Empowerment, Not Entitlement
The New Politics Of Bret Schundler
Originally appeared in
the City Journal, Autumn, 1993
On Election Day 1992, the voters of Jersey City elected 33-year-old
investment banker Bret Schundler, their first Republican mayor in 75 years.
It seemed like a fluke: Schundler's victory came in a special election to
replace a mayor who had gone to prison. He received only an 18 percent
plurality in a 19-candidate field and would have to stand for reelection
seven months later. Since the city of 228,000 had long been dominated by
a Democratic machine, it seemed likely to many that Schundler would be
only a caretaker mayor.
But he immediately set about reforming his city's government. He put
more police on the street, reduced property taxes, and drew on his Wall
Street experience to develop a new method of collecting delinquent taxes.
He proposed an imaginative school voucher plan that he argues would
increase the quality of both private and public education. And be spoke of
themes that struck a chord with normally cynical voters: individual
empowerment, personal responsibility, responsive government.
In May 1993, Schundler garnered 68 percent of the vote to win a
full four-year term, despite an all-out campaign against him that featured
visits from such political luminaries as Jesse Jackson and Senator Bill
Bradley. A former Democrat who worked for Gary Hart's 1984 presidential
campaign, Schundler has attracted national attention as, in the words of
the Washington Post, one of the "new ideas Republicans."
Scbundler was interviewed by City Journal editor Fred Siegel;
Lawrence Mone, director of research for the Manhattan Institute; James
Pinkerton, a Manhattan Institute senior fellow; and Thomas Main, a City
Journal contributor who lives in Jersey City.
What is it about your mayoralty that has drawn national attention
to Jersey City, a small city that has been rather obscure since Boss Frank
Hague ruled in the 1930s?
SCHUNDLER: Obviously, the first thing that drew attention was that I am a
Republican. Jersey City had not had a Republican mayor since 1917, when the
mayor was chosen by a commission. The last time the Republicans elected a
mayor was in 1905.
But the reason people have continued to pay attention is that we're talking
about a new approach to governing, one that I think can create a model for the
nation. During most of the twentieth century, the Democratic Party has been the dominant party in
America, especially in the big cities, because it has
promised to solve people's problems. Republicans, on the
other hand, have preached self-reliance. Voters looking for
governmental help don't want to be told to take care of
their own problems, so naturally we Republicans usually did
not fare well in the cities. My approach is different. I
believe that government does have a responsibility to help
people and should be proactive in doing so. I just don't think
it is doing a good job with the bureaucratic approaches it
Governments have been saying, in essence: If you
have a problem, we will solve it by giving you something.
That approach ignores the fact that man has a soul and is
ultimately saved not by what he is given, but by what he
contributes. You can take a poor person and give him a
house, or food stamps, but if you haven't given him a
purpose, you haven't given him anything. If that person
doesn't have a chance to contribute meaningfully, he will
feel himself to be just a ward.
People need to have a socially reinforced philosophy
that the purpose of life is to give, and that one should be
happy not because of one's circumstances but in spite of
them. These are traditional aspects of both religious faith
and secular thought in America. But recently the prevailing
philosophy of government has been that values are
irrelevant. I think that came out of the positivism of John
Dewey and the materialism of Karl Marx. Culturally, we
have transformed the right to pursue happiness into an
entitlement to happiness itself, with, government the
guarantor. But to be truly happy, people need
empowerment, not entitlement. When you challenge
someone to be responsible, you are putting a burden on him,
but you're also giving him power. Internalizing this sense of
responsibility is essential to happiness.
CITY JOURNAL: Jersey City is 78 percent Democratic
and only 7 percent Republican. How were you able to win
SCHUNDLER: I talked about the policy implications of
the philosophy I am articulating. For instance, I specifically talked about putting more cops on
the street, about lowering taxes, about bringing jobs back to
Jersey City. I specifically talked about workfare, not
welfare; and about school vouchers.
In doing so, I told the voters not only that I was
going to help them, but that I was going to help them in the
way that they want to be helped, by truly empowering them
to be able talk on safe and clean streets, pay affordable
taxes, find a quality job, and send their children to the best
school available-public or private.
