Few Cities Taking the Hard Look

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You might think that the devastating impact the recession is having on municipal budgets would cause city officials around the country to take a hard look at how their governments function and which of their services are truly essential. But you'd be wrong.

For the last six months, we at The Pew Charitable Trusts' Philadelphia Research Initiative have been examining Philadelphia and 12 other major cities as they've gone about the prolonged and painful process of balancing their budgets in these challenging times. We've compiled two reports on their decisions and their struggles. And we've seen little public evidence that any of them are engaging in a fundamental review of operations.

A few mayors, like Dave Bing in Detroit, have talked about the need to consolidate departments, establish priorities, eliminate some services, and privatize others. Even for him, though, it's just talk at this point. He's busy trying to make sure his troubled city can pay its bills from one month to the next.

Around the country, many city governments seem to be operating in the belief that their budget woes won't last for long. If such optimism is well-placed and the economy improves substantially in the months ahead, big cities may be able to return to something resembling business as usual. But the early indications are not promising.

New York, Los Angeles, and Chicago already are projecting huge budget shortfalls for their next fiscal years. This year, Baltimore, Boston, and Phoenix have been forced by falling revenue and cutbacks in state aid to revisit budgets that already had been put to bed. Philadelphia, it turns out, is not the only place where budget-balancing has become a year-round activity.

The hope that this era of tough choices will be short-lived helps explain the widespread appearance of a new phenomenon in many local governments - the unpaid furlough. In city after city, workers are being made to take furlough days, in some cases 10 or more per year, as a way to balance the books.

Philadelphia has instituted furlough days for some nonunionized employees. Whether the city will impose furloughs on anyone else depends on the new union contracts, which are to be worked out at the negotiating table for nonuniformed workers and through arbitration for police officers and firefighters.

Though less draconian than layoffs, furloughs amount to temporary pay cuts. They also can have an impact on the level of services a city provides; in some places, city governments now have furlough days on which all government offices close for business.

But the attraction of the concept hinges on the idea that what's happening to city budgets now is a deviation from the norm and not the new norm. That's why a number of mayors across the country, after initially threatening unionized workers with widespread layoffs, have settled for furloughs instead. It's why some union leaders have reluctantly come to view them as less objectionable than the alternatives.

"We're just between a rock and a hard place," Brenda Clayburn, head of a municipal union in Baltimore, recently told the Baltimore Sun, in reference to a proposed furlough program there. "If we say 'no,' people get laid off."

For officials in many big cities, the unpleasant task of matching revenue and expenses this year has been challenge enough, and they're reluctant to undertake a major restructuring unless absolutely necessary. A few are beginning to think that they are reaching that point.

Meredith Weenick, associate director of administration and finance for the City of Boston, expressed skepticism that revenue from an economic rebound will solve the city's financial problems. "We have to take a hard look at our service delivery," she said, to ensure that Boston can pay its own way in the future and not become overly reliant on uncertain state aid.

In this regard, Philadelphia and Mayor Nutter do have one factor working in their favor. This year, as every year, the city had to submit a five-year budget plan to the Pennsylvania Intergovernmental Cooperation Authority, the state watchdog agency. The requirement prevented the city from settling for the kind of one-year fix many other cities fashioned.

To make the five-year numbers work, Philadelphia cut back on some services and raised taxes, one of only four of the cities we studied that imposed a tax increase. The five-year increase in the sales tax here, combined with a delay in the city's contributions to its pension funds, should allow the city to keep its current governmental structure largely intact.

That may create the space to engage in more long-term thinking. Or it may relieve the pressure to do so.

Larry Eichel is project director of the Philadelphia Research Initiative at The Pew Charitable Trusts.