Cutting the cost of government in Philadelphia.

• Author: Rendell, Edward G.
• Position: Philadelphia, PA's management of its $200 million operating deficit

Each city's problems are particularly its own. I can, however, tell you a little about what we have done in Philadelphia, Pennsylvania, to restore the city's finances and chart a course for the city's growth that has enabled us, for the first time in a generation, to begin competing for the economic opportunities that Philadelphia so desperately needs if it is to secure its future as we enter the 21st century.

In January 1992, Philadelphia faced the worst financial crisis in its history: a $200 million annual structural deficit, a bond rating that had been reduced to "junk" status, and imminent municipal bankruptcy. Either we acted immediately to restore the city's finances or the city's future would be destroyed.

We began by telling the truth to our citizens. I said at the beginning that everyone would share some short-term pain in exchange for long-term gain. In keeping with the requirements of the state-imposed fiscal oversight board, the city developed a five-year financial plan that laid out a course for Philadelphia's economic recovery. We rejected tax increases, across-the-board service cuts, and massive layoffs as the answer to the city's fiscal crisis. Instead, we dedicated ourselves to one fundamental principle: squeezing every nickel of waste from the operation of city government.

We reexamined every aspect of the operation of city government in the effort to save money or increase productivity: improving our tax collections, raising a fee structure that had remained static for over a decade, renegotiating our real estate leases, restructuring our work rules to improve productivity, reducing the skyrocketing cost of health benefits for our employees, cutting the number of municipal holidays, injecting private-sector competition into the delivery of municipal services, and many more initiatives. Our managers and our employees made sacrifices alike. We borrowed ideas from other governments, and we developed ideas on our own, all focused on one goal: reduce the cost of government, which had become bloated, unresponsive, and inefficient.

Our revenue enhancement and management and productivity initiatives have reduced the cost of city government by a total of $1.6 billion. In less than 18 months, our $200 million operating deficit had been eliminated, and the city posted the first of four consecutive budget surpluses. In October 1996, the city projected a...