Last November, newspaper headlines focused on the changing control of Congress. But those who watch local government paid particular attention to what happened in San Diego. San Diego citizens resoundingly voted to grant their new (and newly) strong mayor, Jerry Sanders, the right to (1) reform public employee pensions and (2) competitively procure city services. In so doing, they signaled that it is still possible in large cities for the general taxpayer to win out over well organized special interests.
Over the last decade, San Diego officials betrayed the public's trust by approving unfunded public employee pension increases and protecting bureaucratic monopolies from the private sector competition that increases productivity. These twin blows caused a pension deficit of at least $1.43 billion, expensive (and reduced) city services, and, ultimately, a suspension of the city's credit. The decay of the city's credit rating punctuated two decades in which ordinary taxpayers have been no match for organized special interests. Across the country, these interests have convinced local or state legislative bodies to provide unaffordable benefits, protect government monopolies and create public subsidies to private players.
In many cities, the numerator of "public employee" costs has increased much more rapidly than the often stagnant denominator of "city taxable wealth." In San Diego -- and Houston three years ago -- ever-aggressive property and local income-tax redistribution could not match increased pension commitments, provoking fiscal crisis.
In response, San Diego voters approved two separate initiatives. One ends defined-benefit public employee pension abuses and the other allows the mayor to engage in competitive outsourcing in much the same model that helped the city of Indianapolis save $450 million a decade ago. This second hotly contested referendum simply allows the mayor to consider private competition as a means of increasing productivity in the delivery of city services. These measures will help average taxpayers, many of whom are poor, protect themselves from powerful, self-interested groups intent on using local and state legislation to immunize themselves against market forces.
Across the country, the fight for democratic accountability -- for tax, spending and regulatory policies that set a good foundation for job growth -- is taking center stage. In cities, poorer citizens have less mobility and find themselves the primary victims of unaffordable spending commitments, impractical regulatory regimes and job-killing tax increases. Nevertheless, recent events have shown that when transparency combines with an open forum -- whether referendum or well-publicized city council action -- democracy can produce accountability.
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