Eric Kriss - Municipal Turnarounds

Municipal Turnarounds

On September 11, 1991, the Massachusetts state legislature approved Governor William Weld's emergency request to appoint a state receiver to take over the City of Chelsea's bankrupt municipal government, the first state-designed municipal receivership in U.S. history. Weld named Jim Carlin, a businessman and former state Secretary of Transportation, to become the Chelsea receiver, reporting to Eric Kriss, who, as the assistant Administration and Finance secretary, had drafted the Chelsea legislation.

Chelsea, directly across the Mystic River from Boston, had long been in economic decline with a spiraling fiscal crisis. Carlin and Kriss immediately undertook a broad municipal turnaround, with a focus on labor negotiations with the local Firefighters union. Boston University, already involved in local education, took over school administration.

Within two years, Chelsea's budget was balanced, a restructured firefighters contract was negotiated, city operations were streamlined, and new school construction was underway. As the Receivership achieved stability, a charter change in 1995 implemented a new efficient council-manager form of government. Increased emphasis on economic development and capital improvement led to an influx of new business, and, as the turnaround reached maturity in 1998, Chelsea was named an All-American City by the National Civic League.

In 2004, Springfield, the third largest city in Massachusetts and long suffering from economic decline, requested extraordinary state assistance to meet its financial obligations. Kriss, now Secretary for Administration and Finance, drafted a new receivership bill, modeled after his 1991 Chelsea legislation, that expanded upon the receiver's powers by suspending Chapter 150E, a key law that enfranchised public sector unions and defined the collective bargaining process in Massachusetts. After heated debate and intensive lobbying by public labor unions, the legislature placed Springfield into a state receivership controlled by Secretary Kriss on June 30, 2004, but without the proposed suspension of the Chapter 150E labor law.

Without the Chapter 150E suspension, the state receivership entered into a long collective bargaining process with the teachers' union. In September 2006 agreement was finally reached on a new contract that included merit pay, the first time that student performance was explicitly tied to teacher compensation in a large urban school district in Massachusetts.

The Springfield receivership, as in the earlier Chelsea experience, balanced the municipal budget, streamlined operations, and earned an upgrade in the city's bond rating. On June 30, 2009, the receivership returned governance of the city to local officials.

In February 2004, Kriss advocated the elimination of the monopoly granted to public sector unions through state laws such as Chapter 150E in Massachusetts. These remarks, plus the controversy over the original Kriss draft of the Springfield receivership legislation that suspended Chapter 150E, motivated Harvard University's John F. Kennedy School of Government to host a debate between Secretary Kriss and two labor union supporters, Economics Professor Richard B. Freeman, co-faculty director of the Harvard University Trade Union Program, and Jack Donahue, a Kennedy School lecturer and director of the Weil Program in Collaborative Governance.

The threat of escalating municipal labor costs due to Chapter 150E led Secretary Kriss to introduce the concept of Municipal Stability Factors as an online assessment tool for local officials. When he left office in September 2005, Kriss warned that overly generous contracts with public employees, together with a failure to control employee healthcare costs and an aversion to development that could spur new tax revenue, have doomed cities and towns to a dark financial future. "This is a quiet crisis, a crisis of attrition. It's not a Katrina, but if we extrapolate over the next couple of years, it will get worse and worse and worse."