There is no shortage of articles and white papers addressing the topic of “Local Government Early Warning Indicators.” However, very few offer a concise methodology to address the issue; and most don’t draw any meaningful recommendations to address the dynamics local governments face in today’s new normal.

According to an Alison Wiltshire paper, Developing Early Warning Systems: A Checklist, there are four elements of a people-centered Early Warning System. Why people-centered? Because the average person must be able to grasp the concepts of the message heeded. Mathematicians, researchers and academics are not the ones who will be dealing with a fiscal calamity as it unfolds. The concept of “early” indicates that one would want to understand the issue well in advance in order to act proactively.

Using a medical analogy, if you had a blemish on your forehead and went to your dermatologist right away, you could have it taken care of and virtually eliminate the risk of melanoma. Waiting until it is cancerous would make mitigation much more difficult.

The Wiltshire paper lists four key components in considering risk:

  1. Risk Knowledge Local Government Early Warning System
  2. Dissemination & Communication
  3. Monitoring & Warning Service
  4. Response Capability

Wiltshire also suggests that:

“A vertical and horizontal communication and coordination between early warning stakeholders should be established.”

Munetrix couldn’t agree more. An effective Early Warning System should act as a triage and allow the stakeholders the ability to quickly rank the order in which risks receive attention.

For example, in a major disaster affecting hundreds of people, first responders quickly decide who requires immediate attention and transport; who can be treated at the scene; and who can be released to follow up with their own practitioner. First responders don’t typically perform field x-rays or CAT scans. They rely on others to do further evaluation once they rank the population most in need.

Local government fiscal stress is no different. There are tens of thousands of local governments across the nation and using Key Performance Indicators (spending patterns, fund equity, taxable value, population trends and debt) it is fairly easy to identify the equivalent of who:

  • has a high body temperature
  • has high blood pressure
  • has a low blood oxygen level
  • or has lost a lot of blood

Based on the results of these vitals, state or other intervening stakeholders may need to conduct further tests to determine the root cause.

Our recommendation: triage the population and rank the local governments so the sickest get the first available hospital bed!

Munetrix does exactly this, but also uses the local government’s data to determine where the problem areas likely exist – or the second level of analysis. If the government shows stress, (remember the most available government data is outdated), it is crucial to bring them up to current times. If you went to your doctor and said you weren’t feeling well, only to have the physician say, “Well two years ago you were fine” (you would probably go find another doctor) but obviously there isn’t enough information to do anything with. Similarly, you cannot tell a local government’s condition if you rely solely on audited financial statements, which are not forward looking in any stretch of the imagination. But they are informative from a trending standpoint – and can help the triage process.

Grading Schools
Munetrix algorithms can triage every local government (including schools) at once, providing reports at the state, regional, county and local unit level. We also partner with state governments, who ultimately pay the price if one of their siblings falls ill.

If you don’t know what your Munetrix Score is – you should. And if you’re trending form 98.6 to 100 or 102, make sure you don’t get to the point were your “Fever” could cause organ failure!

Oh, and by the way, if you’re a health nut and doing GREAT, brag about it from the highest mountain! Because in today’s reality, if your Munetrix Score is low, you’re doing something special and should be recognized for it.

  • David Boerger
    3:21 PM, 5 February 2015

    Couldn’t agree more. Excellent summary of the proactive means to ascertain the fiscal situation facing the local governments and schools across the state. Generally, the data indicates schools to be in worse shape fiscally that local governments across the state and in SE Michigan. Does your fiscal scoring system adequately capture the legacy cost liabilities?

    • Bob Kittle
      4:40 AM, 6 February 2015

      Thanks Dave. While we track the Pension and OPEB liabilities in the database, due to a lack of available bulk data on this information, our licensed users add their own actuarial information. Debt is an indicator factor for municipalities, but at this juncture it is not calculated into the algorithm. This is measured as a stand alone until such time that we can come up with a means to integrate the data otherwise. With GASB 67 & 68 however, we will be beefing up the Pension and OPEB tables to allow compliance reporting capability from within the system.

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