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Fiscal Crises and Innovative Budgeting

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Moloba Owolabi
December 18, 2015

When it comes to managing fiscal crises and challenges, the federal government influences many local and state governments. State and local governments typically try to come up with innovative measures to implement the policies the federal government has set forth. Sometimes these cost-cutting, revenue-building measures are very successful and other times they leave communities in disarray.

Photo Credit: SRC

Photo Credit: SRC

Turning fiscal crises into opportunity is a great way for many state and local governments to restructure and strategically plan new and inventive ways to raise revenue and support their economies. Through strategic planning, many local and state leaders can implement reforms and policies that provide effective and long-term success to their local communities.

As the Alliance for Innovation mentioned, by being proactive, local and state government officials can pursue widespread organizational change and restructure outdated business practices when economic indicators are positive. The Alliance for Innovation indicates that local and state governments are important economic agents and, during fiscal crises, they should try to stimulate their economies in the following ways:

  1. Increase revenues to maintain spending.
  2. Accelerate local capital projects with low long-term operating costs. 

When state and local governments typically deal with fiscal crises, they use traditional budget options such as increasing taxes, cutting services or a combination of the two. Now, it is important for governments to develop sustainable and innovative methods for budgeting. Many state and local governments are required to follow the federal government’s requirements, which are often unaccompanied with federal funding.

With that said, state and local governments can start working jointly with other governments on ways to mitigate fiscal crises. As outlined by the University of Pittsburgh’s Fiscal Policy and Governance Committee, there are several policy tools that can be easily implemented by local governments to help ease the effects of fiscal crisis. These tools are:

  1. Utilizing joint purchasing to allow two or more local governmental bodies to buy equipment or supplies. By implementing joint purchasing locally, governments can see an increase in cost savings.
  2. Participating in joint contract agreements in order to provide cities or towns with cost savings through bargaining and economies of scale.
  3. Participating in grant programs that encourage regional cooperation, which can often provide incentives for regional cooperation.
  4. Participating in cooperative emergency response programs, which allow neighboring municipalities to combine resources for more efficient and cost-effective emergency response systems.
  5. Appropriately employing human resources strategies, which can result in cost savings and may help governments effectively balance budgets.
  6. Avoiding excessive commitments to fixed expenses such as debt services, which is a long-term strategy that can help state and local governments maintain fiscal discipline.
  7. Educating the public about the decisions that elected officials encounter during fiscal crises, which can lead to more efficient and productive decisions.
  8. Implementing energy-efficient programs in order to produce cost savings, by retrofitting and upgrading outdated sources. 

State and local governments face many budgetary concerns. Introducing innovative and resourceful methods to tackle these fiscal crises and budgetary concerns is the first step of many to improve the efficiency of these municipalities. As fiscal crises continue to affect state and local governments, it is imperative that government officials proactively seek new and innovative methods to build revenue and decrease spending in their localities.

Collective action and joint cooperation are some of the ways that local, state and federal governments can work together to stabilize and mitigate fiscal crisis. Although the issue of the collective action problem may present itself, it would be beneficial to work jointly in some capacity during a fiscal crisis, whether it is local governments and state governments or local, state and federal governments working together.

Author:  Mobola Owolabi is currently a senior project manager for the Center of Hospital Innovation and Improvement in Philadelphia, Penn. She specializes in various policy and quality improvement projects. Ms. Owolabi holds a bachelor’s degree in organizational communication from Old Dominion University and a Master of Science in Public Policy from Drexel University. Email: [email protected].

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2 Responses to Fiscal Crises and Innovative Budgeting

  1. Norm Sims Reply

    December 22, 2015 at 10:59 am

    The fiscal problems that state and local governments are facing has been predicted for some time. There were and are many drivers for them, not the least of which is a public unwilling to pay for the services they often request and enjoy. At the local level it is also driven by unfunded state mandates, allowing state legislatures to position themselves as meeting public needs simply by passing the cost along to the local units of government.

    Fortunately, local units of government have become more cognizant of this problem than state governments have been, and are already looking for ways to improve efficiency and effectiveness in reasonable yet innovative ways. One example of this is the Citizens Efficiency Commission for Sangamon County (IL) which was established by public referendum twice (both time getting over 60% of the vote) and has published a long list of recommendations. Other localities should consider doing the same, as it is unlikely that the states will solve their problems any time soon.

  2. Julie Ann Racino Reply

    December 20, 2015 at 10:58 pm

    Fiscal crises are occurring for very simple reasons which include the debt load that is being carried, fixed expenses and commitments “which are coming due”, and the fiscal crisis (recession) of 2008 now in recovery.

    Sharing certain services may reduce costs, though remember, that those who wish to keep both contracts may still charge the same amount for the combined services.

    I suggest seeing how the government and tis citizens believe is thte best way to operate, with combined services sometimes a better way, and proceed from there.

    New ways of building citizen income which builds the tax base should also be pursued. And ways to preserve industry with the right kinds of incentives for the “lean and mean” restructruing for the global world is also critical.

    Look forward to examining the high costs of health and human services, especially as related to outcomes that make a difference to the public versus simply transfer to the non-profit sector) still need to be kept in mind.

    Julie Ann Racino, 2015
    Health and Human Services Section, ASPA

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