'The Tip of the Spear'

As the following Wall Street Journal report, "Cities Rent Police, Janitors to Save Cash," suggests, politicians are discovering that there's only so much money to go around and they've got to do more with less. The obvious question, of course, is why weren't they thinking this way before the financial crisis struck?

Faced with a $118 million budget deficit, the city of San Jose, Calif., recently decided it could no longer afford its own janitors. So the city's budget called for dropping its custodial staff and hiring outside contractors to clean its city hall and airport, saving about $4 million.

To keep all its swimming pools open and staffed, the city is replacing some city workers with contractors.

"These are cases where the question is being asked, 'Is this a core service at the city level?' " said Michelle McGurk, senior policy adviser to the San Jose mayor.

After years of whittling staff and cutting back on services, towns and cities are now outsourcing some of the most basic functions of local government, from policing to trash collection. Services that cities can no longer afford to provide are being contracted to private vendors, counties or even neighboring towns.

The move saves cities budget-crushing costs of employee benefits like health insurance and retirement. Critics say contracting means giving up local control and personalized services.

Cities say they have little choice. Municipalities across the U.S. will face a projected shortfall of $56 to $86 billion between 2010 and 2012, according to a report from the National League of Cities.

"You can do across-the-board cuts for only so long," said Andrew Belknap, Western Regional Vice President for Management Partners, a government consulting group. "It's gone from the tactical cost cutting to get through a recession, to in some cases saying we have to exit that business or service altogether."

Maywood, a tiny city southeast of Los Angeles, is taking contracting to the extreme. The city of around 40,000 is letting go of its entire staff and contracting with outsiders to perform all city services. The city is disbanding its police force and handing public safety over to the Los Angeles County Sheriff. Its neighbor, the city of Bell, will take over running Maywood's City Hall.

Like many towns, Maywood is battling a budget deficit. But city officials said they were forced into the situation when the city's insurance carrier decided to cancel coverage because of the $21 million in legal expenses and judgments against the city stemming from the conduct of its police department. Without insurance, the city is barred from hiring employees who work directly for the city.

"We're on the cutting edge here. We're the tip of the spear," said Magdalena Prado, Maywood's community-relations officer, who works for the city as a contractor. Ms. Prado said she has gotten inquiries from cities across the country "wanting to know how this is going to play out. They're facing their own financial strains and looking to us as an example."

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Comments

[Kelly Huston]

there are many out there saying the bulls are back, but I cant see it.

The guy from FFT http://www.forecastfortomorrow.com/ftmembers is saying a bigger crash is coming late this year now. I hope he is wrong, but just cant ignore him as he called the last one back in 2008.

[Blurtman]

Can't they outsource this work to India?

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[Marion Shaw]

There is one major flaw in outsourcing or contracting
out jobs already held by American workers. It ultimate=
ly creates a new market for presumbably competitive
bidding, but in fact, it is a method to further
weaken the financial positions of Americans. Take the
military for instance inIraq. /the military used to
feed its own with its own labor. I hear from a reliable
source at one base, it costs fifty dollars a meal for
all personnel via the hands of the contractor. Absurd.
Municipal workers should be given a chance to take less
money for the same job getting ready to be contracted
out for less money. Most people would rather have
something than nothing, if that is the only option.

[Kevin M]

It reads as if the City of Maywood (CA) is engaging in a voluntary unincorportation. If there are no city offices or city services, there is no city.

Wonder how many other municipalities will go this route when pressed with few options.

[Econ Man]

We should outcource the whole government & all these stupid municipalities. Actually, just get rid of them all, period. Hallelujah!!!!!!!

[AMF]

The private sector has been outsourcing everything they can for many years now.
If it's good for the goose, it's good for the gander; let the government outsource just as long as it isn't offshored.
And the government workers get the same deal as private works got, some opportunities to work with the new outsourcer and reduce wages and benefits. If they don't like it, them maybe they can get the government to help protect citizens jobs be it private or goverment jobs. I didn't here one government employee give 2 sh*ts when my job was outsource and offshored.

[wolfie52]

I normally don't like the "contracting" out of jobs. It mostly about corporations hoping for a race to the bottom of the wage barrel.

However, I work for the USPS. We employee "custodians" in our buildings. The senior one in my office makes over $50,000/year + all the benefits of federal service: retirement, health care, up to 5 weeks vacation! I am amazed at this. This person spends hours a day chatting with co-workers or shuffling slowly around the building. I have had him corner me in the bathroom while I am in a hurry to get to my route and start asking me inane questions as if I have not a care in the world! His job could EASILY be contracted or filled by someone making about $25K/year and more (MUCH MORE) work would be done. Yet management tries to micro-manage those who are actually doing productive work and IGNORES this individual while he wastes away time!

[Michael]

"The senior one in my office makes over $50,000/year + all the benefits of federal service: retirement, health care, up to 5 weeks vacation! I am amazed at this."

Heavens! 50K Really? That's surprising?

It is to me but for a different reason- at just how little it is.

And 25K? You've got to be joking right? That's less than the minimum wage here - which also includes 4 weeks *paid* annual leave and 10 days *paid* sick leave. Did I mention the free basic health cover?

Your country is screwed. How is an economy supposed to run if everyone gets a below-poverty-level wage? Hint: it doesn't. It hasn't been either, it's just been surviving as a system of debt slavery wrapped in 'free market' stars and stripes vestments made of magically invisible silk ...

If you people supporting this massive cost cutting can't see how messed up your country has become, you only deserve the outcome headed your way. In this time of information availability there's no excuse to being so ignorant of your own interests.

(sorry to rant Michael, but how can someone read this site and so completely miss the point)

[MichaelN]

"And 25K? You've got to be joking right? That's less than the minimum wage here - which also includes 4 weeks *paid* annual leave and 10 days *paid* sick leave. Did I mention the free basic health cover?

Your country is screwed. How is an economy supposed to run if everyone gets a below-poverty-level wage? Hint: it doesn't. It hasn't been either, it's just been surviving as a system of debt slavery wrapped in 'free market' stars and stripes vestments made of magically invisible silk ...

If you people supporting this massive cost cutting can't see how messed up your country has become, you only deserve the outcome headed your way. In this time of information availability there's no excuse to being so ignorant of your own interests."

I had to reply to this inane comment from "Michael."

Why? Because $25,000 per year, with the type of benefits that you are describing, is NOT "minimum wage" any where in the US. Yes, this type of salary in major urban areas would be low, but elsewhere in the country this salary, again factoring in benefits, is an acceptable starting income for a low-skill job.

I don't know what country "Michael" lives in (love the name, btw), but IMO, you're talking apples and oranges.

[kwark]

Outsourcing, particularly of functions formerly handled by a government employee, is typically evaluated in the public sphere only once - at the beginning. Everyone is pleased as punch with the reduced costs to the taxpayer, case closed, everyone go home and forget about it. But unless some REMAINING public employee has adequate oversight, authority, AND is in turn held accountable (ie the public pays attention for more that a soundbite), contract cost creep PLUS declining service quality are almost inevitable. After some period of time, the taxpayers end-up paying about the same as before but receive less, sometimes way less, as in REALLY crappy service (my observation from where I live anyway). So Outsourcing certain city services (for example) often makes good sense but the long-term consequences of wholesale outsourcing of municipal services is likely to prove to be something of a double-edged sword.