If there were similarities between the gubernatorial campaigns of 1990 and 2002, the parallel between 1991 and 2003–new Republican governor facing fiscal crisis–is even closer. There are a handful of reasons to believe that Mitt Romney could be better able to manage the fiscal retrenchment and bureaucratic restructuring ahead than Bill Weld was in slaying his dragons in the early ’90s. Weld, after all, talked a good free-market game. But apart from his years in big-firm law practice, Weld was himself more a product of the public sector, namely the US Department of Justice, than the private. In contrast, Romney’s Bain Capital background gives him firsthand experience in the nuts and bolts of corporate restructuring. Though it may offend some to say so, the skills of a leveraged-buyout artist may be just what the state needs in this difficult time–the ability to identify the core business in a bloated enterprise, strip away the flab of redundancy and distraction, and make the firm once again fit for lean and muscular growth.

But there are at least as many reasons to believe that the Weld budget rollback–itself no picnic–was a piece of cake compared to the dislocations that will be necessary to balance the state’s books in the coming years. For one thing, the state has been through these convulsions once, and not so very long ago. Though there is always a certain amount of bloat, not to mention patronage payroll-padding, that can be wrung out after 10 years of expansion, the Republican retrenchment of a dozen years ago did a good deal to weed out ancient relics that bog down the modern mission of government.

We’re not just talking about low-hanging fruit here. The consolidation of state facilities–state mental hospitals, public-health hospitals, and state schools for the retarded–in the 1990s was a wrenching, if overdue, exercise for all concerned. There is no equivalent to facility consolidation in today’s budget, no similar vestige of the past just waiting for the combination of political will and fiscal necessity that could break through political resistance and bureaucratic inertia. It’s all well and good to talk about merging MassHighway and the Massachusetts Turnpike Authority, but the efficiencies to be reaped by consolidating road crews are a far cry from the savings gained by shutting down nine large, outmoded institutions.

But there is a more fundamental reason to believe it’s going to be more difficult to reduce spending this time around. Much of the growth in the state budget over the past decade has been concentrated in two areas, one of which has been grown deliberately, the other uncontrollably–education and health care, respectively.

At the trough of the last budget crisis, in fiscal 1992, state funding for education bottomed out at $1.4 billion (down from $1.7 billion in 1988). Since then, education local aid has risen steadily–the result of the 1993 Education Reform Act–reaching $4 billion in fiscal ’02. Over that time period, education spending grew from 10 percent of the state budget to 17 percent. This sustained funding commitment to education reform was the Commonwealth’s greatest investment of the 1990s and, politically, its proudest achievement. To go back on it now would be to make a mockery of the 1993 pledge to teach every child to high standards–a pledge the state is still struggling to fulfill.

Then there is health care. It is, like the consolidation of state facilities, an area of state expense in which most of the cards have already been played. Competition and managed care, the reforms of the early ’90s, held down health care costs through mid-decade. Medicaid, or MassHealth, the state’s largest health-care program, grew only modestly from fiscal ’92 to fiscal ’97, $2.8 billion to $3.6 billion over five years; as a percentage of the state budget, Medicaid actually declined slightly during that period. But then health-care inflation returned with a vengeance. Medicaid spending jumped to $5.4 billion over the next five years, and stands at $6 billion this year–25 percent of overall state spending.

So, it’s not for nothing that the early talk about the coming year’s inevitable budget-cutting has begun with trial balloons from House Speaker Thomas Finneran about trimming Medicaid. Such moves may be unavoidable, simply considering the magnitude of the impending deficit–$2 billion and possibly rising. But there are two problems, apart from the moral implications of rolling back health coverage for those who can afford it no other way, with looking to Medicaid as a source of savings. One is that Medicaid is not, by and large, growing because it’s an out-of-control state program, but because medical costs are on the rise for everybody. The 12 percent-per-year growth rate projected for state-paid health care is no worse than that facing private employers. The other is that Medicaid is not only a driver of spending; it is a source of revenue. Since the federal government shares the cost on a 50-50 basis, it takes $2 of service cuts to get $1 of actual savings for the state. To reach any given savings target, by means of reducing benefits or eligibility, we would have to do double the damage.

