In a state with high unemployment, with temporary census workers masking the true weakness of the job market, and with the prospect of upcoming tax increases that will retard economic growth, there are still ways for local governments to improve their own prospects. I posted earlier this year on the suggestions of Stephen Goldsmith of Harvard’s Kennedy School of Government about government strategies to avoid. See, “Red-Ink Tsunami: Why Old Ideas Can’t Fix the New Government Perma-Crisis”.
Goldsmith listed five “Strategies of Yesteryear that Won’t Work Today”:
1. More federal aid
2. More government debt
3. More taxes
4. More delaying tactics
5. Incremental, stopgap measures
Goldsmith picked up on that those suggestions in a subsequent article, entitled, “Burdening the Future: It’s Not Just the Feds.”
Goldsmith describes the problems that many state and local governments face:
The recently released federal budget has shed a harsh spotlight on government’s tendency to spend today while leaving the bill for our children to pay. The budget projects $8.3 trillion in deficit spending between 2011 and 2020 on top of an already massive debt….
Government budgets, unlike private sector accounting, make it possible to ingeniously “kick the can down the road”….
A clearer understanding of the ways the future gets burdened with the debt of the present is a good place to start.
1) Paying employees with promises
Set aside any discussion as to how much public officials ought to be compensated. Instead, focus solely on how they get paid. In general, public workers earn both current salary and benefits plus credit toward promises of future compensation, most notably pension and retiree health care benefits. The problem with this is that today’s elected officials rarely put away enough to cover expected payouts….2) Borrowing to stay Afloat
The amount of municipal debt presents challenges to city and state governments. And when government borrows for capital purposes leaders need to make the case for why the investment produces a strong foundation for the community and why the debt matches the life cycle of the asset. A riskier problem occurs when officials borrow to manage operating deficits. Essentially this is the difference between a family that takes out a mortgage for their home and one that takes out a second mortgage to help finance their credit card purchases….3) Accepting Medicine That Makes the Patient Worse (a Short Term Fix)
No stressed mayor or governor faced with layoffs and budget cuts can rationally turn down stimulus money. But instead of investing the money in transformative approaches to public services that will permanently reduce the cost of production, the federal government forced local officials to temporarily keep public jobs at unsustainably higher levels – thus ensuring an even steeper cliff event when the money runs out….4) Deferring maintenance on infrastructure
Very few governments maintain a true capital budget reflecting depreciation. Therefore officials have little incentive to defer today’s needs to prepare for tomorrow’s infrastructure crisis. Yet this deferred maintenance comes at a very steep price eventually as the neglected small repairs of today become the huge replacement expenses of tomorrow. Recently enacted GASB rules 43 and 45, helpfully require governments to account for the costs of unfunded liabilities on their balance sheets, belatedly forcing some attention to this issue….
Not every state or municipality has all these problems; those that have even some of them are struggling under that burden. Whitewater, Wisconsin has a particular problem of focusing on grand projects rather than simpler undertakings. The cost in taxpayer earnings, municipal debt, and the redirection of city workers’ priorities to build something like the Whitewater-University Innovation Center is an example of mistaken priorities. It’s a capital project, but it’s hardly maintenance of infrastructure. It’s something far worse — setting out on another new, bad idea rather than fixing underlying problems from former bad ideas and ignored present needs.
The best immediate fixes for Whitewater would be to scrap the Innovation Center and Tech Park, recognize the many wasteful mistakes from failed tax incremental financing schemes, abandon any further tax incremental schemes for the city, and to focus on basic maintenance, and choose simple governance over showy cheerleading.