Archive for June, 2011

Local Governments Choose Bad Over Worse

June 28, 2011

By Stateside Associates

As state governments continue to deal with budget gaps, so too are the nation’s cities, counties and towns. Local governments’ fiscal concerns mirror what is going on in most states, with employee-related costs for health care coverage and pensions having the largest negative impact on the local government’s ability to fund.

Similar to the states, local governments are taking varied actions to help deal with these costs. Many are requiring employees to pay more for their health care or pensions. A number of cities and counties in California included referendums on the November 2010 ballots to cut public pension costs. In some cities, such as Huntington Beach, California, employees voluntarily agreed to pay more into their pensions to avoid cuts. However, for other local governments, funding pensions has become very difficult to accomplish. The Prichard, Alabama public pension fund ran out of money in 2009 and the city stopped sending checks to retired workers. This is an extreme example, but it shows how some localities must make substantial changes to their pension systems, or risk running out of money.

According to an analysis conducted by Professors Robert Novy-Marx (University of Rochester) and Joshua Rauh (Northwestern’s Kellogg School of Management), underfunded pensions for municipal and local government employees total $574 billion, which averages $14,000 per household. For residents of some large cities, the pension situation is worse. For example, New York City’s unfunded pension liabilities total nearly $39,000 per household. Cook County, Illinois Treasurer Maria Pappas announced June 21 that the debt carried by the various governing bodies within the county total $108 billion, with pension benefits totaling over $50 billon of that amount; $25 billion of that is unfunded pension liabilities. The debt load averages $63,525 per Chicago household and nearly $33,000 per suburban household.

Local governments in some states have asked for help from their state legislatures. June 13, the Rhode Island League of Cities and Towns requested legislation to revamp the rules for municipal pensions, in order to financially assist struggling local governments. In Florida, Governor Rick Scott (R) signed legislation that requires state and local government employees to contribute to their pensions. The Florida League of Cities supported the legislation and participated in the Governor’s bill signing ceremony on June 23.

In these times of tough fiscal conditions, as revenues for local governments are declining and funding from other sources disappearing, are local governments becoming more fiscally conservative? To deal with the shrinking revenues, many local governments have cut spending and instituted hiring freezes, furloughs and/or layoffs. It is estimated that local government job cuts in 2010 and 2011 will approach 500,000. Some localities are also privatizing services, and are looking for other innovative ways to save resources, such as sharing services with other local governments, or even consolidating government functions and/or local governments. The Rhode Island League of Cities and Towns has also requested legislation to make it easier for communities to enter into agreements to share services.

What about increasing revenue? It appears that more localities are looking for ways to reduce spending rather than looking for additional revenues. In an era of falling home prices, property tax-dependent localities are going to find filling deficits with tax increases a very hard sell.

If revenues continue to decline for localities, as predicted, what path will local governments choose? Will we see more requests of state legislators to provide regulatory relief? How long can localities be innovative in finding fiscal savings before they are forced to find ways to increase revenues?

Major Changes Ahead for NCSL

June 23, 2011

By Michael Behm, Senior Vice President

Since late 2010, a working group – most of you have probably never heard of it – composed of legislators and staff within the National Conference of State Legislatures (NCSL) has been considering dramatic changes to the nearly 36-year old organization of state legislatures.

Among the initial – but still unofficial – recommendations of NCSL’s Working Group on Committee Structure and Policy Development Process: Cancel the 2012 Spring Forum due to declining attendance numbers and realign NCSL’s policy positions with its core principles in order to advocate on a much smaller, more focused, policy agenda. While the Working Group plans to release and discuss its official recommendations later this summer at the Legislative Summit, August 8-11 in San Antonio, Texas, senior NCSL staff have recently been providing a preview of its considerations to a small number of legislative and government affairs audiences.

The Working Group’s efforts are a response to a series of legislative focus groups commissioned by NCSL’s Executive Committee and held over the last two years to scrutinize and improve NCSL’s policymaking process, to become more responsive to its state legislative constituents and increase legislator participation in NCSL.

The most immediate, visible change is the cancellation of the 2012 Spring Forum. According to staff, this decision was academic. The April timeframe in which it has been held during the last two years is horrible. Forty-one states were in session during the meeting this year; 38 states were in session during the 2010 meeting – resulting in poor attendance numbers and Standing Policy Committees failing to meet quorum requirements. Lengthy sessions lasting late into spring were once the exception, but they are now becoming the rule.

The Working Group did decide to return to a three meeting schedule in 2013, along with a Spring-like Forum, but the meeting will be rescheduled for a later date and will likely be re-oriented. All of that said, the decision has its risks. This is the first large seasonal forum that NCSL has ever cancelled and scratching any large event can send mixed signals about an officials Group’s health. NCSL and the other Groups all compete for private sector sponsorships and busy state policymakers. The face time with policymakers is a value proposition to the private sector and now there is one less meeting, which will create some grumbling. And one legislator mentioned to me that by taking an NCSL meeting out of the “seasonal rotation,” you risk losing those legislators and staff who have routinely attended the meeting in the past…possibly for good.

