The Challenge interviewed Matthew Ertas, Director, Bureau of Developmental Services on the 13th of February. We at The Challenge can think of no one in New Hampshire so qualified to speak about the benefits and draw backs of consolidation of services, than Matthew Ertas. Ertas was on the front line when (former) NH DHS Commissioner John Stephens ordered the forced consolidation of (formerly) two independent Area Agencies into one in the North Country.

After John Stephen left DHS to pursue political ambitions, Ertas remained behind to make sure services to families in the North Country were delivered in a quality manner. To this day, Ertas keeps an eye on the lingering after effects of this forced merger.

The New Hampshire Challenge wishes to continue coverage of this merger, because politicians continue to seize upon easily held assumptions that mergers are surrounded with for political gain. Among these assumptions are claims that larger agencies can contract for services at reduced rates – sometimes called "economies of scale", assumptions also surround the savings the state can realize by consolidation of administrations which oversee Area Agencies.

To compliment the re-printing of Janet Krumm’s extensive research of how the service delivery system in NH developed, present leadership of The Challenge wanted to present the facts concerning how many of the assumptions involving the North Country played out. We wanted near term history to reveal the truth of the matter for the use of our readers in the future. Some may wish to maintain what every other area of NH Government treasures, local control. We purposely and willfully arm our committed readership with these facts now, to challenge those who would put forward unchallenged assumptions.

In point of fact, NH DHS had considered consolidation of the formerly two independent regions in the North Country for over six years. They were both small in terms of the size of the populations they serviced, and some structural problems were already revealing themselves. NH DHS had been invited to look into problems involving service delivery, and responsiveness to families needs.

NH DHS Commissioner John Stephen was not the origin of the thought to consolidate, he did not actually think of the concept first, but quickly seized upon it when he found his department considering it.

Stephen charged the idea with politics. He immediately claimed that by creating "economies of scale" savings could be realized by forcing together two administrative layers of the existing Area Agencies serving the North. Stephen went on to claim that by creating a larger customer base, resource, goods and services could be brought to the "users" for less money. The former Commissioner wrapped bot the idea, and himself with the reputation of a previous well thought of Commissioner of Human Services, Terry Morton and gained much press by claiming he would save the taxpayers of NH $800,000.00 by ordering the consolidation.

Ertas explained that approximately $550K of state funds were spent as a onetime expense to facilitate the legal, technical, housing, and transportation expenses brought on by this forced consolidation. Because the initial estimates indicated that $780K of savings would occur, this amount of money was set aside and aimed at reducing the wait list for forty people. Again, Commissioner Stephen lost no time gaining state wide press and claiming that because of his order, the notorious wait list was being quickly reduced.

Yet, the state had spent $550K for the consolidation, and an additional $780K for additional wait list funding. The fact is that during the very time John Stephen professed $800K in savings to willing listeners hungry for good news he was overspent by $480K.

Making matters worse, the two former agencies which now were operating as one were experiencing serious cash flow problems, and shortfalls. These structural financial problems would linger for the following five years, and have only now started to diminish. NH DHS was approached time and again by the operators of the newly consolidated region, and had to infuse funding to maintain basic services to the people with developmental disabilities in the newly designated mega-sized region serving the north.

Further compounding the situation caused by the legislature accepting Stephen’s reports of savings, was the loss of "Local Control" for the large geographic region which was forced to consolidate. "Local control" is a well revered mantra for NH politicians in all other aspects of service delivery in our state. From Education, local taxation, transportation planning and other civic services, the operating premise of NH has always been to maintain local control for cost effectiveness, until former Commissioner Stephen’s forced this centralization and consolidation.

Because of the loss of local control, many times the remaining officials at NH’s DHS heard "the merger" being used to explain the need for additional money for the newly created centralized agency in the North. Ertas went on to explain this as "an unfortunate dynamic" brought on by the forced consolidation. "Our greatest asset was local control" Ertas explained. Parents and members of local agencies know local resources which can be secured at sometimes lower cost for the benefit of service delivery. Ertas explained that over $390K was needed to plug holes in cash flow, and other shortcomings caused by the merger. "As the agencies become larger, it is hard to maintain the local relationships" Ertas observed.

Ertas however, spared no praise to the leadership and clients of the two Area Agencies which were forced to consolidate. "The consolidation came out OK, because a collaborative spirit to move on was displayed by all involved."

However, after four years of sending additional money to the North Country because of mistakes created by Stephen’s forced rapid merger, Ertas observes that consolidations should only be accomplished when a long term plan is put into place. Such a plan needs to be well thought out. "Combining Area Agencies does not automatically equal making a stronger entity, thoughtful planning is needed." Ertas went on: "You run into major issues. You need to know the strengths and weaknesses of the groups you are merging. Due diligence is required for such a decision to be made."

Looking at the money through the years, Ertas observed that after all was said and done, "perhaps there is now a one percent savings realized. Ultimately, you have to ask yourself if the turmoil you placed people under was worth it." While very small savings are now realized, they continue to be small in relationship to the cost of giving up local control, a former hallmark of NH governance.

Another costly aspect of the merger was the increased reliance on the use of e-mail. Ertas observed that e-mail can be so impersonal and communicate hostility or confrontation when none was intended. This again points to Ertas’s observation, "our greatest strength was local control."

The moral of this experience is somewhat simple. Politicians can gain press and rapidly claim savings by "mergers"; however the facts do not support it. In this case, the only economy of scale was the press gained by former Commissioner Stephen, the facts reveal taxpayer of NH actually suffered for five years because of it. Worse, the citizens in need in the North Country suffered for five years while NH DHS had to leak additional revenue to undo damage done to their service system which was forced from "local control" into a more "centralized" model.

Matt Ertas’s final observation was that for success in future consolidations, long term planning must be made to address services, responsibilities, transport and continued citizen involvement through local control.