THE AVENUE AUGUST 24, 2010
As we’ve pointed out, local governments across the country are facing severe budget gaps as the fiscal effects of declining house prices and tightfisted consumers wreak havoc on property and sales tax revenues.
With federal stimulus dollars beginning to run their course, many cities are turning to what Crosscut’s David Brewster in Seattle calls “motherhood” ballot measures to fund popular or necessary expenditures while leaving less sexy line items in the general budget. So libraries, parks, and roads may go to the voters for approval, while information technology and the motor pool are paid for with existing tax revenues.
Writ large, the same dynamic played out with the recent state teacher aid just passed by Congress. Assuredly, the clamor would have been substantially diminished had aid to state DMVs been on the Hill’s legislative calendar.
During tough times, this a la carte government can relieve budget pressures and ameliorate interest group battles over a shrinking pie. But it also reduces accountability and, if poorly thought out, hampers iterative improvement of government operations—given that dedicated revenue might reduce the incentives for improving performance. Rainy day budgeting for emergencies is also potentially less of a priority.
Another emerging budget technique is the selling of government assets to private sector firms in return for big lump sums for general budgets and pension obligations. As documented by the Wall Street Journal, this privitization, or "rescue investing,” has gained momentum since 2008 when Chicago sold its parking spaces for over $1 billion to a Morgan Stanley led group of investors.
This too can create tradeoffs by substituting a one-shot budget fix for a steady revenue stream. Also, who do constituents complain to about public services run by the private sector?
We should expect more of the same in the coming years absent robust economic growth. Let’s hope though that nobody follows Philly’s lead in strong-arming blogspot bloggers for a $300 business license.