By Anita Kumar
Washington Post Staff Writer
Tuesday, March 30, 2010; B06
RICHMOND -- Virginia Gov. Robert F. McDonnell will soon launch an aggressive initiative to reshape and shrink state government, an attempt to make good on one of his signature campaign promises and leave a lasting mark on the state.
As soon as this week, McDonnell (R) will name a team of 25 advisers that will spend months searching for ways to shave hundreds of millions of dollars from the state budget and make government more user-friendly.
They will consider closing some of the state's 130 agencies, consolidating accounting and payroll systems, putting more forms online, privatizing state functions and eliminating annual reports.
"Right now, with this economic downturn, families and businesses are having to make adjustments and cuts. People are more willing to think outside the box and support a governor that wants to change the way you do business," McDonnell said in an interview. "We need to look at if there are smarter ways to do things."
He said he will call the General Assembly back to Richmond this fall for a special session to approve his recommendations if he can build support for some of them.
The most controversial by far will be his goal to sell the state's 350 liquor stores, which McDonnell pledged to do on the campaign trail last year. He estimates the sale could bring in as much as $500 million for much-needed road improvements, but his critics argue that any one-time proceeds would be offset by the permanent loss of $100 million in annual revenue that goes to other state services.
McDonnell is modeling his efforts on initiatives by former Virginia governors George Allen (R) and L. Douglas Wilder (D), current Republican governors Mitch Daniels of Indiana and Bobby Jindal of Louisiana, and on reforms in Australia, Scotland, Germany and the United Kingdom.
McDonnell said he has met with Jindal and Daniels about their efforts. In Louisiana, Jindal formed a commission to identify $800 million in savings, including selling the state airplane and having inmates clean state buildings. In Indiana, Daniels formed a commission that recommended moving a slew of services, such as public safety and health, from the local to the county level.
McDonnell's first two months in office were dominated by the General Assembly session and budget cuts. Now, he has a chance to set the agenda, using this commission as well as two others on jobs and higher education and a possible special session on transportation.
Ed Gillespie, a longtime Republican strategist who was chairman of McDonnell's campaign, said the reform initiative will provide McDonnell an opportunity to demonstrate he can achieve what he talked about on the campaign trail, using an issue that appealed to voters of all backgrounds.
Conservatives in Virginia, who have long argued that state spending has ballooned in recent years, applaud the effort.
"State government has not shared the burden that the private sector has," said Ben Marchi, Virginia director of Americans for Prosperity, which lobbied for a decrease in spending this year. "State government has been a safe zone."
A recent report from Virginia's Joint Legislative Audit and Review Commission on state spending over the past decade shows spending in Virginia has grown 73 percent in the past 10 years, with the state's operating budget at $37 billion.
But much of that is for directed funds, such as tuition help for state colleges. The state's general fund has grown more slowly -- 46 percent in the past decade. After adjusting for inflation and for extending services to Virginia's quickly growing population, general fund spending has grown 8 percent over 10 years.
Many Democrats say they welcome the review as long as McDonnell does not use it to force his own ideological changes -- which Allen was accused of doing in the 1990s when his Blue Ribbon Strike Force recommended offering tuition credits to promote school choice and turning mental health facilities and child support enforcement over to private contractors.
Senate Majority Leader Richard L. Saslaw (D-Fairfax), who has been in the legislature for more than three decades, said he expects there won't be much new in the report.
"I've heard it all before," he said. "If it makes sense, we'll do it. If it doesn't make sense, we won't."
The governor's study will be the 15th effort at major government reform in Virginia in the past century.
McDonnell signed an executive order on inauguration day forming the commission, but he waited until after the legislative session to put it together. It will comprise 20 citizens and five legislators. Another half-dozen people representing liquor retailers, wholesalers and distributors will form a working group to study privatizing ABC stores.
The commission is charged with providing initial recommendations to McDonnell by July 16, and a final report by Dec. 1.
Ronald Jordan, executive director of the Virginia Governmental Employees Association, said his group, which represents thousands of employees and retirees statewide, plans to watch McDonnell's efforts carefully, but is not sure the state's workforce can shrink further.
The state, which employes 103,000 workers, has eliminated hundreds of jobs in recent years as a result of state revenue projections being lowered by $11 billion during the worst economic downturn since the Great Depression.
In the 1990s, Allen's strike force recommended eliminating 15 percent of the state workforce, or about 16,000 jobs, as well as cutting funding for museums, experimenting with private road maintenance, selling excess state property, abolishing some boards and selling the state yacht. Many of the recommendations were implemented, and Allen eliminated about 10,000 jobs during his four-year term.
"Here we are 12 years later. I guarantee you there are even better ways to handle things," Allen said. "You have to change your way of thinking."
Nearly a decade later, Wilder served as chairman of a commission for then-governor Mark R. Warner (D), who was looking for savings while the state was facing a multibillion-dollar budget shortfall.
Wilder suggested several ambitious changes: abolishing two Cabinet secretariats, merging multiple state agencies, eliminating Northern Virginia's Center for Innovative Technology, consolidating purchasing, and selling the state's liquor stores. But many of the recommendations were not implemented, in part because the commission was reluctant to make specific recommendations.
Wilder suggests McDonnell consider selling surplus property, engage in more video conferencing and change the budget cycle. "They may seem like little things, but when you add them up -- $10 million, $15 million -- it makes a difference," he said. "Fat is fat. You need to cut it out."
McDonnell's aides said he does not have a specific figure he hopes to save except for the liquor store sales, which he pledged to spend on transportation.
If there are savings, McDonnell said they would go back into the general fund, where the money could offset recent budget cuts to education and health care. "When I have a substantive package of meritorious government reforms that will save a substantive amount of money, it would be my intent to have a special session so I could get these things passed, so I could take the savings and put it back into restoring the cuts," he said.
Researcher Meg Smith contributed to this report.