1) Reinvent Public Service Delivery.

The goal here is to reverse the downward spiral forcing governments to borrow more and more expensively. To begin an upward spiral, these four short-term tactics being employed should be adapted so they serve as steps to creating a new social contract.

a) Increase taxes. Most notably doubling Illinois’ income tax in early 2011 has pushed increases close to their limit. Raising it again -- even to avoid default -- will turn out the Governor and the Assembly’s leadership. Since we will need new taxes to balance our fiscal houses, they must be proposed as part of a new deal… which, we point out, will be a tough sale.

b) Increasing user fees also has limits. This two-decade trend has escalated in recent years as property tax revenues dropped. These fees are acceptable to the public because requiring a fee for an un-common service seems fair. But government provides many long-term services that the users cannot contribute enough to sustain.

c) Cut budgets. These mostly reduce services; instead of improving what is left. Not surprisingly, taxpayers do not like tax increases when they are also enduring service cuts. No one likes to pay more for less.

d) Reinvent services within the budget cycle. This is easiest done through privatization. But similar to most other forms of reinvention, this process must be continuous and outside of the budget fracas so multi-year savings can be reinvested for future service improvements.

Since all the above methods in Phase 1 are short-term, our task is to convince taxpayers to make mid-term future investments.

We believe the key is to shape a Sustainable Deal.

Part 1 of this series, “Chicago-ism” looks at today’s most high-profile rendition of Reinventing Public Services. Chicago has the biggest challenges. More important, Rahm Emanuel’s campaign introduced the concept of fiscal sustainability and we will review its progress.

Related and in more depth, Part 3 explores reforming Tax Increment Financing (TIF) so it becomes the primary economic development tool for neighborhoods and can be guided by a sustainable deal. Also important, TIFs test the notion of taxpayer’s long-term Return-On-Investment (ROI). ROI becomes very important in persuading the public that new taxes will return a good value to the public.

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