Read my book about Municipal Financing — you can find it on Kindle and Amazon.

The Union Gets the Final Say

School districts have begun giving labor unions veto power over whether a promising technology may ever be used to increase the productivity of their workforces.

On June 25, 2026 the Seattle Education Association proposed that its school district “shall not implement, utilize or promote AI Systems that eliminate, reduce, or replace work traditionally performed by bargaining unit members without prior written agreement of the Association,” and “any productivity gains from AI System implementation shall not be used as a basis for staffing reductions or increased task and workload expectations.”1

Four months earlier, in California, the United Educators of San Francisco (UESF) carried similar phrases into a four-day strike — down to the definition of the systems covered, which in both documents reaches any “computer system, software, algorithm … or automated process” performing “pattern recognition … language processing … or data analysis.” That describes most modern payroll and benefits software.

San Francisco Unified School District signed a contract with OpenAI for up to 12,000 ChatGPT accounts just a few weeks before the strike but then accepted UESF’s AI restrictions in the midst of it. So, it purchased the tool, then agreed not to use it to change how the work gets done. Sacramento City Unified’s teachers hold the same guarantee in a ratified contract of their own.2

Los Angeles Unified School District (LAUSD) wanted a committee to sort things out. For months, it advocated for a joint task force to study AI and make recommendations. In March 2026, the chair of a fact-finding panel recommended that the district concede the AI consent requirement — and so it did. On June 16, 2026, its board approved in a single sentence: the “Establishment of a task force to discuss Artificial Intelligence (AI)-related issues including AI not replacing Bargaining Unit positions or members without the express written agreement of union.” A body was created to study the question but then handed the answer before it could schedule its first meeting. 3

During my thirty years in municipal management, we were accustomed to giving the union notice before changing how work was done. We would negotiate how a change would affect people — schedules, workload, assignments. That is effects bargaining, required by law for decades in the states that bargain with their public employees. But a manager required to give notice, or meet and confer, still gets to decide. A district management that must obtain written permission does not decide at all.4

The AI-related obligations are decidedly lopsided. San Francisco’s article requires the district to give ninety days’ written notice, documentation of what the system does, and an analysis of its effect on bargaining unit positions. Nothing in it requires the union to answer, sets a standard for a refusal, or provides an appeal from one. Seattle’s is the same. A teacher’s worry that a district in fiscal trouble will reach for AI to cut headcount is not irrational. But effects bargaining is in place to address such circumstances. The school districts’ AI concessions amount to an abdication of management.

Everyone Else Gets to Find Out

Employers elsewhere are overwhelmingly not firing people over AI. Gartner attributes about one percent of studied workforce reductions to AI productivity gains. Boston Consulting Group projects that 50 to 55% of U.S. jobs will be reshaped within two to three years: the same role, with very different expectations about how the work gets done.

That is the workplace question that is alive everywhere else — which tasks move, which roles change, what a job description should look like in three years. Nobody knows how it will turn out. Organizations learn by experimenting, not by negotiating permission to experiment.

Private schools face no such restriction on using technology to improve their outcomes and make their teachers more productive. Many of them will discover what AI can do and adopt it where it helps. These government school AI clauses are the taxi medallion of 2013 — a legal restriction that protects incumbents, raises the price, and holds only until the alternative arrives. Medallion owners bore their own losses. Public districts socialize theirs. The students who pay first are those whose families cannot afford another school. The taxpayers pay next, including those who leave and go on paying for the school their children left.

The Tutor Their Parents Can’t Buy

The greatest cost here is not administrative productivity as such. It is what students lose. If AI turns out to be even a fraction of the tutor it promises to be, the children who gain most are the ones whose parents cannot afford one. Just as the internet brought a world-class library to children without proximity to one, AI brings the possibility of a versatile tutor — one that keeps the precocious child from being anchored to the class average and gives the struggling child the help his parents cannot afford.

A school district that puts friction in the way of finding out what a promising technology is worth in a classroom is working against its own educational purpose. That it would bargain away the right to find out is unconscionable.

So They Cut People Instead

The districts giving up their right to manage the workforce are the ones that can least afford it. LAUSD enrolled 408,083 students in 2024-25, down from 746,831 in 2002. It is spending about $2 billion more this year than it takes in, and it has hired an outside consulting firm to build models for closing and consolidating schools, with consolidations deferred to the following school year. Seattle Public Schools has already committed its $42 million rainy day fund, borrowed $27.5 million from its own capital program, and closed a roughly $100 million gap — and warns that if its fund balance goes negative it faces binding conditions from the state, “potentially losing local control over how we spend money.”

An organization can control costs in only two ways: by changing what it does, or by changing how it does it. The AI restrictions neutralize the second in organizations far more likely to expand what they do than to trim it.

What that costs is on display at LAUSD. On June 16, the board adopted the AI memorandum without discussion, as part of $1.48 billion in labor agreements. The item it did discuss that evening was the Fiscal Stabilization Plan immediately preceding it — $2.488 billion in cuts and 6,008 positions, which the district had to pass first, or its chief financial officer could not certify that it could pay for the agreements. Two weeks later the county issued its first Lack of Going Concern determination for the district.

The potential to change the way the work gets done to make the teachers more productive is now frozen in the name of preserving jobs just as the organization was forced into massive personnel cuts.

These agreements further invert the district’s relationship between productivity and pay. Generally, technology makes a worker more productive, the output is worth more, and the worker earns more. That is a trade, and it is what makes a pay raise sustainable. Here the increase came first — an average of 13.86% — and the ability to execute improvements that could have paid for it is contractually prohibited. Nor may the district put the money where it would do the most good: teachers are paid on a single salary schedule keyed to training and experience, and departing from it also requires the union’s agreement. The excellent teacher is paid on the same scale as the one who is not — under the same permission requirement now extended to AI.

The district does not decide.

There is a structural contribution to this dysfunction. A private firm that refuses to adapt loses customers to one that does, so the employer and workforce have a mutual interest in productivity. A government school system faces no such test. Its revenue arrives as per-pupil funding. The people who bear the cost of operational stagnation are students and taxpayers, and they are not at the table. The organization across the table influences who sits on the board and is the gatekeeper to the tools of adaptation.

Nobody Had to Disclose

How does something as egregious as bargaining away one of the two means a district has for controlling cost get approved in a public meeting?

Because the only question anyone is required to answer is what it costs, from a very narrow perspective on what constitutes cost.

From what I can tell, the State of California has the most detailed process for approving a school district labor agreement. Before the board may vote, the district must lay the major provisions of the labor agreement in front of the public, and the superintendent and the chief business official have to formally certify that the district has the means to pay for it. Wages and benefits are calculated to the dollar and projected across the contract term. Everything that is not about money gets one line. On Los Angeles’s June 16 filing, that line reads “Not applicable.”5

Nothing in the process requires anyone to evaluate, quantitatively or qualitatively, the opportunity cost of losing control of the ability to improve work processes and work methods. Nothing requires the district to disclose that a key right of management will now be unavailable to the next school administrator and the next district board.

In Washington state, where the same restrictive AI clause is pending now, the requirements sit in a different place. A Seattle board member votes on the labor agreement in a public meeting, and his finance office gives him a cost figure — as a matter of the board’s own policy rather than state law. The state aims its attention at the budget rather than the agreement: every district must maintain a four-year plan estimating what it will cost to sustain current programs and service levels, and the state ranks every district by financial health to head off insolvency and the binding conditions that follow. [5]

Today, nobody can quantify with precision what AI might save a school district. But a district can recommend that its board forbid finding out. And in neither state does anyone have to discuss this when approving the agreements.

Three questions belong in front of every governing board before it ratifies a labor agreement: (1) what operational authority are we giving up, (2) what is it costing us to give it up, and (3) what would it cost to buy it back?

Districts already estimate the cost of a one percent raise. But the ability to manage the workforce is just as important, arguably more so. The two district officials who certify that the district can pay for the agreement should have to certify these answers as well.6

History will not record that AI failed America’s public schools.

It will record that we negotiated away the right to find out.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

In 2026, Monterey Park, California, became the first city in America to permanently ban new data centers. The council chamber was packed for months — and then residents settled it at the ballot box, with roughly 86 percent voting to stop a building that would never enroll a child in local schools, never clog the roads at rush hour, never call 911, and never ask the city to build a playground, library, or recreation program for it.

It was a quiet, windowless neighbor, and it was treated like an invasion.

Meanwhile, the ordinary projects that actually burden residents escape moral panic. Apartments bring real traffic, real students, real policing needs, and real road wear. Retail development brings cars, deliveries, trash, and endless fights over parking. Nobody loves those impacts, but they are familiar. They fit the old categories. The data center did not. So the city turned its fury on the building that asked almost nothing of the people already living there.

That is not just a story about one proposed building. It reveals how cities judge private development.

