Wednesday, October 22, 2008

Cooper City Economics

I continue to be struck by the relevance of Henry Hazlitt's Economics in One Lesson even though it was published over sixty years ago. Hazlitt pulls no punches from the outset, reminding us that "Economics is haunted by more fallacies than any other study known to man." As we have seen, the human costs of these fallacies are massive. The 'Lesson' Mr. Hazlitt teaches continues to be timeless. If we are going to evaluate policies, whether they are policies enacted by governments, corporations, institutions, or individuals, then we have to look at how those policies affect everyone, not just favored constituencies or select, special interest groups.

The recent severe financial crisis and resulting worldwide economic recession that has been forecasted for years is finally unleashing it fury upon us. State tax collections are at their weakest level in years and one key revenue source, sales taxes, are showing no growth in the first three quarters of 2008. Continued slowing in the economy, especially as of late, means further declines in tax incomes can be expected. The result is that our city leaders who have just completed action on 2008-09 fiscal plans are likely to face the need to make budget cuts and major adjustments in the short months ahead.

States and local governments have been squeezed from several sides in recent years. Fiscal savings from falling welfare caseloads are much smaller now, so there’s less money for states and municipalities to shift over to services. Federal grants have been falling, and non-health, welfare and safety services will be further strained by the recent growth in those non-essential expenditures. Recent weaknesses in state and local tax revenues are definitely creating new pressures to cut spending right here in our city.

Public and publicly induced private investments have provided fuel for neighborhood-level development, enabling community-based activity to go to scale. Flexible federal and local dollars, generally in the form of tax credits and block grants, together with federal regulations prodding banks to lend, have previously contributed to a significant flow of capital available for community development, but no longer.

We will have to soon deal with hard truths and tough choices if we are to responsibly deal with local reforms. Nationwide, there are over 18 million state and local public employees, making up 14 percent of the nation's total work force. These employees do much of the real world of domestic governance. We literally could not live without them, yet that 14 percent of our national workforce are actually dependent on your hard earned tax dollars. They provide our water, collect our trash, vaccinate our children, police our communities, and administer traffic safety, airports, and the systems we need to communicate with each other.

They do much of the teaching, training, and counseling in our public schools, universities, and community colleges to prepare our children for fulfilling careers. They are responsible for environmental clean-up and protection programs. They design and carry out programs to lift our most needy out of poverty and into jobs and housing. They operate the hospitals that are the last hope of the uninsured. They staff most of our prisons, as well as our court system.

Not a day passes during which their work does not touch and shape our every day lives. Yet, there is a growing consensus among both citizens and public officials that state and local institutions of government need to drastically improve their efficiency, reduce their capacity and improve performance if we are to meet the challenges of our rapidly changing economic and social systems.

Any new cuts in social services or assistance will be imposed on spending levels already below where they were several years ago. Several shifts in recent years in the relationships between fiscal capacity and city expenditures for unnecessary ‘feel good’ programs have hampered our ability to provide for necessary services without raising taxes or going into debt. This year’s deficit is $1.6 Million dollars of your hard earned wages and income, yet I still espouse that we should have begun this new fiscal year with a zero-based budget, as I always have.

Making the tax system in our city more responsive to economic growth is a high priority for us all. It is good policy to have a relatively balanced system with significant reliance on a variety of taxes and methods of taxation for several reasons. Six of the most important tax revenue schemes that Cooper City is likely to focus on in the near future are: 1) making our tax system more responsive to the immediate lack of local economic growth; 2) broadening our options in relation to local tax bases; 3) making the local tax system more balanced between residents and businesses; 4) paying more attention to how our local tax burdens are distributed; 5) giving local government departments more revenue options, and; 6) employing additional user fees and charges in appropriate contexts when dealing with local government ‘non-essential’ services.

The dilemma facing Ben Bernanke and his Federal Reserve Board, as well as the other central banks (beginning with the European Central Bank), is not at all comfortable. For years they have shirked their fiduciary responsibility, and now they find themselves in a blind alley that will definitely affect each and every one of us. They can either allow the recessionary process to begin now, and with it the healthy and painful readjustment or they can procrastinate with a "hair of the dog" cure. With the latter, the chances of even more severe ‘stagflation’ in the not-too-distant future will increase exponentially.

