the transformation department, said the facility's closure, announced in May 2019, wasn't part of the reorganization.

The number of filled positions dropped from July to March at the Department of Corrections by 68 to 5,418 and at the Department of Health by 58 to 7,068, Fecher's report showed.


The executive branch agencies reduced their rent by $929,407, to $43.8 million, and their office space by 80,082 to 3.9 million square feet, from July to March, according to the report.

Some of these savings will be realized in fiscal 2021.

"Departments have focused on co-location when possible and evolving to a new work environment that is less expensive and ensures less square footage," according to Fecher's report.

• The Health Department reduced its rent from $1.80 million to $1.42 million and square footage from 127,012 to 100,616.

The Health Department's rent reduction resulted from the end of some contracts leasing private space for its in-home health care services program, Johnston said. The department sold that program to a private firm in 2016.

• The Commerce Department reduced its rent from $3.36 million to $3 million and square footage from 199,633 to 175,786.

In February 2019, the Arkansas Development Finance Authority bought what was known as the Verizon 4 building in the Riverdale area in Little Rock for about $26 million.

Except for the Division of Aeronautics, the Wine Producers Council and a portion of the Division of Workforce Services, the divisions of the Commerce Department have moved into that building, Curtis said.

• Johnston said that in fiscal 2021, the Transformation Department and the Department of Labor and Licensing together will save about $127,000 in rent costs.


The 15 departments have saved $6.3 million in general revenue spending and "reinvested that funding back into their department to accomplish more without requesting additional revenue," Fecher's report said.

That includes:

• Department of Human Services, $2.9 million

The Department of Human Services' reallocations totaled $8.8 million, including the $2.9 million in general revenue. That includes rebidding the primary contract for information technology services and support at a net savings of $3.75 million from fiscal 2017-19 and shifting $1.75 million for Division of Youth Services' residential programs to community-based programs.

• Department of Parks, Heritage and Tourism, $987,735

The department reallocated $756,685 by returning general revenue from previous fiscal years from savings in personnel and operations and management, the report said.

• Transformation Department, $565,000

The report also touted conservative estimates of $3.2 million in general revenue in "transformation transfers."

That "is a term used to capture any new initiatives that departments have absorbed with no additional funding, whether enacted by law or at the secretary's discretion," Fecher's report said. That includes $2.6 million in general revenue at the Department of Human Services and $331,513 in general revenue at the Department of Labor and Licensing as a result of attrition in its leadership positions, according to information provided by Johnston.

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