Consolidation, Cooperation Key to Reducing Government Spending

Consolidation and cooperation between the private and public sector will be key to reducing government spending as Sonoma County and others in the region face ballooning deficits that force layoffs and elimination of services, according to speakers at North Bay Leadership Council’s 2011 Economic Insights Conference held Thursday in Petaluma.

Sonoma County is dealing with a $44 million budget deficit in the next fiscal year, which will result in layoffs as well as cuts to community policing, homeless and veterans’ programs and other social services, along with public works.

But relying on the economy to get better or raising taxes won’t improve the situation because the system is, essentially, broken, according to Robert Eyler, chair of economics at Sonoma State University and director of the Center for Regional Economic Analysis.

Instead, local governments need to seek out partnerships with local companies and the nonprofit sector to figure out the best way to provide service while keeping costs low.

“Over time it’s got to be a cooperative, single vision effort rather than entitlement at all cost, where the union member believes that he is entitled to the job and the benefits, no matter what happens,” Eyler said. “We have to find a middle ground.”

Eyler urged local governments to consider four points when deciding whether to consolidate or outsource services.

• Will the return on investment for the acquiring organization be better if merged?
• Does doing so enable the local government to deal with market opportunities quicker?
• Does not merging or outsourcing prevent expanded capacity?
• Are local government assets undervalued?

In other words, local governments need to think more like businesses if they are to rein in costs and offer services to their constituents, Eyler said.

Some are already doing so, with good results.

For example, San Mateo County has only one planning commission, which has representatives of all 21 cities, saving the cities total of $3 million a year.

The South Bay city of Cupertino outsources police services to the Santa Clara Sheriff’s Office, totaling a savings of $4.8 million a year.

Eyler and other speakers said there are plenty of examples locally where consolidation should be at least considered, including combining government services for Rohnert Park and neighboring Cotati and merging San Anselmo and Fairfax fire departments.

“We need to think of this as a structural and cultural change,” Eyler said. “If we just cover the cracks in the short term, that structural problem will just show itself down the road.”

Another major cause of worry for local governments is unfunded pension liabilities, which are estimated at $400 million for Sonoma County, according to a 2010 study by the Stanford Institute for Economic Policy Search.

But it could be as high as $2 billion, considering that estimates are based on a 8 percent annual return on investments, which is much higher than the current rate, according to the study, overseen by Joe Nation, a professor of public policy at Stanford who also spoke at Thursday’s conference.

Nation, who represented Marin and Sonoma counties in the California State Assembly 2000-2006, said that pension reform will have to occur at the state level because California’s workers are represented by three statewide retirement systems such as California Public Employees Retirement System, California and the University of California Retirement System.

He said municipalities were not necessarily locked into pensions for the remainder of workers’ lives, but could be altered through a change in the state’s constitution.