Aligning NCSL’s policymaking process with its core federalism principles regarding state flexibility, unfunded mandates and state sovereignty is the first serious effort in NCSL’s history to redesign the policymaking process and reduce NCSL’s overwhelming number of policy positions. The consequences of these changes will be much longer in term than the Spring Forum cancellation. By my count, the Group currently has over 190 policy positions. The Working Group concluded – but anyone could have – that the number of NCSL policies is now unwieldy as guidance for its federal lobbying efforts. Many policies conflict or are duplicative, some are now antiquated or otherwise irrelevant to NCSL’s mission and the sheer volume dilutes NCSL’s lobbying influence on the Hill, according to staff.

Add to that private sector and legislator concerns that some policymaking reflects individual ideological or political agendas, rather than serving a broad states’ agenda. Additionally, all of this policymaking demands a huge time commitment of the legislators during any one of the three NCSL meetings in which the Standing Policy Committees convene – time that many legislators believe could be better focused on developing a smaller, stronger group of advocacy positions, attending other, perhaps more valuable, issue sessions and networking with the attendees.

The question of how to achieve this realignment with the core principles is still a work in progress, according to staff. Empowering the Executive Committee with setting NCSL’s priorities at the beginning of each biennium, and directing the committees accordingly, is one preference of the Working Group, according to sources. More changes will necessarily affect the decision and policymaking process, the role of the Executive Committee and those rules associated with the General Business Meeting and perhaps another change to the Standing Policy Committee structure.

The Working Group has of yet been less than conclusive about changes or restructuring to the 12 Standing Policy Committees, according to staff. The current committee structure resulted from a 2002 consolidation of the Assembly on State Issues (ASI) and Assembly on Federal Issues (AFI) committees. Since that time, there are fewer policy committees and meetings, but many more policies. Legislators participating in the focus groups voiced concerns about less time to address emerging state and federal issues and “best practices,” along with an inability to more closely focus on obtaining grant deliverables for NCSL. The focus groups, I am told, voiced support for two-year Committee appointments to ensure that legislators are more knowledgeable about subject matter and committee process and to encourage member continuity. More will follow on the committee structure as the Working Group evaluates the number of Standing Policy Committees, their issue jurisdictions and respective policymaking role.

In the interests of disclosure, I am the Vice President of the Board of Directors of NCSL’s Foundation for State Legislatures. I can tell you that the Working Group is serious about its effort to improve NCSL for both its legislative members and private sector participants. I can also tell you that change of this sort likely has few fans or supporters – even among Working Group members – but it reflects the “new normal” in this climate of cash-strapped states and travel-restricted policymakers. And I also know that the Working Group is interested in your ideas about implementing this change – ideas that I can help you direct to the right NCSL staff or feed directly to the Working Group members. If you are interested in the list of Working Group members, please email or call me.

In the meantime, if NCSL is important to your government affairs program, these proposed changes should trigger several questions:

  • What can I do to adapt to this change and the loss of a significant meeting from the 2012 Groups schedule and where does my organization fit into these changes?
  • Will fewer meetings – even one – translate into a lesser ability to influence the process and build/nurture valuable legislative relationships?
  • Will I have new rules to learn when the policymaking processes change?
  • And where will I find more time to participate with NCSL “in-between” the meetings in order to ensure that the staff and legislators know me and respect the resources and expertise of my organization?

Democratic, Republican and Tea: How Three Parties Shaped the 2011 State Legislative Sessions

June 16, 2011

By Constance Campanella, President and CEO

Revolutions often turn sour for the revolutionaries – even in victory. It is one of the most powerful lessons of the American Revolution that the victors did not become the new dictators, but instead invested their success in a system that could empower and protect the citizenry.

With that American system came the alliances we have come to know as political parties and for most of the past 235 years, dozens of political parties have formed and fizzled, leaving just a couple in dominant roles nationwide.

While the Reform, Libertarian, Green and many other parties failed to root themselves sufficiently to gain real power and success, the Tea Party has proven to be the most potent, non-party entity in American politics – perhaps on par with the Suffragates at the turn of the 20th Century or the civil rights movement of the 1960’s.

Less a political party than a political movement, the Tea Party reached its apex of power on November 4, 2010. As a result, the proximate beneficiary of Tea Party enthusiasm – the Republican Party — claimed the U.S. House of Representatives, 29 Governorships, 56 State Legislative bodies and 24 State Attorneys General offices – a history-making bounty of political power.

In 2011, the victorious Tea Partiers, allied Republicans and even a few Democrats set to work in the states to confront high taxes, stagnant business climates, high unemployment and depressed revenue streams.

