July | August 2017


Efficiency in State Government

by Mikel Chavers
The Comptroller’s office in Pennsylvania was spread out over eight separate locations. Inundated with paper bills and other paper documents, the office was known as more of a place where things got stalled, not a model of government efficiency.
That negative stereotype was something the office had to fight. The battle was further complicated because in uncertain economic times, the state was expected to do more with less money, according to Anna Maria Kiehl, deputy secretary for the Office of Comptroller Operations in Pennsylvania’s Office of the Budget.
“Pennsylvania is no different than any other state. We’ve been struggling with this economy, and budget cuts and program cuts have just become a way of life,” said Pennsylvania Secretary of the Budget Mary Soderberg.
The budget office is operating with 7.5 percent less funding than the 2002–03 fiscal year and about 30 percent less people.
Paper invoices were coming in to all the different locations and all the different agencies, and then coming into the respective comptroller’s offices. There was such a backlog of bills and invoices, according to Soderberg.
In fact, just one utility company the state did business with would send about 10,000 paper invoices a year—all going to different locations, including state hospitals, state police barracks, prisons and the state department of transportation warehouses, according to Soderberg.
Bills could be paid late, incurring late charges if just one of thousands of invoices was lost on someone’s desk. So officials completely revamped the organization of the office and streamlined operations with the latest technology. All offices were consolidated into one and everything went paperless.
“So we’ve flattened the organization,” Kiehl said, “which goes against the grain when it comes to state governments and hierarchies.”
The new system centralized all invoice receipts from vendors.
The result was a complete streamline of perhaps one of the most basic functions of state government: paying bills and paying employees. Another result? “Vendors are no longer being paid late,” Kiehl said.
And that’s helping state government funds to stretch even further, bringing a new level of efficiency. The new system and organization led to a 47 percent reduction in overtime costs, a 63 percent reduction in travel expenditures (because with only one office, staff weren’t traveling throughout the state) and a 35 percent reduction in office postage, according to Soderberg.
That’s especially important in tough times.
“The more that we can save on the administrative side of the budget, the more that we will have to invest in significant programs like education, health care or the cost of running our prisons,” Soderberg said. “Unfortunately, because of the economy and because of the current environment, there is no appetite to increase taxes. This has given us more visibility about where we’re spending the money.”
In fact, in 2009 the system proved its very important worth. When the budget was late for 101 days because of political reasons, state government in Pennsylvania basically came to a standstill. Almost no invoices could be paid until a final budget was passed.
When the budget was finally signed, the office had a mere two weeks to play catch-up with bills and invoices. In that two weeks, the office processed $4 billion in payments, Soderberg said. That level of efficiency hadn’t been seen before in comptroller operations.
“We could not afford any mistakes in this period of time,” Soderberg said. “We couldn’t have any important payments slip through the cracks.”
But Pennsylvania isn’t the only state streamlining what seems like basic and fundamental processes involving money, how it’s collected and how it’s tracked. Here’s a look at how other states are getting smart about doing more with less and making sure the state is getting all the funds it deserves.

Illinois Catches Gas Tax Evaders

In Illinois, officials beefed up auditing functions and hired additional investigators to crack down on businesses that evade the gas tax, costing the state millions in lost revenue.
By beefing up audits, the state found some gas stations were underreporting their overall total sales and therefore the sales tax was underreported.
“We were thinking it was going to be several million dollars but by Aug. 19, we had actually recouped $12.7 million,” said John Chambers, chief of the bureau of criminal investigations for the Illinois Department of Revenue.
Since then, the efforts have continued and the state has collected more than $25 million in gas taxes, according to Chambers.
“We’ve recouped millions of dollars, but more importantly, hopefully we’ll deter that from happening again,” Chambers said. “That’s going to be additional monies coming into the state every month.”
And more money is important because, “it’s no secret the state of Illinois has some budget issues,” Chambers said.

Tennessee Shifts Business Tax Collection

In 2009, the Tennessee legislature passed a law to shift the collection of business taxes from the county to the state department of revenue. Collecting the taxes through the revenue department meant greater efficiencies for the state.
“With this change, the Department of Revenue has used its resources and experience in tax administration to provide greater efficiency in the collection process and increased revenue for the state and for local governments,” said Sara Jo Houghland, director of communications for the revenue department.
“We decided to administer this tax as we do all of the other taxes we cover with our expertise and our databases,” she said. “Also, generally, people are more compliant at the federal level than the state, and it goes the same with people being more compliant on the state level than the local level.”
Through the state’s ability to leverage streamlined processes, the department of revenue was able to identify nonfilers by making use of existing data sources including other state tax registration information and data from other state and federal agencies.
Because of more efficient efforts, the department has assessed in excess of $1.7 million in business taxes and collected more than $1.2 million of that amount, according to Houghland.

New Tax System in Maryland Nets Big Bucks

Maryland’s new Modernized Integrated Tax System has snagged the state nearly $65 million in back taxes, just by upgrading to the latest technologies. Using other strategies, the agency collected more than $1.4 billion in late taxes over the last four years, according to the comptroller’s office.
The centerpiece of that effort is a state-of-the-art data warehousing and tax collection system that brings the office processes to a whole new level of efficiency.
That’s allowed the office to take on more data-matching projects to determine where taxes were being underreported and “these were new projects that we were able to automate,” said Daniel Riley, deputy director of compliance division in Maryland.
That’s important because without an automated, efficient system, big data-matching projects would have to be done by hand, involving more staff to do all the legwork. Sure, the office could run all kinds of projects to make sure folks are paying their taxes, but that’s the kind of effort that takes massive manpower.
“If everyone had all the staff that they wanted, this wouldn’t be an issue,” Riley said. “The reality is that government agencies are being asked to work with less all the time.”