A budding recovery
Creative problem solving helps budgets
Rather than cut services, some local governments are attempting to stretch their dollars farther through implementation of various efficiency initiatives. In the Pew report, some examples were cited:
- Anaheim, Calif., and Luzerne County, Penn., contracted park maintenance, graffiti removal, and the collection of delinquent taxes to the private sector.
- Facing a $190 million deficit in the 2010 budget, the Dallas City Council turned over the operations of the city zoo to a nonprofit organization.
- Olathe, Kan. recently partnered with surrounding Johnson County to build and run a single 911 dispatch facility, saving the city more than $300,000 in annual staffing and equipment costs.
- In Nevada, Washoe County and Sparks and Reno have started issuing streamlined, multi-jurisdictional business licenses from a single location in an attempt to improve efficiency. In Beaverton, Ore., trucks that lift and dump garbage cans using hydraulic arms require only one worker per route.
- Santa Clara County, Calif., implemented an online tool for visitation requests for inmates in its large jail system, lowering the demand for staff and reducing complaints.
“Cities are thinking through what are the absolute core services that cannot be affected by fiscal issues,” says Michael Pagano, dean of the College of Urban Planning and Public Affairs at the University of Illinois-Chicago, who co-authored the NLC report. “There’s no one repository of collaboration among cities. But we know it’s very widespread. Local governments continue to search for partners so they can maintain the minimum level of services.”
Hoene also says that local governments have dipped into their reserve funds when innovation, reductions and consolidation are not sufficient to meet their mandate for a balanced budget. Prior to the recession, as city finances experienced sustained growth, city ending balances, which are similar to “rainy day funds” and are used for capital projects and to meet borrowing requirements, rose to a survey high of 25 percent of general fund expenditures. However, as economic conditions made balancing city budgets more difficult in recent years, ending balances have been increasingly used to fill the gap, the NLC report found.
In 2011, cities reduced their ending balances to 18 percent of expenditures (compared to a projected 15.4 percent). In 2012, city finance officers projected ending balances at 12.7 percent of expenditures. Actual ending balances often register at higher levels than projected ending balances. However, if this projection holds, since the high point in 2007, cities will have drawn down total ending balances by nearly 50 percent (from the high of 25.2 percent to 2012’s 12.7 percent).
“Local governments have been drawing down ending balances to weather the storm,” Hoene says. “There is a continuing decline in ending balances. I think there is a direct signal from the bond market to be careful.”
Donald Haider, a professor at the Northwestern University’ Kellogg School of Management who specializes in municipal finance, agrees that local governments need to pay attention to the vital flow of funds from the huge municipal bond market. “The whole municipal market is in play right now,” he says.