Abstract
To set the tone for the Special Issue, this article focuses on understanding the total impact of the Great Recession on local governments, predicting whether these impacts will be permanent, and providing explanations for the changes that these governments have made and prescriptions of how to address them and whether it constitutes a “New Normal.” This opening article first reviews the articles in the Special Issue that examine various facets of the “New Normal.” To add substance to this context, data from a recent survey of county and cities are presented and provide timely and useful information on these government’s recovery strategies, patterns of behavior, and responses to the their changed situation brought on by the recession. Finally, this article closes with a consideration of the data against the framework and a call for further research while looking at what these strategies imply about research on new governance arrangements for local governments.
Introduction
This special issue of the State and Local Government Review sets out to summarize thinking about the effects of the Great Recession on U.S. Local Government and to consider the magnitude of the changes actually made by local governments based on data collected especially for this issue. As such, it attempts to address the questions of both whether the Great Recession was a defining moment for U.S. local governments and what it has genuinely wrought.
Reacting to Recession and Researching Recovery
This essay begins with a framework drawn from the authors appearing in this special issue on the gravity of the Great Recession and the panoply of potential reactions to it: the essay opens with a summary of their description of the impact, permanence, and explanation of the changes made in reaction to the Great Recession and their prescriptions of how to address them and views on whether it constitutes a New Normal. The essay then reviews the most salient findings of a recent survey of county and city administrators conducted by the State and Local Government Review with the sponsorship of the National Association of Counties and the National League of Cities. These data provide important information on city and county recovery strategies, patterns of behavior, and responses to the changed situation in local governments due to the recession. Finally, this essay closes with a consideration of the data against the framework and a call for further research and concludes by looking at what these strategies imply about research on new governance arrangements for local government.
How Bad Is It and What to Do?
The important questions for research on local governments in the U.S. about the Great Recession of 2007 to 2009 and the subsequent recovery are: (1) “How bad is it?” That is, is it enduring and has it caused abrupt, significant, and lasting change in local governments’ structures and processes; and (2) How to handle it?” That is, what have local governments done about it, what should they do, and why have they done it? The authors in this special issue each address these questions, although from different aspects, with different emphases, and using different data.
A New Normal
Martin, Levey, and Cawley, think the Great Recession was bad in an almost unprecedented way in post–Great Depression America because—like the Great Depression—it is a global restructuring of the economic system. For that reason, they argue that the environment of local governments in the United States has changed significantly and that these governments will be resource constrained for some time to come because of the relatively huge amount of money ($225 billion) that has been sucked out of the local level of government in the structural deficit projected to be achieved by 2015 (Government Accountability Office [GAO] 2010). For them, this represents a continuing structural deficit for U.S. local governments which must be addressed in the long term through changes in their goals, makeup, and organization.
The notion of a structural economic problem is noteworthy because the Great Recession did not create, but only exacerbated an already growing gap between the demand for local services and the ability to pay for them with current revenues. Even before the Great Recession, U.S. localities were showing signs of underfunding especially for things like pensions and were betting on the “coming “of a growing economy to resolve gaps. Accordingly, Martin, Levey, and Cawley see an inevitable admixture of changes across the board for U.S. localities for the foreseeable future including constrained spending, smaller workforces, changed service mixes, and less attractive jobs in pay and benefits. This situation and the reactions taken to address it constitute a “new normal” for local governments. To address this, they recommend a list of options that cover the clusters of alternative actions open to local governments, from raising revenues through taxes and fees, to reducing expenditures through changing services and reducing the wage bill. The most interesting of these may be the notion that the public should be educated to understand the trade-offs between having and paying for services.
System Evolution
Ammons, Smith, and Stenberg do not address directly the individual changes made by local governments in reaction to the Great Recession. Rather, they raise the issue of whether the Great Recession has been a watershed event that has punctuated the heretofore gradual change in the U.S. local government system. They are looking for both specific and lasting effects of the Great Recession that make it a turning point and defining moment for local government. They both ask and answer the question of whether the fiscal distress of the Great Recession was sufficiently grave that local governments have had to significantly and permanently reduce spending and employment, change their structures, and retool their services; their answer is a resounding “no.”