Jersey City voters are perhaps more jaded about
bureaucrats and politicians than anyone else in the country.
This has been the most machine-driven town in America,
notorious for corruption. So voters are very skeptical of a
politician's honesty. I argued that power corrupts and that if
you accrue all power to politicians, they are going to be
abusive. I argued that we need a system in which politicians
don't have so much power in the first place. If we put
power into people's hands -- for instance by giving them a
voucher -- we will have given them the means to protect their
own interests, and they will no longer be subject to wanton
misuse of power by politicians.
Jersey City is the most diverse city in America -- about
30 percent African-American, 25 percent Hispanic, and 9
percent Asian. Forty-one percent of Jersey City residents
don't speak English at home; 14 percent immigrated to the
United States within the past ten years. And yet people of
every race, ethnicity, and religion were able to agree on
these basic ideas. In the regular election, in which I ran
against a machine candidate, I won nearly 70 percent of the
CITY JOURNAL: You came into office with a $40 million
deficit on a $290 million budget. The previous
administration was saying the only answer was to raise
taxes and cut city jobs. What did you do?
SCHUNDLER: We would have been bankrupt by today
if we had followed that plan. They had planned to raise
municipal property taxes by 54 percent, when Jersey City's
property taxes were already among the highest in the nation. People were already
protesting by not paying their taxes; we were collecting
only about 78 percent of taxes due. Raising taxes again
would have put even more taxpayers into default.
We realized the only answer was to cut spending.
We immediately began to reduce the city workforce, going
from 3,200 to 3,000 employees through attrition. We will
look at further options to reduce the size of the city payroll.
We also had to increase the tax collection rate.
When only 78 percent of the people are having to cover
100 percent of costs, those who do pay must carry a much
higher tax burden.
CITY JOURNAL: What is the average tax collection
rate for cities in New Jersey?
SCHUNDLER: For cities it's in the vicinity of the high
eighties; for suburban communities it's in the mid-ninties.
We brought Jersey City's collection rate from 78 to 92
CITY JOURNAL: How did you do that?
SCHUNDLER: For one thing, we began a pro-
gram of rent receiverships. If the owner of a large
apartment building isn't paying his taxes on time,
we'll collect his rent. We also demanded that the
Federal Government's Resolution Trust
Corporation pay taxes on properties it has taken
over. Through these efforts we were able to get the
collection rate up to about 90 percent. We eliminated a tax increase even before the bulk lien sale.
CITY JOURNAL: What is the bulk lien sale?
SCHUNDLER: Under state law, if an owner
doesn't pay his taxes within six months, the locality puts a lien on the property. Interest accrues on
the delinquent taxes at a rate of 18 percent. The
locality then tries to sell the lien by auctioning it
off to investors who bid down the interest rate.
The buyer collects the taxes and earns the interest,
or takes over the property if the owner still does
Financial institutions have never bid on liens, because
they are sold one at a time and the value of the asset is not
enough to justify the cost of administering it. Just as it is not
worth a bank's while to give a mortgage for $2,500, it is not worth it to buy a
$2,500 lien. Thus, only individual investors were willing to
buy our liens.
But buying liens is a lot of work for an individual
investor as well. In order to collect, the lien holder has to
threaten to foreclose; accordingly, individual investors had
to be paid to be the bad guy. As a result, we had maybe
five investors buying liens, and always at the full 18
percent. When our taxes began to escalate and more
taxpayers went into default, there were far more liens on
the market than these few investors could buy. Since the
city wasn't getting any money for those liens, its budget
shortfall got worse and worse and it raised taxes higher and
higher. This created a snowball effect as higher taxes led to
still more defaults.
Having worked at Salomon Brothers when they
created the secondary mortgage market, I was able to look
at this and say: We can sell liens to institutional investors,
by pooling them and issuing a securitized note. There's an
economy of scale that would make it much more effective
to sell the liens as a pool than individually, and because
institutions are already set up to collect debts, I don't have
to pay them 18 percent to be the bad guy.
