HICKS: Muncie's budget woes point to a troubled system

June 15, 2009

The budget struggle in Muncie has true statewide implications. Big budget cuts and layoffs of 40 percent of the fire department are summer fare. It is worth watching beyond the city itself, but for those of you not familiar with Muncie's woes, a brief primer is needed.

The property-tax debate didn't start in Muncie, but some of the most useful arguments about the injurious property taxes came from this fair city. With property-tax rates pushing 5 percent and a full suite of underperforming public services, Muncie had managed to make itself largely unlivable. Who would indeed have thought this possible 50 years ago?

The exodus of commerce and residents was not sufficient to motivate change. It took the state to begin the fix. The phase-in of property-tax caps rightfully constrained local spending in places where it had run amok. But the real problem isn't just spending, it is that local government in Indiana is so ill-conceived.

After months of a budget impasse, and much wrangling, Muncie's mayor announced that 40 firefighters would be laid off. This, along with several other belt-tightening measures, would prevent bankruptcy by year's end. It is worth noting that these cuts would leave Muncie with a police-to-firefighter ratio that is right at the Midwest average (1.6-to-1).

A mystery group labeling itself the Community Action Committee delivered a last-minute alternative budget proposal. The specifics of the proposal are largely irrelevant, but one essence of their proposal--local government consolidation--should be viewed closely by everyone around the state.

One piece of the proposal that merits comments is the proposed consolidation of the Muncie city fire department with that of the township. That the township and city occupy virtually the same real estate should have prompted this proposal in the early 1900s. But this late proposal didn't begin to touch the real consolidation problem.

Muncie is among many cities facing difficult choices. Sadly, the choices are all the more difficult because the system is so poor. In fact, the budget concerns that Muncie and other local governments face are really a circular problem. Taxes got out of hand largely because of an 18th century system of local government. That same system cannot fix the problem--for it is the problem.

While Muncie wrestles with eliminating fire protection, the real option for spending cuts cannot even be touched by the city. One example is the Muncie Sanitary District. Its operations are independent of the city. It is its own taxing district. Muncie residents are among a shrinking minority of Americans who still have public employees empty their trash cans each week. Simple wisdom would simply end this service.

I can think of no better argument to consolidate local government than note that Muncie has been deprived of the choice to keep firefighters or privatize trash collection.


Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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