Public confidence in U.S. political and economic leadership is near to nonexistent. Nearly three-fourths of Americans believe our country is headed down the wrong track, according to an average of opinion surveys by RealClearPolitics. Few officeholders command positive approval ratings. For Congress and many state legislatures, approval ratings are in the teens.
Despite these dismal appraisals and the gridlock gripping Washington in advance of an election year, some governors and legislatures rose above partisanship and wrote a record of accomplishment in 2011. A few states even demonstrated the prescience of U.S. Supreme Court Justice Louis Brandeis, who wrote in a famous dissenting opinion almost eight decades ago that states can serve as laboratories of democracy “and try novel social and economic experiments without risk to the rest of the country.”
Nevada has launched one such experiment. Trying to succeed where the federal government has failed, the state is holding mortgage companies to strict standards on home foreclosures. The spark for this action was the continuing collapse of home prices in Las Vegas, which has the highest rate of foreclosures and the steepest price declines of any major metropolitan area in the country.
Three of five homeowners in Nevada are underwater, owing more on their mortgages than their homes are worth. One of these underwater homes is owned by state Attorney General Catherine Cortez Masto, a Democrat who by dint of office and circumstance takes an exceedingly dim view of fraudulent foreclosures. Spurred by Masto, the Democratic-controlled Legislature passed and Republican Gov. Brian Sandoval signed a measure requiring mortgage companies to file an affidavit proving they have a right to foreclose and increasing criminal and civil penalties for use of fraudulent documents in such actions.
Masto said the law was directed only against the “criminal element,” but it has prompted all financial companies holding mortgage papers to proceed cautiously. According to market researcher RealtyTrac, home foreclosures in Nevada dropped an astonishing 75 percent in October.
Across the country in Rhode Island, a heavily Democratic Legislature and Gov. Lincoln Chafee, an independent who supported President Barack Obama and was in turn supported by him, broke ranks with the labor unions and approved the nation’s biggest public pension cutbacks. The legislation Chaffee signed into law just before Thanksgiving will boost most state retirement ages to 67, freeze cost-of-living increases for retirees, and create hybrid retirement accounts that shift investment risks to individual workers from the state.
In taking action, Chafee cited the bankruptcy of the city of Central Falls, R.I., where pension benefits have been wiped out. Chafee told stateline.org that the Central Falls saga was a reminder of how “real” pension problems have become for states and municipalities.
Rhode Island is on the cutting edge of what has become a national movement to reduce public pension liabilities that collectively amount to $1.26 trillion, according to a report by the Pew Center on the States. Two-thirds of states have in recent years changed their pension systems, none as ambitiously as Rhode Island. More changes are on the horizon: a major battle next year looms in California where Gov. Jerry Brown, a Democrat, has proposed a 12-point plan to overhaul the state pension system.
Just as troublesome as public debt and the housing crisis is lagging economic growth. On this front, states are captive of the lagging recovery, but Georgia has demonstrated that job retraining can help on the margins. An 8-year-old bipartisan program known as Georgia Works enables employers to train jobless workers for up to eight weeks while they continue to receive their unemployment checks. More than 32,000 workers and 16.000 companies have participated in Georgia Works, and a fourth of those workers were hired by the firms with which they trained.
Obama incorporated features of this program in his jobs bill, which was rejected by Congress for other reasons. But Georgia Works has shown that retraining can make a difference, and limited versions have been copied by other states.
State revenues that collapsed during the Great Recession slowly began to recover in 2011. The increase in the revenue stream and tight budgeting has eased the fiscal crisis for many states. A recent report from the National Conference of State Legislatures found only four states facing midyear budget shortfalls compared to 15 at this time last year. Nevertheless, 2011 was no walk in the park for the states, which since July have had to make up lost federal revenues previously provided by the 2009 American Recovery and Reinvestment Act, the Obama stimulus bill.
The most notable fiscal comeback occurred in Minnesota where a partisan battle shut down the government for 20 days last summer. The shutdown came when Gov. Mark Dayton, a Democrat, rejected demands of the Republican-controlled Legislature to close a projected $5 billion deficit entirely with budget cuts. Eventually, Dayton acceded to most of the Republican demands, which have helped produce rapid and largely unforeseen results. Instead of a deficit, Minnesota is now projecting an $876 million surplus for the fiscal year.
The Washington Post gave much of the credit to Minnesota businesses, which have bounced back more rapidly than their counterparts in other states. (The latest Minnesota unemployment rate was 6.4 percent, compared to 8.6 percent nationally.)
“Obviously, the private sector deserves huge credit,” said Larry Jacobs, a University of Minnesota political scientist, who said the budget cuts also played a significant role.
Unlike the federal government, all states except Vermont are legally required to balance their budgets. This requirement, coupled with a lower level of partisanship in many legislatures than in Congress, has enabled governors with a pragmatic bent to govern effectively. Two governors — Democrat Andrew Cuomo of New York and Republican Rick Snyder of Michigan — stood out in 2011:
Those of us who have welcomed the new open primary in California as an alternative to the present ideological rigidity in both parties are hoping for candidates such as Snyder, a political novice who won the GOP nomination in 2010 in an open primary in which independents and Democrats participated. He went on to become governor in a Republican year in which the GOP also won control of both Michigan legislative chambers. From the start, Snyder showed little interest in the culture wars or in pursuing red-meat policy solutions that would encourage liberals to dig in their heels. He refused to join other members of his party in targeting the Michigan Education Association, pushing right-to-work legislation, or joining other Republican governors in opposing Obama’s health-care law.
For his pains, Snyder, who calls himself a conservative, was derided by critics on the right as a “RINO” — a Republican in name only. However that may be, he has been an effective governor, who, in the words of Holland Sentinel columnist Jim Timmermann, pushed “through sweeping budget and tax reform packages that slashed business taxes and remade the landscape of state government.” He also successfully urged legislation that curtailed public-employee benefits and gave school districts new powers to evaluate teachers.
In New York, meanwhile, the liberal Cuomo, also elected in 2010, stood up to the left wing of his party by refusing to endorse continuation of the so-called “millionaires’ tax,” in reality a surcharge on individuals earning more than $200,000 a year. Instead, Cuomo negotiated with hospital workers and health-care interests to accept spending caps and $2.8 billion of cuts in Medicaid and then presented a $132.5 billion budget that wiped out a $10 billion deficit and won legislative approval before the April 1 deadline, unusual in New York state.
“He said what he was going to do and pretty much did it,” said Kathryn Wylde, president and CEO of the Partnership for New York City, a business group, told me earlier this year.
Ever since, however, Cuomo has come under fire from true believers who, ignoring his campaign promise not to raise taxes, complain that he compromised too much on the surcharge. Emboldened by the Occupy Wall Street protests, liberals tried again this month to extend the surcharge, which expires at the end of the year. Working with both the Republican-controlled state Senate and the Democratic-controlled Assembly, Cuomo once more crafted a compromise that will create a higher tax bracket for the wealthiest New Yorkers while reducing the tax rates for millions of middle-class citizens. The fact that no one is completely satisfied speaks well of the Democratic governor.
For all the current public unhappiness with politics, the examples provided by Snyder and Cuomo and the constructive performance of several legislatures show that the art of governance has not been lost in the United States. Wouldn’t it be wonderful if Washington could learn that lesson?
— Summerland resident Lou Cannon is a longtime national political writer and acclaimed presidential biographer. His most recent book — co-authored with his son, Carl — is Reagan’s Disciple: George W. Bush’s Troubled Quest for a Presidential Legacy. Cannon also is an editorial adviser to State Net Capitol Journal, which published this column originally.