LANSING – The Michigan Department of Management and Budget was able to shave more than half a billion dollars from the state’s spending last fiscal year with changes in state contracts, leasing and financing.
The $500.7 million savings was over the department’s targets for the year, according to the department’s annual report.
“DMB has relentlessly pursued every opportunity to cut costs,” said DMB Director Lisa Webb Sharpe. “We owe our success to a four-pronged approach: achieving efficiencies, reducing duplication of services, pursuing wise investment options, and cutting costs wherever possible.”
The largest portion of the savings, $211 million, came from the state’s retirement systems. The state changed some actuarial assumptions and made some changes to health plans, but it also encouraged more retirees to use mail-order programs to cut costs. Many retirees also became eligible for Medicare prescription benefits, shifting those costs from the retirement system to the federal government.
The next largest chunk came from contract changes. “DMB achieved these results by negotiating price reductions, canceling unnecessary contracts, taking advantage of prompt payment discounts, eliminating sole-source contracting and continuing full and open competition to achieve the best contract prices possible,” the report said.
The state also consolidated a number or leased offices and moved out of others, saving $83.9 million in rent payments.
And rent payments to the State Building Authority were cut $40.1 million a year with the refinancing of the authority’s bonds, savings that is expected to continue through 2015. The authority last fiscal year sold more than $847 million in new bonds to finance new projects and refinance existing debt.
The department also trumpeted surplus land sales, which not only brought in $32.3 million in revenue, but also saved the state $1.7 million in annual maintenance.
Among the land sales highlighted in the report was the former Ypsilanti Regional Psychiatric Hospital, which went to Toyota for $11 million for its new technical center.
On top of the operational savings, DMB also saved $280,088 through its membership with state universities in an energy purchasing coalition. Savings from that membership has, however, dropped since it began in FY 2003-04 when savings were $844,963. In FY 2004-05, the state saved $745,319.
But the state also continued savings through programs requiring that heat be turned down, air conditioning be turned up and equipment be turned off at the end of the work day.
DMB also reported savings for other units of government. Local governments using the state’s mail presorting service saved $554,000 last year, the report said. And they saw discounts averaging 38 percent using state purchasing contracts.
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