Cities and counties were challenged during the last Great Recession to maintain fiscal sustainability, forcing some local jurisdictions to declare bankruptcy. At the same time, some jurisdictions have demonstrated resilience in maintaining fiscal health during major economic downturns. These stories of failure and success provide invaluable lessons for local government officials who want a roadmap for promoting fiscal sustainability. Based on 12 case studies of local jurisdictions in Southern California conducted in the past three years, we suggest the following.
- Effective Leaders Prepare for the Future and Possible Economic Downturns--After the passage of Proposition 13, LA County officials changed their decision-making culture to include only longer-term, identifiable resources in their general fund budget; and to develop strategies and partnerships to meet perceived needs.
- Fiscal Fluency Is an Essential Leadership Expertise --Brea’s city manager initiated a “bottom up” strategic planning process in 2008 asking employees from all levels to attend a series of meetings on budget solutions. The participant’s came away with increased knowledge of how the budget effects each department and were willing to consider significant cuts in their own departments.
- Structure and Collaboration Matter in Sustainable Decision--Making sustainable fiscal decisions does not happen by accident. Elected officials and senior appointed staffs do not need to have identical interests, but their willingness to work with each other is a critical pre-condition for success.
- Partnerships Advance Fiscal Sustainability --Leadership and encouragement from policy officials are essential; legal authority and instruments are needed, and most importantly staff, who are willing to partner is needed to make it work. Losing 85% of the City of Pasadena’s affordable housing budget in one year the director relied on partnerships with nonprofits to provide case managers to ensure service delivery was not compromised.
- Strategy Matters --When developing self-enforcing fiscal organizational practices and culture in combination with institutional rules, strategy is imperative.
- Fiscal Sustainability Rules Extend Beyond the Budgetary Process--The right institutional design can create the space for transparency and accountability within the government and with the community. To be effective, the new rules need to help build trust between the board/council and the appointed executive and that between the local government and the voters.
The overall lesson is that fiscal sustainability is not just an internal budgetary control issue; it is ultimately a collective action problem involving diverse stakeholders. Structures and strategies that facilitate transparency, coordinated efforts, accountability, and conflict resolution among diverse interests are key to maintaining fiscal sustainability. We thank the John Randolph Haynes and Dora Haynes Foundation for support of the Southern California case studies.
University of Southern California, University of San Francisco, and National Civic League team members have been in cities across the country to discuss these findings and how they relate to local leadership. To request a meeting or if you want this team to conduct a case study in your community, email firstname.lastname@example.org.
Research team members include:
Mark Pisano, Professor for the Practice of Public Administration, School of Policy, Planning and Development, University of Southern California;
Dr. Sui-Yan Tang, Frances R. and John J. Duggan Professor of Public Administration, Sol Price School of Public Policy, University of Southern California;
Dr. Richard Callahan, Associate Professor, University of San Francisco, School of Management;
Gloria Rubio-Cortes, President and Executive Editor of National Civic Review, National Civic League; and
Michael McGrath, Chief Information Officer and Editor National Civic Review, National Civic League.