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

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

Today’s Presentation • Background & context for each city • Both stressed, but in fundamental different fiscal

positions • Lessons learned • Implications for New England cities & towns

San Bernardino

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…

Baltimore

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.]

Why?

Fundamental differences • Come at this with humility in

observations • Combination of factors • Still may be additional ingredients to

the “secret sauce”

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

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

Political Culture

Political Culture San Bernardino

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)

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

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)

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

QUESTIONS? OBSERVATIONS? DISCUSSION

Michael Lawson Independent Researcher and Consultant George Mason University Fiscal Sustainability Project mlawson2003@gmail.com 202.543.3437