By law, we are prohibited from borrowing for
operating purposes, so the city can't issue notes backed by
these liens. Instead, we had to sell the collateral to an
institution, which then issued its own notes. I hired a
financial advisory company to go to
Wall Street and interview firms to find out whether such a
deal was doable and how much it would cost.
The advisory firm concluded that First Boston was
the most capable of putting the deal together, given the
amount of money we were willing to spend. First Boston
assumed a substantial risk: it spent a lot of money doing the
research and putting together a structure for the deal. I
could have said no, and they would have been out all of
that money. But they put together a great deal. We sold
$44 million worth of liens, for which we got $25 million in
cash and a note worth $19 million, on which we're
expecting about $8 million in interest. So we'll get about
$52 million for $44 million worth of liens.
I've set the stage for a saving not only to the city but
also to the delinquent taxpayer. In the future, now that this
type of deal is established, different firms will be bidding
down the interest rate on the liens.
CITY JOURNAL: Does this strike you as ironic? After
all, the 1980s -- the decade of financial engineering -- are
supposed to be over. One could call this, without any
pejorative, a sort of Milkenism.
SCHUNDLER: I have never had any moral qualms about
Wall Street. My sense is that Wall Street works, and that
America would be severely hurt if Wall Street didn't work.
Without the financial industry, governments wouldn't be
able to build hospitals, schools, roads, and so forth. People
wouldn't be able to build businesses if not for the money
Wall Street provides. Financial innovations do not only
benefit Wall Street firms; they ultimately result in savings to
consumers. Mortgages in America arc less expensive
because of the secondary mortgage market. And because
there are no copyrights on Wall Street, new markets
become efficient very quickly, and the benefits of these
innovations spread very quickly.
CITY JOURNAL: You have also proposed a novel
method of financing education. Would you describe the
state of Jersey City's schools and how your plan would
SCHUNDLER: When I took office, our public schools
had already been taken over by the state, not because of financial bankruptcy, but because of
educational bankruptcy. We are spending an average of
9,200 per pupil and getting little in return. We
used to have only 16 percent of students pass the
the high school proficiency tests. The state recently
inflated the curve, yet still only 44 percent pass.
The state takeover hasn't helped, because it
doesn't address the fundamental problem. It's not an issue
of which politician controls the schools, the problem is
that politicians have control in the first place. That
control should belong to parents.
CITY JOURNAL: Your solution is a voucher plan?
SCHUNDLER: Yes, because vouchers put control over
education directly into parents' hands. Money is power.
Whoever has control over education dollars will have
control over the education system. Now, I know the state
doesn't have any extra money, and Jersey City certainly
doesn't have any extra money. But the trend has been for
public education to become more expensive.
Meanwhile, 25 percent of Jersey City's children are
in private schools. This is very high by national standards,
but 15 years ago we had 50 percent in private schools. As
taxes have gone up, private school tuition has become
difficult to afford. Again, we have a snowball effect: as
people leave the private schools, tuition goes up for those
who remain. So more people will leave. This trend will
continue if we do nothing, and at some point this last 25
percent will move into the public system. That represents
about ten thousand students. At $9,200 per pupil, that
would be another $92 million per year in state and local
spending. My plan would allow us to freeze spending at
its current level.
The state gives Jersey City $6,600 per pupil in the
public schools. Under current law, if a student leaves the
public system, we lose the state funding for that child. I
propose that the state freeze the amount of money it
gives to Jersey City. If a child leaves the public system
and goes to a private school, the city would still receive
the same $6,600 for that child.
We would then take that money and put it into
escrow. If a thousand children transfer out of the public system, we would have $6.6 million in
escrow. We would divide that escrow -- whatever the
amount happens to be -- by the total number of children in the private system: the one thousand new
students and the ten thousand who were already
there. That $6.6 million divided by 11,000 students
amounts to about $600 per student -- almost half the
total cost of the average private grammar school
tuition in Jersey City. We would give each child in
the private schools a voucher for that amount.