Every Building Gets a Grade

Years of attending city council meetings have taught me that cities develop an opinion about every type of building. Housing worries them because it “demands services.” Warehouses disappoint them because they “do not employ enough people.” Enough by what standard? There is no market standard for how many people a warehouse should employ. There is only an elite class that has decided headcount is the scorecard.

Then comes big-box retail, which offends the refined civic palate. Costco is too vulgar, Walmart too large, the parking lot too plain, the shoppers too ordinary. The same people who claim to love “community” cannot bear the places where actual families buy paper towels, tires, and affordable rotisserie chickens. Retail is tolerated anyway — but for the money. Sales tax makes it respectable. The transaction is admired not because people want the goods, but because the city organization gets a cut.

Notice what is really being graded. Not the value a property creates for its owner. Not the voluntary trades it makes possible. Not the burden it places on neighbors. The city is grading land uses by what they do to the city’s own budget.

That is why cities can maintain the appearance of financial stability while they grow, only to panic when the music stops. They spend more every year, expand their missions, layer promise upon promise, and quietly depend on new growth to cover old commitments. The result is a demographic Ponzi scheme with a master plan and public comment periods.

Then the data center arrives. It has an invisible product, few workers, a large footprint, heavy power use, and a low service burden. It fits no column — not housing, not jobs, not shopping, not sentimental “sense of place.” So the people holding the report card reach for the ban.

And the officials with the report card are not the only ones who reach for it. In Monterey Park the voters banned the box themselves, and overwhelmingly — a collective mood, formalized. Most of them, I suspect, were not considering the city’s budget at all; they were uneasy about a windowless building doing something they could not understand. A different impulse from the council’s ledger, and yet, as we’ll see, the same mistake. Whether their vote makes it legitimate is a question I’ll come back to.

The left-wing snobs and the crony dealmakers fail the same test.

The snobs want to ban the data center because it offends “community character” — usually the taste of people who already got theirs, sometimes dressed up as a worry that the development is not “sustainable.” Either way, they elevate a fuzzy concept over the property owner’s right to build and treat the neighborhood’s preferences as a veto over a lawful use. And the snobs are not always a crowd of homeowners; sometimes they sit on the dais. Tucson’s city council voted unanimously in 2025 to reject the Amazon-linked Project Blue — turning away tens of millions in projected tax revenue and thousands of jobs — on the ground that the industry was not “sustainable” and that the city needed protecting from it.

The crony dealmakers commit the same error with the opposite sign. They do not defend the owner’s right to build; they ask what the city can extract — an abatement, a ribbon cutting, a negotiated tribute. Prince William County, Virginia approved what would have been the world’s largest data-center campus in a single 27-hour hearing — an outgoing board majority overriding its own planners’ recommendation to reject it — because the tax revenue was too tempting to refuse. Less than two years later, courts voided the approval, and the project collapsed for good in 2026. The same building is treated first as a prize and then as a menace, but never once as a right.

This is why the political right is often a poor advocate for development. It shows up only when there is a deal to be had. The left opposes building in the name of impact; the right supports it in the name of opportunism. So builders and developers have no principled defender.

The corruption was never the data center. It was the abatement.

What Cities Are For

A city should not be in the business of bribing growth into existence through tax incentives or banning it out of existence through legislation. Its job is simpler and harder: protect the rights of residents whether the population or business activity rises or falls. Courts, police, and the roads the city already owns are basic obligations. Manage them honestly, finance them transparently, keep the mission bounded — and if each new use pays its own way, growth is not a fiscal emergency and decline is not an existential crisis. The boom-bust panic is not a feature of population. It is a feature of an addiction to growth.

This is also the answer to anyone who calls the Monterey Park ban simple democracy at work — the community deciding what it wants. There is something to that: a community’s character is a real thing, and the wish to shape it is not disreputable. But a right is precisely the thing a majority may not vote away. The owner whose land was placed off-limits was almost certainly not among the thousands who voted to forbid his project, and he bears a cost none of them will. “The community decided what it wanted” turns out to mean the many decided what the few may do with their own land. That is not self-government. It is the oldest problem in politics wearing a city planner’s hat.

This is not the claim that new residents are costless. More people require more policing; more cars wear roads faster. The point is that those costs scale and self-fund when each resident and each use pays its way. What makes a newcomer a fiscal question mark is not the cost of protecting his rights. It is the unbounded city mission layered on top.

Under such a standard, the data center is easy to understand. It is one of the lowest-burden neighbors a city will ever be offered. It pays its own way and asks little back. Nobody across town should be stuck subsidizing it — and nobody across town should be allowed to ban it because it fails an aesthetic test.

A grocer never holds a hearing on whether it can “handle” more customers. Every customer is a voluntary exchange, so more of them is simply good. Cities fear more residents because they have inverted that relationship: the resident is treated less as the principal being served than as a claim on a common pool. Fix the relationship, and residents become as unthreatening to a city as shoppers are to a grocer.

More Than a Windowless Box

So far I have defended the box on the modest ground that it asks little of anyone. But that undersells it — because the objection to it was never really about municipal burdens, and neither is its value. A data center is the physical machinery of the AI age — a combine harvester for the mind. Cheap energy once gave the average person the equivalent of dozens of servants doing physical work; this is the equipment that begins to do the same for mental work: a tutor for the child a school failed, an adviser for someone who could never afford one, a researcher for a person no institution credentialed. Notice who that threatens. It is the same class that sneered at Costco for making abundance vulgar and common, now recoiling from the building that would make intelligence itself common. Water, noise, and power use were the stated objections — but they do not explain the fury.

Many people fear what they cannot picture, so they fill the windowless building with imagined dangers: vast quantities of water, diesel fumes, forever chemicals, and AI itself.

The largest fear of all was electricity. The proposed Monterey Park facility reportedly would have drawn roughly twice as much power as the city itself. But a giant new customer does not, by itself, raise everyone’s rates. Often it does the opposite. A data center is a steady, around-the-clock buyer, and a large steady buyer spreads the grid’s fixed costs across more kilowatt-hours. That is why the states absorbing the most new demand have generally seen rates rise slower, not faster, than the states that turned it away.

Where rates have spiked, the culprit has been a shortage of reliable supply — plants retired faster than new ones were permitted — not the new customer as such. And a growing share of new facilities now build their own generation, leaning on no one’s grid at all. Where added capacity really is needed, that is a pricing question: the utility should charge for it, or the customer should finance it, so the load carries its own cost instead of landing on everyone else’s bill. That is a reason to write a contract, not to outlaw a lawful building.

Some concerns are real. Noise and backup-diesel emissions are real, preventable pollution; water matters where it is scarce and subsidized. Regulate them at the margin with setbacks, objective emissions standards, and market-priced water. That is the opposite of banning the category. A city that outlaws the box has not protected its character. It has voted to keep capability scarce — and a people that withdraws its own tools out of fear of a thing it will not trouble to understand is not being cautious. It is disarming itself. And it does so at the very moment its rivals abroad — China chief among them — are racing to build the machinery it is voting to keep out.

The honest fiscal upside is not a larger city payroll. Quincy, Washington, is the useful example because its property-tax levy rate fell by roughly 70 percent after data centers arrived — the burden on residents went down, not up. In Loudoun County, Virginia, data centers now generate nearly half of county property-tax revenues. Yet those revenues have also proved volatile when server equipment is not refreshed on schedule. That is a warning against fiscal dependence, not an argument for bans. A surplus is proper only when it shows up as lower burdens on residents — retired debt, lower rates, fewer claims on taxpayers. If it becomes new payroll and a larger mission, residents were right to be suspicious, just not about the data center.

A city should be as indifferent to whether its population grows as a court is to how many contracts get signed. Its job is to protect rights, not to hit or hold a number. Growth is something residents and businesses do, not something the city government engineers or defends against.

Cities should not merely tolerate data centers — and they certainly should not bribe or ban them. Under the proper standard, the windowless box stops looking like a threat and reveals itself for what it is: one of the most productive and least demanding neighbors a community will ever be offered, and, behind its blank walls, part of the machinery by which a free people builds a better future. That is not a thing to fear, or to grade, or grudgingly to permit. It is a thing to welcome — and, yes, to praise.

Participatory budgeting—sometimes called “community budgeting”—lets residents propose and vote on how a slice of public money will be spent. It is usually presented as an innovative budgeting reform.

In reality, it creates a new source of legitimacy for government activity—and with it, another pathway for government to expand its scope.

Cities face chronic budget scarcity because their missions are vague, broad, and unbounded. Municipal mission statements routinely frame the city’s purpose in terms that carry no outer bound—maximizing services, enhancing quality of life, pursuing excellence in municipal efficiency, service, and innovation. With an open-ended mission, every new activity can be treated as if it had been properly vetted. Unlike a business or a chartered nonprofit, the city has no external check—no loss of revenue, no investor revolt, no charter violation—when it adds another responsibility. The result is an organization that continually accumulates responsibilities because its mission provides no stopping point.

