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Preparing for the Next Recession

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

By Jerry Newfarmer
May 6, 2016

JN - downturnWhile revenues are rising in many cities and towns, there are still many more ways to spend those increased revenues than there are revenues themselves. Employees who haven’t had a raise in years want one. Residents want services restored. Deferred costs, like maintenance and technology, demand attention.

It’s a natural impulse to want to restore everything to what it was before the recession. But some of the changes forced by the downturn were good for governments. Unnecessary layers were eliminated, departments adopted energy-saving equipment and staff positions that were duplicative or low-value were trimmed.

The challenge now is to operate from the new normal, keeping whatever good that the last few years produced instead of wishing for things to return to the way they were. By carefully choosing how to spend increased revenues, leaders can make their governments stronger and better prepared for the next recession.

Here are some ideas to consider when deciding where to spend rising revenues:

  • Pay back any money you borrowed from restricted funds to cover the general fund first. That is a top priority.
  • Next, look at vacant positions. Fill the ones that will directly improve the delivery of services; wait on others.
  • Eliminate furlough days.
  • Compare your organization to other local governments and increase salaries across the board if you’ve fallen behind.
  • Increase salaries for positions that are experiencing high turnover or are hard to fill. Be judicious with the salary increases, though.
  • Look at your strategic plan and update it if it’s been a few years. Nearly everything has changed in the years during and after the recession; chances are your goals don’t reflect that. Resetting them now would help align spending priorities.
  • Create or update a long-range financial plan that is balanced at current revenue and expense levels. Don’t forget to include technology, fleet and maintenance needs, which have probably been neglected over the past few years but are necessary to service delivery.

Moving from specific actions to more general strategy, local government leaders would be wise to keep the following in mind in the near future:

Create or improve management systems. Articulate how your work is planned (strategic and work planning, budgeting and financial planning); how your work is managed (communication, performance management, financial management and Council policy support); and how talent is managed (organizational development, performance evaluation and employee recognition). Seeing these various functions as a whole helps engage managers in making it work better.

Prioritize financial resiliency by doing more long-term forecasting.

Strategically rebuild services by focusing on the next 10 years of service and what is needed now—not in the past—and will be in the future.

Create a sustainable city government by focusing on internal systems, performance measurement and analysis—the foundational things that enable an organization to be effective and continuously improve.

Don’t forget ethics and values. They need to be at the forefront, not an afterthought, which means hiring for ethics and values, being accountable, standing up for what is right and not letting poor performers waste precious resources and distract other people’s good work.

Economic conditions will improve and worsen as economic cycles unfold. But with good management techniques and strategic preparation, leaders can be prepared for any conditions, thereby optimizing the performance of their organizations and minimizing the pain of difficult times.

Author: Jerry Newfarmer served as city manager in Fresno and San Jose, Calif., as well as Cincinnati, Ohio. Newfarmer is founder and president of Management Partners, which helps local governments improve their operations. 

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