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Fiscal Resilience & Fiscal Crisis: The Case Studies of Baltimore and San Bernardino

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Michael Lawson, a researcher for the George Mason University Fiscal Sustainability Project, provides a fiscal comparison of Baltimore and San Bernardino

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Fiscal Resilience & Fiscal Crisis: The Case Studies of Baltimore and San Bernardino

  1. 1. FISCAL RESILIENCE & FISCAL CRISIS: THE CASE STUDIES OF BALTIMORE AND SAN BERNARDINO Michael Lawson Independent Researcher and Consultant George Mason University Fiscal Sustainability Project mlawson2003@gmail.com 202.543.3437
  2. 2. Background on GMU Fiscal Sustainability Project • Fiscal challenges of cities following great recession • Granular, case-study focus of six cities • Different state oversight, regions, structures, intergovernmental roles • Funded by MacArthur Foundation • Three-person research team (plus advisors) • My focus today: Baltimore & San Bernardino
  3. 3. Today’s Presentation • Background & context for each city • Both stressed, but in fundamental different fiscal positions • Lessons learned • Implications for New England cities & towns
  4. 4. San Bernardino
  5. 5. Bankruptcy • Economic shocks • Shocks from DC and Sacramento • Issues internal to San Bernardino • July 2012: Month of (initial) reckoning • Bankruptcy petition filed August 1, 2012 • Still in bankruptcy court to this day…
  6. 6. Baltimore
  7. 7. Fiscal Comparisons San Bernardino • Bankruptcy • Negative fund balance • CalPERS creditor Baltimore • AA- rated • Fund Balance: 10% • Pensions: 82% funded Financial position does not constitute “success” for a municipality. [Necessary, but not sufficient; output, not outcome.]
  8. 8. Why?
  9. 9. Fundamental differences • Come at this with humility in observations • Combination of factors • Still may be additional ingredients to the “secret sauce”
  10. 10. Charters San Bernardino • Exec. authority: Fragmented • Hiring & firing complicated • Budget: Fiefdoms • Salary formula in charter Baltimore • Exec. authority: Clear, strong • Mayor • Budget: Bd. of Estimates • Council can only cut budget
  11. 11. Culture of Professionalism San Bernardino • Turnover in manager, finance • Lack of trust in numbers Baltimore • Stability in finance, budgeting • Electeds set policy, but don’t set financial numbers • Bd of Estimates open; 2 other electeds
  12. 12. Political Culture
  13. 13. Political Culture San Bernardino
  14. 14. Political Culture San Bernardino • Mentioned by everyone • Mentioned in 1981 study • Directed at city attorney, but… Baltimore • Not mentioned by anyone • Taken for granted, unless it is bad… • When prompted (re mayors)
  15. 15. State Role/IGR San Bernardino • Fragmentation, overlap – 27% counties – 26% municipalities – 19% school districts – 28% special districts • State filed suit against SB – CalPERS • No emergency manager statute in state law Baltimore • Consolidated, no overlap – 24 counties (City of Baltimore considered county) – 96% of LocGov Spending • State assumption – Detention ctr; central booking – Community college – Light rail and bus systems – Stadiums, port, conv. ctr. – Partnership:Schls & HumSvcs
  16. 16. State Role/IGR San Bernardino • IGR: 6% of revenue • Fiscal equalization – Little general equalization • Other recent state actions – Redevelopment agency fees – MV fees/law-enfrcmt grants Baltimore • IGR:27% of revenue (excl ed.) • Fiscal equalization (general) – Disparity Grant (floor of 75% yield statewide) • Highways grant – 80% of statewide total • Unusual alliance among Big 3 • Baltimore-rural fiscal interests • Gov’r w/ties to Balt,PG(since ’87)
  17. 17. Intra-local Equalization California • Fragmentation, overlap – 27% counties – 26% municipalities – 19% school districts – 28% special districts Maryland • Consolidated, no overlap – 24 counties (City of Baltimore considered county) – 96% of LocGov Spending • In Maryland, equalization of taxes AND services within county first • More fiscal room for targeting
  18. 18. QUESTIONS? OBSERVATIONS? DISCUSSION Michael Lawson Independent Researcher and Consultant George Mason University Fiscal Sustainability Project mlawson2003@gmail.com 202.543.3437

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