Category 3 – External, Political
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Public Unwillingness to Pay Taxes
Contributed by Mark A. Glaser and Corinne Bannon, Wichita State University
Citizens may be increasingly unwilling to accept responsibility for the well-being of community and retreat into self-interest. Citizens who have retreated into self-interest:
- Are less likely to trust government and are unwilling taxpayers
- Tend to see government performance in a negative light
- Are less likely to join with government to co-produce community improvement
- Are more likely to make demands on government that exceed willingness to pay
Government should provide leadership that promotes symbiotic relationships between community and government. Symbiosis occurs when citizens are willing to join with government to define public concerns and to develop solutions where public and community resources are applied collaboratively. Research indicates that issues of community, trust, and willingness to pay taxes are intertwined.
Building a symbiotic relationship hinges on four issues: relational community, demonstrated trust, performance-based trust, and socio-geographic community. More about how to enhance each of these is presented below in descending order of importance.
Relational community is the extent to which both citizens and government are willing to: (1) rise above self-interest and do what is best for the community, (2) act in ways that promote sustainable community and that preserve the future, and (3) advance social equity by creating opportunity for all members of the community. When citizens believe that they and other community members are willing to put community interest above self-interest and contribute to a relational community they are considered “attached” to the community. Research shows that the vast majority of citizens expect government to lead in building stronger communities and improved quality of life – or, in other words, create relational community. Research also indicates that citizens who are attached to community are more likely to see government in a positive light, including positive images of performance, and are more willing taxpayers. Below are a few points on how to build relational community:
- Government should practice the behavior that it expects from citizens. When public agencies respond to the demands of narrow bands of self-interest they create more of the same.
- Public agencies who involve citizens in the development of a community-based rather than a government-based strategic agenda have the authority granted by citizens to reject demands made by those who are driven by narrow self-interest.
- Relational community can have a reciprocal relationship with demonstrated trust. Work on demonstrated trust may help build a relational community.
Demonstrated Trust and Citizen Engagement
Citizens should be involved in strategic budget decisions and government should articulate how it intends to invest public dollars and should demonstrate that it has invested public dollars as planned. Demonstrated trust focuses on measures of process. Research indicates that citizens who believe that government demonstrates that it can be trusted are much more willing taxpayers in support of public investment. Below is advice for improving demonstrated trust.
- Citizen engagement processes should inform and encourage citizens to evaluate their basic values and priorities. Citizens who are informed through engagement processes that incrementally build understanding can become competent advisors to government.
- It is important that the media be involved and informed, much like citizens, in community-building processes.
- Research finds that relational community and demonstrated trust go hand-in-hand. When government demonstrates that it can be trusted it strengthens commitment to relational community.
- Government should continuously demonstrate that it can be trusted.
Performance-Based Trust and Citizen Engagement
Performance-based trust is the extent to which citizens feel that the investment of tax dollars produces desired outcomes. Citizens’ images of the performance of government are driven by an amalgamation of experiences including media reports. Research reveals that citizens who feel that government has earned performance-based trust are more willing taxpayers. Some points for building performance-based trust include:
- Government credibility is advanced when it shows connections between the investment of public dollars and positive community outcomes.
- Research indicates that there is a moderate to strong connection between performance-based and demonstrated trust in the minds of citizens, and a moderate connection between performance-based trust and relational community. Hence, improving these aspects of the symbiotic relationship will have reciprocal impacts on performance-based trust.
Socio-Geographic Community: Neighborhood
Citizens who are attached to neighborhood are more willing to join with neighbors and local government to co-produce improved neighborhoods. Points to bear in mind when seeking to build socio-geographic community include:
- Neighborhoods can form the building blocks of community if their actions are tied to an overarching community agenda.
- However, neighborhoods can also fragment the community and encourage civic isolation if not weaved into wider community strategy.
Decline in Intergovernmental Revenue
Revenue shared with local governments by the state/provincial or federal government may decline as priorities at the state or federal level change or as fiscal stress at these levels trickles down. Local government with high reliance on shared revenues may be particularly vulnerable to this cause of fiscal distress.
- Direct intergovernmental revenue to non-operating purposes. Consider using intergovernmental revenue to finance capital improvements (assuming the operating and maintenance costs can be financed in the operating budget). This way, operating programs will not experience immediate disruptions from declines in intergovernmental revenues.
- Adopt a policy to limit operational use of intergovernmental revenues. Set a policy to only fund a defined percent of your operations. This will limit the damage from declines in intergovernmental revenues and interruptions in service levels.
- Adopt a policy to govern the acceptance of grants. Grants require matching funds and may result in an ongoing program that the government has to fund when the grant ends. Consider a policy that limits the available funds for matching requirements, requires a multi-year pro forma of the financial impact of the grant program, and that requires a careful analysis of a potential grant’s ability to further the organization’s overall goals and priorities.
- Provide frequent and detailed information to state and federal officials. Ensure that state and federal representatives are armed with facts on the impact of actions taken at those levels on local government, particularly regarding shared revenues, grant programs, contracts for service, and unfunded mandates.
Ineffective Communication with the Public
Contributed by James Garnett
Failing to get direction and muster support from key constituencies can cause fiscal distress. Failure to listen to citizen feedback about the kind of community they want including – the appropriate mix of taxes and services, and the kind and quality of services demanded – can also create a downward spiral with growing unwillingness to fund services. Failure to inform and educate citizens about the importance of government services reduces public support when cuts are threatened.
- Bring your public information officer or other communication professional into the loop so he or she can help devise strategy for communicating about financial problems or actions. This usually requires explaining any financial complexities in basic ways that can then be conveyed to the public or other stakeholders.
