Note: This article[A] borrows heavily from the thoughts of Mark Funkhouser[1] and Liz Farmer.[2] I repackage and express them here because, in my estimation, they are among the most important, and yet the least understood, of those that elected officials need to consider on their way to making policy decisions which benefit the public.
It seems common for elected officials, regardless of where they fall on the political specturm, to argue for spending of one type or another: everyone has what they consider to be a necessary use of public funds. They also largely share a reluctance to think through the consequences of that spending.
Sophocles Quote
“I have nothing but contempt for the kind of governor who is afraid, for whatever reason, to follow the course that he knows is best for the State.”
The purpose of this article is to list a few guidelines which, if understood and followed, would help those who share in the public trust to check these competing tendencies and avoid the financial calamity that they can cause.
Governing bodies should not:
Use one-time funds to fix long-term problems. Balancing a budget with one-time funds runs the risk of masking a structural[3] problem which will likely get worse next year. If annual expenditures are exceeding revenues, then drawing down reserves or transferring "excess" fund balance from elsewhere will, at best, just stave off the problem for one year or, at worst, allow it to grow into an even bigger problem. (Note: An exception to this is using one-time funds to give the organization time for structural changes to take effect.)
Build new assets or launch new programs for which there are not sufficient revenues to operate and maintain them. For example, when your city has a strong need for a community center, it is hard not to apply for a grant paying for 80% of the construction cost. If, however, you don't have the means to pay utilities, insurance, janitorial costs, etc., the wonderful asset might become a monument to an unintended consequence of a good intention.
Sometimes, the lure of a program is enhanced by a companion proposal to incorporate some sort of revenue stream - a user fee, for example. It is a blatant error if no revenue projections are made showing how much of the cost will be covered, but it is borderline insidious if projections are made which are based on completely unreasonable assumptions regarding rates to be charged, the numbers of users, and the costs of collecting the revenue, the human resources and other ancillary costs involved.
Tackle something new before fixing your own problems. Repairing a storm sewer is not as glamorous as building a new community center, but it is certainly arguable that the elimination of periodic flooding in a portion of your city or the runoff which goes, untreated, straight to a waterway, should be dealt with first.
While it will be appreciated by hardly anyone, dealing with existing problems can sometimes have a dual benefit of actually improving your structural finances - such as when a street lighting system is upgraded from mercury vapor to the much lower costing, and greater light emitting, LED technology.
Fail to take the time to identify the long-term consequences of an action. In the mid-20th century, starting a landfill probably seemed like a reasonable way to meet a legitimate public need for disposing of solid waste. By the end of the century, however, the consequences of that decision caused signficant financial strain for many communities as they attempted to undo the contamination of groundwater or other issues not considered in the beginning.
Similarly, it might seem that the private sector ambulance service is inadequate and should be taken over by your city, but will future governing bodies have the financial discipline to charge as much as the service costs - especially when service to indigent patients and less-than-aequate Medicare payments are considered?
I realize that articulating one or more of these concepts during the middle of a discussion about an ostensibly beneficial improvement or program can be difficult; it is easy for the perception that you are a 'Debbie Downer' to cloud the message you are trying to convey. Similar to parenting, one of the challenges of good governance is to convince your colleagues that "no" or, at least, "not right now" is in the community's best interest.
[3] "Structural" is defined as expenditures incurred and revenues received as a part of normal, ongoing operations. Accountants would refer to them as operating revenues or expenditures.
[A]Updated and/or uploaded on or after 2022-04-30.