Scituate’s small-town politics illustrate global challenges
“Even in a small town providing a very well defined range of services with transparent financials and highly participative democratic systems, we are still making a bit of a mess of things and are headed, full steam ahead, for the economic buffers.”
This weekend the 18,000 people of my adopted hometown of Scituate, Massachusetts get the opportunity to vote to increase their taxes. That people would volunteer to pay more in taxes in these tough economic times is remarkable, but it looks like it will happen.
The debate in Scituate is a simplified version of that which needs to play out across most towns, cities, states and nations across the developed world. It may look like a simple yes/no vote on more taxes, but it exposes a much deeper and longer term debate that people need to address.
It concerns our view on the scale and scope of government (how much are we willing to pay to deliver collective services for the public good?) as well as raising interesting questions on the efficacy of government at all levels (how good a job is government really doing with our money now that we are in tougher times?)
Some forms of American local government deliver a fascinating insight into these issues because they remain largely uncluttered by other factors on larger political stages, like the role of money in politics, the debate on how much to tax corporations versus citizens, and the inter dependencies between countries.
What we get is a transparent set of publicly-available accounts and a system of government where citizens get to vote in town meetings and referenda on virtually all major decisions. This enables us to focus on the behaviors of leaders, government bodies and citizens alike.
Let’s begin with a brief synopsis of how town government works in Scituate and in many other towns across the USA, as well as looking at how more austere times have affected the operation of that government.
Scituate elects a group of selectmen to administer the town, and decides on key issues using an open town meeting, where all registered voters can make key decisions and approve budgets. This is a fairly common system of government for smaller towns in New England.
The town raises money primarily through a real-estate tax. Each property has an assessed value and homeowners pay a yearly percentage of that value to the town. So this is a tax on wealth rather than income (citizens pay income taxes to the Commonwealth of Massachusetts and to the Federal government as well).
The town raises some money from other sources including State grants, taxes on businesses and fees for services.
In return for this money, the town is responsible for delivering primary and secondary level education, water and sewage services, police & fire, upkeep of the local road system, provision of seawalls to protect the coastline, programs for seniors and youth, and a host of other smaller services.
Many of the town’s facilities are ring-fenced into enterprise funds, which endeavors to ensure that activities break-even in their own right, and that costs are borne as much as possible by the actual users. Examples of this include the local public golf course, the water board or the marina/harbor that is at the center of the town’s charm.
That means the local citizenry are really paying in a communal sense for the basic administration of the town (the cost of the government mechanism itself), education, roads, seawalls, police, the fire department as well as some communal parks, recreation and senior/youth programs.
This whole endeavor is about a $54m annual exercise (approximately $3000 per person in the town). As with most local government in the USA, the town has limited ability to borrow, but is allowed to use bonds to fund major investments within strict limitations. Servicing of debt interest is not a major burden for the town as a result.
However, in the past three years the town has faced rising costs and falling revenues. Revenue is down as real-estate values have tumbled and there has been less money coming in from the State, which is facing its own deficit crisis.
The rise in costs is of great interest because its main driver has been increased costs of salaries, benefits and pensions for town employees – teachers, police officers, firefighters and government staff themselves. This is not much different from the “Wisconsin debate” or the austerity measures applied to public sector workers across Europe. The difference in Scituate is that no real action has been taken on these costs.
Therefore, in the past couple of years most expenditure lines have remained flat or increased, the contingency fund has been raided and a series of redundancies (most notably in local schools) has been used to fund rising employee costs. Unions seem to prefer to agree to job losses for the most recently recruited to protect benefits for longer serving staff, regardless of ability.
State law prohibits towns from raising local taxes by more than 2.5% per annum and so this year the town has run out of wriggle-room and is having to ask its people to pay an extra $2.2m per annum in taxes to balance the books.
And so a couple of weeks ago I found myself in one of the most remarkable political institutions that I have encountered – the US town meeting. At this event the local board of selectmen asked the townspeople of Scituate to approve the annual budget and to agree to put the $2.2m tax increase to a town-wide referendum to be held on May 7th.
This meeting highlighted some of the fundamental issues that all political and governing institutions (and their citizenry) face. About 700 of the town’s residents attended the meeting, bringing to mind the old saying that “decisions are made by those who show up.”
The meeting voted on a base budget of about $54m in about 30 minutes (and it only took that long because of procedure).
It then spent an equal amount of time on the “hot topic” of the $2.2m.
The hall then all but emptied as the motion to proceed with the referendum was overwhelmingly approved, but the meeting then continued to approve multiple millions of dollars of decisions that were embedded in the preciously approved $54m budget – for example $2.7m in “Community Preservation Projects”.
