Local Government: "If You Can Keep It."

By Carl H. Neu, Jr.
President of Neu and Company and Director of the Center for the Future of Local Governance

In 1787, Benjamin Franklin responded to a person who asked what sort of government will our nation have, "A Republic, if you can keep it." Franklin's maxim envisioned a wholly new nation imbued with the principles espoused in the Declaration of Independence and the wisdom embedded in the United States Constitution. RE: America Already is Europe, Arthur C. Brooks, Wall Street Journal, July 9, 2012.

In 2012, Franklin's skeptical response now has metamorphosed to "Local Government, if you can keep it." The issue confronting us is will we be able to keep our local governments viable and capable of representing people within their communities, Or, will they be reduced to mere illusions that denude the founders' belief "That government closest to the people governs best!"

The nation's founders and Alexis de Tocqueville, Democracy in America, saw the birth of the American Republic as the refreshing, exciting and liberating alternative to the outworn tyrannical rule of autocratic governments. Finally, a new form of government emerged in which the people had absolute sovereignty and where freedom and democracy would flourish because the federal government would be checked by explicitly enumerated and limited powers.

In the early 60's, America began a journey on the pathway of growing entitlements, inflation, and deficit spending under the pretext it would lead to expanded economic growth, robust employment and smooth business cycles. Now we, and the people of Europe, see the destiny awaiting those who travel this pathway: pain, suffering, national austerity and possibly insolvency. The final blow: loss of faith in government resulting from bad policy and economic decisions made over the last five decades. We also see another inevitable conclusion: state and local governments, in the end, are the ones who ultimately will suffer most.

State and local governments are amidst two powerful jaws of a vice. One jaw is forged by the ever expanding and intrusive hegemony of the federal government into nearly every aspect of our society, its institutions, the sovereignty of states and local governments, and ultimately the very freedoms of the American people. This aggressive and growingly authoritarian hegemony suffocates our economy's growth prospects and any realistic hope that current levels of unemployment and underemployment will soon, if ever, be reversed. The policies perpetuating the fiscal pressures facing the nation combined with the very enormity of the resulting deficits, economic and political consequences have negated the historical efficacy of Keynesian approaches to stimulate and resuscitate depressed economies. The failed efforts currently being undertaken by the U.S and European nations have shown our economic and political challenges have become immune to previously effective remedies. As Robert J. Samuelson, son of the Nobel prize winning Keynesian economist Paul Samuelson, observes ironically in his July 8th Wall Street Journal article Why U.S. economic policy is paralyzed; "Yesterday's Keynesians [have] undercut today's Keynesians."

Now, economic prospects are caught between the fear of prolonged weak economic and job growth, and too much debt at the national, state and local levels. The federal debt for example debt is made up of the "acknowledged" debt which is reported daily. That's above 16 trillion dollars and growing. But add the other mostly ignored debt: the enormity of unfunded mandates and obligations and the grand total is approximately five times the entire U.S. gross domestic product, GDP. This 80 trillion dollar ($80,000,000,000,000) "debt bomb" when combined with state and local government debts and obligations is where the greatest danger to state and local government lies. As this jaw of the vice closes, massive and frightening prospects loom for state and local governments; e.g. Medicaid expansions, unfunded federally imposed mandates, reductions in transfer and other program funds coupled with major constraints and reductions in local government property and sales tax based funding sources. These are the present consequences that emerged from decades of bad fiscal policy decisions and commitments. Yes, we have to a great extent "inherited the sins of our fathers [and mothers]" many of whom still are among us.

The second jaw of the "closing vice" was forged mainly by state and local governments. This is demonstrated shockingly by the headline STOCKTON, CALIFORNIA Files for Bankruptcy Protection. The July 4th article How Stockton went broke: A 15-year spending binge is available at Reuters.com. On July 12, San Bernardino, California filed for bankruptcy. Michael Auslin states on July 11 in National Review Online that municipal bankruptcies may become the "New Normal." State and local governments face diminishing revenues while demands and obligations soar. The pain is inflicted in part by the flagging economy. But most of the pain is self-inflicted from an unwise dependency on growth projections in boom times, while neglecting to recognize booms tend to be followed by busts. But the real crushing power of the "second jaw" stems from irrational and unsustainable public employee pension and health care obligations that now just can't be met without drastic reductions in key services, bankruptcy protection and further taxation. A recent informal poll on Fox News, July 11, indicated only 3% of taxpayers were willing to submit themselves to the latter to save their city if it faced the prospect of bankruptcy.

Elected officials currently in state and local governments who aspire to become elected officials in the elections of 2012 and 2013 now face a Call to Stewardship required to forestall the total closure of the two jaws of the vice with the inevitable loss of state and local government authority and sovereignty. Ergo - the modern stewardship challenge to preserve the sovereignty of state and local governments operating in partnership with, rather than subjugation to, the federal government. Jefferson considered the states, and especially the local governments, to be the civic laboratories and very bedrock of American democracy.

