Last week, we looked at factors that influence local leader’s ability to put their communities on a more sustainable fiscal path. Today, we will look at how changing the public engagement process is essential to achieving better long-term fiscal outcomes.
Citizen Demands and Changing Economic Circumstances
The U.S. has a strong tradition of community input into local government decisions. Immediately after the American Revolution, local offices that were once appointed by colonial governors became elected positions. The New England Town Hall model practiced direct democracy even earlier. Historically, citizens participated in local politics by voting, campaigning or running for office, attending hearings and keeping up through the local press.
The current mix of municipal services came about through a long-term process of increasing citizen demands for government as the economy grew and changed. This took many decades. As the economy grew and became more complex with industrialization, communities across the country sought new city services: professional police and fire departments, better streets, water supplies and garbage disposal. City budgets grew with their local economies and the changing ideas about the appropriate role of government.
The scope of municipal services has changed very little in decades. Yet, economic and fiscal conditions are very different than in the era of growing local government. Today, many cities face ongoing financial stress. The reasons for this stress come on the spending and revenue sides of the equation. There are growing salary, benefit and retirement costs and a seemingly never-ending list of technology and equipment upgrades. At the same time, the tax base has stagnated, even in communities with growing economies. Growth in services, declines in manufacturing, internet sales and other factors have reduced the share of the economy subject to local taxation. In the face of these new constraints, demand for city services have not changed. Any hope of improving local fiscal sustainability must begin with new conversations with and among citizens.
Reexamining Demand and Costs for City Services
Many cities appear trapped in an incremental budgeting process. They practice an ongoing series of short-term adjustments to deal with what are long-term, structural challenges. The results gradually weaken city services, harm morale and recruitment and increasing citizen frustration. Incremental budgeting is a prudent strategy in good financial times. It slows spending growth. It also works during temporary downturns by managing painful cuts until funding returns to a growth trend. It is not a great strategy when communities face systematic financial stress. Incremental budgeting becomes kicking the can down as financial strain builds.
The solution is a deliberate engagement with the public that goes beyond the annual budget hearing. The challenge is to have conversations on priorities that help local leaders make tough decisions with the full support of their constituents and stakeholders. Local leaders need to begin a new community engagement process if they want to achieve lasting reforms. Historically, public participation in municipal finances was annual outreach for input on the proposed budget. That budget seldom represents a major departure from the previous budget. Town hall participation is usually very low. Programs facing cuts rally friend’s groups or neighborhood associations, but there is little real dialogue and the point of contention is simply a change in funding levels. There is no discussion of priorities in the context of long-term change. There is no really useful feedback to local leaders who what to build a more sustainable city.
Information for Change
The economy is always changing. Recent trends have been hard on local governments. Nationally, job and income growth is becoming more and more concentrated in fewer and fewer localities. Migration, rural to urban, and from north to south weakens the tax base in the cities losing businesses and residents. The destination cities face growing service demands and the risk of budget hangover down the road. State and national government finances are in little better shape so not much help can be expected from them. Cities need to develop a clear picture of their economic foundation and how that is changing. Local governments should be rethinking their services and operations with these long-term changes in mind.
Local leaders also need to develop good measures of the costs and benefits of municipal services. This is the only way to determine what a sustainable level of services might look like. Municipal services can be very technical, but this information needs to be collected and packaged in a transparent way so it can support a serious public discussion. Communities need this information to set priorities and identify when they need to look for alternative, lower-cost ways of achieving their goals.
Armed with this strategic economic and operational information, local leaders can start having conversations with their citizens. This type of engagement can change public perceptions of local government. The current approach wears down citizens and city staff and nurtures nothing but a mindset of diminished expectations. This can be demoralizing and wasteful for a community. When presenting a clear description of the long-term costs and benefits of city services, local leaders help citizens explore and articulate what is most important. The community can begin to feel empowered and in partnership with their government.
Next week, we will take a deeper dive into community engagement and look at specific practices to build citizen participation and commitment. Part of the answer is helping citizens reimagine their role in creating a more fiscally sustainable place to live. In the meantime, let us know how we can help your community begin the journey to fiscal sustainability.