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Public Goods and Sustainable Community Development

July is a time to celebrate the ideals in the Declaration of Independence, think about the founding of our nation and enjoy the magic of a perfectly grilled hamburger. But the holiday should also be a time for reflection on the future of the nation and its communities. If the nation wants to create sustainable communities that will thrive in the future, many citizens will need to reevaluate their view of taxes and public goods. As public administration scholars and practitioners, we can play an important role by showing how the nation’s current fiscal discussions often produce outcomes that are not efficient, effective or fair.

In past columns, I have discussed the importance of public goods, such as infrastructure and education. This month, I would like to discuss the difficulties of financing these public initiatives. Today, many are not willing to pay the taxes needed to fund services that are crucial to sustainable development. Many of the practices of sustainability come from government actively ensuring that its citizens have access to beneficial public goods, such as quality infrastructure, an effective education system and a clean environment. Public goods, once provided, cannot be restricted and produce either a large degree of positive spillover effects (e.g., education) or negative ones (e.g., pollution).

In a PA TIMES online column, Sarah James and June Sekera argue for an increased role for local governments in providing goods for sustainable communities. Federal gridlock means that local governments need to act. Local governments may be the best at developing innovative solutions to help us create sustainable communities. For instance, local governments can use their land-use powers in a proactive manner to ensure sustainable economic development. Additionally, local governments can create transportation options to make communities more efficient and perhaps more active to potential residents. Most of the local practices that the authors describe fall under the umbrella of community development.

As I discussed in my inaugural column, community development should be viewed in a holistic manner—including many forms of assets that affect the long-term health of communities. Community development, when practiced based on this definition, seeks to grow sustainable communities, and in doing so, depends on a well-financed public sphere to ensure the provision of public goods. Most local assets, such as infrastructure and education, are public goods that we all enjoy, and since we all benefit from them, we should all pay.

The problem with our current fiscal discussions and practices is that many have moved away from a philosophy that we all benefit from the public sector to the viewpoint that only the few that directly benefit from a service should pay for it. This is a flawed philosophical approach for the funding of public goods. It has led to many of our services, especially at the state and local level, being funded by user fees and private-public partnerships, not traditional broad-based taxes. User fees are not stable forms of revenue. They do not ensure that all of society pays and benefits from public goods.

States stepping away from their fiscal responsibilities to their public universities and colleges shows the dangers of relying on a user fee (i.e., tuition) to fund a public good. Over the past three decades, states have decreased their funding to universities—a revenue scheme based on broad taxes paid by many—in favor of institutions raising tuitions—a funding scheme that concentrates cost on students. A recent report by the National Association of State Budget Officers shows that states have cut higher education spending at greater rates than spending on prisons and Medicaid. Additionally, the authors of the report argue that reliance on tuition is a trend that is not sustainable. This is asking a great deal of students and their families because they are shouldering the cost a good that produces broad spillover effects. The quality of our labor forces is such a key component of community health that higher education and training should be funded by broad-based taxes.

Policymakers are also turning to public-private partnerships to fund public goods, especially infrastructure. Indiana is becoming a testing ground for many public-private partnerships. These partnerships are often sold as being innovative funding sources and opportunities for the private sector and the public sector to work together. However, experience has shown that in many ways the partnerships lead to the public sector giving up valuable assets to the private sector for short-term financial injections. And the giving up of government control may lead to more long-term cost than short-term gains. For instance, Indiana is outsourcing its lottery system for a lump sum of cash but also a loss of future revenues. The “marketization” created by public-private partnerships is damaging the provision of public goods. The over marketization of our communities is leading to: poor education systems, crumbling infrastructure, vacant downtowns, poor planning and zoning, and a general stepping away of government from providing public goods.

So, what is the policy solution to these problems? We need to make and express the connections between public goods and healthy communities. We need to revive traditional means of funding services and develop new broad-based funding sources that do not damage the economy. Instead of fighting a war on taxes, we need to embrace our responsibility to fund public goods. It is not like the current situation is saving us money. We are funding services through user fees and partnerships in an inefficient, ineffective, and unfair manner—the opposing goals of public administration. By relying on stable broad-based taxes, we can declare our fiscal independence and provide the public goods needed for sustainable communities. This will be no easy task. Next month, I will discuss how policymakers may achieve this goal.


Author: William Hatcher, Ph.D. is an assistant professor in the department of government at Eastern Kentucky University. He can be contacted via [email protected]. (His opinions are his own and do not necessarily represent those of his employer.)


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2 Responses to Public Goods and Sustainable Community Development

  1. Pingback: The Need for Political Institutions to Focus on Sustainable Development | PA TIMES Online

  2. Jim Butt Reply

    July 8, 2013 at 9:48 pm

    Another very fine article on this important topic. I recently had to comment on another aspect of this situation. This happens to be about my state of Pennsylvania, but is a concern elsewhere.

    As I noted:

    There is some legislation being proposed to shift the tax burden [of local education] from property to income taxes. Regrettably, this would only make things worse and put our children and local economy at greater risk. Income taxes are a highly unstable alternative to property taxes because school districts can’t rapidly cut costs or relocate to lower-cost areas like workers can. The population of an established school district does not typically change much from year to year and a stable funding source is required to sustain the necessary services.

    Imagine having to furlough teachers or increase class sizes because the economy had a bad year. And how would a district plan for its upcoming school year if it took in revenues based on monthly income receipts? The result of using an income tax base would necessitate holding a very large reserve to compensate for the short term ups and downs in the economy. That’s not healthy for our students or the nation. Indeed, continuing to fund schools during downturns helps to restore the economy to health faster.

    In addition, home values are already subject to economic volatility, as most of us have witnessed in recent years. We don’t need more reliance on a highly volatile tax base, but instead, districts need more stability through a better state-wide education funding formula that provides equity to all districts, especially those with high poverty and high demands for special needs students. Children can’t choose which district they are born to, but we, as citizens, owe each child a strong educational opportunity. It’s our duty.

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