No budgeting process can reverse that dynamic. Some simply make expansion harder to challenge. Participatory budgeting is uniquely pernicious precisely because it launders expansion in the moral prestige of “democracy” and “community,” which disarms the people who would otherwise object.

Advocates claim participatory budgeting improves both outcomes and legitimacy. By letting residents propose and vote on projects, the process surfaces needs that standard budgeting supposedly overlooks, directs resources toward historically underserved areas, and builds trust through direct participation. The result, they argue, is spending that better reflects community priorities and a public more invested in local government.

The Architecture of Expansion

In practice, participatory budgeting feeds a city’s unbounded mission. When residents vote to fund a new bike lane or a community garden, the money has to come from somewhere—but participants are asked only which projects to fund, never whether government should be funding any of them. That question never enters the room. And each approved project arrives with the imprimatur of “community voice,” which makes the underlying activity harder to challenge later.

The council’s role is eroded not by the amount spent, but by the creation of a new officially sanctioned constituency with its own claim on city funds. Whether the new channel is a citywide ballot or a steering committee, the result is a parallel track of political legitimacy that operates alongside the council. In New York, participatory budgeting shifted council members’ discretionary capital spending away from parks and recreation toward schools and street improvements—inside a capped pot. The Parks Department was never relieved of its obligations. It still maintains the same acreage, answers the same complaints, and faces the same expectations—just with fewer dollars. The reallocation was never debated as a policy choice. It emerged as a side effect of the participatory vote, a tradeoff nobody owned. The vote changed priorities within government; it never asked whether those priorities belonged within government’s proper scope.

Participants in these processes do not need to justify their choices against every other city function. They answer to the logic of their own process—identify needs, allocate resources—not to the constraint that the council must consider the city as a whole. The council can adopt or reject their recommendations, but the existence of the channel itself shifts the burden. What was once a single budget process with one set of trade-offs becomes two, one of which has no reason to consider the whole.

What Counts as Success?

Participatory budgeting claims democratic legitimacy. It does not earn it. Suppose the representativeness problem were solved—every resident informed, every resident voting. The outcome would still be illegitimate. The problem is not that the wrong people showed up. It is that the money is treated as a collective pool available for whatever wins a vote. Democracy is not the standard; the rights of residents and business owners are.

The cities running these programs track participation rates, demographic reach, and dollars allocated, but none define what a better outcome would even look like. There is no standard of success external to the process itself. Participatory budgeting is considered successful because it engaged participants and allocated public funds. The process becomes both the means and the measure of success. If participatory budgeting was functioning as democratic accountability, someone would need to say what improved and why conventional budgeting could not have achieved the same result. The official city announcements do not.

Official announcements from cities that champion participatory budgeting reveal what they themselves consider success. New York celebrates record voter turnout, unprecedented participation, and the number of projects funded. Boston highlights millions of dollars allocated and community-selected investments. Greensboro emphasizes ideas submitted, residents voting, and projects funded. Such metrics demonstrate that the process functioned as designed. What they do not demonstrate is that residents became safer, businesses freer and more prosperous, infrastructure more reliable, or public resources more appropriately allocated than they would have been under conventional budgeting.

That omission is revealing. The announcements read like audits of the process rather than evaluations of the results. They measure participation, not municipal success. A budgeting process cannot establish its own legitimacy simply by documenting that people participated. Before government can claim success, it must first identify the standard against which success is judged.

Proponents also claim participatory budgeting gives voice to otherwise marginalized groups—residents who lack political connections or visibility. But the mechanism does not check whether that actually happened. It counts heads and categories. A process that seats the same activist organizations cycle after cycle is not amplifying the voiceless; it is giving an institutional microphone to people who already know how to work one. The claim of inclusion functions as moral cover: it makes the program difficult to criticize without appearing indifferent to the people it says it serves.

Participatory budgeting gives public officials distance from priorities they would otherwise have to defend. When a project is unpopular, they can point to the community process. When it is popular, they can claim credit for listening.

The people who participate see themselves as civic-minded residents filling a gap left by unresponsive government. The structure they operate in, however, gives them no reason to weigh competing claims on the same city funds. They face no trade-offs with other city functions, no requirement to justify the total footprint of government, and no electoral consequences from those who stayed home. Their mandate is to identify unmet needs and spend to meet them. When a council adopts its recommendations, it is not deferring to “the community” in any meaningful sense. It is deferring to yet another interest group whose incentives are perfectly aligned with fiscal expansion.

The Missing Standard

Participatory budgeting does not constrain spending. It creates a second, unaccountable channel that competes with the one voters can actually discipline. Without a principled boundary—an external limit on what counts as a legitimate city function—every new allocation simply adds to the total. That limit is not a tighter process or a clearer mission statement. It is a standard that can tell you when to stop: one that answers to something outside the preferences of whoever is in the room.

The only standard that does that is rights. Government exists to protect people from force and fraud, and whatever that turns out to require, it excludes everything that is not that. Grant government the most generous rights-based role you like—courts, police, and, if you insist, the roads and water mains that let people move and live under law—and it is still bounded, because it answers to something outside itself. “Enhancing quality of life” is bounded by nothing, because there is always one more thing that would enhance someone’s quality of life. It excludes nothing and therefore constrains nothing.

The question is never whether a service sounds worthy. It is whether the standard behind it can ever be satisfied. Once a mission answers to “quality of life” rather than rights, no mechanism can prevent expansion. The mission is downstream of the standard. Fix the standard, and the mission bounds itself. Leave the standard unnamed, and every redesign of the mechanism will leak in the same direction.

So the next time a city announces that residents will “decide how to spend” some slice of public money, ask the only question that matters: What are they not allowed to spend it on? If the answer is “nothing,” the issue is no longer budgeting. It is the absence of limits on government itself. And if the answer is “they can only rank projects already in the maintenance plan”—fine, but then stop calling it participatory budgeting. Sorting a pre-approved punch list is clerical work with a civic veneer. The label is only honest when the scope is broad enough for participants to set real priorities, and that is exactly the condition under which no one can say where their authority ends.

The real question is not who decides how public money is spent. It is who decides what government is for. Until that question has a principled answer, every new budgeting reform will simply become another pathway for government to expand its scope.

Taylor Swift’s Manhattan wedding generated headlines after New York City billed her approximately $160,000 for permits and the city’s response to the event. Predictably, the internet erupted. Some insisted Taylor should have paid even more. Others rushed to defend her. Perhaps before more people scamper to take sides, we all need to calm down.

Because the more interesting story isn’t Taylor Swift’s wedding. It’s why Mayor Zohran Mamdani thought it was important for New Yorkers to know exactly how much she paid for city services.

For much of the twentieth century, cities generally treated police protection as one of the services funded through general taxation. If a private event required additional police presence, the costs were usually absorbed as part of the city’s overall responsibility to maintain public safety.

That began to change during the municipal fiscal crises of the 1970s.

As cities searched for ways to cope with growing financial pressures, they increasingly shifted costs from general taxation to identifiable users. Ambulance services became billable. User fees multiplied. Property owners assumed responsibilities once borne by cities. Permits, inspections, recreation programs, sewer laterals, water laterals, and countless other activities that had once been bundled into general taxation gradually became separate charges. As I discussed in The Municipal Financial Crisis, the proliferation of municipal fees became one visible symptom of a broader fiscal transformation.

Not all of that evolution was bad.

In fact, charging users for genuinely special services can be more just than asking every taxpayer to subsidize them. If a private event requires street closures, dedicated traffic control, or security beyond what government would ordinarily provide, there is a reasonable argument that the beneficiary—not the general taxpayer—should bear those additional costs. By contrast, government’s core responsibility to protect the public from force and maintain public order is properly funded through general taxation. The challenge is knowing where one ends and the other begins.

But adopting a user-pays model creates a new obligation.

The rules governing those charges must be objective, published, and established before anyone requests the service. People should know in advance what services are billable, how the charges are calculated, and that the same methodology applies to everyone. Objective rules don’t merely inform people. They constrain government.

That’s where the Taylor Swift story becomes interesting.

Supporters of the city’s billing describe the $160,000 charge as simple cost recovery. But cost recovery isn’t self-executing. Someone had to determine how many officers were necessary, how many hours they should work, which services were required, and which costs would have been incurred regardless of the wedding. Those are judgment calls.

And even the word “cost” does more work than it appears. Overtime is only the most visible number. A city can also load onto the bill a pro-rated share of training, equipment, and medical benefits—costs the taxpayer already paid to have a police force at all, and that don’t rise because one more wedding takes place on a Saturday. The very decision to staff an event on overtime, rather than by adjusting shifts already scheduled, pushes the total toward the most expensive labor the department buys. Assembled this way, a bill can look precise to the dollar and still recover far more than the event actually cost the city. That isn’t cost recovery. It’s revenue wearing the costume of cost recovery.

