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After a three-month bombardment of horrible news about the District’s financial crisis, Washingtonians are finally breathing a sigh of relief. Every mayoral folly, every overspent dollar, and every bookkeeping shenanigan seems to have been exposed, and Congress, D.C. politicians, and Op-Ed writers have reached a cheerful consensus on how to save the city: install a financial control board.
Hill hearings and news accounts have touted the financial control board as D.C.’s miracle cure. Similar boards, after all, rescued New York City from insolvency in the mid- ’70s, performed CPR on Cleveland when it defaulted in the early ’80s, and revived Philadelphia when that city faced bankruptcy in 1991. So, according to the popular wisdom, a D.C. control board would wean the city from its profligate government, erase a mammoth deficit, liposuction the bloated payroll, restore Wall Street’s confidence in D.C.’s credit, and maybe even settle the baseball strike. A bill creating the board will probably zip through Congress before the end of March.
Rep. Thomas Davis (R-Va.), chairman of the House Subcommittee on the District, calls the board “good news.” D.C. Delegate Eleanor Holmes Norton has embraced the control board as the best way to save, and ultimately strengthen, home rule. And the General Accounting Office has issued panegyrics to the sublime powers of control boards.
Unfortunately, they may all be wrong. D.C.’s power brokers have not learned (or even considered) the lesson of Chelsea, Mass., the city whose turnaround Washington City Paper first described in December (see “Apocalypse When?,” 12/16/94). Like Chelsea, D.C. requires more help than a financial control board can give. D.C. requires a full-scale federal receivership. Here’s why:
Financial control boards, as you might expect, perform one task extremely well: They control finances. In New York, for example, the Emergency Financial Control Board smashed a huge deficit by forcing the city to shed 60,000 employees (20 percent of the work force) in the mid-’70s, and another 17,000 workers during the recession of 1981-82. In Philadelphia, the Pennsylvania Intergovernmental Cooperation Authority prodded municipal unions into accepting a wage freeze and benefit cuts, savings that helped yank the struggling city out of the red.
Make no mistake, the D.C. board would eliminate the city’s deficit and restore its credit rating—no matter how much it hurts District residents. If, as expected, the D.C. board follows the model set by other cities, it would order the city to cut hundreds of millions of dollars immediately, but let Barry and the council decide where to slash. Then, if the politicians fail, the board would seize the reins of government and perform the Draconian surgery on its own. The board might, for example, issue 5,000 pink slips, reduce wages 10 percent, and shut schools a month early.
But if boards excel at controlling finances, they’re much worse at reforming government. Ester Fuchs, director of the Barnard/Columbia Center for Leadership in Urban Policy and an expert on city fiscal crisis, says financial control boards focus too narrowly on the bottom line. “You can always balance the budget by cutting spending and reducing the work force,” Fuchs says, “but that does not mean you get good services. It just takes you further and further from substantive policy changes.”
And the D.C. government desperately needs substantive policy changes. Unlike New York, Philadelphia, and Cleveland, D.C. is not just broke, it is broken. Courts have found illegal, incompetent, and unconstitutional action in virtually every District agency and have issued orders to improve mental health care, juvenile justice, food stamp and welfare administration, homeless services, and conditions in every Department of Corrections facility (see “Guilty, Guilty, Guilty,” 3/25/94). Citing abuse of monumental proportions, enraged judges have also placed the entire Department of Public and Assisted Housing and the foster care system under the control of court-appointed receivers. The District Public School system spends more per student than almost any major school district in the nation, yet its pupils score at the bottom of every standardized test. The University of the District of Columbia (UDC) squanders more of its budget on administrative costs than any university in the country. And so on.
A financial control board—which would sit above the council, the mayor, and the mayor’s cabinet—can’t possibly dig deeply enough into the bureaucracy to correct these awful city services. “A financial control board is too far away to diagnose where the ills are. You need people who are able to get inside the agency intensely,” says Michael Spence, the receiver of Chelsea, Mass. “Unless you touch and feel and smell, it is hard to know where the money is being blown away.”
But a receivership could solve D.C.’s fiscal crisis and also repair its nonfunctioning government. Under a receivership, Congress would temporarily abolish home rule, fire the mayor and the council, and invest a single person with all legislative and executive authority. After a five-to-seven-year term, this receiver would withdraw and Washingtonians would elect a new government.
If congressional leaders want to see proof that a receiver can reverse a city’s decline, they should travel north of Boston to Chelsea, an industrial suburb with a population of 30,000. In the late ’80s, Chelsea was wrestling with most of the same difficulties that D.C. is facing today: a soaring deficit ($10 million—25 percent of the budget), a shrinking tax base, high crime, government incompetence, and a shortage of tough-minded politicians. In 1991, with the city on the verge of bankruptcy, the Massachusetts legislature voided the city charter, canned the elected officials, and appointed a receiver with near-dictatorial powers. In his first year, the receiver performed the nasty fiscal surgery that a financial control board will do in Washington: He closed the budget gap by eliminating 150 city jobs (40 percent of the payroll), raising inspection fees, and hiking sewer taxes.
But unlike a control board, which would have disbanded once it balanced the books, the Chelsea receiver then spent two more years retooling the government. He enlisted a new police chief who instituted a community policing program. In a community that is more than 30 percent Latino, the receiver hired the first Latino cops and government clerks. He consolidated more than 30 city agencies into 15. He recruited new economic development projects that are bringing hundreds of jobs to Chelsea. And he appointed a panel of citizens to rewrite the city charter. The new charter replaces the old “strong mayor” government with a council and professional city manager. In late 1994, after just three years under the receiver’s thumb, Chelsea restored democracy by electing its new council and school board.
A receiver could perform the same magic in the District. Consider the troubled foster care system. A receiver could oust the incompetent bureaucrats, impose a new management system, and entirely restructure how the agency handles child services. A control board, by contrast, would simply reduce the foster care budget and let it muddle along.
Of course, neither Congress nor District officials have dared float the idea of a receivership for D.C. Revoking home rule—even temporarily—would enrage Washingtonians. Norton, Barry, and other D.C. politicians have warned that self-government must remain at least nominally intact. A receivership also terrifies congressional leaders because they know that it would force them to shoulder real responsibility for the city. By appointing a control board, Congress could take credit for its deep concern about the nation’s capital, yet still leave the mayor and council to do the RIFing and furloughing. Under a receivership, however, Congress and the receiver—the masters on the Hill—would be blamed for every hungry baby, underfunded school, or unemployment line.
It’s too bad Norton and her colleagues won’t even discuss the possibility of suspending home rule. A receivership would grant the people of Washington an opportunity that a financial control board can’t: the chance to build a government that actually serves citizens.