For Release Sunday, November 30, 2008
© 2008 Washington Post Writers Group
By Neal Peirce
WASHINGTON — The recession is driving America’s city governments into an epic fiscal storm. Unlike earlier downturns, all three big revenue sources–income, property and sales taxes–are falling together. Cumulative budget shortfalls are already in the tens of billions and rising.
Among America’s 87,500 governments, only Washington can print money. In a pinch, the only real option for cities and states is to spend less—thereby taking money out of the economy and deepening recession. With more than 20 million employees, 14 percent of the total American workforce, states and cities are a significant part of the total national economy.
This recession seems sure to be so serious, say urban finance experts, that many cities will be forced to go well beyond their familiar tight-times reductions in park and library budgets. A growing possibility: to cut into that historically inviolate sector–police officers and firefighters.
Together, police and fire operations consume the lion’s share of most local budgets. And the fire operations represent the most wastefully managed part of local government, according to municipal experts who spoke as a panel at a National Academy of Public Administration meeting said last week.
A leading critique: three-man crews on fully rigged fire trucks rushing to the scene of all alarms, all but a tiny fraction of which–given modern wiring, sprinklers and other fire-prevention techniques–turn out to be false.
Equivalent safety results, say the municipal critics, could be accomplished by dispatching one firefighter in a single car to an alarm scene, rapidly summoning major-scale equipment and crews when there’s a truly serious fire emergency.
In fire departments that offer emergency medical care, 80 percent of the budget is spent on the 20 percent of the activity that’s actual fire suppression, said John Shirey of the California Redevelopment Assn. Another panelist added: “The one thing that exceeds the inefficiency of fire departments is the political power of the fire unions.”
The most logical step would be merging of police, fire and emergency services, with all personnel cross-trained. Fire and police unions won’t hear of such “multitasking.” But in a prolonged, tough recession, resistance could weaken.
In Vallejo, Calif., public safety spending got so out of hand that the city declared bankruptcy last May. And small wonder–police captains are paid more than $200,000. After five years of service, Vallejo public safety officers and their families get lifetime health coverage. And after working 30 years, it’s 90 percent of last pay for life. All are benefits unthinkable in the world of fast-disappearing defined-benefit pensions that most tax-paying citizens face.
Another headache for cities and states: the erosion of the pension funds they’d invested in to pay future retiree benefits. Before the recession, many funds had serious unfunded liabilities. Now declining stock values–20 percent in both California and Virginia pension funds, for example–are impacting harder. The investment payback most localities had assumed–around 8 percent a year–now looks chimerical. And they know they face a mega-wave of retiring baby boomer workers, meaning a rising tide of retirement benefit demands.
The nation’s municipal bond markets–relied on by states and localities to even out revenue flows or finance capital projects–are now virtually shut down. Yet it’s not municipal lending that triggered the national financial havoc of the last several weeks, notes Shirey. He appropriately blames the shenanigans of the private financial sector, with the major national credit rating agencies asleep at the switch. Municipalities rarely default, but they’re having to take a big part of the hit, obliged to streamline and economize as never before.
How to do it? There’s an oft-neglected candidate: corrections. Because of politically-motivated mandatory sentencing legislation, prisoner rolls have been growing rapidly, reaching world-leading shares of the total population.
Complains Maricopa County (Ariz.) Manager David Smith: “We have 40,000 felony cases yearly and corrections costs us $819 million! We built a very large big new jail, and it’s full again. We’re going broke slowly with this criminal justice system.”
So Smith has launched a major prisoner reentry program in South Phoenix, a 10-block area with 300 ex-felons and people still on parole. “We call it the $50 million zipcode,” he says, because of costs the criminal justice system incurs there. Smith has co-located 15 services for homeless people in the area, partnering with churches and non-profits. The program: help released prisoners get identification, find needed services, put some money in their pocket if they stay out of trouble, and find jobs.
The same approach, applied to corrections nationally, could likely save stunning sums over time. It’s more needed than ever in tough times.
Redrawing borders and merging some city and county governments, going “green” with energy-saving fuels and carbon-conserving buildings–all sorts of ideas, too controversial for normal times, may now have their day.
In dark times, it won’t all be bad news.
Neal Peirce’s e-mail is npeirce@citistates.com.
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