Examining the changes made by some clearly distressed local governments—ones having undergone default, ratings downgrades, or oversight—they do not see the sort of transformation that would be predicted if economic crisis were an event that precipitated radical change for local governments. They do agree that the Great Recession has caused and may have accelerated some local governments to make changes, but unlike Martin, Levey, and Cawley, they do not see the Great Recession or local governments’ reaction to it as marking a change from a more settled situation and an accepted way of doing things to a “New Normal” of turbulent environment, drastic reaction, and permanent modification. Instead, Ammons, Smith, and Stenberg see effects of the Great Recession not as a “New Normal” but as a “Continual Evolution” of local government and current adaptations as just another step in a gradual process that has not seen their governance radically reshaped in 200 years, even during other economic downturns, shocks, or catastrophes like the Great Depression. They come squarely down on the side of incremental change: any lasting change in the local government system will only be observable a long time from now.
Decision Making
Kimberly Nelson tries to elucidate both theoretically and empirically what local governments have done to handle the Great Recession and the limits of their reactions to it. She examines deeply a number of local government cases and uses theories about decision making applied to local government to see what explains the choices that have been made in these cases. What she finds is that rather than a set of patterns repeated across different local governments, attempts to deal with the economic downturn have been both widely rational and particularly idiosyncratic depending upon opportunities and timing. Using Simon’s “Bounded Rationality” as a framework, Nelson points out, among other things, that local governments are likely to act similarly at first in reaction to fiscal contractions as less risky widely shared and heuristically obvious options are employed, but over multiple budget cycles the absorption of the necessary structural changes to local government revenues will be incremental and limited by local boundaries to riskier decisions.
Using this framework and her cases, Nelson is able to discuss the limits that local governments must confront and the options open to them at stages in trying to institute change. Probably, it does not matter whether these changes are seen as a set formula, coping, professional heuristics, or innovations, they are the product of both opportunities and constraints that are the general boundaries of decision making in local government. For Nelson, a general description of what local governments have done about the economic downturn can only be revealed after enough time has gone by that shared slack has been wrung out of the system and local boundaries have allowed for similar situations to emerge. There may be lasting system change and dramatic innovations, but the changes are too gradual, constraints are too local, and it is too early to tell what the trends are right now.
Collaborative Benefits
Michael Abels accepts the fact that local governments will have to do more with less for some time to come, and he is willing to offer what seems to be a logical prescription for local governments to take on the path to getting service demands and revenue supplies to match. His suggestion is that local government managers use collaborative networks to support the necessary new governance arrangements which must do at least the same, if not more, with less. As an example of opportunities for collaboration of this type, he points out certain shared local government service provision which requires large investments and by nature is networked such as roads and transportation systems and certain social services. Consolidating system governance of these kinds of networks through collaborative management allows the jurisdictions to spread the costs of operating delivery systems across larger areas. This creates efficiencies of scale and employs network governance through collaborative management in much the same way that special districts are used.
Abels sees special districts as an example of the sorts of collaborative governance options that local governments will need to employ, if they are to make up for the ongoing resource shortfalls that the Great Recession has engendered. He offers that the role of jurisdictionally based governance frameworks such as special districts, which cannot always be created easily, can be played by collaborative managers who use collaborative leadership to exploit the efficiencies of regional networks and gain these benefits. Over time, Abels offers, resource scarcity will lead to a greater use of collaborative management as the successful local government leadership model. Thus, under the new structural changes shaped by the Great Recession, it will and should become the new paradigm for local government managers who will transform local government from narrow and restricted county and municipal workforces, communication networks, and service provision to regional networks that manage, share, and fulfill these elements and needs.
