The Politics of Fiscal Stress: Organizational Management of Budget Cutbacks.

• Author: Field, Joanne

In 1978, the voters of the state of California passed Proposition 13 in reaction to sudden and substantial increases in the property tax bills. Proposition 13 not only capped the property tax rate but carefully blocked circumvention of the tax cut. The immediate prospect for most local taxing jurisdictions was a cut of more than 22 percent in their operating funds. In response to the crisis, the state provided "bail-out" funds to local governments from its then swollen coffers and ultimately assumed a much higher share of the funding burden, but from 1979 to 1982, local jurisdictions struggled with unprecedented budget adjustments. Echoes of these struggles can be heard again across the land as state and local governments face dramatic revenue shortfalls resulting from the current economic slowdown, the shifting of program responsibilities from the federal to state governments and from there to the localities, and rapidly rising bills for Medicaid, roads, schools and corrections.

Landon Curry spent the years from 1978 to 1982 observing how three neighboring school districts on the eastern shore of San Francisco Bay - Berkeley, Richmond and Oakland - grappled with declining revenues, budgetary uncertainties, shifting political relationships and declining enrollment as families fled the public schools. He describes the results of his observations as a study in political or organizational anthropology rather than as quantitative analysis of response to fiscal stress.

The author characterizes the three communities by their unique, if incomplete, political features - Berkeley with the University of California and a long history of radical political activism; Oakland, home of the Black Panthers, with a high level of black political involvement; and Richmond with an active John Birch Society and a strong ultraconservative element.

The author tests several theories of cutback management against what he observed in the three districts. Theoretically, in a period of fiscal stress an organization will depend more heavily on its planning and financial core in order to direct its more limited resources toward the protection of its mission and long-term goals. This is considered more desirable than allowing short-term political concerns to come to the fore and deflect energy away from concern over substantive goals. Focusing on three variables - relative wealth, level of centralization of decision-making authority and critical internal conflict - the...