Weekly Report – April 11, 2016
Rebuilding the Civic Commons
Good news. After years of declines, more Angelenos are finally getting back to work. L.A. County’s unemployment rate is 5.5 percent and 6.2 percent in the City of L.A. This is a far cry from 2010, when the rate topped 13.9 percent. All in all, L.A.’s economy is looking healthy, with steady job gains for the past 73 months.
One of the most promising signs in the economy: Solid job creation and tighter labor markets have pushed hourly wages up by 2.3 percent for the past 12 months and the labor-force participation rate is back up 63 percent.
Though progress is being made there still exists a lingering concern about the long-term economic health of the region. GDP growth has not translated into income growth for most Angelenos (and Americans), middle-skilled jobs continue to go unfilled due to a lack of qualified workers (there are an estimated 157,000 job openings in L.A. on a given day) and the supply of workforce and affordable housing continuous to lag behind demand.
These challenges don’t hurt just the unemployed and business owners. It’s bad for all of us. A workforce sitting on its hands is a drag on economic growth; and hampers opportunities for upward mobility. Lost productivity produces little or no income and generates minimal taxes, which impacts government’s ability to pay for the services and programs its provides.
How we deal with these challenges will determine the region’s future success.
Strengthening the Political, Business and Civic Commons
In the fall of 2012 David A. Moss, McLean professor of business administration and founder of the Tobin Project at Harvard was interviewed for an article entitled Can America Compete? He discussed his research showing that business leaders were concerned about the nation’s political system and how increasingly dysfunctional it has become.
He went on to explain that since the days of the nation’s founding fathers, Americans have harbored profound disagreements about the proper role of government. Some see government as the problem and seek to limit it; others believe government can better harness the collective effort of individuals to solve important problems they would have trouble solving on their own.
In the past, reconciling the two had not always involved meeting in the middle, but rather adopting the best of both sides, which led to a more productive and economically successful nation. (His example – the simultaneous advancement of strong legal provisions for limiting deficit spending and public education financed by new taxes.)
Today the central source of weakness in our political system is an absolutist view of politics (and political tactics) – where any success for one side is seen as a devastating loss for the other. Research data from Nolan McCarty, Keith T. Poole, and Howard Rosenthal shows that political polarization in Congress is at or near an all-time high, driving more distance between the parties and less ability to compromise.
Unfortunately, poor politics translates into poor governance. Think about all the elements of the business environment that are products of political decision making – from rule of law, property and labor rights to planning and trade policies.
As the race for the presidency heats up, it is important to remember that CEOs and other business and civic leaders can make a difference and help strengthen the political commons by making clear to their stakeholders and to the broader public that a healthy political environment is vital to a healthy business environment and a healthy economy.
One silver lining in all of this – one party should never be able to completely destroy the other. Our democracy requires competing parties that provide a broad and diverse set of ideas from across the entire political spectrum.
California on the other hand, seems to have become, according to the New York Times, a “guinea pig in a bold economics experiment.” For years two ideologues had found a balance in the great state:
- “Government policies should promote fairness by narrowing the gap between rich and poor, spreading the wealth and making sure that economic outcomes are more equal.”
- “Government policies should promote opportunity by fostering job growth, encouraging entrepreneurs and allowing people to keep more of what they earn.”
The balance was, the spoils went to the winning party. I.E. – The republicans held the Governor’s chair for 16 years under George Deukmejian, Jr. and Governor Pete Wilson and both leaders held the line on tax hikes, reduced regulations and cut government spending. Then the election of Governor Davis’ in 1998 reversed course by providing labor and the education community big wins. All administrations also found common ground on the state budget and other issues because there was always enough leaders from both parties to drive a debate.
Today the vast majority of California’s political class align their rhetoric with both statements, but truly implement an agenda tied to the first one. The evidence is clear. More and more local municipalities are raising the minimum wage, and Governor Brown passed a wage increase for all of CA. The November ballot will potentially be loaded with tax increases that will impact businesses and high earners starting in 2017. And CA’s regulatory climate and NIMBYism continue to stymie economic growth opportunities tied to the state’s biggest job generators – airports, ports and urban infill.
The good news – all of these initiatives have and will make positive impacts on the lives of millions of Californians. The bad news – business leaders seem to be excluded from more and more of these policy discussions at the state and local level – discussions that happen to impact them more than anyone else. In other words, a lack of true debate is thrusting California into unknown territory during a time of global economic insecurity.