New Data on Local Government Opinions on and Reaction to the Downturn
Clearly then, at the very least U.S. counties and cities have revised their current expectations about how they can govern at the grass roots and the resources at their disposal to do it. What does new survey data reveal about how they have revised their actual behavior when it comes to facing the challenges of local governance under the new conditions? What are they doing differently and expect to be doing differently in exercising their authority, capitalizing on opportunity, improving their prospects, and fulfilling the public trust? To answer these questions, we rely on responses of nearly 600 (N = 580) local government managers from U.S. counties (N = 438) and cities (N = 142) to an online survey conducted by the Florida Survey Research Center. These were random responses to e-mail solicitations sent to about 3000 managers from lists provided by the National Association of Counties and the National League of Cities. The survey instrument considered both opinions of the respondents on the severity, duration, and permanence of the economic downturn and their actual reactions to it by asking them to answer a series of closed-ended questions arranged by budget category, intergovernmental relations, and innovation. 1 The findings from this survey are presented below.
Perceived Effects of Decreased Economic Activity
Both city and county respondents agreed that budgets and budget deficits were their number one concerns of all the issues facing them since the beginning of the Great Recession. Nearly half (48 percent) of the county respondents identified this as the top issue of the three most important issues facing them and almost one-third (29 percent) selected it as the most important issue overall. For cities, budgets played an even greater role with a little over half of them (54 percent) selecting it as a top three problem, while a little less than one-third (30 percent) of city respondents selected it as their number one problem. However, while all sized groupings of cities indicated that shrinking budgets was their number one difficulty, large cities seemed to be squeezed more by closing budget gaps, choosing it as their top rated challenge in two-fifths (40 percent) of the responses. Likewise, county respondents picked it as a top three issue in 40 percent of even smaller jurisdictions rising to almost three-quarters (70 percent) for the largest counties.
In some respects, this budgetary gap focus is mirrored in the selection of the other top issue facing local governments because both factors involve depressed revenues. Both county and city respondents selected the economy as the second of the three most important local issues they have confronted in the last three years. Nearly half (46 percent) of county respondents picked it as one of their top three issues and almost a quarter (23 percent) chose it as their most important issue—this was nearly double any other issue selected as number one except for budget itself. Interestingly, preoccupation with the economy as an issue was related to the size of the county jurisdiction with a little more than one-third of them (35 percent) opting for the economy as a top problem but growing from nearly a quarter (23 percent) rate among respondents from the smallest counties of 5,000 and under to selection by two-thirds (66 percent) of counties of 500,000 or more; moreover, half (50 percent) of all larger counties saw the economy as their top problem. The importance of the economy as an issue in the last three years was paralleled in its ratings by cities: over a third (35 percent) of municipalities of 25,000 and below viewed it as their number one problem with this rate of response growing to two-thirds (66 percent) in cities with populations of 500,000 and larger. Though about one-fifth of cities (18 percent) saw the economy as their number one problem across the board by size of jurisdiction—somewhat less than one quarter (23 percent) of counties—the economy was in a strong second place for cities and a full 10 percentage points ahead of the next issue.
There seems to be some agreement about the causes of this economic squeeze and some about its effects, although less agreement about what can be done and whether doing anything about it is within the capacity and capabilities of local government. A little over half (51 percent) of the county respondents think that the availability of good jobs has gotten worse over the last three years and just a tad more (55 percent) think the cost of living has increased. There is a bit of a split by size on the latter issue: less populous counties (5,000 through 99,000) seem to be somewhat harder hit by cost of living increases with two-thirds to three-quarters of them seeing an increase and the most populous counties predominately seeing it as unchanged. About two-fifths (42 percent) of the responding cities see the job situation as actually improving over the last three years with an even split of about a quarter (27 percent) thinking it is either improving or getting worse; the upshot is that about two-thirds (69 percent) of city respondents think that job availability is the same or better. However, there is somewhat more pessimism about the cost of living among the city respondents: fewer than one-tenth (8 percent) think it is better, three-fifths (61 percent) think it is the same, and almost one-third (31 percent) think it is higher. This means that most (92 percent) of the city respondents think that the cost of living is the same or worse than it was three years ago.