The present situation becomes even more discouraging when you consider how much of the growth of the state budget over the past decade has been concentrated in these two areas. According to calculations by the Massachusetts Taxpayers Foundation, from fiscal ’92 to ’03, spending on education aid and Medicaid combined has grown at a rate of 5.3 percent per year above inflation, while the rest of state government has grown at an annual rate of just 1 percent in real terms. (The other largest chunk of the state budget–human services excluding Medicaid–has grown even more slowly, 0.2 percent above inflation.) As a result, Medicaid and school aid–$10 billion between them–now make up 42 percent of the state budget, up from 31 percent in 1992.

With this bleak backdrop in mind, I spent the fall paying visits to state budget experts past and present, gathering their ideas for savings and reform. I conducted these conversations, for the most part, on an off-the-record basis. The good news: There is no shortage of ideas for changing how the state spends its money in order to get more out of it. The bad news: I spoke to no one who had a $2 billion solution, or anything close to it. Reform may make state government more efficient and more effective in the long run but, our new governor’s campaign rhetoric notwithstanding, it will not close next year’s budget gap.

One of these budget sages reminded me that, in 1991, the incoming Weld administration put forward immediate budget cuts, to solve what was then a looming deficit, but also an 18-month “fiscal recovery plan,” which laid the groundwork for longer term restructuring and savings. The Romney administration would be wise to follow the same course. A reform plan won’t make the fiscal ’04 budget any easier to take–or put together–but it could make an innovation virtue out of today’s spending-cut necessity.

In my serial brainstorming sessions with number crunchers, several ideas kept coming up. Here, in my own words and combined with my own thoughts, are three broad themes to guide the coming forced-march reinvention of Massachusetts state government.

REORGANIZATION: There is already talk coming out of the new administration of a major reconfiguration of agencies in order to consolidate and streamline state government. Be prepared for the pooh-poohing of the idea that’s sure to follow: It’s a bureaucratic morass, the savings in administrative streamlining are miniscule, it’s rearranging the deck chairs on the Titanic. Still, there’s been no major restructuring of state government for more than a generation (Weld’s effort to do so was largely stymied), and it’s long overdue. In addition, for an administration that is intent, by inclination and necessity, on prioritizing state responsibilities, a reorganization plan is an important statement of purpose. Without redefining the mission of agencies in the most powerful and transparent way, how are managers to be held accountable for results?

Nonetheless, much of the early talk has been about reshuffling cabinet positions, which reduces the process of restructuring state government to who gets the exalted title of “secretary” (so far, education, yes; economic development, no). That’s too bad, because I heard a fair amount of sentiment for abolishing the secretariats altogether. They are the useless middlemen of the bureaucracy, I was told, too far off the ground, and too much the captives of advocates and vendors, to exercise real control over the agencies underneath them. Better to consolidate the tiny (and some not so tiny) agencies and offices that now report to them into a few larger, functional departments. For instance, create a single environmental regulation and management agency out of the current hodgepodge (DEP and DEM; Department of Fisheries, Wildlife, and Environmental Law Enforcement; Department of Food and Agriculture; Metropolitan District Commission, etc.). Then move the Massachusetts Environmental Policy Act comprehensive permitting process, now in the Executive Office of Environmental Affairs, into a true planning agency, one that perhaps also incorporates the current Department of Economic Development and Department of Housing and Community Development. So far, the Romney administration has gone in the other direction, creating two über-secretaries in the governor’s office, one for planning, another for commerce and labor.

The major reorganization idea floated by Romney in the campaign would break up the huge health and human services secretariat into three components: public health, social and rehabilitation services, and financial assistance. Here, the devil will be in the details, and count on a fight over every single one. But the human-services system cries out for consolidation of some sort. Of two million active cases handled by the eight largest departments, 65 percent of clients are served by two or more agencies. Between central, regional, and local offices, departments within the secretariat take up 2.1 million square feet of space in 149 buildings, under 175 separate leases. In many cities across the Commonwealth, there are four or five agency offices, and clients shuttle between them. There has to be a better way, for the customer and the Commonwealth alike.

