This article is part of an ongoing series about financial sustainability, based on GFOA's new financial sustainability framework. It is adapted from a whitepaper, available at gfoa.org. You can learn more about the framework at www.gfoa.org/financialsustainability.
The underlying reason for transparency is to help create trust amongst citizens, government administrators, and elected officials. When citizens trust in government, they will be more willing to pay taxes, participate in community governance, cooperate with government officials to solve community problems, and invest in the community.
This article focuses on how trust will produce financial sustainability for local governments, and how transparency is a means to obtaining this end. However, financial sustainability is not simply a matter of dollars and cents. A local government has three fundamental responsibilities that are essential to financial sustainability: (1)
* Equitable Responsibility. Each jurisdiction must provide basic services for maintaining the health, safety, and welfare of the community, regardless of an individual resident's capacity for payment.
* Fair Pricing. Each jurisdiction must ensure basic services are provided at prices that are fair to current and future residents.
* Fiduciary Responsibility. Each jurisdiction must ensure that current and future expenditures are justified by benefit-cost calculations and supported by reliable revenue streams. Hence, local governments must think carefully about how to clarify the relationship between the benefits received by stakeholders and the contributions they make to sustaining local government.
The responsibility to provide services that maintain the health, safety, and welfare of constituents may appear to be relatively straightforward, but the need to provide services equitably across stakeholders belies this apparent simplicity. This is because there are different ways to define "equitable." For example, under perfect equality, resources are equally distributed to all stakeholder groups. Another definition of "equitable" might provide services back to stakeholders proportionate to the amount they paid, while yet another might provide services in proportion to the individual need of the constituent. And different definitions might be appropriate for different services. For example, for a municipal water or sewer service, users' financial contributions are typically proportional to their use of the system. For many social services, the users do not pay taxes or fees in an amount sufficient to cover their costs--they are subsidized by other payers. warning that governments that proclaim equality in fact give power and resources to a small elite.
Perceptions of equity have real implications for trust in government. If resources are perceived to be distributed inequitably--according to family background, personal connections, political affiliation, etc.--then trust in the institutions responsible for distributing those resources will decline. (2) If the standard of fairness is perceived to be reasonable and not unduly benefiting one group at the expense of another, this gives the impression that public officials care, and can be reasoned with and influenced.
A government should be clear about its definition of "equitable" and show how that value is implemented. For example, the City of Portland, Oregon, adopted equity as an overarching goal of its strategic plan (see Exhibit 1). From there, the council decided to focus on racial equity and equity for people with disabilities. The city adopted three specific equity goals, covering: 1) the representativeness of the city's workforce; 2) outreach and engagement of marginalized groups; and 3) elimination of inequities in service provision. Each city department developed a racial equity plan to show how these goals would be implemented. The plans were adopted by council resolution.
To identify where services are being provided equitably (or not), Portland uses a series of performance measures broken down by geographies. Population information (e.g., race or disability) can be overlaid on the maps. For example, a map of pavement quality index shows that the east side of Portland, traditionally an underserved area, has some of the best-quality streets in the city. However, a map of traffic fatalities shows that this same area has a relatively large number of fatalities...