Cities On Their Own

The mid-term elections last month have transformed time-tested relationships between the federal government, states and cities. Many details will become clear in the new year, but the overall pattern is plain to see -- cities that have always counted on federal and state money are suddenly on their own.

Both federal and state governments, including Midwestern state governments, are in deep deficit. Partly as a backlash against these deficits, voters handed power to congresspeople, governors and legislators pledged to cut those deficits.

This means two things: (1) the money isn't there, even if governments were inclined to spend it, and (2) they aren't inclined to spend it. Government funding to cities won't come to a halt, by any means, but it's going to be cut back severely. Cities that had looked to Washington or state capitals to maintain or increase funding for schools, infrastructure, economic development and jobs are going to have to look somewhere else -- mostly to their own resources.

These were the themes of two recent conferences I attended -- one in Washington convened by big state universities, the other in Chicago organized by the Brookings Institution called  "Delivering the Next American Economy" and focused on the relationship between the federal government and American cities. Most of the Brookings conference was a big public session dominated by boosterish predictions for cities. But a smaller meeting the next day was both more realistic and grimmer.

John Fernandez, the Assistant Commerce Secretary and head of the Economic Development Administration, told the Washington conference that austerity is here to stay for a while, implying a cut in both federal funds and federal programs.

At the best of times, Fernandez said, the federal government and its congressional watchdogs have a low tolerance for failure, which has a chilling effect on urban innovation. Fernandez, a former mayor of Bloomington, Indiana, promised to do what he could to promote worthy urban projects but warned that the new Republican majority in the House of Representatives would be looking over his shoulder constantly.

At the Chicago conference, Bruce Katz, director of Brookings' Metropolitan Policy Program, exhorted the cities to "place the federal government squarely in the service of metropolitan growth." But he also acknowledged that, while "in an ideal world, the federal government would set a strong platform for metro growth," no such "ideal world" exists here now. "Ideologues rule our airwaves. Washington is fundamentally broken. Most states are broke."

This was the theme of the second, smaller Brookings program, bringing together think tanks, universities, economic development officials and chambers of commerce. They heard that, most recently, the states spent a total of $400 billion per year on eduction, nearly five times as much as the federal government: that total almost certainly will shrink, forcing painful layoffs of teachers, closing of schools and new pressures on extracurricular programs. States also spend twice as much as the feds on highways, even before the stimulus program. That programs is over now, and more potholes figure in our future. The $475 million Great Lakes restoration program, a key to the region's future, also is in danger.

State universities already are seeing their state funding cut year by year. Now the states, seeking to plug budget gaps, will be cutting even more. Nancy Zimpher, chancellor of the State University of New York and former chancellor of the University of Wisconsin at Milwaukee, told the Washington meeting that SUNY has lost 30 percent of its state funding in the past three years, with more cuts probably coming. If Chancellor Zimpher was still running UWM, or any other Midwestern state university, the story would be the same.

What so can be done? Neither cities nor universities are going to turn out the lights. Somehow, they must continue to serve and educate their citizens and find the money for economic growth to compete in a globalizing world.

As for universities, Zimpher had some ideas. Big state universities like SUNY (and most Midwestern state universities) need to slim down and reduce redundancies. Already, state universities in Iowa, Minnesota and other states are closing down academic programs that attract few students. Now, she said, big state university systems can no longer afford to offer a full menu of classes at each campus: programs that duplicate each other must be consolidated.

At the same time, she said, schools must seek "alternative forms of income." This is another phrase for outside contracts, turning university research into money-making projects, contracting with corporations that are willing to pay for university expertise. This is part of the "privatization of public education" that already is going on and is about to go into overdrive.

The Washington meeting itself was largely devoted to this theme. It was run by TRE Networks, a coalition of universities, governments, businesses and non-profits, that aims to enlist universities in regional economic development (TRE stands for "transformative regional engagement"). The universities believe they have knowledge and skills that can be harnessed to this regional development. Clearly, these schools also see an opportunity here to make some money -- some "alternative forms of income" -- by hiring out this knowledge and skills to the regions around them.

As for cities -- well, they're increasingly on their own. There was a lot of talk at both conferences about cities -- non-American cities like Munich or Turin, American cities like Milwaukee or San Diego -- that are reinventing their own economies, using local skills and ideas. European cities seem to get more funding from their national governments or the European Union. American cities often focus on their own strengths and use their own resources to build them up.

"Good things happen in tough times," John Fernandez said, trying to put an optimistic face on things. What he meant was that, with federal funds shrinking, cities are going to have to be more imaginative and entrepreneurial. It's a slightly desperate hope but, for the foreseeable future, it may be all we have. 

For more information on economic development, visit the In the News section of the Global Midwest Web site.