As someone recently stated on a financial blog, “Even as government races to fix the financial crisis, it still makes time for the more mundane tasks that serve its constituents. To that end, my township trustees recently approved October 31 as Beggar's Night. So while I struggle to explain the credit crunch to my children, I can send them off to dream of costumes and candy, all thanks to government.”

Now is the time for courageous leadership, not politics as usual. Now is the time for empowered public servants, an engaged citizenry, and new ideas. I believe that the path to a high performance government based on the trust and lead strategy is clear: Give the city leaders the authority to act and keep petty politics out of the issues we now must be forced to face. We must engage citizens in the business of government without personal agendas, while at the same time encouraging them to be partners in the problem-solving process, not ignoring them or allowing them to become victims of government. This can be accomplished by removing the barriers to a stronger leadership from the Commission, a lean, responsive government, a high performance work force, and also removing the barriers to fiscal responsibility, along with the uncertainties, and a previously mentioned responsive citizenry.

I believe that all of us in Cooper City can benefit from a close look at how we frustrate high performance. We will soon find that ‘piecemeal change’ will not produce the brand of reform that is now necessary to get us back on a solid financial track. Too many governments, especially ours, have scattered authority among too many other non-local officials, boards, and authorities. The city council needs to set broad policy in concert with department officers and then put that policy to work. That means avoiding the tendency on the part of staff to parcel out executive-level proposals to a patchwork of committees and various special interests and consultants. You can delegate the decision, but you certainly can’t delegate the responsibility.

I echo and reinforce what many residents have been saying for some time now: To affect real reform, the structures and systems that underpin our local city government must adapt. Internal bureaucracies need to be de-layered so that the front line is in touch with upper-level management. Personnel, procurement, and budget systems need to be amended so that those tasks are not filtered through myriad layers of management or subverted by reams of rules.

The role of our public employees in pursuing future commission policy cannot be overstated. They need to be both encouraged and challenged. Those employees who no longer care about challenging their daily work or accomplishing something worthwhile should (and will be forced to) leave; those who still want to make a difference must develop and broaden their skills. Far too many of our front-line employees have spent their entire proud careers learning narrow specialties that no longer serve the public well.

Far too many managers are still stuck in the micromanagement mindset that substitutes for the mentoring, coaching, and team-building that our front-line employees need. Given a chance to participate, those front-line employees have to be ready to take up the challenge, wear many hats, and share their ideas. In turn, their managers need to listen to them and to trust them to accomplish agreed-upon goals in the way they think best, and to lead them by coaching and championing, not by politics of dictation and discipline.

Ours is a frank and urgent call for change in the nature of these relationships. How they evolve in the months and years to come will offer Cooper City a choice between two quite different futures. The first is mired in the hidebound, outmoded ways of doing business that too often get encrusted in our governmental institutions. The second emphasizes leadership and trust on a basis that I believe is fully appropriate to a strong constitutional republic and a trustworthy local government.

Achieving a higher performance level will not be easy. Comprehensive reform never is. The temptation will always be toward tinkering with the process, making safe and small-scale adjustments, escalating turf protection and continuing with politics as usual. After all, some on the commission have been recently asking for all of the stakeholders in local public service to give up something, and to take on more responsibility in return. Yet, I firmly believe that whatever any one group gives up, it will receive much more in return. I also believe that if all the various interest groups view this mindset in terms of one broad quid pro quo, positive momentum for comprehensive action will be automatically created.

If we don’t act now, the result from a stand-firm approach that allows elected officials, public servants, and some ill-informed citizens to hide from the kinds of tough choices that would infuse new energy and purpose into public service, would force nonresponsive bureaucracies into the forefront of “no apparent change”. I have a deep disappointment in the way that the city commission and city staff have handled themselves in regards to the budget, both past and present. I just want to make it very, very clear that I see myself as a minority on the dais who will continue to be increasingly responsible to our residents and business owners regarding the way we spend their hard earned money.

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