It all comes back to the local level.
I strongly believe that the L.A. Coalition is in a position to play an important role in shaping L.A.’s political, business and civic commons. By doing so we are once again creating a space in which the private sector, elected officials and the bureaucracy can work together and share ideas and views points that may be different, but have the same goal in mind – good governance.
Building Stronger Civic “Commons” with Innovative Public Private Partnerships
Operations Innovation Team
The Team is a public/private partnership established in 2015 between the L.A. Coalition, the L.A. Mayor’s Office, and Mayor’s Fund for L.A., to bring together private and public sector skilled talent to reform the City’s operational business systems. The Team is leading the creation of the City’s $3 billion real estate asset portfolio, optimizing the City’s $7.9 billion procurement spending, and reducing the nearly $300 million spent on safety and workers’ compensation liabilities. In just a few months, the team has successfully consolidated the City’s real estate records, analyzed nearly $5 billion in procurement spend (a first ever), and partnered with the City Attorney’s Office to implement new risk management controls to bring down costs. The team has secured internal support, mapping out its priority reform initiatives, and secured partnerships with Pepperdine, Columbia University, UCLA, USC, and emerging technology companies to bring the best metrics and execution to reform how the City operates.
The L.A. Coalition’s Role: The members of the Coalition are providing capital, advice, mentoring and additional in-kind resources to the team.
SoCal & NoCal Water Coalition
L.A. Coalition Water Committee Chair Marc Nathanson, Pisces Foundation co-founder and trustee Bob Fisher, California Water Foundation Director Lester Snow and Michael Kelly are leading an effort to bring business and civic leaders in Los Angeles and the Bay area together to advance the idea that California needs to implement an integrated water management system that meets the growing demands of its population, environment, business, residential and agricultural communities. We are working with the Governor’s office, the State Legislature and local officials to advance this initiative.
L.A. Coalition & FUSE Corps Partnership
The L.A. Coalition is partnering with FUSE Corps, a nonpartisan and nonprofit organization that works with city, county and state government leaders to identify and develop solutions to pressing challenges facing city, county and state government – economic and workforce development, human resources, transportation, housing, to name a few.
Once a project is identified FUSE Corps recruits an entrepreneurial and mid-career professional (10 to 15 years of private sector experience) to serve as an executive-level fellow within government. Mark Thomas, the director of the Operations Innovation Team, was a fellow in 2014-15, reporting to Miguel Santana, the City Administrative Office for L.A. In his role Mark engaged a broad array of community stakeholders to develop innovative solutions for cleaning up the streets throughout the city, increasing neighborhoods economic viability and making L.A. a more “livable” place. Mayor Garcetti signed into law a large majority of the report’s recommendations.
L.A. Coalition’s Role: Our partnership will be managed by a newly created L.A. Advisory Committee. I will chair the committee and L.A. Coalition member Charles Hirschhorn will also serve on the committee. We are in the process of talking with city and county leaders about potential projects that the fall 2016 class of FUSE Corps fellows could work on. Once the fellows are in place, the committee and Coalition will provide guidance/advice, mentoring, and in-kind resources to the FUSE Corps fellows. Additionally, throughout a fellow’s tenure, FUSE provides ongoing leadership training developed in partnership with McKinsey & Company, Stanford Institute of Design (d. school) and Smallify. Portions of the training are also made available to government employees from the partner agencies.
FUSE works closely with its local government partners to secure the necessary resources to cover each Fellow’s annual compensation as well as the associated costs of executive search, training, coaching and program management. Most fellowship hosts cover these costs directly through their annual budgeting process and then contract with FUSE to facilitate the program. Other hosts are able to reallocate currently unfilled positions and/or tap into existing budgets for consulting services. Still others divide the costs between public funds and private donors who underwrite a portion of their projects.
Some government hosts identify philanthropic partners who are able to help offset the cost of a Fellow. FUSE may also be able to bring a funder to a project in some cases. FUSE is happy to support such fundraising efforts including meeting with funders, developing proposals and leveraging our nonprofit status to receive tax exempt donations. FUSE also welcomes the opportunity to talk with local funders about how they can advance their programmatic mission by sponsoring Fellows to work in local government on specific issues such as education, health or poverty.