08/07/2012 05:14 pm ET Updated Oct 07, 2012

Run Your State Like Your Ranch

For seven years Montana has been one of the only states in America with a budget surplus: this year it is $453 million. While I have been Governor, Montana has had the highest ending fund balances in the state's history with an average fund balance of $414 million. The average fund balance of the eighteen years prior was $54 million.

In Montana, we've been able to cut taxes, invest in education and infrastructure and keep essential services intact.

How do we accomplish what most states and the federal government cannot? I like to say we run government like a ranch. In ranching -- my old job -- you either pinch pennies or go belly-up. We do the same in government.

For one thing, we challenge every expense. If it isn't absolutely necessary, we eliminate it. When the recession came we found $160 million in savings, which helped us avert a budget crisis. Little things added up: we cut our energy consumption by 20 percent, auctioned off state vehicles and canceled building projects and computer upgrades.

We even saved by spending: we stepped up our efforts to collect unpaid tax bills from out-of-state and foreign corporations, an undertaking that more than paid for itself.

But we don't just cut costs. Like good ranchers, we also leave some grain in the bin in case of drought. When times were good, we stashed away cash in a special savings account. This was a political challenge, because almost every state legislator, from both parties, wanted to spend it instead. But the account proved to be a big help in getting us through the recession in solid financial shape.

And even as we've cut costs and socked away money, we've followed another ranching principle: treat your ranch hands with respect. Like other states, we've had to freeze employee pay and reduce the work force. But as in any good organization, many of the best solutions for cutting costs come from state employees. Some look at payroll as a burden; we look at it as human capital, and we work hard, together with our public employee unions, to keep up morale in tough times. So when we cut the state payroll, I cut my own salary.

Finally, we don't spend money until we've found the lowest price. Around here, government contracts aren't a way to take care of friends. Quite the opposite: we use our purchasing power to get the lowest possible rate. When the real estate market softened, we told commercial landlords who rented space to the state that if we didn't see rent reductions, we'd move to cheaper premises when our leases were up. Most complied, saving the state almost $4 million.

There are savings to be found everywhere in government -- by doing what any rancher or family household does: save money, live by a budget, challenge expenses, find bargains and invest wisely. Montana has proved that it works.