How To Save The City Part I: Evaluating Our Economic Prospects

Like most of you, I’m still trying to get my head around the city’s financial crisis and the budget reductions and policy changes announced by Mayor Nutter.

There is a lot I don’t quite understand and a lot I don’t know. I have far more questions than answers. And, as a result, I’m not convinced that the crisis is as grave and immediate as the Nutter administration claims or that it is taking the best path to dealing with that crisis.

So in this, and some subsequent posts which I’ll add as comments to this one, I’m going to talk about some of my concerns and doubts, not because I suspicious of either the competence or the good will of the administration but because that’s what democracy demands—a give and take between government and citizens that, one hopes, leads first to a better understanding our circumstances and options and second to better public policy.

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Philadelphia—like, we should remember, every other city and state in this country—is in a financial crisis. It may be a little worse here because of our previous failures to make our city government more efficient and save for a rainy day (a point Gaetano has made more than once). But if we want to think seriously about where we are, we have to acknowledge to begin with that we are in the same boat as many other cities.

We also need to understand that we are in uncharted waters. Mayor Nutter presented budget plans against the background of a major financial crisis that has lead to an unrushing recession with its attendant collapse in the city’s tax revenues.

Looking forward at the recession, the administration is projecting a $100 million deficit in the current fiscal year ending in June and a $1 billion in the current five year plan.

This sounds awful, and it is. But in a $4 billion a year budget, a $100 million deficit comes to only 2.5%. And $1 billion over a five year plan is less than 5%. When about half of the budget is fairly fixed, that is a large deficit. But it is not the end of the world.

It is not clear what assumptions about the economy, either here or in Philadelphia, are being used to generate these figures.

And, I have to wonder whether, given the circumstances anyone can really make a serious projection of how long this economic crisis will continue, what kind of relief might be coming from the federal government under President Obama, and thus what Philadelphia’s finances will look like six months, let alone five years from now.

Some recessions are v-shaped. Business activity and tax revenue collapse quickly and then just as quickly recover. Some are a long time brewing and take a long time to clean up. Given that enormity and speed of the financial catastrophe that hit us in the last few months—and the dramatic policy response to it—this recession might be of the first type, not the second.

It is not 1982, when the Fed believed we needed a prolonged recession to wring out inflation. Core inflation was never that high and the inflation caused by the run-up in oil prices in oil prices has already subsided. And it is not the 1990s in Japan, when a flailing government took years to recognize that monetary policy was useless and only a massive fiscal stimulus could boost the country out of the liquidity trap that kept the Japanese economy stagnating.

Important measures have already been put into place to deal with the financial crisis. We have already committed 750 million dollars to free up financial markets. We are already running a deficit and there is a broad consensus that we need it to grow much larger to create a demand induced recovery. Plans are afoot to pass a second fiscal stimulus package this year and perhaps another one in the first month of the Obama Presidency. Democrats are eager to use this moment to expand spending on many unmet public needs, to extend unemployment benefits, and most importantly for our city, to stop the rapid contraction of state and local spending which would, in turn, further depress the economy.

So not only is there little reason to think that the fiscal stimulus will be too low, there is good reason to think that part of the new fiscal stimulus we need help sustain state and local government.

With all this in mind, how can we reasonably estimate the dimensions of this financial crisis? How can we know what tax revenues are going to look like in three or six months? How can we know what new federal funding we will have in three or six months?

The answer, I believe is that we can’t really know. We have to make some estimates here in Philadelphia and see what other cities and states are projecting. And while it often makes sense to prepare for the worst, it does not make sense to decimate (or in the case of the library reduce by 20%) important city services when in a few months time, either because of an economic recovery or new federal aid, the fiscal picture of the city may be looking very different.

And, more importantly, while we clearly need to reduce some spending to meet the crisis, it makes absolutely no sense to take irreversible steps now, when our circumstances may change soon.

