These are troubling times for the supporters of council-manager government, among whom I count myself. The Rogue's Gallery of recently distressed, bankrupt and/or scandal-plagued cities seems to include just as many council-manager cities as strong mayor cities.
Vallejo, Bell, Stockton and San Bernadino are all council-manager cities. (Note the remark about "terrible governance" in this Reuters blog post about San Bernardino. Ouch!) San Diego was a council-manager city during its "Enron-by-the-sea" moment in the earlier part of the last decade. In recent years, city managers have been implicated in some egregious cases of pension-spiking, such as in Vernon and Elk Grove, CA (via Steve Greenhut's Plunder!).
This was not supposed to happen. To its early 20th century Progressive architects, council-manager government was intended to be good government. The Progressives believed that good government required the separation of politics and administration. Council-manager effected this separation by placing responsibility for a city's administration in the hands of an appointed, professional manager, leaving politics to the elected city councilors.
Council-manager proved to be an attractive idea, particularly among mid-sized American cities. Over 60% of all cities with a population between 25,000 and 249,000 have council-manager government. But it also has long had its critics, who tend to allege either that the city manager has too much power for an unelected official, and/or that he does not have enough power to get anything done. The latter argument is relevant to the case of Public Sector Inc.
If truly bold reform is needed to rein in the unions, address pension and retiree health care liabilities, and so on, we will probably need politicians more than administrators. Take San Diego, whose strong mayor, Jerry Sanders, successfully persuaded San Diego voters last month to enact "the most sweeping change to the city's retirement system in four decades." Sanders is the first strong mayor in San Diego's history. He was elected in 2005 after San Diego voters decided to scrap council-manager. San Diego's change from pension laughing-stock to standard-bearer not only coincided with, but was clearly enabled by, its change from strong mayor to council-manager. (See Roger Lowenstein's While America Aged on how San Diego's former city manager abetted pension fraud and mismanagement.)
True, mayors are often beholden to the unions, probably even more often so than city managers. But sometimes, a mayor does come along who is serious about reform. He can then take his case directly to the voters, through elections and referenda. City managers can negotiate tough contracts and propose responsible budgets, but there are important limits as to how political, and thus reformist, a city manager can get. City managers can't really take their case directly to the public, or certainly not in any way contrary to the beliefs and desires of the elected officials who are their bosses. Mayors don't have to answer to anyone but the public.
I don't want to go too far with this, because I do still believe that council-manager government has many virtues. My point is simply that the fight against Public Sector Inc. must be a political effort. Examples of non-political entities that may be helpful to the effort, but will not be able effect radical reform include GASB, Moody's, bankruptcy court judges, and, as much as it pains me to say this, council-manager government.