We already know what honest cost accounting looks like, because we require it elsewhere. When a city spends federal grant money, every charge must be necessary, documented, and not already paid for from another source—and an independent auditor can test it. Special-event billing carries no such discipline. The same government agency writes the rule, estimates the cost, sends the invoice, and keeps the proceeds, with no one independently checking the math.

Were those judgments guided by a published methodology that would produce the same result for anyone planning a comparable event? Or were they the product of discretionary decisions that inevitably vary from case to case?

The distinction matters. The issue isn’t whether Taylor Swift was charged. It’s whether the charge was governed by objective law or subjective judgment.

The rule of law requires more than charging people for services they use. It requires that similarly situated people be treated similarly. A fee that can be adjusted according to politics, publicity, or the popularity of the person writing the check is no longer simply an invoice. It begins to resemble a shakedown.

That’s why Mayor Mamdani’s decision to publicly highlight the $160,000 payment is more significant than it first appears. The bill was no longer simply an invoice; it had become a political trophy. For a mayor whose political identity is built around taxing the rich, publicly celebrating a six-figure payment from one of the world’s wealthiest entertainers was entirely consistent with his political platform.

The episode illustrates the political uses of discretionary fees. Once government has the authority to determine individualized charges, public officials can claim credit not merely for enforcing the rules, but for demonstrating how much they extracted from particular people. Today it’s Taylor Swift. Tomorrow it could be anyone seeking a land entitlement, organizing a community event, or simply asking a city for a service.

And in practice the treatment is anything but consistent. Consider how the same city handles an almost identical activity: commercial film production. A film shoot is a private, profit-seeking venture that closes streets, occupies public space, and draws on the NYPD—the very footprint that produced Taylor Swift’s bill. Yet New York’s standing policy is to give productions free police assistance, free parking, and free access to most public locations. When the City Comptroller audited the program, it found that in a single year the city spent at least $3.9 million serving film productions but recovered only about $1 million in fees. Nearly $1.9 million of that gap was the base salaries of a dedicated 24-officer NYPD unit permanently assigned to assist productions—police costs the city simply never billed, because it wants the film business. The auditors added that even this understated the true cost, since it excluded equipment, other city services, and the disruption the shoots caused.

Same category. Opposite treatment. Nothing about the underlying cost explains the difference; only the politics does. Whether you receive a free escort or a six-figure invoice can depend not on what you cost the city, but on whether the city, at that moment, wishes to court you or to make an example of you.

Cities increasingly rely on user fees instead of general taxes to recover the cost of specialized services. That isn’t necessarily a problem. In many cases, it’s a fairer approach. But a general tax carries a fairness that individualized billing does not: it applies to everyone by the same published formula, so no official decides what any one person owes. Strip that away and fairness no longer takes care of itself—it has to be rebuilt deliberately, through published rules, consistent treatment, and a charge that reflects what the service actually cost.

Taylor Swift will almost certainly shake off both the bill and the criticism.

The real question isn’t whether she should have received an invoice. It’s whether everyone requesting the same services would have known the rules beforehand, understood how the charges were calculated, and received the same treatment.

If the rules are knowable in advance, applied equally, and the amount charged is demonstrably tied to the cost of the service provided, it’s an invoice. If not, it’s a shakedown.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

Every major city that adopted its budget during the past several weeks found a way to close its shortfall while preserving the missions, goals, and activities that define the status quo.

New York City confronted a multibillion-dollar fiscal challenge. Los Angeles closed a nearly billion-dollar gap. Chicago adopted a budget after confronting another massive deficit. San Jose resolved a roughly $50 million shortfall while acknowledging that deeper structural problems remain. Oakland reopened its two-year budget to address a roughly $265 million gap while continuing to wrestle with insolvency concerns.

In each case, elected officials eventually did what they were charged to do: they adopted a budget. And with that, the status quo was preserved for another year.

The budget-balancing tactics varied somewhat. New York relied on new taxes and massive state support. Los Angeles reduced headcount and cut spending. Chicago relied on spending reductions and tax measures. San Jose froze positions and drew down reserves. Oakland eliminated vacant positions and raised taxes and fees. Each approach had its own flavor of pain, but they shared the same pattern: find money somewhere and use it to continue doing what the city was already doing.

The same pattern plays out in smaller cities across the country, only on a different scale.

But why do the same fiscal problems keep returning? Why are large budget deficits so common?

Over the years, I championed the reforms commonly associated with good government and sound financial management: better budgeting, greater transparency, improved accountability, performance measures, efficiency initiatives, better incentives, and more.

These reforms certainly address relevant issues. Yet they have failed to improve the fiscal stability of local government. If such reforms were sufficient, we would expect better results.

At some point, I discovered that these efforts were aimed at symptoms rather than the sources of chronic budget scarcity.

Organizations are defined by what they do and how they do it. Conventional reform efforts focus on improving how a city does what it does—its execution.

But that leaves a more fundamental question largely untouched:

Why does the city do what it does?

Consider the mission statements adopted by local governments.

The City of Ranson, West Virginia states its mission this way: “Our mission is to maximize services to our customers in the most cost efficient manner.”

San Jose’s mission speaks of creating a “great place to live, work, learn and play.”

Neither statement provides a principled basis for determining where governmental responsibilities begin and end.

The problem is not merely their breadth. It is that they assume an unbounded role for government. What goals and activities do such missions include and exclude?

Across the country, mission statements read like aspirational poetry—broad enough to encompass almost anything and precise enough to exclude almost nothing.

These missions incorporate no limiting principles.

They are blank checks.

And accounts that issue blank checks cannot be balanced.

If a city’s mission excludes nothing, it limits nothing. Any goal that purports to improve any aspect of the community acquires a presumption in its favor. As goals proliferate, so do the activities required to fulfill those goals. And those activities drive costs.

Eventually, budget pressures emerge and attention turns to cost-cutting, oversight, incentives, operational improvements, and countless other efforts to improve how the organization does what it does.

Such issues matter. But they arise downstream from a more fundamental question:

What should the city do, and why?

Mission statements do more than describe goals. They embed assumptions about what government is, what it should accomplish, and how broadly its powers should be employed.

Those assumptions are often implicit rather than explicit.

Which raises another question:

Should we acknowledge what government is before deciding what it should accomplish?

Government possesses powers that individuals do not. It can tax. It can regulate. It can compel. Such powers require justification. The nature of these powers should inform how broadly they are employed. And the consequences of misapplying such powers are not merely financial.

Some governmental activities are essential because they define and protect rights and establish the conditions in which people can freely pursue their goals and values.

But every commercial and charitable activity government undertakes consumes resources and displaces private initiative, investment, innovation, entrepreneurship, and voluntary cooperation that might otherwise emerge through residents, businesses, charities, churches, and civic associations.

When government assumes broad and unbounded missions, it becomes easy to substitute political solutions for voluntary ones.

The result is not simply higher spending and taxation. It is the crowding out of institutions, relationships, investment, innovation, and problem-solving capacity that create wealth, solve problems, and strengthen communities outside of government.

Over time, I came to see that questions about mission and scope point to still deeper questions about the relationship between government and the people it serves.

Does the city exist as a means to the ends of residents and business owners, providing the political environment in which they can freely pursue their goals? Or are residents and business owners the means through which the city pursues goals detached from their own?

Those questions changed how I viewed many of the reforms I had spent years advocating.

I still believe budgeting methods, transparency, accountability, and efficiency matter. But I no longer believe they can solve problems whose sources lie upstream in missions, goals, and activities rather than in the execution of those activities. In other words, improving how an organization does what it does cannot compensate for an unbounded scope of activity and purpose.

The relationship between government and the people it serves points to something even deeper.

If a city is considered an end rather than a means to the ends of residents and business owners, conventional financial reforms can only take us so far. At best, they manage symptoms. At worst, they encourage us to perfect the administration of an ever-expanding mission rather than reconsidering the mission itself.

In that sense, they can reinforce the very way of thinking that gave rise to the problem in the first place.

If broad aspirations are accepted as the mission, then every activity defended by appealing to a purported desirable outcome acquires a presumption in its favor.

Every new activity creates new constituencies. Every new constituency invites new costs. Under such a framework, budget scarcity is inevitable. And this is how cities across the country now operate.

By accepting the premise that government should address every aspirational outcome and then focusing our efforts on administering that ever-expanding mission more efficiently, we leave the source untouched.

No budget process can solve a problem created by an unlimited mission.

But chronic budget scarcity is not embedded in the nature of city government. It is the predictable consequence of an unbounded mission pursuing open-ended goals and activities through the special powers of government. Perhaps that explains why large budget deficits are so common and why cities so often find themselves back in fiscal crisis mode.

Year after year, elected officials do what they are charged to do. They adopt budgets. The immediate crisis passes. The status quo is preserved. And before long, the cycle begins again.

Cities do not need bigger budgets nearly as much as they need clearer missions.

And clearer missions require prior answers to questions we have not been asking:

What is a city, and what is it for?

Does a city exist as a means to the ends of residents and businesses?

Or do residents and businesses exist to serve the goals of the city?

