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A recent article in the Wall Street Journal (Many States Are Unprepared for Next Economic Downturn) caught my attention because it highlighted a key factor adding to the fiscal stress of municipalities and schools. The article suggested that most states are unprepared for an inevitable economic downturn as they lack the necessary fiscal reserves or rainy-day funds to cushion the next financial blow, and, it’s already having a negative trickle-down effect.
Forced to do more with less since the last recession, cities and schools are continually struggling with reduced revenue sharing from their states while scrambling to meet the demands of unfunded mandates, retiree obligations, an aging infrastructure and even increased student testing. Add this to the anticipated silver tsunami caused by public sector retirements in the next decade, we see a myriad of local governments that are already stretched too thin and have reached a crisis point.
One of the most alarming things noted in the WSJ article was that some states appear to have little sense of urgency and limited tools to address these budgetary shortfalls. Forget crisis point—this dilemma will have far-reaching and long-term consequences for the populations served by those who gloss over the unavoidable hard truth and do nothing about it now.
With the first quarter behind us, the following three topics are high-value items to consider in Q2 for planning purposes:
al way. We know that more money, better directed, can improve the performance. But that costs money. Are we content to eat out a few less times each week? To live without cable for a while?