The Burst Housing Bubble
The number one culprit of the economic downturn—both a cause and probably a continuing effect—according to both city and county respondents is the housing market. Almost two-thirds (66 percent) of all county respondents believe that the real estate market has gotten worse in the last three years; one-tenth think that it has gotten better in that period, but almost one quarter (24 percent) think it is the same. This means that nine of ten county respondents think the housing market is the same or has gotten worse over the last three years. Similarly, nearly half (49 percent) of city respondents saw the housing market over the last three years as getting worse, while another fifth (20 percent) of them claim it is the same. In short, over two-thirds (69 percent) of our city respondents see the housing market as the same or worse.
Oddly however, housing costs and the housing crisis were not rated highly overall as issues of concern facing counties or cities. Less than 3 percent rate it as one of their top three problems, and almost none see it as their most important problem. Likewise, less than one of the fifteen city respondents thought it one of their top three issues, while none saw it as their most important problem. Clearly, they do not see it as something that they can affect easily.
This is especially interesting in light of the dependency of local jurisdictions on property taxes and assessed valuation, but it makes sense from two standpoints. First, the housing crisis may be subsumed in the respondents’ general views about “the economy” and not rated separately as a problem by them. Alternately, from an operational standpoint, the respondents in both city and county jurisdictions are preoccupied with budget deficits and the revenue streams but not with the sources of those revenue streams such as ad valorem taxes, permit fees, and related items. In short, city and county officials are focused on revenues and expenditures and the economy in general but not on particular markets which they cannot easily change. Their center of attention seems to be on affecting their own revenues and expenditures rather than the general climate from which those are generated. This concentration on the particular and short term rather than the general and long term appears to be a plausible explanation for these seemingly contradictory findings.
Making Ends Meet: Local Governments Behaving Blandly
The pressing question for local governments is how they have reacted to their views of the post recession situation. In other words, what actions are they taking in response to their perceptions? That is, how are they behaving, not how are they feeling? What are they actually doing to cope with what they are undergoing and what do they see on the horizon?
The quick answer to these questions is that they are doing whatever immediately presents itself and is feasible. As the literature on fiscal stress has reported over the last several decades, city and county officials have been looking for instant and substantial savings in the near term to close gaps now. They are using quick-fixes not innovations; they are using obvious strategies and not self-transforming ones. Sensibly, they are attacking first the area that makes up the largest part of their budgets (personnel expenditures). Simply stated, they are picking low hanging fruit that can be snatched without great exertion and without overextending their policy reach. That is, they all are working on the supply side of the local government labor equation and reducing production by reducing labor inputs rather than working on the demand side and reducing the need for or provision of services or tinkering with their technical core and raising the productivity of their current labor force.
Labor saving devices
This tendency is most clearly seen in the ways that local governments are trying to save money to make ends meet in the area of savings from their labor force. They have elected to spend less where they can rather than change the way they spend or address structural economic or organizational problems. For example, in both counties and cities, they are not spending more by not paying more: they are freezing salaries. Two-thirds (66 percent) of the county respondents say they are doing this and three-quarters (76 percent) of the city officials do as well. However, in the largest jurisdictions—where the salary outlays are typically much larger—freezes rise to seven out of ten county respondents and to an equal number for city respondents.
Likewise, they are not only trying to reduce salary expenditures by capping them but are also capping the size of their labor force by instituting hiring freezes. At least two-thirds (66 percent) of all county respondents indicate that they have stopped filling vacant positions, but those counties with the largest labor forces report that they employ this strategy at an even greater rate than the smaller jurisdictions: more than four-fifths of the jurisdictions with populations of 100,000 or greater use it. Where salary outlays are smaller, the percentage drops somewhat. Cities of all sizes are freezing their work forces at an even greater rate. Almost nine of the ten city officials responding (86 percent) indicate that they are not filling vacancies.
In the same vein, both cities and counties report trying to reduce the size of their labor forces rather than trying to stop its growth. However, for obvious reasons—collective bargaining agreements, service demand, political pressure, and personnel policies—this option is less open to them and thus less used across the board. Nevertheless, county officials report employing layoffs in less than a third (31 percent) of the largest jurisdictions, while larger cities are somewhat more likely to report employing this tactic (39 percent).