As more children transferred
out, it would benefit those in both
the public and private schools. If,
say, two thousand students
transferred, the amount of the
voucher would be $1,100, almost
enough to cover the full cost of
Meanwhile, overcrowding in
the public schools would be
relieved. Right now we've got
tremendous overcrowding -- 37
students per class in some junior
high schools. Let's say 10 percent
transfer out. Now the average class
size is down to 33 children.
And only the state
contribution would go into that
escrow. The total local dollars
going to the public school system would remain constant -- I
am committed to that. So we would have the same number
of dollars per student from the state for those children who
remain in the public system, and the same absolute number
of dollars, divided by fewer students, from the local
contribution. That means per-student funding in the public
system would rise as more students transfer out. The public
schools would improve, both because they would have less
crowding and more money per student, and because they
would be subject to competitive pressure from private
CITY JOURNAL: What happens if the private schools respond to the availability of vouchers by jacking up
SCHUNDLER: I think that'll be great, because they need
more money than they're spending today. But I do have a
mechanism to prevent them from raising tuition too much. I
call it a state student credit. If the voucher is greater than
the tuition amount, we would credit the student with the
difference. Students could use that money for supplemental
education, after-school tutoring, vocational education or language or music lessons. Or they could save it up
and use it for college. Hence, low
tuition would be a selling point for
a private school, since parents
could take advantage of the extra
CITY JOURNAL: Do you foresee
any practical problems in
determining standards private
schools will have to meet before
they are allowed to redeem
SCHUNDLER: We have
draft legislation in Trenton
that spells out minimal eligibility requirements. It would
require that schools not practice
racial discrimination and
that they meet safety and academic requirements. To minimize political interference in the public schools, it
stipulates that the state cannot impose additional
regulations beyond those that were already in place on
January 1, 1990, without a two-thirds vote of the State
CITY JOURNAL: Who's carrying the ball for you in the
SCHUNDLER: I think I can persuade the Republican
majority, together with the Democrats who represent
Jersey City, to join in support of this initiative. This is
the same coalition that initiated the legislation allowing the
bulk lien sale, which was passed unanimously.
CITY JOURNAL: Won't the teachers' union resist your
SCHUNDLER: Yes. During the campaign, the Jersey
City Education Association, the local chapter of the
National Education Association, sent out two letters to its
members saying that Mayor Schundler would destroy the
public school system and cause teachers to lose their jobs.
I think that's an amazing surrender, to believe that they
could not compete if they had to. But the fact is, I got 70
percent of the vote, even after intense, high-profile criticism
of my proposal.
CITY JOURNAL: But how do you expect to get the plan
through the State Legislature, where, the teachers' union is
a powerful force?
SCHUNDLER: I will have to convince suburban
legislators that their constituents stand to benefit directly.
Their schools have lost funds because more money keeps
getting directed to Jersey City. My plan would allow the
state to freeze what it's sending us today. If the legislature
does nothing, the cycle will continue and the state will have
to throw more and more money at Jersey City, which will
cause greater hardship in other communities but won't help
our children one bit.
I'm going to go to the suburban chapters of the
teachers' union and tell them that if this experiment does not
go forward, they stand to lose their jobs. If we continue
what we're doing, and more money is directed away from
the suburbs, teachers will be out of work in Morristown and
And if we don't improve the schools in places like
Jersey City, suburbanites will see their taxes go up even
further, because the state will have to spend more money
on prisons to house people who turn to crime because they
cannot read or write.
CITY JOURNAL: Speaking of crime, one of your major
initiatives has been to get more police onto the street. How
have you managed to accomplish this -- in a time of
SCHUNDLER: Politicians will always be prone to use
government to serve their own interests, and playing
games with the Police Department is no exception.
Machine politicians would go to the police and say, "If you campaign for me, I'll let you sit in
the gun-permit section and do paperwork all day instead
of making you patrol the street." So we had policemen
doing clerical work and even delivering mail between
station houses. We had a police force of 840 -- fairly large
for a city of our size -- but only 38 percent of our officers
were on street patrol.
