Governor Directs State Agencies to Use Zero-Based Budgeting Approach

For Immediate Release
July 27, 2006
Contact: Communications Director
Office of the Governor
603-271-2121

Launches In-Depth Review of Consultants, Marketing and Promotional, Information Technology Expenses

CONCORD - Gov. John Lynch today directed state agencies to use a zero-based budget approach and build their budgets from the ground up, justifying every cost.

In addition, Gov. Lynch said as part of the budget process he will be launching an in-depth review of the state's use of consultants, as well as of how state government spends its marketing and promotional and informational technology budgets.

Gov. Lynch issued the budget instructions to state agencies today as they begin preparing the first draft of their budgets, which are due in November.

"In the last budget, we eliminated a major budget deficit, balanced the budget and put $50 million in the state Rainy Day Fund, all without new taxes," Gov. Lynch said. "I am committed to making sure state government continues to be fiscally responsible and uses taxpayer dollars as effectively and efficiently as possible.

"That is why I am once again directing state agencies to build their budgets from the bottom up, using a zero-based budgeting approach to look at how they spend every dollar," Gov. Lynch said. This review will include the entire cost structure, including costs funded by state and federal dollars.

Gov. Lynch also announced that he was launching an in-depth statewide review of the state's use of consultants, as well as of how state government spends its marketing and promotional and informational technology budgets.

"In the past, state agencies' budget requests were reviewed individually. But there are a number of areas where we must conduct statewide reviews of spending to ensure that state agencies are as coordinated as possible and taxpayers are getting their money's worth," Gov. Lynch said.

"We must make sure we are using taxpayer money wisely, which is why I will be conducting a review of all outside consulting contracts. Consultants may make sense for specialized or short-term projects, but we need to make sure we are not paying consultants to do work that could be performed equally well - and for less money - by state employees," Gov. Lynch said.

In addition, Gov. Lynch directed state agencies to provided detailed information on how they spend their marketing and promotional budgets.

"By looking at how we are currently spending our marketing dollars, we can identify ways we can better serve the public, and how we can stretch our marketing dollars further to better promote New Hampshire."

Gov. Lynch said his budget review would also include a study of how state agencies are spending money on information technology.

"We need to have a better understanding of where our information technology dollars are being spent, and be assured new developments dovetail with the new Enterprise Resource Planning (ERP) system where possible," Gov. Lynch said.

Gov. John Lynch yesterday officially kicked off the Enterprise Resource Planning project, a major three-year effort to modernize state government operations and improve efficiency. The project will upgrade and unify the state's financial accounting, grants and project management, treasury, budgeting, procurement, human resources and payroll systems.

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TO THE HEADS OF ALL DEPARTMENTS AND AGENCIES:

As we begin the budget process for Fiscal Years 2008 and 2009, I would like to take a moment to thank you in advance for the many hours of hard work and dedicat ion that you and your agency staff will put into preparing your budgets. I know this is not an easy process, and I recognize and appreciate your efforts. I am hopeful that this process will be much simplified in the next budget cycle, when New Hampshire ' s new ERP system should be on line.

In preparing the state budget for fiscal years 2008 and 2009, we face the challenge of stretching limited resources as far as possible and ensuring that we are using taxpayer dollars as effectively and efficiently as possible. We must also remember that our first priority is to serve our citizens and invest in making New Hampshire a better place for all our people.

The information that you will provide will be the primary resource in preparing both my budget and the final legislative budget. I ask that you please be thorough and careful in your responses so that the information you provide will be as useful as possible in determining appropriate levels of funding. Please include the appropriate statistics where available, and do not assume others know the details of what your agencies do.

Your submission should include a maintenance-level request and a change-level request, with a focus on defining results-oriented outcomes. The maintenance request should be a strict interpretation of the law (See RSA 9:4) and provide for the continuation of current programs at "the same level of service authorized and funded in the preceding fiscal year." The change request may include your recommendations for new or improved programs that you believe are necessary for the efficient operation of your department and that will result in measurable, achievable outcomes that can be measured against competing priorities. Budget changes must be explained in detail on the appropriate Analysis of Maintenance or Analysis of Change forms, with specific information (caseload data, changes in federal or state law, etc.) supporting your request.

Your budgets should be built from the bottom-up using a zero-based budgeting approach. Program areas should be thought of as a unit unto themselves, with total program costs identified in a single organization (org) code. If you have multiple program areas in a single org code, break them out and work with your business supervisor to set up new org codes. Efforts should be made to not mix funding within a single org code.

With this zero-based budgeting approach, you will be reviewing all your program areas. This should aid in prioritization, determining the effectiveness of programs and identifying areas where efficiencies can be achieved.

In addition, this year, I am asking you to pay special attention to your department ' s use of consultants. In this package, you will find new forms requiring you to identify all of your consultant-related spending, and to determine whether it may be more fiscally prudent for these tasks to be undertaken by state employees. Be sure to include all costs when undertaking this analysis. New forms will also be provided to help better analyze position counts and identify expenditures for information technology, marketing and public information, state-owned vehicles and class 090 series expenditures not otherwise identified.

The operating budget is your department's strategic plan for the next two years. Your direct involvement, creativity and active participation in the process will ensure we have the best state budget for New Hampshire ' s citizens.

Sincerely,



John H. Lynch
Governor