Subscribe now

The many California agencies that plan to place new taxes on the November ballot owe it to their residents and businesses to wean their organizations from reliance on serial tax increases to remain afloat. It’s disconcerting that such a clearly unsustainable strategy has become the go-to solution for so many municipal leaders.

The problem is that most government agencies begin their budgeting process four to six months in advance of the upcoming fiscal year. By then, they’re already too late. The two major cost drivers – scope (or “mission”) creep and multi-year labor agreements – are locked in. Under pressure, a city council can make cut costs on the margins, implementing hiring freezes, perhaps, or across-the-board budget cuts.

But these do little to affect the agency’s financial trajectory. Soon, there’s talk of raising sales taxes or persuading voters to approve yet another bond. And soon after that, as revenue fails to keep pace with the agency’s expanded mission and residents complain about poor service delivery, officials will find themselves replicating the budget-balancing scramble that no one wants to experience again.

How can municipal leaders remedy the constant state of budget scarcity?

WHAT IS GOVERNMENT FOR?

First, the budget scarcity affecting municipalities throughout California (and the country) has been decades in the making. Organizational scope creep has become systemic as agencies have embraced missions without bounds. Breaking the cycle of budget scarcity will require asking, “What is government for?” – which types of activities are appropriate for a government agency to undertake?

Anything less than this – imposing rigorous limits on mission – will result in the organization’s relapse into the operational path of least resistance. And that will produce the familiar byproducts of intractable budget problems, scarcity as an organizational way of life, and betrayed residents and business owners.

Municipalities must understand that their foundational problem is broad scope creep – government missions so broad, so nearly limitless, that it’s hard to imagine disqualifying any spending proposal on the grounds that it is outside the organization’s purview. Each new proposal that is accepted increases the scope of the organization’s activities, thereby driving costs upward and ensuring budget scarcity. Likewise, every exhausted activity that cannot be retired – despite its obvious ineffectiveness – further binds the organization to scarcity.

An organization that cannot limit what it does creates and sustains its own scarcity. Such is the cause-and-effect relationship unacknowledged throughout most fiscal sustainability plans.

IT’S ALWAYS BUDGET SEASON

Second, treating the budget process as an annual process, rather than an ongoing one, impedes municipal leaders’ ability to affect the budget in the long term. Government union leaders understand this. That’s why they push for multi-year labor agreements that drive 70 to 80 percent of a city’s operating budget.

The impact of labor agreements is not limited to the fact that such agreements set the cost of personnel. Labor agreements also dictate how the organization will deliver services. For anyone who doubts this, try to introduce a cost-savings change to public employee work schedules or implement a technology that changes job duties and job descriptions without conducting a lengthy meet-and-confer process and/or reopening a labor contract.

Unfortunately, entrenched labor agreements with sacrosanct, untouchable terms (e.g., minimum staffing, traditional work schedules, etc.) are kryptonite to management’s ability to exercise its best judgment; such agreements preempt a municipal leader’s ability to call upon better and best practices in deciding how the organization will deliver services. Changing such entrenched conditions of work and work methods may require multiple negotiating cycles – not just multiple fiscal years – to achieve.

CONCLUSION

The Government Finance Officers Association bestows annual awards for municipal budgets and financial statements. Such awards are based on the organization’s successfully following a process rather than achieving any specific organizational or financial results. But defining a limited mission for the organization and successfully taking charge of how services are delivered requires a multi-year commitment. An award for that achievement – for officials’ ability to produce real change in the trajectory of the organization over the course of years – would be an award worth giving.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

We are witnessing a troubling migration—a flight of capital and talent from states that have adopted increasingly aggressive tax policies. Elon Musk moved Tesla and X from California to Texas; Palantir relocated to Colorado. High-profile individuals and corporations are pulling up stakes and relocating to states with more favorable tax policies.

A casual observer might interpret such migrations as a strategic response to changing cost structures. But that framing misses the deeper issue. These departures are not just about lowering costs; they reflect an effort to exit a system that has decidedly turned against them.

These defections are driven by policies that specifically target the wealthy. In California, for example, public sector union activists have bypassed the legislative process to place a “billionaire’s wealth tax” directly on the November 2026 ballot. The state has also made a previously temporary high-income tax tier permanent. Meanwhile, the New York City mayor is pursuing similar goals through proposed levies on second homes.

The Administrative Breakdown

Such tax policy shifts constitute a hostile attack on success itself. For decades, tax policy was based on the idea that the wealthy should contribute more. Regardless of one’s view on progressive taxation, the system operated on an assumption of fairness: you paid into the system, and in return, the system secured the environment in which you could operate freely.

Today, this arrangement has become decidedly one-sided.

Why is this happening now? Why have states like California and cities like New York become so draconian? Their predation is the inevitable consequence of a government that lacks institutional discipline. When leaders fail to define the scope of their organizations, the result is systemic expansion. Public agencies now claim responsibility for everything from social engineering and geopolitical posturing to ensuring equitable outcomes. Because this growth is untethered from both revenue and reality, expenses begin to outpace collections, forcing the state into a perpetual, desperate hunt for new funds.

Behind this fiscal desperation lies a public agency culture resistant to modernization. Public sector unions use their influence to protect entrenched staffing and legacy operations. They also resist attempts to streamline top-heavy organizational charts. Unable to implement cost-saving improvements, government leaders have limited room to maneuver. Instead, they extract more from their existing tax base to maintain the bureaucracy. These agencies are no longer taxing to fund services; they are harvesting their producers to sustain a bureaucratic machine that refuses to evolve.

Historically, the state’s legitimacy was tied to its role as a guarantor of individual rights and private property. It was created to be the institution that secured the conditions under which one could pursue their values. When the state’s scope expands beyond this, the relationship inverts: it begins to view its most successful citizens not as sovereign individuals, but as resources to be tapped for its own ends.

Whether it is California’s Franchise Tax Board or New York’s Department of Taxation and Finance, the state does not bid you a fond farewell when you leave. Instead, the state treats departure as an act of defiance, subjecting you to an investigation that frames your exit as a crime scene. Auditors track your cell phone pings, examine your credit card swipes, and, in the most egregious cases, dig through your veterinary bills or personal calendars to prove where your pets—and your life—are actually living. You have the right to move, but they ensure that the exit comes with a price tag: a granular, intrusive investigation designed to squeeze every last dollar before you go. By doing so, the state effectively frames the taxpayer as a captured asset, rather than an individual with the right to relocate.

The victims of this predation fail to resist effectively because they adopt the predator’s rules and language. When squeezed, tech billionaires and CEOs often cite their existing contributions—job creation, taxes paid—as a defensive shield, hoping to deflect the mob’s outrage. Some, like Salesforce CEO Marc Benioff, proudly submit, declaring that they are happy to pay their “fair share.”

The Concession Trap

Such an approach constitutes hostage bargaining. In doing so, these producers aren’t defending their property; they are negotiating the terms of its seizure. They concede the state’s fundamental premise: that the wealth they created is a public resource, rather than the product of their efforts. They think they are bargaining for a reasonable tax rate, but they are actually bargaining for the terms of their own surrender. You cannot negotiate your way out of a system that views your productivity not as a right, but as a harvestable asset.

We as human beings possess agency; we have a right to our lives and the fruits of our labor. We and the products of our labor are not assets to be managed by a state legislature or a hungry union. Production is not a debt owed to society for the crime of succeeding.

When the most successful among us choose to validate the state’s predatory logic, they do not merely surrender their own sovereignty; they erode the moral foundation upon which the freedom of every other individual depends.

This is the central flaw in the current flight of capital. High-profile departures—like Musk moving Tesla to Texas or Palantir relocating to Colorado—are a necessary retreat, but they are an insufficient defense. Moving across state lines buys time, but it does not stop the encroachment. As long as California and New York are permitted to normalize this predation without a principled challenge, they are writing the playbook for every other state. Success will be a target wherever it lands, because the doctrine of the resident and business owners as fodder can be exported to every jurisdiction that faces a budget shortfall. Until producers stop negotiating their surrender and start advocating for clearly defined limits on government, the predator-state will simply ensure there is nowhere left to hide.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

The City of San Francisco is reeling from rampant crime and facing a commercial real estate crash. Arguably, City policies have created both problems – the former, a result of lax law enforcement, and the latter, a consequence of the first, coupled with unfriendly business policies. Meanwhile, the City faced a $489 million budget deficit in 2024-2025 that is set to grow to $1.3 billion by 2027-2028.

The anatomy of failed municipal decision-making

How does a municipality dig such a deep hole for itself and then proceed to dig itself even deeper? Recently, the City’s Board of Supervisors unanimously approved a plan that exemplifies just how cities bring about such compounding failure. Failure that comes not from corruption, not from the lack of diligent execution, and not from insufficient resources, but from pursuing goals that are undesirable and/or unachievable. Such dysfunctional goals are enabled by unbounded municipal missions that encourage the proliferation of municipal goals without the board/council/supervisor/public scrutiny that could expose why such goals are undesirable and/or unachievable.

