Tuesday, May 25, 2010

Another Bellwether from California: local government consolidation

A recent story on PRI’s Marketplace radio show got me thinking about how the current economy is impacting local governments and what may come in the future: the cities of Glendale, Burbank and Pasadena are considering merging and consolidating all or parts of their government in order to save costs. Due to a reduction in taxes and state-level budget cuts, the cities are exploring whether a consolidation will help them do more with less.

It makes logical sense that less government translates into lower cost: larger entities have a better negotiating position in purchasing goods and services (gas, paper, various outsourced administrative services, etc). But there may be other reason why government consolidation may be beneficial. A 1980 study in Administrative Science Quarterly found that “the number of administrative units per capita is significantly and negatively related to quality of services.” In other words, fewer government entities lead to an improvement in the public’s perception of the quality of the government services being provided.

Whether or not Glendale, Burbank, and Pasadena go forward with their consolidation, the issue of government simplification may remain a hot topic at the local level for the foreseeable future. State and local government across the country are considering a variety of new measure to reduce expenses and raise revenue . Where else could simplifying the government help reduce costs? Two states where simplifying the complexity of government could result in not only an improvement in perception but actual improvements in how the government is managed are New Jersey and my home state of Rhode Island.

New Jersey has 21 counties, yet has 566 municipalities, and more than 600 school districts, some of which actually have no schools but Rhode Island, to its credit, has only four counties, but has 39 individual municipalities and 50 school districts, all of which do have at least one school (thank goodness for the previous efforts to consolidate the State’s 67 officially recognized villages into its 39 cities and towns).

Even though New Jersey is seven times as large, it is “relatively efficient” (if New Jersey were the size of Rhode Island, it would have 79 municipalities and 83 school districts). Then again, Rhode Island has one of the worst unemployment rates in the country at 12.5%, compared with New Jersey’s 9.8%. The striking numbers here are the number of governmental entities each state has. Each of these municipalities and school districts require its own administrative body, and each needs to generate revenue to pay for its operations (even if it doesn’t have a school).

Because one of the only ways local government can generate revenue is through property taxes, the situation has resulted in higher property taxes for these two states. As a result, New Jersey home owners pay the most in property taxes, Rhode Islanders pay the fifth most in property taxes. New Jersey home owners pay the highest amount of property tax as a percent of their income (and Gov. Christie may increase these taxes statewide), and Rhode Islanders pay the seventh highest amount of property tax as a percent of their income . In New Jersey, this has hurt the state as a whole when governors and state legislators, in an effort to gain votes, pass “property tax relief” bills, which passes along tax rebates to home owners, further inflating the state’s deficit. To balance the budget, Gov. Christie has encouraged local residents to reject their school board’s budget, allowing the state to reduce its obligations to the local school districts. In Rhode Island, the state assembly has already cut funding to local school districts .

While these efforts to blindly cut funding to schools may appear to be the “fiscally responsible” answer, without an accompanying plan to maintain and improve the strength of the educational system, it is not the social responsible solution. In a larger sense, both states’ efforts to manage public pension obligations present a larger and more long-term threat to their budgets (and both education reform and public pensions are an entirely more complicated bag of worms which will be addressed another day).

So, why can’t our public leaders find improvements and efficiencies through consolidation? The main threat to simplification and consolidation comes from the public leaders who run these micro-governments. All politics is local, and with these small municipalities, this rule is twice as true. Ballot efforts to consolidate governments do not have a history of success, due to the support by the residents of their local leaders. With their tiny fiefdoms to rule over, these public leaders are actually working against the public good when they refuse to take action to (or even discuss the possibility of) streamline government. Yes, it may eliminate their job, but it’s for the public good, which is why we hired them in the first place.

Monday, May 17, 2010

Thank You Foster Parents

Most people don’t know, but May is National Foster Care Month. It is a month to raise awareness and properly recognize foster care parents and organizations. I have had the privilege of spending some time working with this population and, let me tell you, it was eye-opening.

To be sure, not every foster care situation turns out well. In truth, many don’t – at least not by society’s standard. But children would not be placed in the foster care system if they enjoyed all of the privileges many of us claim. The foster care kids I worked with often knew their parents, but most certainly communicated that it would be easier if they didn’t.

