When local governments find themselves in a fiscal crunch, tax increases are among the first "solutions" to be floated, preferably of the sort that is hidden out of public view (have you looked at all the taxes buried in your phone bill lately?).
Of course, raising taxes shifts responsibility for the fiscal mess away from politicians and bureaucrats, and onto taxpayers who did not create the mess, but are tasked with paying for it. The problem is that such schemes provide no incentive for government to make the structural changes necessary to avoid the next disaster – "let the taxpayers pick up the slack" is the sentiment.
Fortunately, voters in San Diego have approved tough protections making future tax increases a virtual impossibility – requiring a 2/3rds affirmative vote of the people to approve any increase. Politicians continue to try to find ways around these protections, normally by disguising new taxes as "fees" or other gimmicks, but make no mistake, the playing field has been tilted against big tax increases – and rightly so.
Restoring San Diego's fiscal health without raising taxes requires city government to do something it's not used to: innovate, and compete.
Government doesn't like to do either: just compare the level of service and innovation at your local post office compared to Federal Express or UPS. Or compare how long you stand in line at the DMW versus Target or Macy's.
Government agencies don't like to innovate or compete because normally they don't have to: they're a monopoly. A hundred years ago Teddy Roosevelt railed against monopolies in the private sector (steel, railroads) because they abused their monopoly status to rip off consumers while providing poor quality goods and services. Without competition, any institution (private or public) becomes lazy.
Today, San Diego taxpayers are being similarly abused because San Diego city government has a monopoly on providing certain services to itself.
When an agency needs printing, landscaping, or computer solutions, going to the Yellow Pages has been out of the question. The agency has to "buy" that service from the official city print shop, landscaper, or information technology bureaucracy.
Fortunately, city voters overturned this bizarre system with Proposition C last November and put in place a new one which will allow the city to do what regular San Diegans do every day: go to the private sector for the best quality products and services at the lowest cost. City employee unions don't like this for the same reason the Post Office doesn't like Federal Express – they'd rather the competition go away so they can go back to business as usual.
Business as usual won't cut it any more, fortunately. The City's recently released financial forecast now assumes $86.4 million in savings resulting from reengineering itself and realizing new efficiencies. That's the equivalent of a reduction of 125 full time employees each year for the next three years. The City will also need to achieve cost savings through managed competition and blowing up the existing monopoly that hamstrings San Diego. The clock is ticking and we need bold action to achieve the savings required to balance the city's books.
San Diego isn't the first city to turn to use private sector competition to force the kinds of innovation necessary to reduce costs to taxpayers while improving the quality of public services. In fact, the San Diego Institute for Policy Research is currently researching success stories from other cities with the goal of providing role models for San Diego to emulate.
While Proposition C and its "managed competition" structure will be enormously valuable to getting taxpayers a better deal, the city has made its job more difficult in recent years by passing laws mandating artificially high wages and benefits be paid by private sector contractors selling goods or services to the city.
Make no mistake, while labor officials spin these "living wage" rules as "worker friendly," in reality they are mechanisms used to price private sector competition out of the market. The city will award contracts to (usually non-union) private contractors over (unionized) government workers only if a 10% savings can be realized, and the city's phony "living wage" rules make that more difficult.
The city has a great opportunity to use its new managed competition system to keep the city out of bankruptcy while avoiding tax increases, but it has to move faster if savings are to be realized any time soon.
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