Four years after the recession, four During an economic downturn, a municipal governments (Jefferson series of actions - including but County, and the cities of Stockton, San not limited to, housing and stock Bernardino, and Detroit) have filed for market weakness, unemployment Chapter 9 bankruptcy. All were forced rate increases, and declines in Gross to seek protections from creditors Domestic Product (GDP) -- create due to their financial insolvency, a triggering effect on government while developing and negotiating revenues. In combination, they plans for adjusting weaken the local economy debt or obligations. and the tax base on which Goals The consequences, as the public sector relies to serve as the we’ve witnessed, can be fund programs and services. severe. These financial struggles
Since the Great not simply a result of framework for were Depression in 1929, revenue shortfalls caused the U.S. has entered by the crushing recession good fiscal a recession roughly or Sacramento’s raid on policy. every four to six years. redevelopment funds. In These downturns don’t each case, costs to operate necessarily follow a fixed schedule, government escalated dramatically. but the frequency of occurrence Among the drivers: pension and suggests a certain predictability – if healthcare costs for retirees, lucrative not inevitability – about them.. In labor agreements, and big spending fact, since the Great Recession hit on public works infrastructure. It in late-2007, and the extended bull was a perfect storm - a deteriorating market investors have since enjoyed, economic environment coupled with one could argue that another cooling gross financial mismanagement and period is not far off in the future. negligence by stakeholders that ultimately manifested itself in the form of too much debt.
The Importance of Developing Fiscal Policy Government depends on its fiduciary to ensure that operations are sustainable and a good control environment is established. With those requirements comes a welldefined series of objectives, including the need to develop standards, processes, and structure; to promote high integrity; and to retain competent employees for its mission. Goals serve as the architectural framework for good fiscal policy. Once in place, they effectively represent the form used by government to accomplish its mission. They serve as guideposts for developing the specific administrative and council policies that enable government to effectively function I’ve had the privilege of multiple speaking engagements at workshops and panel discussions with Michael Busch, CEO of municipal advisory and management consulting firm Urban Futures, Inc. We spend a lot
43 CSMFO MAGAZINE NOVEMBER 2016
Included in the November edition of CSMFO Magazine are stories about finance here in California and the professionals who make it work.