I remember the first day I was hit with words that felt as if I had been punched in the gut. I was with a kid that was 12 years old, which, at the time was half of my age. He and I were talking about how his mom was getting out of court-ordered drug rehab in the coming week. I asked if he was excited to have visitation “privileges” with his mom (expecting the answer was an obvious one). I was shocked when he told me how he wished she would stay locked up forever.

Immediately, I said “you don’t believe that.” Without hesitation he said that he did. He rattled off the problems his mom caused, the revolving door between she, jail and rehab and about how her brief stints on the outside only further aggravated him and “screwed up” his visitation with his grandmother, who was the one family member he remained in contact with throughout his foster care placements. Hearing his story, I actually took his side (albeit I did not tell him) and wished his mom would just leave him alone unless she could promise she would not be out of his life for another jail term in the near future. He simply did not deserve the torture of her sporadic appearances in his life.

That night, I told my parents I loved them and wanted them to know that our differences and disagreements were not that bad. They, along with my brother, with whom I fought incessantly, had always been there for me; even if I was not there for them. They provided meals, shelter, protection, and, most importantly, unconditional love: things I took for granted, but are not universally known. This was my first sob story and it happened in my second week on the job. It certainly was not the last.

As I listened to stories like this, and far worse, I realized what a difficult world it is out there for so many kids. They do not enter their foster home in an ideal situation and they certainly don’t always make life easy on their foster parents. But through the dedication and commitment of foster parents, orphaned and abused kids might gain some stability, some nurturing, some structure and some direction. They might even, gain a loved one.

Foster parents, during National Foster Care Month and beyond, deserve society’s thanks. They provide hope and opportunity to kids that have too often lost both. They provide a future to kids that want to forget their past.

Monday, May 10, 2010

The Rules

I’m currently in the process of reading Naked Economics by Charles Wheelan. The book is a “refresher” of basic economic theory, both micro and macro, and presents the fundamental concepts that underlie economic s in simple and direct prose (for anyone that wants a nice econ refresher, I highly recommend it). Early in the book, Wheelan confronts the role of government in economics; presenting an argument that government has a role in economics but should not be involved in the market. In other words, “[g]overnment has the potential to enhance the productive capacity of the economy and make us much better off as a result.” The basic underpinning of Wheelan’s argument is this: the government exists to set the rules, and, without the rules, we wouldn’t have an economy.

The idea is this: the free market is great and we should do our best to make sure that free markets exist, but, without a democratic government (and the laws, rules, and regulations that go along with a democratic government), the cost of doing business would be too high for any rational person or business to chose to engage in the economy. Businesses would need to pay for basic security that they get for free in a democratic society. He cites a 2000 column from New York Times columnist Thomas Friedman, where Friedman argues that developing countries envy the U.S. because of its government bureaucracy.

Without the laws, rules, regulations, and uncorrupted government agencies that make up a stable western democracy, economic development is nearly impossible. These regulations provide the framework for protecting patents, ensuring that monopolies don’t price gauge us, and define property rights. Plus infrastructure investment – it sure is nice not driving on dirt roads (I’ll comment on this in greater depth in another post). As Wheelan writes, “Good government makes a market economy possible. Period. And bad government, or no government, dashes capitalism against the rocks…the reality is that nobody ever likes the umpire, but you can’t play the World Series without one.” For Wheelan, the proper role of government is to deal with externalities, those consequences of individuals acting freely in their own best interests that impact other people.

Juxtaposed against this is the wave of anti-government populism embodied by the “tea party.” These populists want less government in their life. The irony is that I would wager that they don’t want to eliminate the role of government in their life; the inherent sense of fairness and justice that permeates the rhetoric from this group leads me to believe that some government is good. When the “tea partiers” wave their “Don’t Tread on Me” flag, they’re really saying, “Don’t tread on me, unless treading on me will benefit me.” So, it’s not, “Don’t tax me.” It’s more, “I don’t want you to tax me, unless it’s going to the fire department, which will save my house from burning down after I had the unlicensed electrician do some work on my house.” The challenge is in defining the limits of good government. What negative things have an impact on you that are the result of someone “exercising their freedom”? And who decides?

Wednesday, April 28, 2010

How Should Obama Prioritize?

A few months ago, I wrote a post where I said I do not envy the president for having to make such difficult decisions. Sure, it would be great to have such an impact, but making the decisions President Obama must make in the next few months would, well, quite frankly, suck.

President Obama has been very clear that he wants jobs legislation, energy legislation, immigration reform and financial regulatory reform. And advocates for each issue want this done now, and done perfectly. But let’s face it; there are going to be a lot of disappointed people.