We brought that up to 65 percent, and in doing so
we almost doubled the number of cops on the street
without hiring a single additional officer. In fact, we've
reduced the police force through attrition from 840 to
about 810 officers. I'm about to hire 28 new ones, all of
whom will go to the street. And I'm still not done
civilianizing the station houses.
The police, of course, have resisted. When I said I
would take officers out of desk jobs and put them on the
street, they replied that somebody had to do the desk
jobs, and there was no room in the budget for it. I thought
to myself. If that's true, I might as well reduce the number
of uniformed officers and hire more civilians. After all, I
don't need someone at a policeman's salary doing
paperwork in the gun-permit section.
But in fact, I believe we need the extra police on our
streets, so I'm not going to lay off any police personnel.
Instead, I am going to bring in civilians to do the desk
jobs. I acknowledge that I will be increasing the Police
Department budget and the number of people on the
Police Department payroll. I accept that, and I'll be
shrinking other areas of the city payroll to compensate
for that commitment.
CITY JOURNAL: It sounds like the reason you're able
to do this is that none of the police were working for your
campaign, so you didn't have to cut any deals with them.
SCHUNDLER: That's right. Many individual officers did
support me, but I didn't invite them in to do campaign
You know, one of the reasons politicians give in to
special interests is that we don't believe that regular
people will ever appreciate the good things we do when
we fight organized interests on their behalf Politicians are
wrong about this; the people do appreciate what we do
for them. Even so, Marx
said that if you're going to effect a revolution, you have to
make a class "in itself' become a class "for itself." That is,
people have to understand their own interests and become
mobilized. Unfortunately, you may be able to do that for
one election, but the next time around, if you have not
changed the system, the organized interest will be mad, but
the people will no longer be mobilized.
That's why I favor solutions like vouchers, which
empower people directly. On the one hand, vouchers make
it possible to reduce the number of people on the
government payroll. B y doing that, vouchers shrink the total
size of the vested interests in government that wield such
disproportionate clout. But what is even more important is
that they help to make the general public into a class "for
itself." People won't give up power once they've had it. If
you give people vouchers, they will never give them up, and
your reform will be permanent.
I believe it is important to have faith in the people,
but it is also important to create a system that protects
politicians who do the right thing, by keeping people
mobilized. Vouchers are a means to organize the people
around their interests permanently. If we empower ordinary
citizens, they will become a mobilized interest in protection
of their own well-being, and that will embolden politicians to
fight for them.
CITY JOURNAL: Are there any other cities from which
you have learned things that have helped you govern Jersey
SCHUNDLER: Milwaukee has a school voucher
program, and it is moving to see a woman like Polly
Williams, who fought the good fight and changed attitudes
within the black community. The black elites had been
supporting the status quo but eventually were pressured by
the rank and file to change their views.
But I don't really look to other cities as direct
examples. For the most part I just walk the streets and get
my ideas by talking to Jersey City residents. People will tell
you what they need -- you don't have to be a rocket scientist.
If politicians would actually listen to them, most of the
problems would disappear.
CITY JOURNAL: New York is in the midst of a
mayoral campaign. What lessons should the candidates
take from your experience in Jersey City?
SCHUNDLER: A mayor should boldly lay out the
solutions to a city's problems. Even if he can't always
effect them by himself, he can rally popular support for
them. I talked about things in my campaign that were not
directly under the mayor's control. But when I walk the
streets, people don't want to hear me say, "That's not my
job-that's the Federal Government's job." They don't want
to hear me throwing blame. T hey've heard enough of that.
They want to hear me take responsibility and say,
"I'm going to try to get it done." They don't begrudge the
fact that I can't get everything done, but they want to see
me out there fighting for them. What they're electing is not
just a technocrat to administer the bureaucracy. They're
looking for a leader to make the city better for them.
CITY JOURNAL: Do you think your proactive approach
to government could work in a city as large as New York?
SCHUNDLER: I believe that in ten years New York City
will be totally transformed -- the whole governmental system
will be changed. I think that will be the case in Jersey City
in four years. The experiments will be done in places like
Jersey City, where the problems are perhaps more
manageable. Once those experiments have succeeded,
emulated in cities like New York.