The financial desperation among America's local governments is so consuming that cities in Los Angeles County were recently caught trying to sell their promised federal stimulus checks at a discount for cash. This was either the municipal equivalent of seeking payday loans or a clever attempt to avoid the strings attached to federal money. Either way, it evidenced the lengths to which cities will go to avoid confronting a stark fiscal reality: without structural reforms, municipal insolvency will only be delayed.
Local governments everywhere are on the brink of financial ruin. Based on the March 6, 2009 market value of its investments, the Arizona Public Safety Personnel Retirement Fund is approximately 42 percent funded. To maintain existing benefits for law enforcement and fire department personnel, local governments will need to vastly increase contributions to the Fund, massively raise tax revenues, engage in mass layoffs or file bankruptcy.
And tax revenues continue to plummet. Tempe's sales tax revenues dropped 9.2 percent during the four months leading into November 2008. The bursting of the real estate bubble has dissipated property tax revenues. Fees are disappearing too. Chandler--formerly one of the fastest growing cities in the country--reportedly issued one building permit last month.
The Goldwater Institute recently published A New Charter for American Cities, which makes the case for adopting a "Local Liberty Charter" to focus local government on efficiently furnishing the no frills law-and-order needed to secure liberty. Stripping local governments down to core functions is no longer a debating point. It's an imperative.
Nick Dranias holds the Goldwater Institute Clarence J. and Katherine P. Duncan chair for constitutional government and is the director of the Institute's Dorothy D. and Joseph A. Moller Center for Constitutional Government.
Goldwater Institute: A New Charter for American Cities: 10 Rights to Restrain Government and Protect Freedom
New York Times: Cities' Plans to Swap Cash for Stimulus Are Stopped
The Economist: Cities and states are facing big budget deficits. It is partly their own fault