We saw how long healthcare took, which even though it was a very contentious issue, shows how long the legislative process can take (discounting the fact that politicians have tried to achieve universal healthcare for many decades) when strong emotions are evoked.

Yesterday Senator Lindsey Graham (R-SC) made headlines when he decided to step away from his work with Senators Kerry (D-MA) and Lieberman (I-CT) on energy legislation because Democrats have decided to try to pass immigration reform right now.

So why would President Obama and the Democrats do this? Well, Arizona Republican Governor Jan Brewer signed very stringent legislation last week that will allow police officers to question and detain illegal immigrants if they suspect them of being in the country illegally. Now, both sides of the immigration issue want to see the fight become national.

On the heels of Earth Day, and in the midst of immigration turmoil, you have other issues that are, arguably, even more important. We still need to do something about the huge job losses caused by the economic collapse of 2008. We also, according to two-thirds of Americans, need to do something about the circumstances that allowed banks to be so reckless with our economy in the first place.

These four issues are huge right now (should I mention the Supreme Court vacancy or budget process?)! Assuming you can’t do all four (which the Democrats are trying to do), which one should be the priority? The obvious answer, for the unemployed, is jobs. But then is that so obvious to the environmentalists who argue inaction now will cause global catastrophe and create an uninhabitable planet? Is that so obvious to the people that are being rounded up by police officers in Arizona or Americans that truly believe immigrants are stealing their jobs? Are we supposed to forget the serious fear we all felt when the stock market crashed and our grandparents reminded us of their childhoods during the depression? It’s not so easy, but it sure would be nice if it were.

Every president comes into office with an agenda. Both parties have to deal with circumstances beyond their control. Do you think Obama wanted to be president immediately after an economic collapse? Do you think Bush wanted to lead a post 9-11 world? Their priorities were hijacked and they had to adapt. We complain government is in our lives too much, but we expect Obama to solve our economic woes and expected Bush to keep us safe.

Let us recognize the realities of America and its infinite competing interests. We don’t need perfect policy, just like we don’t need a perfect union. We need better policy, which will allow us to create a more perfect union. That is what American democracy is about. It is time we start living up to the principles of our founding fathers.

Tuesday, April 20, 2010

Cooking Your Way to Public Sector Change

In general, we won’t discuss a lot of television in this blog space. However, I feel the need to take a small departure from this informal rule to discuss a recent television program that, for me, exemplifies the difficult and complex challenges that public leaders face. Over the last few weeks, ABC has been showing Jamie Oliver’s Food Revolution, a reality-TV program about British Chef Jamie Oliver’s effort to change the way the residents of Huntington, West Virginia eat. His goal is to shift the town away from processed foods and teach them how to cook nutritious meals using real ingredients at a low cost. Many of the recipes he cooks on the show can be found in his cookbook (which I own and absolutely love).

Let me tell you that this television show is an eye opener. Just watching the show makes my wife and I want to go out for a run, no matter how late at night. The primary goal of Chef Oliver’s “Revolution” is to change the food that is being fed to the children in our public schools. He does this by showing the people of Huntington the negative health implications of the processed food that they are eating (including one particular experiment where he shows children how chicken nuggets are made even though chicken nuggets in the U.S. are not prepared this way) and emphasizing how easy the people of the city can switch to cooking with fresh ingredients.

With the help of Ryan Seacrest Productions, the show is, admittedly, a typical reality television show, with villains and foils, and the show would be remiss without some typical controversy, particularly about whether the changes implemented by Chef Oliver are truly lasting .

However, the show switched from a typical reality television show to a show that demonstrates the implications of our public during one particular exchange between Jamie and Rhonda McCoy. Ms McCoy, the Director of Food Services for Huntington Schools, forced Chef Oliver to serve French fries with a vegetable noodle dish because he had an insufficient number of vegetables in his lunch that day and, according to the federal guidelines, potatoes are considered a vegetable.

Setting aside the debate of whether a potato is a vegetable or a supercarb, I scoured the USDA school lunch program regulations to, hopefully, refute this position. But the vaguely written regulations that school districts have to implement are a good example of how public policies have created negative externalities in our school lunch system and how the public leaders charged with implementing those policies have their hands tied. It’s a situation where the schools don’t give the children butter knives to eat with, and we are forced to feed them finger foods (vegetables, potatoes aside, aren’t good finger foods). It is so concerning that some retired military officers consider our current school lunches a threat to national security.

