COLUMBIA--While some agencies cut programs and positions to deal with budget cuts, one of South Carolina's smaller agencies is skillfully wrestling one of the biggest challenges in state government.

The Insurance Department and its director, Ernst Csiszar, won kudos from Gov. Mark Sanford recently for setting an example in a time of financial crisis that other state agencies could follow.

"It's key to think outside the box when you're addressing the budget crisis we're up against," said Will Folks, Sanford's spokesman. "That's something Ernie has done."

During the past two years of budget cuts, the Insurance Department has gone from receiving $5.5 million in state funding to $4.2 million, a 23 percent drop. The agency has cut about 18 positions, trimming its staff of state-paid employees to about 88.

Insurance is the smallest agency in the governor's Cabinet, and Csiszar acknowledges it's sometimes easier for a small agency to make cuts than a large one.

"For us, a 1 percent reduction might represent one or two or three positions," he said. "If you're looking at a 1 percent reduction in Corrections (Department), you might be talking about 50 people."

The Insurance Department has been able to handle the cuts while its workload has increased, Csiszar said.

About the only consumer services eliminated have been a few outreach programs, agency officials said. For example, some hurricane seminars along the coast were not held this year.

Much of the department's success in battling the crisis can be credited to preparation.

Csiszar, the only Cabinet member Sanford held over from Gov. Jim Hodges' administration, began heading off tough financial times long before the ax fell on agency budgets.

"The director made a conscious decision early on that it was obvious two years ago that the state was going to be facing some tough times," said Deputy Director Tim Baker.

The department began leaving open positions after staffers departed. Four deputy positions also were cut, and the remaining two deputy directors took on extra work.

"See the gray hairs?" Baker says, laughing as he points to his salt-and-pepper beard.

He's not the only one. Employees have been reporting slightly more overtime, said department spokeswoman Ann Roberson.

"I think these days we're all doing a little more with a little less, and everybody's pulling their fair share -- and then some," she said.

Morale is also up, Roberson says. Three years ago the agency moved from a building in downtown Columbia to an office complex northeast of the city. In the new building, Csiszar has done some shifting, putting departments whose work is closely linked near each other.

Changes in the computer system also helped the department cut costs. Insurance agents can renew their licenses online now, cutting down on paper.

Also with the new system, an insurance examiner can download many documents long before he goes to company offices for field work.

"There's more of a work- load," Csiszar said. "You've got to do more, but you've got to be smarter."