Just months after Cory Booker became Newark’s mayor in 2006, the city’s housing authority was forced to lay off nearly half its work force when an investigation found that the agency, under the previous administration, had misused federal funds to pad its payrolls. Even though the authority was under pressure from Washington, which threatened to withdraw federal funds if it didn’t cut payrolls, the layoffs were unpopular.

For Mr. Booker, who has earned a national reputation as a reformer, that 2006 controversy was only a preview of what was to come. Today Newark, like many American cities, is facing intense pressures to reduce its budget. And many of the mayor’s options—including layoffs and proposals to sell city assets and privatize services—are deeply controversial. How his efforts to tame the city’s budget play out may determine the future of Newark, a long-troubled city that has lately seemed on the verge of revival.

Mr. Booker, who was re-elected in May, has battled during his four-year tenure against an entrenched culture of patronage and corruption in a city that liberally spends other people’s money. When he took office, state government in Trenton was sending Newark some three quarters of a billion dollars annually to prop up its municipal government and its school system. Yet the city still couldn’t pay its bills. An audit found that outgoing mayor Sharpe James had left the city’s books a mess, with unpaid invoices and uncollected taxes that contributed to a $44 million budget hole.

James was eventually convicted of corruption and served 18 months in jail. Prosecutors put other officials from his administration behind bars too, including James’s former chief of staff, who was convicted for taking bribes after investigators discovered $157,000 stuffed under the floorboards in a home he and his girlfriend shared. A prosecutor in that case described Newark City Hall as a "supermarket" where everything was for sale.

Mr. Booker took over a government bloated by years of corruption and patronage, even as city agencies were paradoxically starved for resources. The police department, for instance, was one of the nation’s largest, measured on a per-capita basis. But it lacked computers and its precinct houses were in disrepair.

Impatient for reform, Mr. Booker turned to private sources. He established a foundation to raise money to modernize the police department.

He did the same with education. In a city where neither the mayor nor the board of education controls public schools—which were taken over by the state in 1995 after an investigation uncovered widespread corruption—Mr. Booker established a foundation that has raised some $20 million for the city’s charter schools.

Mr. Booker also secured a $100 million donation from Facebook founder Mark Zuckerberg for the city’s public schools and extracted a promise from New Jersey Gov. Chris Christie to have a say in how the money is used. A foundation Mr. Booker established has also raised $10 million to maintain the city’s parks, often one of the first victims of municipal budget cuts.

But the mayor has also been slow to cut the size of city government. Personnel costs alone have grown more than 60% during his tenure. While neighboring cities like Camden, Jersey City and Irvington have privatized services like garbage collection to save money, Newark has continued to operate its own sanitation department at a cost of some $25 million last year. And the city pays richly for employee benefits, including health care, which costs about $17,000 per worker, or twice the average health-insurance costs for a private business in the state.

The downturn in tax revenues and cuts in municipal aid by the state have sent Mr. Booker scrambling. His latest budget, which closes an $80 million deficit, projects as many as 1,000 job cuts, amounting to nearly a quarter of Newark’s work force, in the next two years. The city has already laid off 167 cops after a recalcitrant police union refused to negotiate salary and benefit givebacks.

Newark averted cuts in the fire department when the firefighters union agreed to the city’s request for concessions. Newark’s police director, Garry McCarthy, says the police force, which is still one of America’s biggest when measured against the city’s population, remains adequate—though any long-term spike in the crime rate will damage his and the mayor’s reputation.

The mayor, who acknowledged shortly after taking office that he would have to shrink the size of the city’s government, has earned some justifiable criticism for not tackling the city’s budget problems earlier. Ironically, much of the political fire now aimed at Mr. Booker is because of his efforts to cut headcount in a city where, as one local columnist wrote, "public employment is often the best hope for a good, secure job."

Newark’s budget crisis is not unique, by any means. Across the U.S., 80% of cities have laid off workers and 44% reduced services in the last year, according to a survey by the National League of Cities.

None of these other cities is governed by a mayor who has earned near-celebrity status. Mr. Booker has established himself as a crime-fighter and an advocate for school reform. If he’s to complete the revival of Newark that he’s until now pursued with such passion, he’ll have to prove himself as a budget hawk and an efficient manager of diminishing resources.

Original Source: http://online.wsj.com/article/SB10001424052748704034804576025903122158370.html