Montana Governor Brian Schweitzer loves to pinch pennies and in January, he went to the public asking for their best money-saving ideas. State residents are now voting on the best four suggestions, which could save the state up to $5 million per year. Not a lot of money, maybe, but the project got residents thinking about government spending. It’s the old-fashioned suggestion box brought flamboyantly into the Internet Age.
And it’s this kind of thinking that has helped the governor and Montana state legislators make sure that their state is one of only two in the country that isn’t facing a crippling budget deficit in this grimmest of financial crises.
Philadelphia isn’t so lucky. The city has just weeks to figure out how to close a yawning hole in the next budget plan, possibly up to $150 million, and make decisions that will determine what kind of city we live and work in far into the future.
This is the second in a special series of the Committee of Seventy’s “IN THE KNOW” project, explaining the issues, politics, and consequences as Mayor Michael Nutter and City Council hash out the city’s next spending plan. In this edition, we will look at the hard choices other governments are making – and some of the unconventional ways leaders are finding to cut costs and restructure government.
These ideas are often the product of necessity. After three years of nasty budget problems, political leaders are out of easy answers and they’re scrambling for solutions. Sometimes, this takes the forms of big decisions that require political courage, including layoffs and service cuts, and we’ll talk about those shortly. But let’s start with some smaller, interesting approaches that send a message that government is serious about cutting costs and promoting efficiency in ways that would be familiar to every struggling household or business.
By themselves, these ideas won’t save the day, but looking around the nation makes one thing clear: plenty of places are doing things differently than Philadelphia, where city leaders seem intent this year on simply raising taxes and fees while avoiding major service cuts, which make politicians tremble on the eve of an election year.
- May 5, 2010
What are some interesting ideas for saving money?
- Get rid of unnecessary boards and commissions.
At the state level, lots of folks are doing this. In the last few years, Maine, West Virginia, Nevada and Washington state have all dug into their boards and commissions and found many that cost too much or didn’t have enough to do, sometimes both. So the deadwood got the ax (Washington state alone got rid of 154 out of 470), saving needless administrative costs.
Could it work here: No doubt. There are at least 81 permanent boards and commissions in Philadelphia and an ever-shifting list of temporary ones. Surely somewhere we can find boards which do little work, or duplicate the work of others. For example, do we really need a Veterans Advisory Commission, when the state and federal government have whole cabinet departments for this? (The chairman is a Democratic ward leader and earns $80,000 per year. Surprised?).- Lease back the city-owned luxury boxes at the stadiums.
New York Mayor Michael Bloomberg agreed last year to give back the city’s luxury boxes he had negotiated for at the new Yankees and Mets baseball stadiums. Under the deal, which he agreed to only after the public complained, the mayor said the teams could sell the boxes at market rates, but the city would get the money. The teams agreed to pay the city at least $100,000, but luxury boxes for the Yankees were selling for up to $800,000 per season and up for $600,000 for the Mets, so the city stood to get some real money.
Could it work here: Of course. Philadelphia enjoys luxury boxes at the city’s sports arenas, boxes that would be worth well into the six-figure-per-season range on the open market. True, seats are often given away to city residents, but city officials and their families also take advantage of the boxes for championship games and rock concerts. In San Diego, they call this kind of thing a “gift” and make officials treat it as taxable income.
- Turn out the lights.
Colorado Springs officials decided they could save $1.2 million a year by turning off every third streetlight – about 8,000 out of 24,000 lights. (The city has also tried to save money by removing trash cans from the streets, selling the police helicopter, and not watering the grass at most city parks.)
Could it work here: Sure, though there are probably plenty of crime-wary Philadelphia residents who would be unsettled at the idea of darker streets at night. The city did save about $1 million in 2009 and 2010 by reducing the number of planned new lights. It also shifted to cheaper light systems in some traffic lights.-Find people to take top jobs for free.
Detroit’s mayor has hired a former Detroit Edison president as the new Chief Operating Officer for the city. Not only does the new COO have lots of business experience, he is willing to work for just $1 per year, donating the rest of his $156,000 salary back to the city, which needs every dollar it can get after decades of business losses and population declines.
Could it work here: It’s happened before – businessman Tom Knox worked was Deputy Mayor under Mayor Ed Rendell and accepted just $1 a year. In June, we’ll have an opening for the important post of Managing Director. Philadelphia is awash in talented and well-off people who might be in a position to work for little or nothing as a public service.
- Trade tourism advertising with another city to generate revenue from visitors.
