Cut the Cities Some Slack

Pietro S. Nivola
Pietro Nivola
Pietro S. Nivola Former Brookings Expert

June 20, 2003

As the fiscal crisis in California and in other state and local governments worsens, hard-pressed communities again are contemplating tax increases or cuts in basic services — actions that, either way, are likely to run more households and businesses out of town. In the face of this distress, many local officials as well as policy wonks in Washington are clamoring for the standard solution: more federal aid.

But maybe, this time, the federal government ought to add another remedy — namely, real relief from federal rules and rulings that tie local finances in knots. It would take a book, not just a short article, to list the national commandments that claim significant municipal resources, but consider just a few examples.

Environmental regulations have required localities to spend tens of billions of dollars building and operating new waste water treatment facilities. While the price tags of these projects have escalated sharply since the 1970s, federal co-payments to help defray the cost have dwindled. Quite a few cities probably shouldn’t be forced to install state-of-the-art secondary treatment plants at all. The most elaborate installations may be essential for landlocked cities, but not at many seaports where ocean tides automatically help flush away excess organic residues. The U.S. Environmental Protection Agency could grant more waivers in places like these.

More than 80,000 acres of brownfields blight American cities, costing them billions of dollars in lost property tax revenues. The specter of legal liability over potentially toxic waste on these sites frequently discourages their redevelopment. In some instances, the standards for cleaning up contaminated sites are simply unreasonable. Federal courts should not have to entertain interminable litigation over cleanup projects where (as defendants in some actual cases established) the soil is already so safe that it would not even harm someone who might eat samples of it daily over several months.

Environmental policies are not the only regulatory activities that have placed unexpected burdens on local governments. Federal laws have had the admirable aim of promising persons with physical impairments “fair and just access” to public facilities. But the same laws also extended almost no financial support to municipalities that have to provide these special accommodations. As a result, this well-intended directive has posed budgetary challenges for a number of fiscally troubled cities. From the outset, lawmakers on Capitol Hill underestimated the cost of the extensive task they mandated.

As Washington increasingly delves into education policy, local public school systems have had to contend with a profusion of federal prescriptions. One of them, mandating special educational services for the learning disabled, has become all but unaffordable. Congress has never come close to funding the authorized federal share of this $50 billion annual expense. Year after year, the tab falls lopsidedly to the states and localities. The impact on city schools, where the percentages of special education students are high and the means to sustain them low, is especially onerous.

To be sure, these sorts of fiscal millstones are an old story. Mayors and governors complained about unfunded mandates in the early 1990s, when, like now, the U.S. economy was sluggish and local budgetary pressures mounted. Congress eventually responded by passing legislation that would supposedly constrain the congressional habit of heaping expensive obligations on state and local authorities without providing the funds to help them comply.

The mild attempt at self-restraint, however, hasn’t sufficed. For one thing, most existing legislated mandates are grandfathered, and new ones continue to be enacted. For another, a prodigious source of strictures and sanctions on local governments — litigants obtaining broad decrees from the federal judiciary — remains active.

So cities have labored under court orders that micromanage racial balances in schools, the capacity of city sewers, the operation of city jails, the instruction of learning disabled kids, the recruitment of police and firefighters, the seating of passengers on public buses, and much more. Whatever the merits of these edicts, at times their fiscal implications should give pause.

Amid economic woes and deepening deficits, states and cities presently have their hands full paying big unanticipated bills — for essentials like homeland security. New York City had to spend as much as an additional $5 million a week on security during the recent Code Orange.

Policy-makers at the national level could lend assistance, not just by shoveling more money into local budgets but also by judiciously disencumbering them.