The debate on the extra $2.2m was fairly boisterous but it was clear that the “live within your means” brigade were significantly outnumbered. The town officials directly tied most of the tax increases to the jobs of schoolteachers, firefighters and police officers as well as a small amount to infrastructure. This well-known device maximizes the chances that people will vote for more taxes to protect their services. Had they ring-fenced the education/police/fire budgets and given the town the option to raise taxes to fund Community Preservation work, the outcome may have been different.
Because what’s amazing is that this extra $2.2m chunk of tax does not know that it is different from any other $2.2m in the base budget.
And so the way that this “base” budget, some twenty times bigger than the tax hike, was nodded through with little scrutiny should be a source of embarrassment to both officials and citizens alike.
It’s said that the main difference between markets and governments is that bad ideas and habits can survive a lot longer in government because there is no market action to destroy what does not work. A prime example of this is the inertia that comes with embedded or current spending. This is one of the main obstacles to helping people make the right choices about what services they want to collectively pay for if circumstances change.
For someone who has spent a large part of their life managing multimillion dollar budgets it was disappointing to see few of the base budget lines shrinking or disappearing. I am well aware of the differences between running a for-profit corporation and running the local services of a town – but it is clear to me that if people believe we have made “tough choices” in the past two years in Scituate, then we really are going to struggle as economic conditions continue to deteriorate – which they will.
As a great example of this, the selectmen admitted to a $54m unfunded retiree benefits liability (pensions and medical cover) that they have no idea how they will address. They have no plan to deal with it and don’t even have a “plan for a plan”. They have decided to set up a fund to begin to save for this and the princely sum of $14,000 was placed in it. The town officials consoled themselves by noting that this challenge faces other towns in the USA and Scituate is far from being badly off in relative terms.
In addition the town is going to have to spend millions of dollars over the coming years to repair and rebuild seawalls that protect only a small number of houses in the town. No-one wants to raise the question if this is a good use of town money if we cant afford teachers and firefighters – although I can imagine that waking away from these coastal defenses could lead to a lawsuit or two.
And there is no evidence yet of the town working with unions and large service providers to minimise costs and restructure contracts. A lot was said about “waiting for the State to make key decisions”. But this has not stopped other towns and cities (like Boston) from asking public workers to take a share of the austerity.
So here’s the issue. Even in a small town providing a very well defined range of services with transparent financials and highly participative democratic systems, we are still making a bit of a mess of things and are headed, full steam ahead, for the economic buffers.
We still gloss over the big spends and argue over the shiny, controversial, smaller new ones. Not unlike the way the US Federal government has a government shutdown crisis over a tiny proportion of what is spent, and seems unable to address the huge social security and health care spends.
Town officials still lack the skills, appetite and backing of the citizens to really get tough on costs and engage in the difficult debates with unions.
And as citizens we don’t help in that endeavor by forcing the tough choices onto the agenda.
In the end, it’s easier for both officials and citizenry to “extend and pretend”.
We cling to some slight modification of the status quo and hope that something will come along in the future to save the day.
It’s exactly what the Irish government is doing with its banking crisis. It’s exactly what the US government is doing with its debt crisis.
And it’s exactly what we are doing in the small, beautiful town of Scituate.
Either citizens have to take some courageous steps to change this now, or the circumstances of a crisis down stream will do it for us. Unfortunately I don’t believe that the business-as-usual systems and processes that we have in place can do it for us. They have been built for, and during, the good times and they cannot adapt to the bad times – as I said, in government bad ideas and poor choices can hang around unchanged for generations.
For the record, I can’t vote in the Scituate referendum on May 7th. Somehow the maxim of “no taxation without representation” doesn’t apply to me as a resident alien 🙁
If I had a vote, I would vote “YES” to increase taxes.
Despite my criticisms above, Scituate has historically been a relatively well-run town with comparatively low taxes. Relatively speaking, we are actually on ‘higher ground” than many other communities. And because I believe in pooling our resources for the public good, I believe that my town will need both spending cuts and tax increases to provide adequate services and balance budgets over the long term.
But I don’t believe that we can continue to just raise taxes and be done.
Elected and appointed officials are partly to blame for being soft on costs and for not forcing the debate on tough choices. But mainly we are to blame – after all it is our government.
UPDATE: The people of Scituate voted to raise taxes on Saturday 7th May. 38% of eligible voters turned out (remarkably high for this sort of exercise, but still disappointingly low really). The tax hike was passed by 2664 to 2391. This was a slim margin compared to the town meeting vote that created the ballot. In a non-binding vote on the same paper, the town voted 2731 to 1924 in favor of “asking” the town government for no more tax overrides in the next three years.