Recently, the Auditor began publicizing a list of 18 such cities, towns, and villages. It doesn’t include a half-dozen that already have had or will have the state take over their functions precisely because of an inability to pay bills or to provide services. This posting reflects the increasing number of entities that have run into trouble.
While municipalities that make the unfortunate grade fell prey to a number of factors that put them in fiscal peril, almost all of these are self-inflicted. The only one that isn’t, more than trivial depopulation, among these two dozen applies in only half of the cases.
Many suffer from ancient water systems that they run themselves that they under-fund deliberately. Lower rates kept by elected officials avoids prices hikes, which then voters may punish them for by not reelecting them. To make matters worse, in some cases where revenues that exceed operating expenses instead of banking and using the surplus for future maintenance, those dollars end up subsidizing other municipal operations.
Worst of all, the chief executives of these municipalities have had every pecuniary incentive to stay in office. Half pay their mayors at least $25,000 annually, even though none have a population of more than 12,000. Bogalusa’s and Grambling’s make six figures, and Robeline’s 176 residents paid over $30,000 for theirs.
This all stems from Louisiana’s populist political culture where, for almost a century, politicians have promised that somebody else will pay for an abundance of goodies. And it shows in the composition of these municipalities’ governance. Almost half of them have only Democrats, from the traditional party of populism in Louisiana, in elected offices, and most of the others have Democrats as mayors and as a majority of councilors/aldermen.
The problem, then, mainly stems from lack of self-restraint by governing elites and electorates that tolerate such behavior. Further, these leaders often eschew voluntary solutions such as taking Auditor-provided free fiscal management training, turning over their water systems to larger providers, or disbanding municipal government and reverting to unincorporated status to let the parish and/or special districts provide services. All involve changes in behavior that lead to loss of status or positions as elected officials, which they historically have resisted.
Since populism, for now, has ingrained so thoroughly an ethos that government positions bring power and privilege, stronger compulsory measures need enactment into law. At present, government only can put a local government into receivership through its Fiscal Review Committee, comprised of the auditor, attorney general, and treasurer. That body forwards a request to the attorney general to issue a rule that appoints a fiscal administrator and then have that approved in court. Essentially, it suspends independent governance of the entity until the appointed administrator feels it capable of running its own affairs again.
The legal requirements to trigger this are somewhat nebulous. Missing three annual audits in a row puts you on the radar. Otherwise, it’s whatever the Committee thinks. The Auditor’s institution of its fiscally distressed list takes a step in the direction of needed earlier detection and vetting.
But legislators need to make heightened scrutiny mandatory. The Auditor lists several criteria that lands a government on its distressed list. Lawmakers should put in statute an annual compilation of the list and that list appearance draws automatic review by the Committee as well as missing three audits triggering an administrator request. This provides an incentive for entities to avoid producing such negative indicators that will lead to more prudent management. Finally, the law should expand the power of the fiscal administrator to recommend as a solution reversion to unincorporated status, and to give the state the power to do that, along with the existing power to recommend bankruptcy under federal law.
It’s better that these problems never develop and that local governments remain under the authority of their elected leaders without a takeover. These changes increase the chances of both of these outcomes occurring.