London and New York have each donated $178,500 worth of ad space to the other in a two-year bid to boost mutual tourism.
Could it work here: Philadelphia has lots of official “sister cities” around the world: from Florence, Italy, and Tel Aviv, Israel, to Tianjin, China, and Kobe, Japan. Ad trades could boost the city’s tourist market, which already pumps $5.3 billion into the local economy and generates $805 million in taxes. And Philadelphia residents could get away to new places; we hear Douala, Cameroon, another one of our sister cities, is lovely this time of year.
- Send city workers home on Fridays.
This was all the rage two summers ago, when many cities - Birmingham, Alabama the largest among them - cut their office hours to Monday through Thursday. A number of states did the same in certain agencies. The move cuts cost, both salary and utilities for the day, by about 20 percent.
Could it work here: Maybe. In fact, Mayor Nutter has done some furloughs and salary cuts, but with 19,000 of the 23,000 city workers under union contracts, the mayor would need the unions to agree in order to do it on an even larger scale. And remember that that 20 percent savings meant that the public couldn’t get one day and all those workers didn’t get paid.- Run city government computing using the free Google services like Gmail, Google Calendar, and Google Docs.
Los Angeles is moving toward using online services like Google, where information is stored on far away privately-owned servers rather than on a city-owned network. Known as “cloud computing,” this saves the city from setting up expensive computer systems.
Could it work here: Not to get all Google-y eyed on you, but a great many city employees already use Gmail in their personal lives anyway, so why not go the next step and use the other services from Google? And the city does occasionally use some of these services, including Google Calendar. The trick in doing it on a larger scale is security – lots of people aren’t going to be happy seeing government information and sensitive personal data stored on some far away computer that the city doesn’t control. - Name a “job creation czar” to generate more business.
Los Angeles Mayor Antonio Villaraigosa has just hired a new deputy mayor to focus exclusively on “job creation;” if more business comes to the city, not only do more residents get jobs, but the government gets more tax revenue. His first steps have been in trying to improve the transparency and efficiency of the city’s legendarily cranky bureaucracy, which business leaders have complained about for decades. The Los Angeles Times called the new job “an innovative response to a challenging historical moment.”
Could it work here: Potentially. Mayor Nutter (and several of his predecessors) pushed efforts to streamline the city’s bureaucracy, particularly in key business areas such as planning, zoning, and development, though we haven’t taken the high-profile approach of LA’s mayor.- Switch from bottled water to tap water at all city events.
Davidson College in North Carolina is doing this now, since bottled water is more expensive than tap water and the plastic bottles generate extra garbage and are produced using our precious stocks of oil.
Could it work here: This is easy, particularly considering Philadelphia has excellent tap water (it’s not an accident that this place was home to so many breweries over the centuries). Banning all bottled water from city buildings and events would be a major statement in favor of environmentalism and money saving at a time when we need both.- Double-sided printing on everything.
The Department of Work and Pensions in London expects to save 200 million sheets of paper a year doing this. The town of Paradise, California won’t even look at a company’s contract proposal unless it is printed on double-sided paper. Insurance company Aflac routinely prints on both sides to save paper.
Could it work here: All printers have this ability – it’s just a matter of deciding to do it.- Consider bankruptcy.
We’re far from that point in Philadelphia, but our monstrous pension problem and growing debt burden could get beyond control. A surprising number of cities and counties are talking about bankruptcy this year, including Los Angeles and our own capital city, Harrisburg. The county in Alabama that is home to Birmingham is $3.2 billion in the hole and is on the verge of becoming the biggest public bankruptcy in history.
Could it work here: The day may come when this makes sense for Philadelphia. Under federal law dating from the Great Depression, bankrupt cities and counties (but not states) can reduce their debts, lower their interest payments, and shed expensive union contracts and unmanageable pension plans. Of course, the city would have to pay off some outstanding loans from the state before even thinking about this option.
We’re talking about raising taxes in Philadelphia. Are we alone?
Hardly. Lots of places are at least thinking about it. Here are just a few:
• Legislators in Kansas are considering raising taxes on businesses, liquor, and tobacco and have talked about raising the top income tax rate, to head off cuts in education and social services.
• A public advisory panel is recommending that Duluth, Minnesota raise property taxes by almost 30 percent to close a $2 million city budget deficit.
• The County Executive in King County, Washington (where Seattle is located) wants to ask voters whether they would prefer to raise the sales tax or lay off sheriff’s deputies and court prosecutors.