Reducing labor costs by furloughing or giving incentives to employees to retire has been used as well by local governments though more predominately by cities than counties. However, in the case of counties, more jurisdictions report doing nothing than using these alternatives. More specifically, a quarter of counties (27 percent) report that they have done nothing to reduce personnel time and fewer than one in five have used retirement incentives (18 percent) or furloughing(16 percent) employees. Conversely, hardly any cities (5 percent) report taking no measures in the personnel work time area. Moreover, city respondents report a more vigorous use of both furloughs and retirement incentives with 39 percent using layoffs and 36 percent using retirement incentives.
Income supplements
Though both county and city respondents report that their local governments are trying to decrease outlays, far fewer indicate they are looking for opportunities to increase the funds at their disposal whether through saving or generating additional revenue income. A little over two-fifths (44 percent) of the county respondents indicate tapping “rainy day funds” to supplement their spending, while over a half of larger jurisdictions (56 percent) are using this option. When it comes to increasing income, county respondents do not report as much activity across the board, with 40 percent reporting an increase in fees for services, although this is used more often by larger jurisdictions (60 percent) and but negligibly in the smallest ones (7 percent).
By comparison, city officials report tapping their savings at a rate (46 percent) similar to that of the counties and being much more aggressive over all when it comes to increasing their revenues. Almost three-quarters (71 percent) of city respondents report increasing fees for services, with larger jurisdictions employing this option at an even greater rate than smaller ones. Likewise, cities are not as shy as counties about increasing taxes. One-third of cities report raising taxes, whereas only about a quarter (26 percent) of counties indicated that they have—somewhat fewer than those that report not utilizing any revenue enhancing measures. Very few cities report not taking any measures to increase revenues (4 percent).
Benefits as burdens
One area where the cost outlay for labor can be affected appreciably, although it is somewhat trickier to act upon both contractually and politically, is the benefits given to employees both in the area of health insurance and in the area of pensions. Most counties and cities did not report that meeting health insurance (59 percent and 67 percent, respectively) and pension benefit obligations (70 percent and 53 percent, respectively) for their employees had increased as a problem after the Great Recession began. In fact, both rising health benefit costs and the underfunding of pension pools were becoming serious concerns for their jurisdictions several years prior to the slowdown in the economy. While these are continuing fiscal concerns, pressure continues to mount and cost savings are vitally needed. For instance, close to half the county respondents (43 percent) report that they are worse off when it comes to paying for the health care benefits for current employees.
In general, city respondents are divided on what to do in the area of current employee benefits with a little over a third (37 percent) taking no action at all and another third (33 percent) increasing the employee contribution level for retirement plans and a little over one-quarter (27 percent) increasing the city contribution. These city government actions closely mirror the actions taken with respect to new employees, except that instead of increasing retirement payments for them, city officials report decreasing retirement plan payments for new employees in 20 percent of cases. County respondents indicate considerably more tentativeness with over half reporting they have made no pension contribution changes for current (54 percent) and new (57 percent) employees. Only one in five (20 percent) indicate that they have increased the contributions of both current and new employees to retirement.
With respect to controlling or reducing health care costs, there has been more activity. City respondents report some attempt to act in this area which almost two thirds (63 percent) of them indicating they have increased the contribution of their current employees to health care plans and nearly as many in total splitting nearly evenly on decreasing their city’s contribution (30 percent) and increasing it (29 percent). One of five (20 percent) have done nothing with the contributions for current employees. Only about half (49 percent) have increased the contributions of new employees, but one-quarter (25 percent) have decreased the contribution for them and a little fewer than one in five (19 percent) have increased their city’s contribution. However, one-third of city respondents indicate that they have made no changes in the health care area. Most (60 percent) report that they have not touched the payments for retired employees, and in less than a quarter of the cases (23 percent) have increased their contributions, apparently finding it easier to tax those who are working.