But, the policies also reinforce the challenges with school funding. The crux of the problem is that the USDA has created the regulations for the school lunch program, but Congressional funding for the school lunch program fluctuates, forcing the local school districts to find funding sources to cover the funding gap between what is provided federally and what is provided locally. This is usually results in the use of mass produced processed foods and the sale of “competitive foods” such as soda and candy to supplement their funding.

These rules without the funding (or inverse funding) from Congress is exactly why a Big Mac costs less than a salad. It reinforces the research that has shown that industrial processed foods can contribute to illness and that foods with higher levels of fat and sugar could be as addictive as heroin or cocaine.

By, highlighting the negative, the show has helped increase the momentum for changing the system. This is being done in a few ways. First, the attention the show has given to the current state of school lunch programs, in conjunction with the pet projects of the First Lady, has helped push for a change of the policy with the Child Nutrition Act, which is currently making its way through Congress. While not the be all and end all, the bill would provide the first substantial funding for the School Lunch Program in 40 years, while giving the Department of Agriculture more flexibility in setting policy.

Second, in the long run, hopefully, changing the school lunches will also contributed to a decrease in the cost of health care. Finally, whether they play a hero or a heel on the show, the Food Revolution is also starting a dialog about the type of leadership it takes to change eating habits. As one writer highlights, the key elements for getting decent food into schools are:
• A principal who cares about what kids eat
• Teachers who care about what kids eat
• Parents who care about what kids eat
• Food service workers who not only care about what the kids eat but also know their names

Now, if only Alice and her compatriots would come out from behind the lunch counter and get to know the kids in Huntington…

Tuesday, April 13, 2010

What's up with our National Debt?

I am fiscally responsible. And I truly believe that if I were an elected official I would follow my principles when allocating the budget. Many, if not all, elected officials believe they will do the same, at least before they are elected. So what changes when they are given America’s purse strings?

I am sure you have heard members of both parties talk about taking a stand and not running up massive government debt that future generations will have to pay. Additionally, they often take aim at political opponents and point out fiscal recklessness. Other than Dick Cheney (who pointed out that “Reagan proved deficits don’t matter”), there seems to be consensus among politicians that deficits matter and make us weaker. Yet, year after year we see the budget fall further and further in the red.

The truth – sorry Mr. Cheney – is most politicians are right that deficits and national debt DO matter and they WILL be passed down to future generations, who will have to make huge and unfair sacrifices to pay for our mistakes. The solution, unfortunately, is extremely difficult and guaranteed to be unpopular – which matters to politicians who have to rely on popularity to keep their jobs.

According to Senator Voinovich’s Web site, who was my childhood Governor, the national debt is 12.5 trillion dollars and growing. So with such a ridiculously high debt, why don’t our elected officials simply spend within our means?

The answer is that it is even less popular to actually do something about the debt then to be blamed for being fiscally reckless. If you were an elected official, how would you decrease this monstrous debt?

First, it is important to note that less than 40 percent of our budget can be cut, without difficult changes in the law. The part of the budget that can be axed is called discretionary spending. Of these expenses half is spent on the Department of Defense budget, which is nearly $700 billion per year.

Would you cut earmarks? Sweet, you just stopped money from going straight to your state for that new hospital, research center, highway or park. And even if you are okay with that, you are only saving $20 billion a year – barely a drop in the bucket with more than $12 trillion debt.

I have it! Let’s stop helping states avoid cutting teachers, police, firefighters and judges! That would be perfect! Not quite. Even if we did, it would barely dent our debt but leave future generations even worse off than if we just saddled them with insurmountable debt.

We, the taxpayers, always expect government to do more with less; that is why we want tax cuts and service increases. But we must be pragmatic with the federal budget and demand our elected officials do the same. We irresponsibly demand tax cuts to stimulate the economy (by the way, how did those $1.8 trillion tax cuts in 2001 and 2003 work for the financial crisis of 2008?), and then are outraged that our communities are falling apart, federal scholarships are not increasing at the rate of tuition and pot holes become the norm. We want government to solve our problems – and polls show this to be true – yet expect this to happen at no cost.

We, the voters, either need to allow (and reward) politicians to make tough decisions or quit pretending that we are appalled they are doing EXACTLY what we demand.