COMPETITION: The Weld administration’s campaign to contract out state services, conducted with zeal but rife with abuse, was brought to an abrupt end, in 1993, by the Pacheco Law, which set exacting (some say impossible) standards for privatization. Now, 10 years later, a variety of people told me, it is time to reopen the privatization discussion. The objective would not be to set off the wholesale replacement of state employees by underpaid contract labor, as the Pacheco Law rightly sought to prevent, but rather to inject the rigor of competition into the essential functions of state government.

“Reinventing government” gurus ranging from David Osborne to former Indianapolis mayor Stephen Goldsmith argue that the benefit of the privatization option lies not in the inherent efficiencies (or bargain-basement wages) of private-sector contractors but in the exercise of defining what it is a state agency wants done in terms that make it possible to consider different ways of doing it. In the Indianapolis example, Goldsmith has explained (see “Efficiency Expert,” CW, Spring 2002, for one such discussion), unionized public employees won many of the contracts that were put out to bid. They often did so by reorganizing the work process and squeezing out layers of supervision and middle management. We could use some of that here.

Though many public managers and government watchers long for the outright repeal of the Pacheco Law, realists recognize that’s not going to happen. But a discussion of how to use the mechanism of competition to provide incentives–if not pressure–for innovation up and down the public-sector chain of command is much needed, and likely to be critical in the coming period of budgetary stress. Such a discussion will have to include how the Pacheco Law could be modified to facilitate, rather than discourage, change in the means of delivering public services.

TECHNOLOGY: It took a while before the reality caught up to the cliché, but technology really has changed everything. Or at least it could if we put it into effect. The Commonwealth has made great progress on redesigning its Web portal to be inviting and useful, as well as user-friendly. But driver’s-license renewal aside, only a small portion of the dealings between the state and its citizens, vendors, etc., can be conducted online. Though the payoff may be long-term, rather than immediate, the Internet still holds plenty of promise for efficiencies that will save money and improve customer service.

More importantly, information technology may be the key to all sorts of management efficiencies throughout state government. Simply put, modern IT and business systems should make possible a degree of agency restructuring–actual or, in some cases, virtual–that a dozen years ago would have seemed outlandish. In a recent paper for the Pioneer Institute, former administration and finance secretary Charles D. Baker Jr. makes a compelling case that the biggest obstacles to improving efficiency and service in health and human-services are the silos of information and management responsibility created by agencies that are defined by service and/or disability category but actually minister to many of the same clients. That’s no different today than a generation ago. But to solve that problem years ago would have required creating a single, gargantuan bureaucracy. Today the technology exists to determine eligibility, assign, and track clients across agencies to coordinate services, case managers, and benefits. EOHHS is moving in that direction, with its MassCARES client-and-resource mapping system. With ancient information systems that don’t talk to one another, not to mention ancient bureaucratic antagonisms and legal barriers, still in place, that can be taken only so far. But even in the context of service cuts today, it will make sense to make the necessary investment in technology to streamline services tomorrow.

And that’s in a people-oriented bureaucracy. Imagine the online and automation possibilities in principally paper-pushing ones, like the registries of deeds. Even the judiciary. Today, in many district courts the goal is to finish all sessions by midday in order to have the afternoon free to do the resulting paperwork. What if there were no paperwork, the full record of every courtroom action entered instantly by the clerk at the bench? Given the snail’s pace and false starts of courthouse automation to date, despite a $75 million bond behind it, this paperless courtroom may be hard to envision. Still, at some point the challenge before the judiciary may not be figuring out how to avoid layoffs but appreciating how few assistant clerks are needed to keep the wheels of justice turning.

If there’s a single thread that runs through these three aspects of reform–reorganization, competition, and technology–it’s the idea that it may be possible for government to do more with less, not immediately, perhaps, but ultimately. During a time when agencies that have gotten used to doing more will be forced to do sharply less, that may be hard to believe, let alone keep in mind. Let’s hope the Commonwealth’s new chief executive officer will be able to do so.