Public unions rise to the challenge of competition

November 20, 1995|By Neal R. Peirce

INDIANAPOLIS -- Municipal labor unions have argued for years that the real barrier to more efficient and economical local government service isn't the front-line worker. Clumsy, patronage-plagued city management is the villain they cite.

Now, in Indianapolis, there's evidence the unions may have been right. The city's managers are giving union workers unprecedented scope to redefine how they do their jobs, from maintaining the city's vehicle fleet to trash collection. And the workers have taken up the challenge, doing their jobs efficiently, economically, helping generate remarkable budget savings.

Yet there's an ironic twist. The author of the new Indianapolis order is a Republican, Mayor Stephen Goldsmith, who ran in 1991 promising a big privatization push for city services. Simply mentioning privatization in the presence of public-union leaders usually triggers apoplectic reactions running from predictions of gross corruption to imperiled services to starving workers.

Mr. Goldsmith, taking office in 1992, did ask a blue-ribbon business panel to pinpoint contracting opportunities across all of city government. The group used a ''yellow pages'' test -- is the same service available there? -- and identified dozens of privatization opportunities.

But the new mayor's own thought shifted quickly, from ''privatization at all costs'' to competition as a ''core strategy.'' He became ''increasingly impressed,'' he said later, ''with the inherent ability of our own employees to perform better when the system allowed them to. I underestimated what they could do if we unloaded the bureaucracy off the top of their heads.''

A breakthrough occurred when the city invited bids for street repairs, previously done by unionized city workers. When the workers discovered that high middle-management costs would make their bid uncompetitive, Mayor Goldsmith agreed, and cut 18 expensive slots. The workers revised their proposal to dispatch one truck rather than two on most jobs, and to reduce work crews from eight to five workers. With that, they won the contract.

Now, says the city's public-works director, Michael Stayton, the city has learned realistic pricing for each of its services -- enabling smarter contracting.

Overall, there have been competitions for 60 services. The city's own workers have proved to be highly competitive in labor-intensive businesses, such as trash collection, sewer and vehicle maintenance. Outside firms with worldwide technology staffs have generally had the upper hand in bidding for such sophisticated tasks as management of wastewater-treatment plants, computer systems, and most recently, operations of the Indianapolis Airport.

Transfers and retirements made it unnecessary to fire union workers. The local AFSCME (American Federation of State, County and Municipal Employees) seems happy. Officially, it still opposes privatization and competition. But it claims victory in fighting ''wholesale attempted privatization of AFSCME-represented city services.'' And it boasts that its demands have been met ''for guaranteed participation as partners in redesigning government, including radical cuts in management ranks.''

There's been a dramatic decline -- from 5,500 to 3,800 -- in the overall city payroll on Mayor Goldsmith's watch. Some of the jobs are now performed by workers for private contractors, of course. Still, the overall city budget has gone down about $10 million a year, even after increases of $10 million to $15 million a year for fire and police services (which weren't opened to competition).

A better credit rating

The economies have bolstered Indianapolis' Triple-A credit rating, kept a lid on taxes, and contributed heavily, the mayor believes, to the best private job-creation year in Indianapolis' history and more new population than in any year since 1980. The stability and gains, says Mr. Goldsmith, are critical in the competitive race with lower-tax suburbs trying to lure Indianapolis' businesses and middle-class residents.

The mayor is persistent. After a rancorous fight over privatization recently, he recommended breaking up the local bus company's monopoly. His goal: to get out from under restrictive federal labor rules, encourage minorities and small business entrepreneurs to run vans, and especially to increase bus service so that low-income people can get to jobs.

Where he's come up short, Mr. Goldsmith confesses, is in his ''municipal federalism'' initiative, an effort to improve the economies of some of Indianapolis' most poverty-plagued neighborhoods. The challenge, he believes, is not just to focus infrastructure dollars and crime enforcement in those neighborhoods, but to give local citizen-led councils -- community-development corporations and others -- real authority for how money gets spent, and contracts to run local services.

A more tradition- and patronage-oriented city council has been reluctant to do that, and neighborhoods showed more suspicion and less willingness to take responsibility than Mayor Goldsmith had hoped. But with the city's new neighborhood training academy to identify and prepare leaders, with 30 churches working to take over parks and clean up alleys, he sees some hope for future advance.

What Mr. Goldsmith has shown is how competition saves money while preserving services. What the unions have learned is there is life -- often very happy life -- in a competitive world. Both lessons could be among the most important of the '90s.

Neal R. Peirce writes a column on state and urban affairs.

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