And, there was a welcome mat of sorts as state lawmakers across the U.S. showed respect for a movement that swept almost 800 new Republicans into office in 2010. If Tea Party was the wave, incumbents were trying to learn how to ride it and not drown under it.

But, almost immediately, state lobbyists began to voice their frustration with this new cohort – a combination of fiscal hawks, libertarians and conservative social issue devotees. While industry lobbyists generally prefer Republican control, this new group was not exactly what they expected.

More zealous and less tolerant of “go along, get along” tactics, the Tea Partiers immediately began to flex their muscles both at Democrats and at fellow Republicans deemed to be “moderates.” Willing to shut governments down, slash budgets and confront public sector labor unions, the Tea Party lawmakers acted on their agendas with speed, focus and ferocity that unnerved the traditional players. They were not just freshmen, they were freshmen on a mission.

Further complicating their transition from activists to lawmakers, was the adoption of non-fiscal issues by Tea Party lawmakers such as illegal immigration and school vouchers. Some even regard Tea Party support for nationwide efforts to reign in excessive public sector union contracts as a departure from the core agenda. Others see it as an essential component of fiscal discipline.

While not part of the Tea Party (T.E.A. – Taxed Enough Already) core agenda, these other issues do reflect the core conservatism that most Tea Partiers embrace.

But, it is the fiscal agenda that has defined the Tea Party influence in 2011. In state after state, the Tea Party legislators – deft in both social networking and media relations – kept stoking the constituency that elected them. They formed Tea Party caucuses and co-opted the Republican leadership and agendas.

The Tea Party 2011 Rollercoaster

In the Texas legislature, where Democrats have been relegated to positions behind the backbench, Tea Party legislators prevented a raid on the Rainy Day fund, pushing government budget cuts instead to close the $27 billion budget gap. That Rainy Day fund was raided in 2003 and 2005 under the same Republican Governor.

In Arizona, many conservative elected officials and candidates gravitated to the Tea Party. State Senator Russell Pearce (of S.B. 1070 fame) successfully campaigned for many candidates utilizing the illegal immigration issue to its fullest. Most of his candidates won giving the GOP a huge 21-9 advantage over Democrats in Arizona’s Senate. Pearce was elected President of the Senate by his Republican caucus last November, and immediately declared his legislative body “the Tea Party Senate”. Tea Party activists held demonstrations at the Arizona state capitol during the 2011 legislative session encouraging the Republican controlled legislature to make massive cuts in state government. Due to Arizona’s historical budget deficit, the legislature and GOP governor passed an $8.3 billion budget that included cuts of more than $1 billion in education and Medicaid programs – with the Tea Party cheering them on.

Now, Senator Pearce faces the prospect of a recall election that is within 1,700 signatures of becoming a reality.

In Minnesota, Tea Party supported lawmakers comprise more than half of the Republican majority in the Senate and nearly half of the majority in the House. First term Governor Mark Dayton (D) has taken to calling his opponents “extreme right-wing caucus members” who do not know how government works. A government shut down will occur on July 1 if the sides cannot compromise on a new two-year budget by closing a $5 billion budget gap. Observers insist that unlike the 2005 shut down under then-Governor Tim Pawlenty (R) – the partisan fervor is likely to make this event longer and more harmful.

Wisconsin and Florida Governors – Scott Walker and Rick Scott – both vocal and enthusiastic Tea Party supporters – have seen their public polling numbers nose dive, despite winning large portions of the Tea Party agenda in their first few months in office.

Also in Wisconsin, six Republican Senators face recall elections along with three Democratic Senators – a reaction to the protests that occurred in Madison in February when Democratic Senators fled the Capital to thwart Republican efforts to reform public sector compensation.

In Virginia, which holds legislative elections in 2011, observers credit the Tea Party with strengthening Republican commitment to core conservative values as the Old Dominion continues to behave as a swing state.

Next?

About 20 state legislatures remain in session in 2011, so more Tea Party-fueled events are likely before year end. But, the real test of enduring power will come in 2013, following the 2012 elections. If Tea Party-supporters again triumph and claim more and bigger majorities, this political movement may yet become what its name implies.

Discussion

What evidence have you seen that the Tea Party is either here to stay or not likely to be long lived?

Do you think the Tea Party movement will morph into a true third party or remain as a prod to the Republicans to stay on the conservative path?

Is the Tea Party likely to stretch into more issues? If so, can it keep itself focused with the same intensity as was seen in 2009-2011?

I would like to extend my thanks to friends and colleagues in the states who provided information and perspective for this blog. Some chose to remain anonymous, but special thanks to Chris Herstam of Lewis & Roca in Phoenix, Rob Jones of Alliance Group Ltd in Richmond, Lisa Ard of Cornerstone Strategy Group in Tallahassee and Jim Daughton of Metz, Husband and Daughton in Tallahassee, Jeremey Shepherd of Martin Schreiber Associates in Madison and Phil McFarren of the McFarren Group in Harrisburg for their thoughtful perspectives. – CC


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