What To Do?

1. State and local government leaders must assert themselves to push back against the federal government's hegemonic ambitions, policies and programs.

   The unfair burdens placed upon states by the expansion of federal programs, mandates and spending are, in essence, "downward taxation" on local government constituents and a fiscal desiccant that absorbs and denies state and local economies the vitality essential to their survival.

2. State and local governments have to get their own houses in order - streamlined and redesigned to sustain the "New Normal" of scarcer revenues and growing demands, especially from an aging population.

   Some state governments and governors are taking critical and resolute steps to ensure their future fiscal and political viability. Notable among them are Arizona, Florida, Indiana, Iowa, Ohio, Oregon, New Jersey, North Carolina, Texas, Utah, Virginia - even little Rhode Island. They are addressing responsibly the mandates and public pension and healthcare issue confronting them while also resizing to realistic service delivery commitments. They are working to increase revenues through innovation and growth initiatives, not tax increases. In sharp contrast, some states, most notably California and Illinois, seem enthralled with accelerating the pace of their fiscal death marches.

   Many local governments are demonstrating similar leadership maturity and responsibility. A great example: Kent, Washington. Mayor Suzette Cook in her 2012 State of the City Address lauds proudly the city's commitment to a sustainable funding model as the city recognizes and is acting upon the need to find stable footing in its new world market. The city continues to adapt to a new economic reality, one with reduced revenues. She further acknowledges the hard choices the city has had to make as a result of these realities. The mayor's and city council's commitment to being responsible leaders, stewards and public officials is laudable and exemplary.

3. Local governments, working together and through their respective state associations, are initiating major efforts to streamline their service delivery models.

   There are many examples, but three stand out, at least to me.

   1. Redesign Minnesota

      This massive effort, initiated by the Minnesota Association of Counties, has become a statewide collaborative effort to:

      • Devise the means to deliver efficient government services to citizens within a future of significantly reduced resources.
      • Enhance governance, transparency and flexibility within and between local and state governments.
      • Demonstrate that local government officials can provide leadership to improve the long term outlook for Minnesota.

      The effort is the transformational and collaborative REDESIGN of how governments work together and provide service delivery to their citizens.

      To see and appreciate the totality of this effort - go to www.mncounties.org and www.redesigningMN.org. Another masterful video is "The New Normal" by David Gillette. It is best to access this by going to www.youtube.com. Search for "The New Normal" by David Gillette. A must view.

   2. Keep It Local Florida

      This joint partnership of the Florida Association of Counties, Florida League of Cities, and the Florida School Board Association is dedicated to the principle "Government closest to the people governs best" and the empowerment of Florida's towns, counties, citizens and taxpayers to protect local grass roots decision making in developing solutions to Florida's most pressing problems.

   3. REAL Colorado

      This initiative began in October, 2011 with the bold and innovative effort made by 10 of Colorado's 64 counties seeking the reform of the State's byzantine Human Services System. It has evolved into a statewide effort to improve government services through the support of Colorado Counties Inc. and the implied endorsement of Governor Hickenlooper in his Executive Order, D2011-005, Establishing a Policy to Enhance the Relationship between State and Local Government. REAL Colorado:

      

      

      

4. Reflect upon and heed the lessons from Stockton's mistakes:

   The article How Stockton Went Broke is a litany of failed and irresponsible leadership and stewardship.

   The biggest culprits: rosy scenarios and unsustainable fiscal commitments embedded in the addictive lure of "entitlements" which now are the "Pac-man" consuming local and state government resources and threatening their very sustainability. No responsible steward should ever make a commitment that isn't self-funding and sustainable. Defined benefit pension and healthcare plans are open ended fiscal snares. Defined contribution plans are specific and leave no tentacles that ensnare future resources.

All these efforts, plus many others underway in American communities, demonstrate as Jefferson observed:

Local governments are the civic laboratories of American democracy.

They also demonstrate the essential role of state and local governments in preserving the grass-roots viability; innovation and sustainability of "we the people" who refuse to surrender our sovereignty to the expansion of federal government hegemony, or the perpetuation of past mistakes and misguided policies.

In the elections of 2012 and 2013, those who hold or are newly elected to state and local government offices have the duty of stewardship that accepts, preserves and enhances the precious gift bestowed to us by the nation's founders. They intended to have the gift passed on to future generations improved, polished and made evermore valuable and dear to those receiving it. No responsible steward would allow the gift to become diminished, tarnished and devalued. The outcome would disgrace the tenure of those who allowed that to happen and imperil the bedrock of democracy.

Our task is to keep the Republic and the sovereignty and sustainability of our state and local governments which are closest to the people and govern best.