This article is from Cal-Tax Digest, published
by the California Taxpayers' Association.
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All over the U.S. city governments are in financial difficulties. Their costs rise; their tax bases shrink. As the cities raise taxes to support the poor, the middle class leaves. As the middle class leaves, the sources of revenue also leave.

The end will doubtless be that the federal government will assume a greater share of local costs, certainly most of the cost of welfare, the biggest item in most municipal expense budgets, plus a larger share of the cost of education and health services. These items are 1, 2, 3 in New York City's costs, representing in this fiscal year $3,888,000,000 out of a total of $7,709,000,000 or almost exactly 50%. In the other half of New York City's budget is included the sum of $1,325,000,000 for debt service and pensions, some of which can also be attributed to welfare, education and health.

But it doesn't seem likely that the U.S. will pick up the whole tab for any service, nor is Congress in a big hurry. The cities will probably have to meet rising costs for many years to come. What with inflation, union demands and rising expectations, we can assume that if city costs in New York and elsewhere are not reined, they will continue to rise almost everywhere by from 10% to 20 % per year, compounded.

Can the cost increases be controlled while we wait for the Feds to take over? Probably, but it won't be easy, and we should expect the shrillest objections. After all, 60% of the budget represents payroll. But municipal cost cutting might be achieved in several ways:

Privatization. This can be complete or partial. A good example might be refuse collection. It costs the City of New York $49.50 to collect a ton of refuse. Private collectors make a profit at $17.50 a ton. A study produced by the City Administrator in November 1970, never released by the city, disclosed that each private sanitation employee represents the collection of 3.3 times as much refuse as his city-employed counterpart. If it chose not to close its sanitation department, which costs $250 million a year, the city could close parts of it, such as the service it provides to non-tax-paying buildings. Or it could take bids on its more costly or more wasteful services. It could then eliminate part of its erroneous supervising bureaucracy.

Health and hospital services cost New York City $687 million. Yet throughout the U.S. there is probably no public institution that volunteers are more willing and able to run on a private, non-profit basis. Local boards of laymen and physicians have not needed the huge bureaucracies that afflict public hospital systems and that don't produce better medical care.

A recent estimate by a physician who has served at three New York City municipal hospitals is that 30% of the pertained don't need to be kept in hospitals. Typically, the city keeps a patient in a hospital at a costs of $700 a week who could be taken care of at home for $150 a week. The average stay in a New York City municipal hospital is twice as long as that in a voluntary hospital. If the city is to continue to operate hospitals it should collect all the money available to it from Blue Cross, Blue Shield, Medicaid, Medicare and various insurance and reimbursements programs. In that case it should not need additional municipal subsidy.

An approach to cutting health-care costs might be to give away hospitals that qualified medical schools or trustees are prepared to operate, eliminate marginal or high-cost hospitals, establish ambulatory medical treatment and diagnostic centers for provision of fully reimbursable medical services, centralize facilities and staff for high-cost or specialized services and establish tight control to avoid or end unnecessary hospital treatment.

Once the decision is made to "privatize" wherever greater efficiency is available hundred of opportunities will be found. Among them: clerical services, including city payroll and welfare check management, perhaps by opening neighborhood bank accounts for recipients; municipal reference publishing, including, in New York City, such items as the Official Directory and City Record; supervision of public works construction; building and housing inspection; management of municipal loan programs through savings banks or mortgage brokers.

The basis for privatization is that public employees today are on the whole better paid, receive very much larger fringe benefits, and are less productive than private employees.

Eliminate Municipal Functions. Not less than 25,000 employees ($250 million) could be dropped if New York City didn't have to employ welfare investigators and their back-up office people. Every year 40% of them quit anyway and have to be replaced at great expense. The same function could be served by either a different intake procedure or a law that tied relief to the income tax system. No one seriously believes investigators are able to do "case work" even if case work were still relevant under today's slum conditions.

Eliminate Unnecessary Bureaucracy. A characteristic of government is excessive centralization of decision making. Reorganization almost always takes the from of adding additional staff or layers of staff, and decisions are always kicked up to the highest possible level. This is basically because elected officials are not prepared to accept the consequences of low-level, line or field decisions and the lower-level people don't want to be second guessed. It has been found better to do nothing than to do something.

Probably the biggest chunk of unnecessary municipal bureaucracy can be found in school systems. The average private school works fairly well with one headmaster. The big city school system often reduces its principals to senior clerks, imposing upon them layers of assistant superintendents, associate superintendents, specialists and supervisors. When New York City recently set up 31 separate school districts, the first effect was to add 1,500 supervisory employees at the district level.

Similar, if not such enormous, savings opportunities could be found in every branch and agency of government. But it would require the adoption of a management philosophy more nearly like that of the best-run private businesses, requiring responsibility to be taken at the lowest level where it can reasonably be taken. The middle bureaucracy levels and staff must be kept lean.

Analysis of Tasks, Methods, Systems, and Assignment of Personnel. An old "rule" of management is that it is "always" took 10 men to do a job, nine men could do it better. The rule can be applied to police squads, fire stations, sanitation garages or street repair gangs. It would be hard to find a situation where it doesn't work.

When the late Stanley Isaacs was borough president of Manhattan in the administration of Fiorello LaGuardia, he observed that a street repair crew consisted of seven men. Six did the work and the seventh goofed off. He reduced the crew to six. Then five did the work and the sixth goofed off. To scoffers, Mr. Isaacs replied, "Okay, But anyway you look at it, it's a 14% reduction in cost."

He was also fond of saying to fellow liberals, "Waste is never progressive."

The thrust must be to obtain more production within the available time or for the same cost. No matter how productively he uses the rest of his time, should a college professor getting $30,000 plus several thousand dollars worth of fringe benefits a year be allowed to teach only six classroom hours a week? Under some conditions 20 or even more might not be excessive. In the higher education system of New York City, savings of tens of millions could be achieved by requiring more production.

A city may establish high qualifications for building inspectors who can make judgements on construction when, in fact, almost off of the work is for housing violations of a sanitary nature. Any intelligent high school student could do this work with two weeks training and some field experience with an instructor.

The whole concept of appropriate manning is relatively unknown in the civil service. Most manning is based on tradition or rule of thumb. It is not uncommon for government agencies to set up a table of organization before even deciding on the precise program to be carried out. It becomes the responsibility of those hired to define their own "duties."

Most governmental organization studies, even of the Hoover Commission type, take a macro view. What is also needed is an examination of the details. Could not some clerical workers in parks, taxation or highways, as examples, be shifted during their off seasons to departments where more clerical workers are required? Are there city services that are no longer necessary or that duplicate those of state or federal governments?

Are there better ways to read water meters, fix potholes, keep vital records? If no-fault automobile insurance were adopted, would it reduce the work, and possibly the cost, of civil courts by as much as 50%?

Relief From Past Mistakes. The municipal unions have demonstrated their ability to cause city officials to meet any demands they have the nerve to ask for. It is unlikely that city officials, who by and large depend on municipal unions and their families as part of their political combination, will act to avoid union exactions. Hard pressed cities will have to hope for some stiffening by governors and legislators. Legislatures could be asked to change or suspend certain unproductive fringe benefits or to restrict the bargaining right of cities or at least to require that all union agreements be ratified by the local legislative body so that responsibility is fixed.

It may be said that all of these ideas are unacceptable to politicians and, therefore, probably can't be adopted. But to reject them is to say that there is almost nothing the cities can do for themselves.