• Lawmakers in Hawaii have just hiked the tax on every barrel of oil brought into the state from 5 cents to $1.05, a 2,000 percent hike.
I’m struggling to pay my own bills – cutting back on vacations, saving on groceries. Why isn’t our government doing the same?
Mayor Nutter says he is committed to belt-tightening, though most of that happened in the last two years, when the city faced an even bigger deficit. The mayor says he only has about $1.7 billion, or less than half the budget, to use for quick cuts since the rest is spoken for under long-term contracts, such as paying for pensions and interest on borrowed money. He says he squeezed nearly $39 million in 2009 and a bit more for this year. He has about $33 million in various cost savings in his next budget proposal. A lot of his cuts have come from eliminating vacant positions and slashing overtime budgets.
What are some specific things the mayor has done?
The mayor has been particularly interested in trash collection, computer technology, and the city’s official vehicle fleet. He has also asked for efficiency ideas from an advisory group of business leaders, known as the Private Sector Outreach Board. Here are examples of things he’s done during the budget crisis of the last two years:
• Reducing the city’s vehicle fleet and tightening the rules for employees taking cars home: $7 million in 2009, $1.5 million in 2010. He says leasing rather than buying will save $4 million in the next budget.
• Improving computer automation and consolidating the 700 separate agency servers: $1.5 million in 2009.
• Improving and expanding recycling programs to reduce the amount of garbage in landfills: $3.6 million in 2009 and another $1.5 in 2010.
• Consolidating three overlapping economic development agencies: $375,000 in 2010.
When my business is in trouble, we sometimes have to cut salaries and fire staff. I noticed that the mayor isn’t proposing this. What about other city governments?
Elected officials usually try to avoid huge layoffs, which are unpopular, by asking public employee unions to give up some salaries and benefits, which are usually the most expensive part of any city budget. (In Philadelphia, salary and benefits eat up 60 percent of the city’s money every year.) Here are some examples:
• The mayor of Las Vegas says he will have to lay off 300 employees unless the unions agree to an 8 percent salary cut and a freeze on raises and benefits (a demand the largest of the four city unions has refused).
• San Jose is planning to lay off up to 1,300 employees, but say they could reduce that number if the unions agree to a 10 percent pay cut.
• Detroit’s mayor is demanding a 10 percent pay cut from unions, along with benefit cuts, to keep layoffs to a minimum. He is planning to eliminate only about 300 positions, on top of the 1,100 cut last year.
Philadelphia is a big union town. Can we ask our unions to make cuts?
Sure: city officials would need union help to make severe cuts, but it can be done. San Francisco is a strong union city too and Mayor Gavin Newsom managed to get 20 public unions (though not the police and bus drivers) to agree to sizable cuts as a way to head off even bigger layoffs. The unions agreed to take up to 12 unpaid furlough days per year, effectively a pay cut of almost 5 percent, for the next two years. That means the city will only have to lay off 500 employees instead of the 1,500 the mayor had planned to fire.
Is everything about layoffs and taxes? What about making government work better?
While almost everyone has at least thought about taxes or layoffs and service cuts, it does seem that some places are looking at creative ways to trim expenses by making government more effective:
• The mayor of Harrisburg commissioned a study that showed the city could save money by limiting employee perks such as unlimited accumulated leave and sick time, by reducing its vehicle fleet, and by combining emergency dispatch services with Dauphin County.
• The City of Columbia, South Carolina commissioned an efficiency study that showed that with an upfront investment of about $2.2 million, the city could save up to $12 million per year on various streamlined processes.
• The City of Saginaw, Michigan says that a new plan to reorganize City Hall staff will save $1.4 million by streamlining processes and eliminating 23 positions (12 of which are vacant anyway).
Some of these ideas sound good. How can I get Philadelphia to give them a try?
We hope the city’s leaders are reading this too. But the mayor and City Council members do pay attention to the calls, letters, and emails they get from city voters, so you’re always free to let them know about these, or any other ideas you may have.
For help on how to contact the mayor or your Council member, please see our guide to the members: Seventy.org/Resources: Elected OfficialsThis is second installment in the special series of budget-related “IN THE KNOW” features. We plan to release more over the next few weeks as new issues arise and the budget process develops. Our first edition was a primer on the larger process and it is available here: "In the Know:" What You Need to Know About the City Budget.
Please feel free to e-mail your comments, or requests for Q&As on other topics you care about, to email@example.com. We look forward to hearing from you.