- Rally support of your stakeholders by arming them with information about the implications of fiscal stress and potential cuts. Clients of your services and other key stakeholders need information and encouragement to support your cause in policy arenas. Do this carefully to avoid being seen as maverick or too political.
- Communicate with peer agencies or professional associations since these can be sources of cost-saving innovations or lead to direct interagency cooperation. Professional associations can also offer impartial guidance and a credible forum for discussion of the issues.
Use a citizen survey to find out what the public's highest priorities and most valued services are. A survey can also reveal citizens' perceptions of the value they get from local government for their tax dollar. This information can be used to better align the services provided with what citizens most want.Best Practices:
Interest groups can push for new services or expenditures that benefit a relatively narrow segment of constituents and can resist reductions to favored programs. Therefore, interest groups can cause government to take on additional expenditures that do not benefit a broad constituency when times are good and constrain managerial flexibility when times are bad.
- Strategic planning that engages the community. A strategic plan can be used to get clear priorities for the government. When the public is fully engaged in the development of the plan, it becomes a community plan rather than a “city,” “county,” or “district” plan. It is easier for government leaders to resist interest group pressure when the strategic plan and priorities have this kind of democratic legitimacy. Best Resources:
- Centralization. Interest groups can flourish when there are multiple centers of power that they can access to advocate for their favored policies. Centralizing power may help curtail interest group access to resources.
- Formalize access. Create a formalized process for interest groups and especially those seeking funding to access the government entity. An annual grant application process can reduce the numerous appeals for money throughout the year and provide a structure to which officials can refer applicants.
- Gather data on citizen preferences. The availability of hard data on citizen preferences (as from a citizen survey) can be used to counter special interests. Best Resources:
Decline in Local Fiscal Autonomy
State laws or other legislation can place a variety of constraints on local government revenue options. Declining local fiscal autonomy limits a government’s ability to respond to increasing service demands.
- Priority-driven, revenue-driven budgeting. In an environment of severe fiscal constraint, governments need a budgeting process that is designed to help government live within its means. In such an environment, a budget process should focus on the revenues available (rather than last year’s expenditures) and direct revenues to fund the services that have the greatest positive impact on the community’s goals. This kind of budget process identifies the highest priority services and directs limited funding to those and cuts or reduces the rest. Best Resources:
- Pursue home rule or other legislative exemptions. Home rule status can confer additional authority to levy taxes or raise fees. However, changing legal status often requires public approval and the public should be confident that the change in status and, in particular, any new taxes or fees will be used to provide services that are valued by the community. Legislative exemptions may also be possible for a tax to fund a specific purpose or if the tax has benefits across multiple jurisdictions. Best Resources:
- Know the rules. Carefully evaluate all assumptions about legislative restrictions and conduct a detailed review of local ordinances to determine if there are revenue sources currently untapped or artificially constrained. Occasionally state and federal laws and regulations have changed or case law has altered their interpretation allowing for new access to previously denied sources. Alternatively, these changes may have created new liabilities for governments that have not updated their compliance.
- Earmarked new revenues. If there is an option to place a new tax or fee on the ballot, citizens may be more supportive of the initiative if the revenue is earmarked for a specific purpose that they like.
- Payments in lieu of taxes (PILOTs). The government could investigate forming agreements with tax-exempt properties to compensate government for the cost of the services provided.
State/provincial or federal government can impose service requirements on local government without a corresponding allocation of resources. Mandated activities can add to the budget and constrain flexibility.
- Understand what is really required. Often activities (and expenses) build up around a mandate – activities which may not actually be required by the letter of the law. Take a close look at the actual wording of the mandate to understand what actually is required and what flexibility is available and check on how other jurisdictions are implementing the mandate. A better understanding may make it possible to cut activities that are not actually required or design more cost-effective ways to fulfill the mandate. Consider creating and empowering an oversight group to examine mandates. Do not include people whose jobs are directly connected with the mandate as part of the review group.
- See if the mandate can be changed. It may be possible to change the requirements of legislation to achieve the underlying public policy goal without prescribing particular processes. Look carefully at the intended outcome of the mandate to determine if another methodology can be used to achieve the same results. This is most practical for mandates at the local level (i.e., in an ordinance or charter), but may also be possible for mandates at the state level.
- Chartering or opting out. It may be possible to deliver a service in a different way, such that a mandate no longer applies. For example, nursing homes run by local governments are subject to different restrictions and rules than private providers. Hence, turning over a nursing home to a private provider may have a financial benefit.
Reduced Demand for Service
When the demand for public services decreases, government cost structures are often inflexible and may not be easily downscaled. A decline in school-age population may leave a district with excess personnel and facilities. A state government’s grant program to local governments may shrink as the state’s focus shifts to other policy issues. However, local government may be left with fixed costs in personnel and equipment, as well as local demand and clientele created by the service.
- Priority-based budgeting. Use a budget process that identifies the highest priorities of the public and that then directs funding to those programs that have the greatest impact on the community’s priorities. Best Resources:
- Use measures of demand in budgeting. Performance measures can help indicate if demand for a service is going up or down. For example, number or dollar volume of permits issued, number of calls for service, or number of participants in a recreation program indicate demand levels. Areas of decreasing demand are candidates for cut-back.
- Shared services with other governments. Look to combine resources with other agencies to maintain economies of scale. Best Resources:
- Diversify programs, clients, or constituents. It may be possible to serve different segments of the population to compensate for a loss in demand from others. For instance, a decreasing youth population may call for recreation and library services to focus more on seniors. An economic development department facing less demand in a recession from new business looking to come to the community might shift its attention to retaining the businesses already established there.
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