So, for example, while I’m loathe to see any city-wide reduction in library hours branch or, even worse, a temporary closing of branch libraries, I see absolutely no justification for deciding today that 11 branches of the library should close and their buildings be shut down and sold.

Of course, maybe the Nutter administration’s budget proposals were actually based on more optimistic than pessimistic estimates of tax revenues of the next six months. I suppose that’s possible.

But, we really don’t know, do we? For the Nutter administration has not revealed, at least to the public, either its assumptions about the national and Philadelphia economy over the next years or its assumptions about tax revenues. Perhaps it told City Council in the closed door meetings it has been having. So there is absolutely no way for any of us to know to evaluate the need for some of these extreme cuts.

And that brings me to my next post, about transparency in budgeting.

Part II: An Inclusive, Transparent Budget Process?

What would an inclusive, transparent budget process look like?
I once took part in such a process and maybe that experience can shed some light on what we might do here in Philadelphia.

It started I the summer of 1975. I was a rising senior at Wesleyan University, and I had just been elected to the Educational Policy Committee, a administration-faculty-student-committee that reported to the faculty.

Wesleyan was in a serious financial crisis and everyone knew that substantial changes in almost every area—from tuition to financial aid to the size of the student body to athletic teams to academic programs—would be necessary to resolve it. Various proposals had been put forward by the administration and a previous student-faculty committee and had been heavily criticized. And the mood of the campus was raw and angry as everyone was concerned about protecting their own turf.

At that point the President of Wesleyan, Colin Campbell, did something incredibly rare among leaders. He opened up the University planning process to the whole community.

His administration released a large report—called the Red Book for color of the paper it was bound in—that set out in great detail the various options the administration was considering in every one of those areas.

Not only that—the university provided stipends and housing for a group of students who met over the summer to evaluate the Red Book options and prepare what became known as the Student Priorities Project report. I was one of those students.

And, in compiling our report, we weren’t limited to just the information in the Red Book. We met with every top administrator in the college and many faculty members to ask questions and gain more information.

Our meetings were open and a parade of students floated through, some staying for just a day, others joining our commmittee, all of them raising questions and offering suggestions.

We prodded and examined the assumptions of the Red Book and found many that made sense and some that didn’t. We pointed out that some of the administrative expected savings could not be met and identified new areas for savings they had overlooked.

We presented a draft of our report to the administration and had a long talk with President Campbell and others about our conclusions. Then we made revisions and released our report in the fall of 1975, where it was subject to at least one large campus discussion and many smaller ones among both students and faculty members.

And when the administration developed the next documents—the Orange Book which narrowed down the options for further consideration and the Green Book which had its final recommendations for the EPC and the faculty—our report and the discussions subsequent to it had clearly made a difference in a few major ideas and lots of smaller ones.

But even more importantly, the mood of the campus had dramatically changed. The widespread fear that the administration had a number of hidden agendas had faded. There was broad acceptance of the need for radical and in some cases unwelcome changes in the University. And the atmosphere of distrust and anger had been largely replaced by a cooperative search for the good of the University. There was, of course, kibitzing, and kvetching, and self-serving arguments in our continued discussions. But a spirit had been created that minimized them as every faction on the campus came together to deal with the crisis.

And President Campbell taught those of us who were interested in politics an incredibly important lesson: leaders can gain power by sharing it with others. For by being honest, open, and transparent with the University community, Mr. Campbell gained two things:

First he learned much more about the various options he was considering and what was important to the various constituencies on campus.

And second, he gained the support he needed not just to push forward difficult plans but, far more importantly, to do it while holding the University together. And the trust he gained that enabled him in the subsequent years, and with similar methods, to institute important academic reforms.

That’s what a real inclusive, transparent budget process looks like and why it can be so powerful.

I’m not going to spend any time here comparing it to the budget process in Philadelphia or explaining how we could do something like that here. The difference between what we do in this city and something closer to the idea of inclusion and transparency is obvious. And while it is not as obvious how we might do something like this in the city, think about for fifteen minutes and you will come up with ten good ideas about what we could that are probably as good as I could develop.