On September 5, 2023, City Supervisors unanimously approved a “Final Governance Plan, Business Plan and Viability Study for a San Francisco Public Bank.” Describing the document as a “viability study” suggests that the working group that prepared the report evaluated the prospect of a City-run public bank to help policy makers reach an informed decision. But those closely watching the City over the past several years know – and a review of the June 2021 Administrative Ordinance that established the working group clearly shows – that the City Supervisors have long decided to create a public bank.

Over a nine-year period that began in 2011, City Supervisors commissioned several studies related to the creation of a City-run bank. Within 18 months after the California legislature authorized public banks (AB 857), effective January 1, 2020, the Supervisors had already determined that “a San Francisco Public Bank would create a fiscally safe and sound institution to invest public funds in a manner that aligns with the values and interests of the City, including investments in City residents, businesses, and sectors that serve the public good and that are underserved or unserved by the existing financial industry,” and that a public bank could “create significant long-term benefits for the City, which include allowing local tax dollars to be invested in local priorities while still ensuring the safety and preservation of capital, liquidity to meet City cash flow needs, and return on investments.”

If, in June 2021 when the Administrative Ordinance was being considered, a resident had objected to the City’s pursuit of a banking endeavor, he or she would have been told something to the effect: “This action simply paves the way for the study of a bank’s viability and the development of a plan; it does not itself establish a public bank. There will be plenty of opportunity for public comment before any formal action to create and fund a bank is taken.” When decision-making is orchestrated over several years in such a way, there is no appropriate time to voice concern. Objections are unavoidably either too early or too late. Such is the cloudy decision-making process that leads to the cavalier diversion of funds from core municipal services to sports facilities, convention centers, and now public banks.

The working group’s report

The working group’s report states that “the fundamental need for a City-owned Bank stems from the historic failure of existing financial institutions to equitably serve the needs of low-income communities and communities of color and to deliver financial services that are not extractive or damaging to those same communities.” A City-owned bank would “address the three main areas where financing disparities are most pronounced: affordable housing, small businesses, and green investments.”

The working group reported that when they reviewed outcomes in homeownership rates and lending by gender, race, and ethnicity, they discovered disparities (e.g., lending outcomes that were inconsistent with the City’s demographic makeup). The working group did not pursue causal explanations for the disparate outcomes (e.g., actual instances of discrimination in lending practices or underlying explanatory factors), instead simply concluding that such disparities constitute “a pattern of discrimination.”

The working group proceeded to estimate the “gap in the local financial market” – i.e., the loans and funding expected to go unmet by existing financial institutions – to rest between $1.3 and $2.4 billion per year through 2030. Its report went on to state that “local enterprise lending for small businesses unsupported by existing large banks and other financial institutions likely runs to several tens of millions of dollars annually.”

The working group did not disclose all the assumptions and calculations that led to these estimates, but the broad dollar range in the case of affordable housing and the vague dollar range in the case of small business assistance should not be surprising. If one attempts to quantify all the loans and other financial assistance that did not get made by conventional banks and then uses that estimate as a basis for projecting future “funding gaps,” based on a goal of closing assumed outcome gaps, the possibilities are endless.

But the analysis overlooks a key fact of economics: At any given time, there is a fixed amount of investment capital. Any attempt to close an assumed “funding gap” requires diverting capital from where it otherwise would have gone. For example, City funds appropriated for its public bank are funds that cannot be used for protecting residents, businesses, and their property or for maintaining City property. (Later, I’ll discuss the issues related to using the City’s investment funds to further finance the public bank’s activities.) The report does not acknowledge such consequences. Meanwhile, the Supervisors brushed aside a joint letter from the Office of the Controller and Office of the Treasurer and Tax Collector that points out that “given the significant costs associated with a [sic] forming MFC/Public Bank, policymakers would likely need to divert funding from other initiatives.”

The one initiative that policymakers clearly do not want to jeopardize is the City’s Climate Action Plan (CAP). The CAP begets a $21.9 billion funding gap that the working group takes at face value and suggests can be addressed by the public bank. The CAP declares war on fossil fuels, culminating in a laser-focused goal of achieving “net-zero greenhouse gas emissions by 2040.” While it was not in the purview of the working group to challenge the goals of the CAP, the CAP’s goals are relevant to this discussion because we are examining a crisis in the making. By accepting the legitimacy of the CAP’s strategies, the working group incorporated the CAP’s goals, methods, and assumptions into its recommendations.

The City’s CAP falsely equates some climate impact from fossil fuels with catastrophic climate impact and uses this evaluation to conclude that “it is urgent that San Francisco take aggressive and equitable action to mitigate the catastrophic impacts of climate change.” The CAP fails to acknowledge that the most significant instances of CO2 reductions have come from nuclear energy and the substitution of natural gas for coal. Nowhere in the 300-page CAP does the City acknowledge the positive contributions made by fossil fuels; that fossil fuels are uniquely capable of providing safe, reliable, affordable, and scalable energy; and that their use is essential to protecting residents and businesses from the dangerous effects of climate. Nor does the CAP discuss the impact on its residents and businesses of requiring or encouraging the City government organization, City residents, and City businesses to adopt less reliable, more expensive forms of energy. (For a full account of why “net-zero” is an undesirable goal from the perspective of residents and businesses, see Fossil Future, by Alex Epstein.)

The rush to replace fossil fuels will make San Francisco a more expensive place to live, work, and operate the city government organization. Low-income residents and small businesses – who are particularly sensitive to the cost of energy – will be the most visible victims of the CAP’s implementation. Meanwhile, the CAP’s strategies will benefit green cronies and opportunists who will be happy to partake in loans and grants that require little scrutiny or accountability. The working group’s recommendation to use a public bank to implement CAP strategies encourages such abuse of City funds.

The working group’s plan assumes funding the City-run bank with $60 million in contributed capital by the beginning of year four, the first year of banking operations. This amount is to be appropriated by the City and granted to the municipal finance corporation (MFC) to establish a public bank. The plan calls for an additional “contributed funding” of $250 million over an eight-year period. These funds would also be appropriated from the City but could be reduced by any amounts received from outside grants and donations.

According to the plan, in addition to receiving a $310 million commitment over the eight-year planning horizon, the bank would “serve as the depository for the City’s assets,” including those assets currently held in the Treasurer’s $15 billion Pooled Investment Fund. For now, the State’s public investment requirements might save the City from itself, since the proposed bank will have difficulty complying with the California Government Code for public funds investments. But if the State were to make special provisions for deposits of public funds in public banks, the City Treasurer will be challenged to maintain his professional responsibilities in the face of political pressure to invest in activities that are, by their nature, riskier than those in which the City currently invests.

There is an additional, unaccounted-for effect of converting the City’s pooled investments from their current securities to deposits in a public bank. Such action would reduce the demand for such securities, thus negatively affecting the federal agencies, bond sellers, commercial paper sellers, and money market funds whose securities the City currently holds as investments. The point here is not that such an impact would be large but, rather, that the working group did not consider such an impact. Nor did the group discuss the risk to taxpayers if the City were to deliberately move from a proven investment strategy to one that compromises on safety, liquidity, and return.

The working group’s plan relies heavily on Community Financial Institutions (CFIs) and Community Development Financial Institutions (CDFIs) to carry out many of the details of the public bank’s financing programs. (In San Francisco, there are several such community banks, credit unions, and lending funds whose missions are to support designated sectors of the community.) Such a strategy makes sense from the perspective of operational efficiency. However, this approach puts the City in the position of picking winners from the pool of CFIs and CDFIs. Moreover, as the Office of the Controller and Office of the Treasurer and Tax Collector jointly point out, such an arrangement does not promote accountability: “The impact of City funds may be harder to quantify as compared to existing City programs that involve more direct lending practices.”

What should the city do for housing, small businesses, and its residents’ environment?

The City can help residents who struggle with housing affordability by evaluating its role in sustaining land use and zoning policies that promote racism and its role and that of the State in hampering developers with requirements such as single-family zoning and other building restrictions that make housing less affordable. Such policies have extended the racist housing laws of the past and are at the root of current housing shortages. Rather than divert local tax dollars and other public funds to compensate assumed victims of such policies, it would be more effective – and just – to reform the restrictive land use, zoning, and building policies that continue to create real victims.

The City could help its small businesses by rolling back its burdensome commercial regulations. City officials’ indifference and insensitivity to small businesses were clearly displayed during the pandemic and are further evidenced by the City’s slow post-pandemic recovery. The City’s priorities for small businesses should be to remove its own barriers to the free conduct of all business within the City and to refrain from actions that restrict energy freedom.

In its evaluation of residential lending, home ownership, and business lending, the City should reconsider why it regards individual residents and business-owners only as members of an ethnic group, gender, or income class. That such a superficial, divisive approach to public policy continues unchallenged does not inspire confidence that municipal officials will correctly identify problems, develop effective solutions, or ever be able to clearly define their organization’s mission. A city cannot do justice to its residents – who are merely a group of individuals living in the agency’s jurisdiction – if it does not treat them as individuals.