Distinct from cities, counties have been more willing to pass the costs of health care onto their current employees with a shade over half (51 percent) increasing the payments expected from them; this tendency is even stronger in large jurisdictions where four in five counties report having enacted increases. A little less than one-quarter (24 percent) report having decreased their contributions for current employees, while about one fifth (21 percent) report having decreased them for new employees. Less than two-fifths (39 percent) report increasing the obligations for new employees and about one in five (21 percent) report decreasing their own contribution. Like cities, counties have not touched the health care for retired employees in almost three-fifths (59 percent) of cases, and like cities, almost half (45 percent) report making no changes at all for new employees and no changes for current employees in a little over one-quarter (28 percent) of cases.
No Hope on the Horizon
County and city respondents are split on their views as to whether and how soon things will get better. Fewer than one-third (31 percent) of county officials think that revenues will return to pre-recession levels and nearly half thought they will not; another one of five seem to throw up their hands and just do not know. The pessimism is more pronounced in the largest county jurisdictions wherein two-thirds (67 percent) of respondents did not think revenues were coming back. The most frequently occurring county prediction for their return was five years. Two in five (40 percent) city officials thought that revenues will return to the 2009 levels and slightly more than half (53 percent) thought they will not. In addition, about one-sixth think that it will take only two or three years, but an equal amount think it will take five years. So, city officials are somewhat more optimistic than their county counterparts, thought not dramatically so.
Benefits and Burdens from Other Levels of Government
Very few jurisdictions think state and local relations have improved as a result of the Great Recession or during the recovery. Most report worsening relations between localities and states. Larger jurisdictions report worsening relations with the state at a higher rate than smaller ones, but the rate for the smaller ones is significant too. There are clear reasons for this. While local jurisdictions may have received some relief from the American Recovery and Reinvestment Act, the aid from those sources (largely federal funds, passed through the states) is gone (Perlman 2009). If local governments are reluctant to squeeze their employees and citizens much, they not only get no help from the states and the federal government but are squeezed in turn by them but especially by the former (Benton 2012). This is seen clearly in the reactions of respondents from the local jurisdictions.
State governments: No help at all
Most local jurisdictions do not report much help from the states. Moreover, they do not report much of a decrease in the burdens (usually in the form of mandates) placed on them by the states and, in fact, report an increase in these rather than stability during the recovery. A preponderance (82 percent) of city officials responding to the survey agreed that states had decreased all kinds of funding and financial transfers to them including those for services, revenue sharing, and others. All respondents (100 percent) from the largest cities reported that this was the case for their jurisdiction. Moreover, almost three-quarters (71 percent) of cities saw the states as reducing their local authority to act on their own and mandating increased local activities without any funding for them. In short, states are seen by cities as giving them less than before the recession while burdening them with more responsibility, but concomitantly reducing their authority to fulfill that responsibility and carry out those actions.
Counties are no better and may be a little worse than cities in their attitudes about the states. A significant number (84 percent) of the county respondents saw a decrease in financial support from their states on which they depend. Distinct from cities, fewer than half (42 percent) of the county respondents reported that their authority was reduced by state action; this is the same direction but a somewhat lesser rate than the cities. This is not too surprising since counties typically are mandated to perform more functions than cities. However, counties were almost identical to cities in their reporting the burden of additional state assigned activities that do not have additional funding (unfunded mandates) accompanying them—that is, more than two-thirds (68 percent) agreed that this had happened to them. Likewise, and again just like cities, counties saw their responsibilities increased without sufficient revenue to carry them out. In each case, similar to the city respondents, the rate of agreement was higher for larger jurisdictions (80 percent).
The federal government: No harm, no foul
It is pretty clear that no local jurisdictions believe that the federal government is coming to their rescue. Both county and city respondents specify that they are receiving decreased amounts of financial assistance from the federal government: over half (54 percent) of the counties see it that way and almost two-thirds (65 percent) of the cities agree. However, fully one of the ten counties (10 percent) and about one-sixth (17 percent) of the cities actually think that funding from the federal government has increased over the last three years. More of the smaller-sized jurisdictions see this as being so than larger-sized ones. In general, though, counties and cities feel cut off from resources by the federal government just as they do from the states.
