Incrementalism: A Solution for Local Governments' Unfunded Liabilities.

Author:Kavanagh, Shayne

The journey of one-thousand miles begins with a single step.

--Chinese proverb

Many local governments struggle under the weight of unfunded liabilities. Pension liabilities are, perhaps, the most notorious of these, but there are many unfunded liabilities that local governments must be concerned with, such as those associated with:

* Accrued employee paid time-off that must be paid out to employees upon separation.

* Funding for self-insurance programs to reach prudent levels of coverage.

* Maintenance to keep capital assets in acceptable condition.

The dollar amounts associated with these liabilities can be quite large--perhaps even so large that funding them seems like an unobtainable goal. This can lead to a sense of helplessness, causing public officials to take no action at all to reduce the size of the liabilities.


Public finance leaders might be able to harness one of the most pervasive forces in local government to help solve the problem of unfunded liabilities: incrementalism. Put simply, incrementalism is the practice of taking small steps over time in order to reach a larger goal, where each successive step builds on the last. Incrementalism is sometimes derided in local government because it does not provide the fast-paced revolutionary change that people who are enthusiastic about government reform typically prefer. However, incrementalism does have the advantage of practicality. It allows a large number of stakeholders to come along with the change gradually, one step at a time. This slower and less jarring pace means that the coalition supporting the change is less likely to be pulled apart by centrifugal forces that accompany any significant organizational change. Incrementalism attenuates these forces.


To make incremental progress towards the goal of funding liabilities, public managers must first establish that it is a goal worth reaching. Given the many competing priorities facing public officials, it may not be immediately obvious why they should want to fund liabilities. Further, some officials may see liabilities as a highly abstract problem, removed from their immediate concerns of providing services to the public.

A first step toward establishing funding liabilities as a worthy goal is to establish "financial sustainability" or a similar concept as one of the governing board's official goals, on par with goals like public safety or economic vitality. For example, in...

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