A tour of the state with municipal policy experts left me convinced that few if any Indiana cities will institute the necessary budget corrections in time to avoid crises next year.
Talks with civic leaders, elected officials and editors in seven Indiana cities suggest we are more likely to follow the recent example of Harrisburg, Pa. That is, we will still be arguing about minor budget cuts when the gates of Chapter 9 bankruptcy begin to close.
Indeed, Dr. Sam Staley, an adjunct scholar of the Indiana Policy Review Foundation, believes many cities are running up against what he calls the “10 Percent Rule.” The concept, although more psychological than fiscal, is worth understanding in the context of Indiana municipal politics.
First, property-tax caps, generally lower tax revenue and increased costs have brought our cities to a historic point (projected budget shortfalls of 10 percent or more). It is a point where old remedies and fixes no longer work.
“The nut of the rule of thumb is that it takes at least a 10 percent change ... to motivate a meaningful change in behavior or direction,” Staley told the editorial boards of several Indiana newspapers, including The News-Sentinel. “By ‘meaningful,' I mean a change in direction or behavior that is strategic and involves a realignment of priorities or resources.”
Staley reminds us that 10 percent is “an upper bound.” He says good managers start rethinking priorities at 5 percent or even lower, especially if the shortfall has continued over time.
My concern is that Indiana cities, many of them facing much larger shortfalls, seem content to address their crises with incremental and short-term policy tweaks. Regarding the line items in their budgets, they are not asking the critical question, “Is this something government should be doing?”
Maj. Ryan Cummins, a former finance chairman for the Terre Haute City Council and someone I consider an expert on Indiana municipal budget policy, shares this concern. He predicts that as budget discussions pick up this spring and summer some Indiana city councils will realize they face virtual if not actual bankruptcy by their fall budget deadlines.
Cummins dismisses as ineffectual the familiar “press-release economics” of cuts in phone use, gasoline and overtime. Even cutting out staff deadwood with the promise of improved departmental efficiency won't be enough. He believes Indiana cities must face the fact their budgets are dominated by employee compensation (80 percent in his city). Successful local government, Cummins says, will shed not only jobs but entire departments.
Cummins joins Staley in seeing a reappraisal of all municipal expenses as the solution. That will require a process of openly and politically defining the responsibilities a particular community wants its government to assume.
As a councilman and a finance chairman, for example, Cummins questioned whether citizens truly want their government to own cemeteries, swimming pools, parks and golf courses. And do they care whether the emergency personnel who answer their 911 calls are municipal union firefighters or equally trained and equipped private contractors?
His re-election, vigorously opposed by the city's employee unions, was testimony that talking realistically about budget priorities is not political suicide.
How does such a discussion begin? A good start is the introduction of “core functions” legislation. Such proposals are being considered nationally as a way to organize that discussion around the question of “what, exactly, is the job of city hall?” Let me emphasize that an honest and independent media is key if the discussion is going to be constructive rather than postured.
Kim Thatcher, the sponsor of such legislation in Oregon, began her campaign with nothing more than loose agreement that government “can't and shouldn't do everything.”
“Our system of budgeting wasn't working,” she explained recently to the American Legislative Exchange Council. “Instead of agencies pestering lawmakers for more and more money, we first needed to establish what the core functions of government were and then decide how to divvy up the available funds.”
Her list of core functions serves as a talking point for an Indiana discussion:
• Protecting people and communities through law enforcement, courts and corrections.
• Providing for an educated citizenry, ensuring all children receive an equal opportunity to achieve academic success.
• Encouraging job creation and entrepreneurship by removing regulatory barriers to job production.
• Helping those who can't help themselves using a safety net of social services.
• Building and maintaining the infrastructure to accommodate transportation and utilities.
• Managing public property and natural resources, including protections for air, water and soil, while protecting the rights of private property owners.
• Requiring government agencies to conduct the public's business in an efficient, transparent and accountable manner.
Does everyone agree with those points and in that priority? Surely not; our group certainly doesn't. But office-holders will have to justify alternative positions through cost-benefit analysis rather than factional politics. That, in itself, might introduce the accountability needed to spur city halls to quit doing what doesn't work and start doing what might work.
If Staley and Cummins are right, we've got nothing to lose and the rewards could be great. Any Indiana city that finds the political will to reorder itself has a huge advantage over its neighbors as the economy recovers and investment returns.