Apparently, they are not quite as bothered by that fact and do not see the federal government as their funder of first resort. This would seem logical as substantially larger amounts of federal grant-in-aid monies historically have been funneled to states as opposed to local governments (i.e., states receive about one-third of the total revenue from the national government as opposed to around one-sixth for local governments). Neither county nor city respondents seem to feel as put upon by the federal government as they do by the less distant and more intrusive state government, since cities and even more so counties, have close and dependent relations with the states in their day-to-day operations and regulatory frameworks. Although the views of local governments about the federal government are not as negative as their views of the states, they are not overall positive. In short, that relationship has not deteriorated as much as it has with the states, but still could use improvement. Almost two-thirds (63 percent) of county respondents think that their relationship with the federal government is the same as it was before the recession and about one-quarter (27 percent) think they are worse. City respondents did not have a radically different point of view—almost two-thirds (62 percent) thought that the relationship was the same as before 2009, but slightly more than the county (29 percent) thought it was worse. All in all, very few county or city jurisdictions (9 percent for both) thought that things were better in their relations with the federal government.
One reason for the more favorable view of the federal government by localities is that when it comes to burdens rather than just foregone benefits, the local jurisdictions see the federal government as acting somewhat differently than the states. Only about two-fifths (41 percent) of cities see the federal government as giving them more to do without adding funding and less than a quarter (23 percent) think that the feds are making them responsible for new items without giving them dollars. County respondents have similar views but see even less burden imposed by the federal government. Less than a third (29 percent) of the counties think that they have had new activities mandated by the federal government without funding and less than a fifth (19 percent) think they have had to take on new responsibilities without funding in the last three years. These views are understandable, in that studies of federal and state mandates indicate that there are many, many more state mandates than federal mandates (Benton 1996).
Conclusion: U.S. Local Governments and Going It Alone in the Downturn
Since 2010, U.S. Local Governments have pretty much been on their own in trying to balance their budgets and cope with the recovery from the Great Recession and its aftermath, a period of economic downturn that may have new real growth limits. This has been referred to by some observes of American federalism as “fend-for-yourself federalism” (Pagano and Hoene 2003). Help from other governments has dried up and the best that can be hoped from other jurisdictions is that they do not add the insult of new unfunded mandates to the existing injury of already flattened revenues. There are ways to squeeze a little more out of the local government system and augment revenues, but aid from other governments is not likely to be one of them. Until the private sector prospers in ways that will help both sectors, they are not much of a partner with local government either.
Based on the data presented here, how are local governments dealing with the recent severe economic downturn? The short answer is that they are getting by, but not with any verve, enthusiasm, or flair. They are cutting expenses and shifting revenues as best they can to make ends meet and to balance budgets. They are not innovating their way out of this recession, but rather are nipping and tucking where they can and pulling in their belts as snugly as they will go. For this reason, they are styled above as “behaving blandly.” Certainly, they are not acting in a transformational way.
The aims they are commonly pursuing might be categorized as temporarily buttressing shortfalls and reducing their greatest costs—merely a “band-aid” approach. The latter is largely gained through reducing labor inputs both in the amount (size of the workforce) and in the cost (salaries and benefits of the workforce) of personnel. The former is mostly made up of a mix of spending savings and meager increases in new sources of revenue. For the most part, they have not pursued changes in the structures or mix of service delivery and organization and do not report reliance on managerial solutions. In short, they are trying to get by and hoping for pressures to decrease.
Local Government Next Steps in the New Normal
If they are lucky, signs of renewed growth in the recovery will continue and the New Normal will be a new equilibrium that is similar to the old one, but slower and not as great. However, even if this slow growth is shown as sustained by aggregate measures, not every local jurisdiction has or will be affected equally. Worse yet, things could turn down sharply domestically or the global economy could drag down the U.S. economy. So, it is not likely in the very near future that U.S. local governments will have sources of local revenue that exceed their Great Recession levels. Yet, it is likely that they will have multiple demands for uses of local revenue that do exceed current levels.