Finally, the City needs to reevaluate the goals and underlying assumptions put forward in its CAP. It’s bad enough that affordable and reliable energy sources are being abandoned in favor of expensive, unreliable sources. But the implementation of the City’s CAP comes at the expense of residents and business owners who are now pleading with the City to address the rampant crime and deterioration of City-maintained spaces.

Public banks are not a bad idea because they cost too much

San Francisco, a city with a multibillion-dollar budget deficit and a host of serious challenges, is enthusiastically committing over $300 million and jeopardizing its $15 billion investment pool for the sake of a financial venture that incorporates a flawed approach to affordable housing, a counter-productive approach to supporting small businesses, and a fixation on expensive, unreliable energy sources that will further compromise the City’s ability to perform municipal services.

Sadly, San Francisco City leaders now disparage the industry that helped build the City – i.e., the industry that built the Bank of America building and the Crocker Bank Tower (now Wells Fargo) and Galleria. Even New York-based Chase Bank spent $300 million for naming rights to the Chase Center. Instead, these officials should be grateful for the banking industry’s enormous contributions over decades – the commercial, home, and personal loans; the local employment, the local sponsorships, the business and property taxes paid, etc. Whatever deficiencies exist in the highly regulated banking industry will not be overcome by ambitious politicians who want to declare themselves bankers by fiat and execute a plan that promises “profitable operations” while vowing not to “maximize profitability.”

Unfortunately, San Francisco is not alone in its quest to fund and operate a public bank. The Cities of Los Angeles, Seattle, Philadelphia, and Oakland are in the process of creating their own public banks.

Public banks are not a bad idea because they cost too much. Such banks would be undesirable at any cost. Public banks are a bad idea because they are a product of municipalities with an unbound mission using their legislative authority to pursue undesirable and/or unachievable goals at the expense of residents and local businesses. A better idea would be for municipal officials to reform their city missions and bind them to a delimited scope of activity, based upon what local legislative and enforcement authorities can and should do on behalf of their residents and businesses.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

In the years since the National Civic League published Is It None of Our Business?, the trend of city halls tackling national issues has shifted from a novelty to a standard operating model. The League’s 2023 analysis argued that local agencies should embrace a broader national agenda—a shift they championed as a positive phenomenon. However, from the current vantage point, this expansion of municipal scope looks less like innovation and more like a costly distraction. While officials have focused on global optics, they have increasingly struggled to manage the essential local services that support their community.

A striking recent illustration of this trend is the wave of municipal foreign policy that gripped city councils throughout 2024 and 2025. More than 100 American cities diverted hundreds of hours toward debating and passing symbolic resolutions on international conflicts—matters where local government has no jurisdictional power and zero impact on outcomes. This shift toward performative diplomacy has occurred at a significant cost to taxpayers. While council chambers were packed for debates on overseas wars, those same municipalities were deteriorating financially, forced to make deep cuts to public works and public safety as the last of their pandemic-era federal funds expired. When a city council prioritizes global optics over its fiduciary duty to maintain local roads and sewers, it isn’t just expanding its scope—it is effectively abandoning its core mission.

The League justifies this expansion by citing national government dysfunction and the relative agility of local decision-making. They suggest that local organizations are well-suited to take on these broader issues, even offering the removal of Confederate monuments and citywide conversations on race as empirical support for their stance.

While some officials remain inspired by the League’s evaluation, residents and local businesses have growing reason for concern. Cities have already taken on more than they can handle, as evidenced by their reliance on serial tax increases, deferred infrastructure maintenance, and reduced service levels to balance their budgets. With each newly adopted budget, we are reminded that most cities operate under a paradigm of scarcity. Vague municipal missions open the door to a wide variety of local governmental activities that add to the organization’s scope once a majority of council members decide that such activities benefit the community.

Meanwhile, environmental initiatives have already expanded the community to include wildlife and inanimate nature, subordinating the interests of residents and business owners to goals that assume any impact on the environment is bad, without regard for the impact of such policy on residents. To further expand a city’s mission to include national and global issues is to paralyze a city council’s ability to define and delimit the appropriate scope of activity for the city organization in relationship to the residents and business owners. Delimitation of scope is critical to the effective operations of any organization; municipalities are not an exception.

Past decisions regarding the structure of our government are not good simply because they prevailed; nevertheless, there are solid grounds for maintaining distinct national and regional levels of government. Achieving a meaningful impact on national issues requires a coordinated, unified approach. While local solutions may appear attractive for widespread issues, a fragmented policy landscape across cities and counties results in ineffective and conflicting local actions. Local agencies, lacking the broader national perspective, are thus more likely to exacerbate problems than solve them. Municipal officials cannot resolve dysfunction at the national level through their exercise of local powers.

For example, what is accomplished if half of the US cities establish environmental policies after concluding that the benefits of fossil fuels outweigh the negative effects while the other half act on a different evaluation? What is accomplished if half of the border cities and towns implement a relaxed border and immigration policy while the other half implement strict policies? And we know what happened when some states implemented blatantly racist laws while others (perhaps not perfectly) abstained from such practices.

But what about the city cited by the League that undertook the removal of a Confederate landmark and the engagement of its residents in improving (among other things) the relationship between the police department and those residents who are “often underrepresented”? Are this city’s actions examples of taking on national issues? Here we need to be precise. A local issue taken on simultaneously by many municipalities can, in aggregate, manifest in a national trend of great importance; but such a phenomenon does not transform such issues from local to national.

The existence of a monument on city or county property is a local issue. And setting aside an evaluation of the outcomes of the “goals and strategies” that emerged from the city’s outreach to address community issues such as race and “equity,” such outreach is purely local. The city’s positive local actions – i.e., removal of Confederate symbols and review of policing policies – were just that – local actions. Such actions do not legitimize the fantasy that municipal leaders can do justice to their local charge and divert municipal resources to undertake bona fide national issues.

Local governments should reaffirm their fundamental roles and responsibilities by defining their business and minding it. At the national level, mission creep has spurred rent seeking, cronyism, and pressure group politics, thus hindering effective government. The National Civic League’s endorsement of the “nationalization” of local government matters invites similar dysfunctional elements to the local level, overwhelming city councils and compromising municipal operations. Maintaining distinct national and regional levels of government is crucial to a coordinated and unified approach to undertaking national issues.

The “’nationalization’ of local government matters,” called for by the National Civic League, amounts to the municipalization of national matters, whereby municipal officials create the illusion that their agencies are effectively responding to wide-ranging issues. But these officials should limit the exercise of their agency’s powers to the fulfillment of their local mission and stay clear of creeping scopes that sabotage the objectives vital to residents and business owners.

Read my book about Municipal Financing — you can find it on Kindle and Amazon.

The misguided quest for efficient government

As the wildfires raged in southern California last year, we witnessed bipartisan support for the reintroduction of The Fix our Forests Act, ostensibly designed to reform forest management. At the same time, the Los Angeles Department of Water and Power announced that it will submit to outside investigations to examine the failure of its water system to supply water to firefighters in Palisades. Meanwhile, the Los Angeles Fire Department’s 2025-26 budget discussions are certain to continue the contentiousness over the department’s priorities and methods. Other fire departments throughout the state are likely to receive special attention from their city councils over the upcoming months.

Public officials at all levels of government champion government efficiency. Whenever there is a government failure, public officials call for audits intended to identify mismanagement and wasteful spending. Periodically, there are calls for the reform of bureaucracies and those who influence them (e.g., DOGE, draining the swamp, etc.). Although enthusiasm for such initiatives runs strong, the results have been underwhelming. Should we expect the results from the upcoming wildfire investigations and post-event analysis and remedies to be different?

Why do attempts to reform government fail? – Are such attempts disingenuous? Misguided? Poorly executed? Let’s examine the unsuccessful attempts to reform government for the purpose of understanding why such attempts yield so little satisfaction and improving efforts to reform government at all levels.

When auditors audit a governmental agency’s project or program, they focus on operational performance, compliance with applicable policies and rules, and whether the subject program met the intended objectives. An auditor’s findings are confined to this delimited scope. Thus, an auditor may have findings related to how well a program was managed or executed, incidents of noncompliance with internal policies or applicable regulations or laws, and/or the extent to which a project or program met its objectives (i.e., goals).

But what if the agency’s goals are inappropriate? What if that convention center should not have been built by the city? What if that housing program was an ill-advised attempt to compensate for city zoning and building policies that restrict residential development? What if that “educational program” had nothing to do with education? What if universal overreliance on fire suppression has infiltrated the missions and expectations of other institutions that are critical to fire prevention? The scope of an audit does not include an evaluation of such goals and assumptions.

