Analysis: The Secret to Cutting Government Waste -- Savings by a Thousand Cuts

In 1991, Texas faced a whopping $4.6 billion budget deficit. The legislature asked state Comptroller John Sharp to review the budget to find some face-saving cuts before they raised taxes. Sharp assembled a crack team and not only found a few savings here and there: He found enough to close the entire deficit. And then he kept going.

Over the course of the next decade, Sharp's Texas Performance Review (TPR) saved the state $10 billion and won awards for government innovation from admirers as diverse as Harvard and the Heritage Foundation. Sharp and his colleagues were called to Washington to help advise President Clinton and Vice President Gore on a National Performance Review -- whose most famous image was the $400 hammers at the Pentagon -- which resulted in $106 billion in savings the first year and helped to reduce the federal payroll to its lowest level since the Eisenhower Administration.

TPR staff also advised California's Republican Governor Arnold Schwarzenegger on a similar state review. My firm eventually absorbed some former TPR staff and adopted its methodology. We have since conducted similar reviews of individual agencies, local governments, or entire state bureaucracies in about a dozen states. Such reviews routinely identify annually recurring savings totaling roughly 5 percent of total operating spending. (By "annually recurring," I mean that cheap gimmicks and one-time savings likeselling the state capitol don't count.)

Let me give a few favorite examples: By unscrewing the tiny light bulb behind the big plastic display that covers almost the entire front of most soda machines -- which serves no purpose but to make the can of Coke look more delicious -- Texas saved about $200,000 a year in energy costs. (There are a lot of soda machines on state property!) Colorado used three different entities to deliver mail on the state office campus, including two government agencies and a private firm (proving that privatization alone isn't always the answer). You could literally stand outside the capitol and photograph three mail trucks following each other around from building to building. And West Virginia had never properly calibrated the salt-spreaders on its snowplows, so that whenever it snowed it was dumping far more salt on the highways than needed. Simply adjusting these devices saved the state about $3 million a year. None of these make a significant dent in structural deficits -- but put together 100 small changes like that and, as the saying goes, pretty soon you're talking real money. It's hard for anyone to be against that (well, except salt companies).

Read more at The Atlantic.