The data collected from our respondents suggests that they have wrung out most of the revenue mitigations, expense shifts, and cost reductions that are immediately available to them and have opted for less risky choices. Yet, under the New Normal of slowed growth, the “ideal type” local government in the United States is very likely to need to make politically sensitive policy choices about what are to be considered core services, how they are to be funded, and how much is paid for them and to whom. These problems will be confronted by all jurisdictions—in some jurisdictions economic realities and political culture will dictate different choices—but in the largest jurisdictions and in a preponderance of others, figuring out how to deal with more transformational change under a New Normal may well become a reality.
Bounded Decision Making
Whether it is necessary or desirable to undertake a significant reform program leading to greater financial efficiency and soundness under a new set of economic expectations and limits is the decision facing all local governments in the United States at the moment. The boundaries for this decision will be set by the political culture, politics, economy, governance, and management of these institutions, as one of our contributors, Nelson, has pointed out. These will be complex and complicated decisions, the quality of which depends not necessarily on lessons learned in an earlier downturn episode or on algorithms for decisions under budgetary scarcity. Rather, these decisions will be more greatly constrained by the ability of each jurisdiction to spend, its particular politics, and the capability and boldness of its leadership.
Accordingly, the local government system will not remain unchanged, as it responds to the New Normal. It will evolve, if not transform. An evolutionary perspective does not require change in the system’s governance and settled notions of local government responsibilities and services. But, in some cases, it could necessitate a rethinking of how to structure, pay for, and the responsibility set of local governments if extreme cases lead to innovations. Most cities and counties have reached the stage in their evolution where they will have enough slack to do business as usual and take no risks. Nevertheless, some will be led by negative (ones of low slack) or positive (ones of high slack) circumstances to make riskier decisions about their governance in the recovery. For these jurisdictions, it will mean a changing mix of services, structures, participants, partners, and networks. They will become more innovative out of necessity and forced choice.
Openness to Innovations
There are some signs that this challenge is being taken seriously by a few local governments that responded to the survey. They demonstrate openness to technological innovation that is both remarkable and, perhaps, should be considered commonplace by now. They are wide open to using electronic means to raise productivity among their employees in various ways. Also, they are already enthusiastically embracing a reduction in the personnel costs of meetings using electronic means and making improvements that supplement their communications nets.
The use of electronic networks as a tool for operations and policy formulation in local governments has been discussed in this journal only recently. It has been pointed out that social networks are becoming collaborative models for local government information collection and sharing, but that the promise of them as tools for inclusive policy formulation and citizen integration rather than just communication has not been realized (Perlman 2012). Neither have the productivity gains been fully gained from restructuring work around electronic and social networks. Any real wiring-in of collaboration to the local government system will require the incorporation of digital application based nodes and social networks in policy formulation and a redesign of services and service provision.
Further Research
What form further local government innovation will take in the New Normal remains to be seen. It can only be monitored and studied as it occurs because the U.S. local government system has just reached the stage where particular jurisdictions may be forced by financial exigency to bear the risk of innovation or may judge a risk return as worthy of investment. The sort of learning that will occur cannot be easily anticipated and the sort of new heuristics that arise will depend on what local realities dictate as feasible strategies. Barnes (2010) has seen the two great governance challenges across the local government system in the next decade as a disconnect between local governments and their citizens (satisfying citizens’ demands for new service constraints such as sustainability or technological sophistication) and local governments and other nearby or associated governments (satisfying the demands of and collaboration with other governments and sectors in the region and nation). In the pages of this journal, experts have identified the primary challenges of local governance for the future as new leadership, new structures, and new management (Perlman 2010). Taken together, they suggest a candidate list of the sorts of governance strategies on which to focus further research. This list of strategies and what we have learned in this special issue lead to some suggestions about focusing further research. It is hoped that this list of strategies and what we have learned in this special issue lead to focusing further research.
Footnotes
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The authors received no financial support for the research, authorship, and/or publication of this article.