Effective State and Local Leadership in the Age of COVID-19

For New Jersey Governor Phil Murphy, the COVID-19 pandemic has driven home a "huge reality" about leadership in times of crisis. Addressing more than 150 federal, state, local, and municipal finance industry leaders at a March 11 webinar, he described his mandate as “to make the state stronger, grow the economy, grow jobs, fairer—make it work for everybody, but also to rebuild trust.”

The Democratic governor was the keynote speaker at “State and Local Leadership Challenges in the Age of COVID-19,” a Livestream event on state and municipal fiscal and operational responses to COVID-19 and the latest in a series of webinars co-sponsored by Penn IUR and The Volcker Alliance. During the 90-minute webinar, Murphy and an expert panel focused on the most effective strategies for dealing with the pandemic, the lessons of past crises, and how COVID-19 is reshaping crisis leadership for the future.

"The past six weeks have seen a sea change in how state and local governments can respond to this pandemic," Murphy said on March 11, the day President Biden signed the $1.9 trillion American Rescue Plan into law. “No matter how we address the challenges at our state or local level, there is no denying there is no substitute for the real and meaningful impact federal leadership and support can have."

The webinar was part of a series of more than 20 webinars on the impact of COVID-19 held since April 2020 and co-hosted by William Glasgall, co-lead of the recently created Initiative for State and Local Fiscal Stability at Penn IUR and Senior Vice President and Director of State and Local Initiatives at The Volcker Alliance, and Susan Wachter, Albert Sussman Professor and Professor of Real Estate and Finance at The Wharton School of the University of Pennsylvania and Co-Director of Penn IUR.

The panel following Governor Murphy’s remarks included former U.S. Representative Tom Davis (R.-Va.); Elizabeth Kellar, Senior Fellow at the Center for State and Local Government Excellence and Director of Public Policy at the International City/County Management Association; Michael Nutter, former Philadelphia Mayor and David N. Dinkins Professor of Professional Practice in Urban and Public Affairs at Columbia University’s School of International and Public Affairs; former New York Lieutenant Governor Richard Ravitch, chair of the Initiative and a Volcker Alliance Director; and Michael Useem, William and Jacalyn Egan Professor of Management and Director, Center for Leadership and Change Management, The Wharton School. Visit the Penn IUR website for replays of the March 11 event as well as of past webinars.

In his introductory remarks to the Livestream, Wendell Pritchett, University of Pennsylvania Provost and James S. Riepe Presidential Professor of Law and Education set the stage for the day’s discussion of leadership issues. COVID-19, he observed, presented “a perfect storm of challenges to state and local governments.” The challenges include health outcomes and disparities, job losses, budgeting and financial shortfalls, setbacks in education, and a dire outlook for public transportation. But “the flip side of all these challenges is an opportunity to reimagine how we make policy and deliver services," Pritchett said.

Panelists said transparent and honest communication with constituents were the key for their effective local leadership as the pandemic hit in 2020.

"What's always been true of leadership turns out to still be true," Useem said. Leadership is "a combination of thinking strategically, communicating persuasively, and acting decisively," he said.

"The city and county managers who have built trust, along with their elected officials, have had the best way forward," ICMA's Kellar said. Among the standouts she cited are the city of Decatur, Georgia, which imposed a mask mandate against state guidance; Bloomfield, Colorado, which provided its first communication on COVID-19 as early as February 27, 2020, and shifted to daily updates less than two weeks later; and San Antonio, Texas, which provided daily news conferences on the pandemic’s local impact.

Panelists agreed on the need to invest in what Murphy called "the things that will create a more resilient future," including education, health care, and infrastructure.

"New Jersey, after the Great Recession, pursued a small-government orthodoxy," Murphy said, cutting services and headcount and funding for education. As a result, he said, it was the last state in the nation to recover from the Great Recession of 2007-09.

"We've taken the completely opposite playbook. We have leaned in to this," he said. "I don't want to be the last state to recover from this pandemic as an economic reality. I want to be the first state to recover."

At the same time, panelists also emphasized the need to maintain fiscal discipline, saying external financial control boards can be useful to local leaders faced with tough budgetary decisions.

"It's sometimes a hell of a lot easier to have some external entity say, ‘This is what you can spend money on and this is what you can't spend money on’," Ravitch said. When Edward Koch was New York's mayor during the city’s last fiscal crisis in the 1970s, he would frequently "go on television and criticize the control board" when it cut an expenditure, Ravitch said. Once off camera, "he'd turn to me and he'd say, ‘Thank God for the control board.'"

Nutter, who served as Mayor from 2008 to 2016, said his leadership benefited from the Pennsylvania Intergovernmental Cooperation Authority, an oversight body created in 1991 to help Philadelphia surmount another financial crisis. "They help to ensure fiscal discipline. It's why we don't run out of money," Nutter said. "Fiscal discipline was the driving mantra of our administration."

In today's environment, he said, "you can't run out of money, and you can't do the things you want to do if you don't have money."

Davis, who wrote and floor-managed the bill that created the District of Columbia Financial Control Board in 1995, said "it's always better having more stakeholders at the table than less," during such crises. The board, which helped stabilize the capital city’s shaky finances in the 1990s, was created with support from Delegate Eleanor Holmes Norton (D-DC), the Clinton administration, and a Republican Congress—a level of cooperation that Davis observed might be impossible in today's divided government. "It's a very different situation than when I was there," he said.

The trend toward delivering services online during the pandemic is likely to result in permanent changes in the way states and localities conduct business, Kellar said. Such practices as virtual building inspections and online council meetings are likely to remain, which may bolster local leadership, as online meetings bring more people into the process, Davis said.

Ravitch noted, however, that the work-at-home trend may also present additional challenges, especially for big cities like New York that depend on property taxes for one-third of revenues.

"The implications to the revenues of New York City for the next few years are frightening," he added. "I believe the city will recover. Cities are the greatest socializing institutions in the world. But we're in a hell of a pickle now."

Videos of all webinars on the impact of COVID-19 are available to stream. The next Penn IUR-Volcker Alliance event will be a Special Briefing on April 15 at 11 a.m. EDT, featuring an expert panel reviewing the Alliance's forthcoming Truth and Integrity in State Budgeting study and discussing how well states had prepared themselves for the pandemic's fiscal stresses.