We are disappointed when audits of government programs tell us what we already knew (or strongly suspected) but leave us without the insights needed to prevent a repeat. Such audits leave public agencies with the same goals that gave rise to the disastrous project or program and thus the same goals that will lead to future unsatisfactory results. The wildfires remind us how much is at stake.

If we passively accept the status quo mission and goals when we “reinvent” governmental agencies or programs, we ensure that little substantive change will result. And if the termination of a redundant or unneeded agency or program is not an option, nothing will be reinvented — only shuffled around or repackaged with little or no benefit. Similarly, there is limited benefit to investing in technology to make public employees more efficient, if those employees are not supporting the right goals. And we do ourselves a disservice if, in our rush to reform fire management, we assume that our predecessors ever got the combination of forest management, public land management, building and zoning, insurance, and fire suppression policy right.

Finally, when we “drain the swamp,” we should be not swap out one set of soggy career bureaucrats, cronies, and influencers for another. Such actions leave the status quo missions, goals, and assumptions largely unaffected, thus ensuring the future abuse of government powers and spending authority.

Shifting the focus of government reform

The inappropriate and misguided goals of government have lured us into adopting ineffective strategies for reforming government. In some cases, we have tacitly accepted vague missions that encourage lofty goals and unbound goal creation, resulting in unchecked spending. In other cases, we do not sufficiently challenge prior assumptions, rendering ineffective any attempts to legislate our way out of life-threatening challenges.

In our rush to make government perform its activities more efficiently, let’s not miss the opportunity to ensure that the agencies under examination are taking on the right activities.

Yes, we want our police to take advantage of the latest technology for managing records and executing law enforcement tactics.

Yes, we want government agencies at all levels to function as modern organizations.

Yes, we want forest management, water and power utilities, fire suppression, and private developers and insurance companies to protect us from the fatal risks of building in geographic areas that are known for their vulnerability to fires.

But – we should be careful not to sacrifice individual rights, due process, and public transparency to streamlined bureaucratic processes. Government is not a business. Residents and business might be frustrated that “government doesn’t move fast enough”; but when those inside a public agency are considering changes to expedite decisions, they need to remember that the proper standard of government effectiveness is not efficiency. The proper standard of government effectiveness is the protection of the rights of individual residents and businesses.

Our first critical task is to audit our government agencies’ missions and goals and examine our assumptions. Then, we can audit our government agencies’ projects and programs for the purpose of improving efficiency, reining in spending, or making us safe from a future disaster. And before we jump to legislate our way out of a problem that took decades to fully manifest, let’s examine all facets of the problem without prejudice.

Only then will we have government programs worthy of streamlining, the ability to control spending, and statewide policies that protect our lives and our property.

It’s understandable that Klein and the others want to discontinue policies that have unnecessarily increased government bureaucracy and slowed development. But from the perspective of sound governance, they have it backward. We don’t have a capacity problem; we have a scope problem. By attempting to legislate the results of productivity, Klein inverts the causal order of prosperity. He treats the state as an engine to force social goals rather than the protector of the rights and conditions that allow abundance to emerge. The hard truth is that government cannot create abundance; it can only secure the political conditions for innovation and productivity—which chiefly requires that it refrain from obstructing them.

The Justice Trap

The foundation of Klein’s argument rests on a distinction he makes in the introduction: that markets are “fine for goods where access is not a matter of justice.1

By reclassifying economic outputs—like housing or energy—as issues of justice rather than results of production, his framework effectively transfers them from the realm of private action to that of state administration.

But justice is not a state-delivered outcome or a curated collection of subsidies; it is a condition. True justice demands the freedom to associate, produce, and trade. When a city decides that housing justice requires overriding market signals and private property, the government stops being a protector and starts being a central planner. We see this manifested repeatedly at the local level in the goals of affordable housing, permanent supportive housing, and economic development.

By declaring production to be a matter of state-defined justice, Klein strips the individual of any claim to their property or associations if such claims conflict with the state’s goals.2

The Myth of State Capacity

The book is steeped in a collectivist framework, frequently using “we” to describe decisions that should belong to individuals. Klein’s framework operates on the explicit premise that “to have the future we want, we need to build and invent more of what we need [emphasis added].”3 Thus, we must collectively decide what kind of neighborhoods to live in and then build them. But one person wants a quiet cul-de-sac; another wants a high-rise above a train station. When the state steps in to decide how we want to live and what we want to build, it isn’t we deciding—it is a small group of planners overriding the actual preferences of individuals. In almost every instance where Klein uses “we,” you can replace it with “the government.” “We need to build more” actually means “The state needs to mandate that more be built, regardless of property rights.”

Late in the book, Klein argues that the government simply needs to be “better.” But better by what standard, if the government’s relationship to the individuals it was established to serve is disregarded?

If we wish to preserve individual rights and individual justice, government is “better” when it engages in proper, rights-protecting activities and rejects the siren song of central planning. To the abundance advocate, however, “better” means a more efficient technocracy. They want a government that is faster at executing on its central planning—one that can override local hurdles not to protect or restore property rights, but to force the state’s preferred version of density. But making the wrong things faster doesn’t make them right.

We see this most clearly in energy policy: the state seeks abundance for solar panels and transmission lines while restricting the very energy sources—fossil fuels—that power 80% of the world. This is not a quest for abundance; it is a political preference disguised as a supply-side solution. True abundance would require liberating all cost-effective energy, not simply being less bureaucratic about how restrictive policies are imposed and favors are provided. When the state determines the what and the who of production, it is a command economy, notwithstanding how its leaders claim to champion efficiency and production.

This mandate-driven approach doesn’t remain at the state level; it trickles down to city halls in the form of all-electric building mandates and restrictive, often nonsensical, climate action plans. When a California municipality mimics Sacramento by banning natural gas or prioritizing ideological energy targets over grid reliability, they aren’t creating abundance. They are imposing higher costs on local builders and leaving their own residents vulnerable to the instability of a state-managed grid. It is the local taxpayer and energy user who pay the price for this trickle-down technocracy.

The Productivity of the Untied Hand

Klein himself states the truth about halfway through the book, noting that affordable housing is built more cheaply and swiftly when public funds are avoided.4 But his perspective is that this fact is “damning,” an example of the failure of state efficiency. In reality, such results demonstrate the inevitable success of the private sector, something that we should encourage and celebrate. The private sector does amazing things precisely when its hands are not tied by mandates, prevailing wage requirements, and twenty-page social engineering checklists that govern 21^st-century construction.

When local governments try to engineer abundance—whether through municipal fiber networks or subsidized housing—they take on economic risks they are ill-equipped to manage. They aim at a metric while violating the principles that produce actual prosperity. These projects carry a long fiscal shadow. When a private developer fails, the investors lose; when a city-led abundance project fails, the taxpayers lose their future. This failure is inevitable because when a municipality adopts abundance as a goal, it shifts from a principled organization to a metric-driven one. Fixated on a specific number—like “10,000 new units”—the city becomes willing to violate the very principles that produce actual prosperity.

This logic is the driving force behind Klein’s “Invent” chapter, where he advocates for the state to take the lead in funding and directing innovation. However, just because the government uses tax money to fund something that some people want or find useful doesn’t make the act right or the project sound. When the state funds research and development that would have occurred anyway, it simply adds layers of bureaucracy and political favoritism to a process that was working.

Perhaps more concerning is when the government funds projects that would not be funded voluntarily. In a free market, profit is a sign of sustainability; if greedy capital won’t touch it, it is a red flag that the project is not a value-creator. When the government overrides such judgment, it isn’t creating abundance; it is subsidizing inefficiency, or perhaps pet projects, at the expense of the taxpayer.

This same gatekeeping mentality—where the state picks winners in the research lab—extends to how cities manage land use. We see this in the surge of development agreements where cities essentially sell permission to build in exchange for political tribute. The city isn’t protecting your right to use your land; it is gatekeeping the market. If you want to build, you must first fund a park, provide below-market-rate units, or adhere to a specific aesthetic. This isn’t abundance; it’s a toll booth. By the time the goal is met, the underlying right to property has been replaced by a system of political patronage.

A city that functions as a gatekeeper eventually finds itself with less to gatekeep.

Conclusion: Freedom is the Source of Abundance

Ultimately, the Abundance Agenda is a conceptual bait-and-switch. It takes the term abundance—the natural fruit of liberty—and tries to sell it back to us as a product of the state. But abundance is a byproduct, not a goal. It is the natural result of freedom. Our history has shown that if you leave people free to produce, they will satisfy their needs—and then some.

If we make abundance our political target, we invite technocratic schemes that inevitably stifle the very innovation we claim to want. We don’t need a government that aims at abundance. We need a government that aims at the conditions that produce it: the freedom to associate and the freedom to use one’s property as one sees fit.

A true inquiry into abundance would ask: “What policies maximize human flourishing?” The answer is never more central planning; it is the restoration of the rights-protecting activities that allow people to build. No, you cannot legislate morality or abundance. But if you protect the freedom to produce, abundance will take care of itself.