Local governments regularly find themselves faced with hard choices when it comes to the budget. Even today, during one of the longest economic expansions in U.S. history, many local governments find themselves facing slow (or no) revenue growth and rising cost pressures. At the same time, local government leaders rightfully aspire to do more than "keep the lights on" at city hall--they want to address pressing issues like violence in the community, student achievement, and deteriorating infrastructure. But where will the money come from to pay for these services and projects? Additional tax revenue isn't forthcoming for many governments, which means they will have to reduce costs in lower-priority areas of spending so they can shift budget resources to higher priorities.
Because the majority of a local government's costs are salaries and benefits for employees, reducing costs often raises the specter of job losses. Hence, there is a large and inescapable emotional aspect to these decisions that local government leaders must recognize and address. It can be approached with forethought and planning, thereby reducing the pain and increasing the chances that people will support the decision to shift resources from one use to another.
In the following pages we present three strategies for making the hard choices go easier.
ESTABLISH PRINCIPLES TO GUIDE YOUR CHOICES
Your principles will provide the answer to questions like "What kind of city/county/district do we want to run?" and "What kind of leaders do we want to be?" These are emotional questions that speak to passions and values. (1) When your principles are explicitly stated, it is easier to recognize which emotions should take precedence when making a decision. Traverse City Area Public Schools (TCAPS), in Michigan, was facing declining enrollment, stagnant revenues, and aging facilities--and the district was determined to provide its students with a world-class education. TCAPS established the following three principles before considering its hard choices:
* Education Priorities Should Drive the Budget. In many districts, the budget process has a way of freezing in place decisions about curriculum and instruction that were made years ago, since each year's budget is often largely based on historical precedent. Instead, TCAPS wanted to be the kind of district where the budget intentionally reflects the most current strategies for providing a world-class education to its learners.
* We Can't Be All Things to All People. Many school districts, as democratic institutions, tend to try to please as many people as possible. However, becoming a district that delivers world-class education at an affordable cost demands focus.
* Get High Academic Return on Investment. The district aspired to make a practical connection between academic and financial decision making, and to get the most bang for its limited bucks.
A number of months later, after decision makers had acclimated to the principles, TCAPS was struggling with how to pay for its strategies to improve student learning. It had investigated some options to improve day-to-day efficiencies from transportation and janitorial services, but found that years of belt tightening had made these services about as lean as they could get. The most significant opportunity seemed to be in closing low-enrollment schools. There is perhaps no decision that is more emotional than closing school buildings. However, by recognizing its principles, TCAPS was able to build a lot of support for this decision. In fact, both the local chamber of commerce and teachers' union supported the decision to close the schools, and more than 95 percent of the students at these schools chose to continue their education with TCAPS at another building.
Local government leaders should establish their own principles that speak to the kind of local government they want to be. TCAPS' principles are a good example to start with, but local government leaders must put deep thought into the principles that are most needed for their circumstances. In particular, most, if not all, local governments could benefit from the principle, "there is no substitute for long-term stability and predictability." When it comes to addressing the complicated problems faced by local governments, predictability, stability, and continuity are invaluable. Progress cannot be made when there are constant disruptions and when local government leaders and staff don't know what resources to expect from one year to the next --not to mention the anxiety created by uncertainty.
Long-term financial planning is critical to realizing this stability. The financial plan should be constructed to support the local government's...