But I will say that, in electing Michael Nutter, this was the kind of budget process many of us thought we would soon have in Philadelphia.

In fact, soon after Mayor Nutters was elected, plans were put in place by the Inquirer’s Civic Engagement program and the Pennsylvania Economy League to create a budget planning exercise that would begin to engage citizens in the kind of planning process I’ve described. My understanding is that this plan was “temporarily” shelved at the request of the new administration.

So far, it is still on the shelf.

I'm sure that Philly's budget process is exponentially

more complicated than Wesleyan's - but it certainly would be improved, and we'd certainly all benefit, from it being opened up for more civic engagement. I am continuously amazed at how managers of institutions can fail to have a common sense understanding that there is an obvious and positive relationship between the power constituents are given in decision-making processes and constituents' investment/acceptance/support in the outcomes (not to mention the fairness/quality of the end product).

Has there been any evidence that Nutter's administration has been more open in the budgeting process than previous administrations? Has there been any evidence that it has been more inclusive?

It seems that baring media from the "briefings" might even suggest the opposite. And were there any reasons given for "shelving" those projects directed at increasing civic engagement and input?

If the answers to those questions aren't positive, why aren't Nutter's supporters raising hell?

Also, anecdotally

I once taught in a brand new high school in New Hampshire that started out with a committee comprised of parents, teachers, administrators, community members, and students that was empowered to make major decisions, including many budgetary decisions.

Working on that committee was very influential to my outlook on education. First, watching the students on that committee was inspirational. Watching them get knee-deep in the processes of weighing information from different perspectives as they solved real and very complicated problems was watching educational processes at their highest level. I have no doubt that the students involved made gains from working on that committee that were at least as significant in terms of educational outcomes as any they made from their academic classes. But also interesting - and more relevant to Philly's budget process, the adults on the committee learned much more about how students were affected by the types of decisions typically made without student input. All the members of the committee learned a great deal about the processes of equitable decision-making.

Unfortunately, and not surprisingly, the school retrenched from its early, radical vision, and the power invested in students by that committee was one of the first causalities of that retrenchment. But I get a kick out of remembering how, in general, I thought that most of the students on that committee had far better skills for rational decision-making than most of the adults.

There is a school called the Sudbury Valley School were students at all levels, including early elementary grades, are empowered in major decision-making processes such as the hiring and firing of faculty. It would be interesting to see an outcomes evaluation done of the quality of the decisions made with 2nd grader input compared to those made in other schools where all the decisions are made by adults. But I have no doubt that budgetary decisions made in Philly would be have much better outcomes if input from citizens was incorporated more directly.

Participatory Budgeting in Brazil, a model for Philly

Porto Alegre, Brazil has been a model of participatory budgeting for more than a decade. They have shown that it is possible to engage large sections of the populations in setting budget priorities and that the results are a more engaged, active, and educated citizenship. This is a model of what Philadelphia could be doing in our budget crisis. If it works is a larger and poorer city, it can work here.

Are there any attempts to impliment this type of process here?

Do you have some kind of link ebrax?

And, for what it's worth, I guess this is a (minor) start:

Here's your chance to ask the Mayor about the budget cuts. On the next It's Our City TV show that airs November 21 at 10 p.m. we'll interview Mayor Nutter. Email us at city@whyy.org before midnight on November 14th to have your question considered.

more on paricipatory budgeting, call for an open budget process

Here's a link to a site on participatory budgeting
http://www.participatorybudgeting.org/

Further research reveals that, more recently, it has been under attack in Brazil. This is probably more a result of centrist turn of the Workers Party there in the last few years. None the less, I still think it provides an interesting model for us. I would suggest that all of us concerned with these budget cuts, (pools, libraries, fire engines, and the rest) together call for an open community process on how to deal with the city's financial crisis. I think there could be potential for a powerful coalition here. Let's remind Mayor Nutter that he ran on a platform of transparency in government. What do others think

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