Agency Consolidation Is in the Air
(Again)

As state governments face difficult economic conditions and limited budgets, cuts must be made somewhere.  Several states have recently looked to agency consolidation/restructuring as an economical and efficient solution.

This spring, Illinois Governor Rod Blagojevich signed into effect an order that consolidates the Department of Professional Regulation, the Department of Insurance, the Department of Financial Institutions, and the Office of Banks and Real Estate into the new Department of Financial and Professional Regulation (DFPR).  According to a press release from DFPR, they expect to save nearly $14 million in the first year as a result of the consolidation.  The Governor states that the consolidated department, with over 800 employees serving nearly 1 million licensed professionals, "will improve efficiency and maximize the state's ability to ensure the integrity and standards of regulated industries and professions in Illinois."

A similar situation can be seen in the Health and Human Services System in Texas.  As directed by HB2292, 12 Texas agencies will be collapsed into four departments to be overseen by the Health and Human Services Commission.  The Department of State Health Services (one of the four new departments) includes the former Department of Mental Health and Retardation, Texas Commission on Alcohol and Drug Abuse, Department of Health, and Health Care Information Council.  The Texas Department of State Health Services (TDSHS) Commissioner states that "bringing together the various programs will allow for better focus on the person and the care they receive."  The administrative savings resulting from the Health and Human Services consolidation, an expected $1 billion over the next five years, are to be redirected into services.

Saving money and increasing efficiency and accountability is likewise one of the goals of the proposed government reform report commissioned by California's Governor Schwarzenegger.  The report, developed in part by Billy Hamilton, deputy comptroller, who guided the consolidation efforts in Texas, cites overlapping and duplicative functions of government departments and agencies resulting in costly inefficiencies and a confusing structure.  In respect to regulatory boards and commissions, specifically cited are the numerous small agencies with duplication of administrative processes which are common to all programs.  The report essentially calls for a complete overhaul of the California government, eliminating 118 boards and commissions and placing the functions of several regulatory boards under the Division of Commercial Licensing within the new Department of Commerce and Consumer Protection.  Overall, the entire reorganization plan aims to save as much as $32 billion over the next five years and make the government better designed to serve the people of California.

In Arkansas, the House and Senate Committees on State Agencies and Governmental Affairs has approved a proposal to conduct a study to determine the costs of reorganization and the potential savings that may result.  In 2003, a proposed measure to consolidate 53 agencies into 10 new departments did not pass through the House Committee on State and Government Affairs.  Sponsors of the current proposal hope that the study will be completed in time to make a recommendation to the Legislature in January 2005.  Since the Legislature will face many costly issues during the next session, lawmakers are being urged to consider ways to improve government efficiency and reduce costs.

Another consequence of these reorganizations, however, is the loss of jobs for hundreds of state employees.  Some opponents of the reorganizations also fear that such a structure could give a governor or a single agency too much power over the regulatory process or make the process less transparent to the public that the agencies serve.  As these new policies go into effect, agencies will enter a transitional period.  If it can be demonstrated that these consolidated agencies meet their goals of reduced costs and increased efficiency, perhaps we will see a revival of the trend that resulted in the development of numerous consolidated agencies more than twenty-five years ago.

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